Month: September 2019

How to Avoid a Bad Real Estate Agent

Many first-time real estate purchasers and sellers take the easy route when it comes to finding a real estate agent.  They ask someone they know for a name and contact information, call/email the agent and ask a few questions (mostly how much in commissions they pay) and then they sign the contract.

If only life were this easy we’d all be happier. This situation reminds me of a sign I once saw in a popular local restaurant, “we don’t make fast food, we make good food”.  Nothing worthwhile comes so quick and easy and not taking the time to do your due diligence can cost you in time and money.

Before signing an agreement with a real estate agent invest a little of your time in getting to know more about your agent to ensure you’re getting what you pay for.  Below are six questions that you need answers to so that you can increase your chances of finding the right real estate agent.

Who knows this agent?

Start with the referral process.  I know what you’re thinking,  “didn’t you just say not to use the referral process to find an agent?”.  No I didn’t.  I said don’t solely use the referral process.  Getting a referral is a great starting point but don’t be lazy, you have more legwork to do.  Having friends, colleagues, or family share their experience is helpful in narrowing down your search but be mindful that everyone has different circumstances and just because your cousin loved his agent doesn’t mean you’re going to get the same level of service.  And even if you get the same level of service you have to take into account that everyone has different standards.  Don’t let someone’s lower standards influence your decision.  

How many years of experience in my marketplace?  

How connected is your agent with the local community?  Some of the best deals occur when somebody knows some “inside” knowledge.  I’m not talking about unethical behavior but there are times when knowing the gossip or backstory of why a person is selling/buying or  how flexible/inflexible they are helps move the deal along.  You also want the inside scoop so you don’t waste your time on a deal that will never take place.  The agent may also know industry people in other trades (inspections, construction, banking) that could strengthen you negotiating position or cut through red tape.  Remember that the true value of a real estate agent is not just showing real estate, it’s their ability to seamlessly guide  you through the process.

How many years of experience in other market places?

Having experience outside of your market gives an agent a different perspective and approach to navigating through difficult situations.  Being a real estate agent is like any other profession.  If you do the same thing over and over again you tend to get stuck in a box and lessen your creative problem solving skills. You also don’t want an agent who is so boxed into their own market that they don’t try new idea (i.e. social media to sell) because “it’s never worked in the past”.

What licensing & certifications does this agent bave?

 Each state has it’s own state agency that oversees the licensing requirements for real estate agents.  Check with your state’s real estate regulator to find out if your agent is licensed and if so, does the agent have any disciplinary actions.  Make sure your agent at a very minimum is a member of the National  Associate of Realtors (NAR).  The NAR has a code of ethics that every member has agreed to abide by.  There are other certifications that realtors have: CRS (Certified Residential Specialist): Completed additional training in handling residential real estate, ABR (Accredited Buyer’s Representative): Completed additional training in representing buyers in transactions, SRES (Seniors Real Estate Specialist): Completed training aimed at helping buyers and sellers aged 50 and older.  If a realtor you really like does not have one of these additional certifications it shouldn’t be a deal breaker but having additional certifications does show the realtor is committed to expanding their knowledge in their profession.  At the bottom of the article there is a link to the National Association of Realtors member search.  

Is this the agents sole source of income?

This question may seem intrusive but knowing that your agent’s sole source of income comes from being an agent will tell you (1) how successful they are at their job and (2) how much of their time can be devoted to your needs.  I’ve personally experienced dealing with an agent who was a yoga instructor.  She used real estate as a “side gig”.   After our contract expired, with no results,  I found a full time real estate agent who showed me what a professional realtor experience was.  You want an agent who is free to provide you service when you need it (i.e. during working hours or after hours) and not have to wait until your realtor gets off from their other job(s).  You don’t need to know how much money your realtor makes but you should know if he/she has divided loyalties that may get in the way of serving you.

What is the agent’s social media presence? 

When you search their name what do I find?  Does the broker have no online presence?  Does their social media content give you a better feeling for who they are?  If available, read online reviews with a grain of salt.  Anomalous online review websites can be manipulated by posting exaggerated negative comments by dissatisfied customers or excessively positive comments by friends and family.  

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After you’ve done your homework and found all the answers to the above questions satisfactory schedule a face-to-face meeting with your final choices.  Ask for, and check, their references  If all things are equal choose the agent who makes you feel most comfortable and trust the process. 

‘’If you’re interested in finding a member of the National Association of Realtors click on the link to begin your search.

https://www.nar.realtor/rofindrealtor.nsf/pages/FS_FOFFICE?OpenDocument

4 Things to Do After the Annual Budget is Done

Many real estate owners are so caught up in the preparation of their annual budget that they forget the value of creating a budget. Budgets are not passive tools to look at once every year, they are active tools in which real estate owners must use to make proactive decisions to  manage their real property.

As a real estate owner your budget should be used to: 

1 – Determine controllable versus uncontrollable costs
2 – Play what if analysis
3 – Measure the success of your strategy and planning
4 – Prioritize your decisions. 

1 – Determine Controllable vs Uncontrollable Costs – After the final budget is prepared it’s a good practice to review the revenue and expense line items and determine which  line items can be influenced by your short-term and long-term decisions. For example, real property taxes can’t be altered by a short-term decision.  Therefore they are an uncontrollable short-term  expense, but may be a controllable long-term expense by challenging your real property assessment. Alternatively,  deciding to increase your insurance policy deductible to lower your premiums, repair rather than replace a major building component , institute tighter controls over staff overtime are actions that can control short-term costs. Categorize all your line items into short-term/long-term controllable versus non-controllable.  This exercise allows you to focus and brainstorm on what line items you can positively effect and also gives  you insight on how difficult it is to positively influence many real property expenses.

