Real Estate News and Commentary

January 19, 2010October 5, 2019

What’s more effective, a marketing strategy or a marketing plan?

Successful home sales begin with a marketing strategy and plan.

Does your listing agent have a marketing plan or a marketing strategy? Ok, it was a trick question. Actually, your agent should have both! Long gone are the days of receiving ten offers a day after the sign goes in the ground. In order to get an edge over the competing neighborhood listings these days, successful listing agents need to have an understanding of planning and strategy concepts, as well as their application.

A marketing strategy is the process of positioning your home; in other words your agent researches and compares data from the neighborhood and your home, as well as comparison data from other homes in the neighborhood and extended market area. Comparisons are made between your home’s characteristics and style to the neighborhood to determine similarities and differences. Once the data is compiled and evaluated, trends begin to appear that brings your home to life; your home begins to have a personality of its own.

Your marketing strategy should also include price. Due to recent market fluctuations, price is a major concern for home sellers. Market instability can reveal erroneous data which may cause you to either set your price too high or too low. Nothing can ruin an effective marketing strategy more than over pricing your home, which can severely limit the number of home buyer viewings; while listing too low can result in selling for too little. Listing and sales price data reveal trends that will assist you in setting an initial list price (as well as subsequent price adjustments).

Once your home is on the market, your agent’s marketing strategy (or lack thereof) will determine how home buyers and real estate agents react when thinking of your home. You should be certain that the strategy is appropriate and inclusive because re-positioning your home can be very difficult; the image that is presented to buyers and agents will be impressed forever in their minds. Additionally, word gets around the area fairly quickly, so negative images are surely to be passed along to others who may not yet have seen your home (and ultimately may not because of the shared information).

The marketing plan can be considered a road map in the application of the marketing strategy. It goes without saying that everyone’s listing is on the internet these days, as well as most agents advertising in the local papers. But as any marketing major might tell you it’s not the ad itself, but what the ad says. So, having ads, placements, and flyers generally do not get the attention of home buyers on their own, rather it’s the strategy that is being expressed that grabs home buyers’ attention. Additional consideration should be given to where and when ads about your home will be placed.

The marketing plan should not stop at an internet and print advertisement. The plan should include when open houses should be held (including what to say to visitors), and other means of reaching out to home buyers (such as post cards and broker opens).

Although marketing strategies and plans are vastly different, they are related. The marketing strategy determines the positioning of your home; while the marketing plan is the map that is followed to help home buyers find your home. Without a strategy and plan, your home sale will have to rely on sheer luck.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of January 18, 2010. Using this this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

January 13, 2010October 5, 2019

Shortcomings of the broker price opinion

A broker price opinion (also known as a BPO) is not an appraisal, nor is it a substitute for an appraisal. The BPO is the lender’s way of getting a “snap shot” of the subject market area. A BPO (not unlike a CMA) is an analysis to assist a buyer or seller in deciding a home’s offering, or listing price. BPOs have been used for many years, and for various reasons that range from quality control to making decisions on mortgage portfolios and loss mitigation.

A BPO is not a perfect tool and is limited to the information provided as well as the people involved in the process. The shortcomings that are inherent in the BPO process begin with the lender that orders the BPO and is extended to the BPO company that “farms” the BPO out to real estate agents, as well as to the agent that completes them.

The problem first begins with the lender who is usually not in the same market area as the subject property. Seeking a way to get a snapshot of a home’s “value,” the lender will pay for a broker price opinion. The lender’s employees who order and use the BPO is sometimes mistaken to think that they are getting a report that will say what the home will sell for, when actually the BPO is just an offering of possible listing prices based on area comparables.

The shortcomings of the BPO are extended to the BPO company (third party) that hires the real estate agents to provide the reports. BPO reports are typically completed over the internet these days using electronic forms that can limit the amount of information that is provided. A typical BPO report requires a limited specific number of comps (listing and sold comps), regardless of the availability of neighborhood comps; the report may have to exclude additional available comps while sometimes use comps that are hardly comparable to the subject property. The online forms used to complete BPOs also limit the amount of information that is input; which can limit the actual market data and conditions that is sought from the lender.

Once submitted, the BPO typically undergoes a review for “quality.” BPOs are usually reviewed for procedural standards as well as comp quality. Interestingly, quality reviews are usually conducted by reviewers not familiar with the subject market area; it is quite possible that some quality reviews are not only conducted in another state, but in another country. Ironically, quality and substance is sometimes sacrificed for quantity or a “specific result.” (Past agent complaints, posted on agent bulletin boards, indicate that they realize some of their reports are altered after submission by someone other than themselves).

The ultimate shortcoming of the BPO stems from the real estate agents who complete the BPO. In recent years, with the explosion of short sales and foreclosures, there has been an increase in the need for more agents to complete BPOs. Some agents seek out BPOs because they are under the impression that they will get an REO listing, other agents seek out BPOs because they solely rely on the BPO business as income, while others just take on BPOs to supplement their brokerage income.

Time and care is necessary to complete a quality BPOs. Many real estate agents performing BPOs have little or no training in conducting BPOs; many agents do not have the expertise to provide a CMA to a home owner let alone completing a BPO. What may be more alarming is that some agents boast about the number of BPOs they complete per week (I recall one agent boasting that they complete over 100 per week!).

“Turn’em and burn’em” should not be the motto of anyone in this process. Because quality BPOs are useful and needed, the future of BPOs may rely on local licensing or registration which can ensure competence of those performing BPOs as well as maintaining standards of those who use them.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

January 11, 2010October 5, 2019

How to dispute credit report errors

Recently I told you about the growing importance of your credit report and why you need to ensure it’s accurate. The accuracy of your credit report is more important today than it ever was, not just because mortgage lenders have tightened credit qualifying guidelines, but also because of the growing reliance on credit reports from employers, insurers and other creditors to get information about you.

It is not unusual to find discrepancies or incomplete information within the report, including old credit accounts and outdated personal history. Errors in personal information and credit history sometimes occur due to transposed social security numbers and confusing people with similar names (including confusing the Jr and Sr name suffix). The Fair Credit Reporting Act (FTC.gov) requires accurate and complete data about to be reported by credit reporting companies and those providing information about you.

The first step in correcting errors is to review your report. As I have previously described, you have the opportunity to receive a free credit report from each of the three credit repositories (other factors may allow you to receive additional free reports). Additionally, since fraud and identity theft is a serious threat to your credit history and a growing concern among law enforcement; a regular review of your credit report is a good idea even if you have previously deemed the information accurate. You can contact each of the three credit repositories directly Equifax (equifax.com), Experian (experian.com), and Trans Union (www.transunion.com), or you can visit annualcreditreport.com (a central credit service created by the three credit repositories). The Office of the Maryland Attorney General cautions people when entering website addresses; when entering website addresses, accuracy is important because of the many similar commercial websites that charge for similar services.

If you determine that errors exist in your report, you must notify the credit reporting company in writing to dispute the information. To document your letter delivery, the Federal Trade Commission suggests that your letter be sent via certified mail with return receipt requested. Besides showing your complete name and address, your dispute letter should clearly identify all disputed items with an explanation of the facts as to why the information is disputed along with a request to remove the information. Additionally, your dispute letter should contain the report with disputed items circled, as well as any copy of supporting material to defend your claim.

The credit reporting company has thirty days to investigate the disputed items. The credit reporting company will forward your dispute, along with any supporting materials, to the provider of the disputed information to initiate an investigation of their own. If the disputed information is found to be inaccurate, then the provider must report the corrected accurate data to all three credit repositories. The credit reporting company must provide you notice of the outcome of the investigation along with an updated report showing any changes.

Sometimes credit reporting companies will determine a dispute is “frivolous” (often when insufficient information is provided) and will terminate an investigation. If your dispute was determined to be “frivolous,” the credit reporting company must notify you along with the reasons for this determination.

Additional and updated credit report dispute resolution information as well as resources are offered by the Federal Trade Commission (ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm), and the Office of the Maryland Attorney General (www.oag.state.md.us/consumer/edge121.htm).

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of January 11, 2010. Using this this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

January 5, 2010June 30, 2019

Coping with the stress of the real estate transaction

Unless you are under the care of a psychiatrist prescribing you Valium, “stress free” is not something that comes to mind when describing real estate. According to the American Institute of Stress (stress.org), stress is subjective and can originate from negative and positive experiences.

On the “Holmes-Rahe Social Readjustment Rating Scale” otherwise known as the Holmes and Rahe Stress Scale (Holmes & Rahe 1967), having a mortgage over $10,000 rates 31 (just above being foreclosed upon) and moving is rated as 20. This commonly used stress scale (which rates life events to determine risk of illness) is cumulative, so the rating for buying a home is at least 51. Your stress level obviously increases when you add in other life stressors such as (but not limited to): getting divorced (73); getting married (50); having a baby (39); changing careers (36).

The reason why buying a home may rate so high on the Stress Scale is that, unlike other transactions, buying (and selling) a home is a large emotional investment! Gordon Gekko, from Oliver Stone’s Wall Street, was on to something when he said, “don’t get emotional [over stock], it clouds your judgment.” Emotions often become amplified when stress increases and can interfere with judgment.