Note, each decision you make will come with consequences (increasing a deductible will lower monthly premiums but subject you to higher out of pocket costs if an insured loss occurs, it may be more costly in the long-run and disruptive if the component you keep repairing finally breaks down for good, increased staff over-site may cause employee resentment & turnover.) but these discussions should occur.

2 – Play What If Analysis – What do I mean by “what-if analysis”? After the budget is done assume everything goes wromg. Assume that 90%, instead of 100%,  of the billing revenue  is collected.  Assume a major building component fails. Assume utility prices skyrocket. What is your plan to keep things afloat? Where are you getting the money to pay your bills, pay for repairs, pay staff? After going through these scenarios  it may prompt you to get a line of credit or forgo lump sum payments to vendors  (to get a discount) and choose longer term payment options. 

3 – Measure the Success of Your Strategy and Planning – Review your budget each month to determine if you have deviated off of your expectations.  If you have , why? Routinely monitor the variances between the actual and budgeted amounts. This exercise is not to criticize or point fingers at the creators of the budget but to facilitate a discussion on actions to take. Too often real estate owners judge the quality of a budget by the size of the line item variances between actual and budget.  This is a waste of time.  If the purpose of budgeting was to guess how accurately one could predict the future than this measurement would be justified. This is not to say that accurate budgeting is not important and time should be invested in the process of making a budget as close to reality as possible; but line item accuracy resulting in no variances is unrealistic. I’ve seen and heard of numerous stories of people needlessly spending money because they were “supposed to spend” an amount, and never did.  They needlessly spent the money anyway because they wanted to make sure the line item wasn’t cut in the subsequent year’s budget. Additionally, don’t get caught up in constantly revising the budget to show people the  accuracy of your budgeting prowess.  Don’t waste your time on window dressing accuracy. Focus on game planning your next moves if large negative variances occur.

4 – Prioritize Your Decisions – Real estate owners are like everyone else, we have unlimited wants and limited resources. Budgeting helps you consciously prioritize your wants and your needs. By looking at where the money is spent you can see your priorities. Are most funds being spent on maintaining the status quo, increasing the market value, or improving cashflow? Is raising revenue a goal or keeping revenue flat? Are long term plans put on the back burner? Repair or replace, which do you side with?  It’s interesting to find real property owners who say one thing and have their budget show a totally different point of view.  Numbers don’t lie.  See if your money does actually go where your mouth is. 

After the budgeting process is over it’s a good idea to review the budget and ask yourself if the budget reflects your ideology as an owner. If it doesn’t then consider redoing the budget so that you’re not faced with making conflicting decisions when reality hits you.   You don’t want to  find yourself authorizing expenses that enhance market value when your budget reflects only spending funds on  the nuts and bolts.

In summary, budgeting is an important best practice that should be followed annually and reviewed at least monthly.  When it’s finally done you must understand the final product. Without a true understanding you simply have a bunch of numbers on a sheet of paper. 

4 Things to Know Before Hiring a Property Manager

Hiring a great property manager can be tough. Many people make the mistake of not taking the time to think about the qualities that make up an ideal property manager. Some people make the colossal mistake and hire a property management company and trust them to assign a property manager to their property. Others do slightly better and are introduced to their property manager but the real estate owner(s) treats the meeting more like a “meet & greet” than an interview of someone who may to protecting their most valuable asset.

Managing real property is not easy. It requires a broad knowledge which includes, but is not limited to: understanding building components, managing building staff & third party vendors, knowledge of insurance & claims, knowledge of finance & accounting, providing quality customer service, organizational skills & time management.

Before you make the decision to hire a  property manger there are four key areas where you and the candidate should be aligned.

(1) What Does the Property Manager Specialize In? – Property Manaers are no different than any other professionals. They all possess key strengths and have areas where they can improve. Your job as a real estate property owner is to match the property manager’s strengths with your real property needs. For example, some property managers  have a mechanical or engineering background, others are excellent communicators and coordinators of personnel, others great marketers. Know what your needs are as a property owner. If you are a board member of an aging condominium you may prefer a property manager with more capital projects experience. Conversely, if you owns a rental property you may prefer a property owner with extensive vendor contacts and cost management experience to maxi,Ive your return on investment.

(2) Experience & Access to Resources – As stated above, no one can have an endless depth of knowledge on all areas of property management but your property manager should have access to resources where he/she can quickly prevent or resolve problems that will occur. In larger property management companies there may be many internal resources. In smaller companies the property manager may rely on vendors or external colleagues to get information they lack.  Either way ask the question, “if something goes wrong outside of your core knowledge what do you do?”.

(3) What Processes Exist?  – Every well run property management company  should not only have an internal process for managing their business but must also have a process for managing your real estate. As a real estate owner you must ask the questions and understand what is the property manager’s process for handling complaints, emergencies, vendor bidding, paying bills, staying on top of real property laws, etc? What about the internal control processes of their business?  How do they monitor the quality of the property managers work? What financial internal controls exist to prevent fraud?


(4) Personality Is  Imporatant – Never underestimate the power of personality. This is not just a matter of liking your property manager but having your tenants/residence and you like your property manager. Never commit to a property manager without a face-to-face or video conference meeting. What type of greeting do you receive? Was their appropriate eye contact? How many “please” and “thank you(s)” do you hear? Manners go a long way in deescalating issues. They also build trust.

If you don’t have prior property management experience the ability to determine the skill level of a property manager can be challenging. As an owner you need to know what type of property manager you’re looking for. Don’t make the mistake of treating a property manager like an employee. They are your vendor and the really good ones will act like your partner..