Although most real estate agents don’t understand stress (what it is or how it’s reduced), it does not stop them from lecturing and blogging about “reducing stress” during the home buying or selling process. Being prepared and dividing the buying/selling process into segments is common advice and makes sense. This guidance often helps buyers and sellers feel a sense of “control” by understanding what to expect. However, the wonderful thing about real estate is that every transaction presents a new set of personalities, conditions, and (sometimes) problems. Reactions among buyers and sellers, as well as real estate agents, vary depending on their personalities and life circumstances. So no matter how much you plan, prepare, and visualize what it may be like, stress can be produced just by going through the process (created by both positive and negative feelings).

For some, being prepared is enough to help them anticipate and deal with most circumstances that may arise; while for others, the act of preparation may actually increase stress. Emotional factors, often based on needs and fears, can play a key role in your stress levels. Sometimes your needs are beyond your control and can increase your stress level, such as the need to stick to stringent timelines. And sometimes your needs can adapt and change which can mitigates your stress, such as finding the “perfect home.”

Fears about the outcome of the transaction can increase your stress, especially if you’re a first time home buyer. Common buyer fears include mortgage approvals and rising interest rates; sometimes buyers fear that the home inspection may reveal problems with the home. Common home seller fears include the home buyer’s qualifications and the ability to consummate the sale.

Good real estate agents know how to address the needs and fears of the real estate transaction to keep stress levels in check. Regardless, some people may turn to self help, “pop” or common stress reduction techniques (such as meditation); and if the stress is overwhelming, it wouldn’t hurt consulting with your physician or a qualified mental health professional – especially if you’re already stressed by your job, family and other life stress.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Permission to use this article is by written consent only.

By Dan Krell
Copyright © 2010

January 1, 2010June 27, 2019

Mortgage fraud: The makings of a crime novel

Mortgage fraud is a most despicable crime. Scammers attempts to get away these types of crimes not only eats away at home owners’ equity and/or depletes lenders’ funds (as well as their investors’ money), it forces the public to pay for extensive investigations, trials and prison expenses. Sometimes, however, some crimes appear to be intriguing, not because of the crime per se, but because you want to get inside the scammer’s mind to understand their motives as portrayed by their blatant behaviors and flamboyant lifestyles. From the case files (otherwise known as press releases) of Rod J. Rosenstein, United States Attorney for the District of Maryland, the Metropolitan Money Store Case would appear to make a great follow up to Oliver Stone’s “Wall Street.”

If not for the fact the events in the case actually occurred, you might think that you might be reading the latest crime novel about the mortgage meltdown. However, seeming to be one of the most intriguing cases prosecuted this year, the Metropolitan Money Store case defrauded home owners and mortgage lenders for over $37million by asserting to offer foreclosure assistance and credit repair to home owners. The story ends with the president and the CEO recent sentencing to prison time after an extensive investigation that netted ten defendants that included an attorney, real estate agent, mortgage broker, mortgage processor, among others.

According to the press release of the US Attorney’s Office, the president of the Money Store was “Personally responsible for over $16 Million in losses to mortgage Lenders…” Additionally, U.S. Attorney Rod J. Rosenstein was quoted to say, “Joy Jackson presided over a ‘money store’ that was in the business of ripping off homeowners and mortgage lenders by submitting fraudulent paperwork to support over $37 million of loans that were never intended to be repaid”…”Instead of helping financially distressed homeowners keep their homes as promised, she secretly used the home equity to buy luxuries for herself, including furs, jewelry and over $800,000 on her wedding.”

Something like a modern day “Tin Men,” home owners (who were behind in their mortgages or in foreclosure) were directed to sign title over to third parties who acted as straw buyers to strip the equity form the homes under the guise that the money taken would bring the home owners current on their mortgages and rebuild their credit. Additional financial and investment groups were also added to expand the the conspirator’s foreclosure “consulting and credit services.” The equity proceeds were used for goods and services for the president and CEO of the Metropolitan Money Store including art, cars, clothing, credit card bills, homes, fur coats, furniture, airline trips, gambling expenses, jewelry, limousine services, student tuition and a luxury wedding. The conspiracy described in the US Attorney’s press releases (for individual defendants) would make Mickey Spillane jealous of not conceiving such a plot.

The good news is that the conspirators in this case were brought to justice, like other mortgage fraud cases, with prison time. Unfortunately, the bad news is that consumers continue to be deceived and defrauded by con artists, even though government warnings and public service announcements alert the public to be cautious of foreclosure rescue scams.

Original published at https://dankrell.com/blog

By Dan Krell