Real estate pt.2

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Buyer Agent Duties

A consumer who becomes a client will receive services that the licensee cannot legally provide to a customer, such as advice, opinions, and advocacy during negotiations. The buyer will be in a much stronger position during a transaction than a customer will because the buyer will have a professional who will offer his or her skills throughout the showing and buying process. Licensees have strong responsibilities to the people whom they are representing. To deny or neglect these duties is a sure way to make the client unhappy with the level of service he or she is receiving, or even cause the client to complain to the Real Estate Board, the Illinois Department of Financial and Professional Regulation. Because so much is expected of licensees, it is necessary for them to know who is and isn't a client and to perform the appropriate duties for a client. These duties are called statutory duties. All of the duties are designed to place the client's needs above the desires of their licensee(s). The licensee(s), of course, will negotiate a commission or fee that is acceptable to the managing broker, who is responsible for the office. Once that is done, the client receives the strongest of skills to be applied by the real estate professional so that the client is in the best position during the negotiation of the transaction. Obviously, if both parties in a transaction have licensees representing them, there may not be a total "victory" of one client over the other, but rather there would be a "meeting of the minds" in which both parties would feel that the negotiations led to a win-win situation.

Getting the Buyers to Make an Offer

After you have shown the properties and the buyers have made a selection, you must get the buyers to actually make an offer. This can be a scary prospect for the buyers. As you work with the buyers, you will need to be sensitive to their signals and know when to pounce. It might be a facial expression or certain words that alert you to their readiness. Maybe up until that point the look on the face of the buyer has been closed or defensive. Gradually or suddenly, the expression will soften and change into one of eagerness or readiness. Sometimes they will ask to go back to a property again and will take measuring implements or even a contractor. These are sure signs they are ready to swing into action. Once you get the sign, be prepared to address objections. Answer the buyer's questions about what the seller might or might not do with questions about what the buyer would like to have happen. For example, if the buyer asks, "Do you think the seller will come down on the price?" Respond with, "What would you like to offer?" Keep putting the ball back into the buyer's court to get them to take ownership of the offer.

Present Information About the Buyers

After you review the listing activity, it's time to talk about the buyers. This is the time to raise the sellers' comfort level that they will be selling their home to people who will really appreciate it. This is particularly important since selling property is so emotional. Even though the sellers may be anxious to sell, they may still harbor some degree of reluctance. If the selling agent has come along to the meeting, he or she can address all the sellers' questions. But if you are presenting alone, give as clear an answer to the questions as you can. Be sure that when you talk about the buyers, you say nothing that could be a violation of fair housing laws. Remember that you should never discuss the buyers' race, national origin, religion, handicap or other characteristics that could lead the sellers to discriminatory behavior or be viewed as discriminatory behavior on your part. In addition to portraying the buyers as nice people, you want to let your sellers know that their offer is a reasonable one. If you know that these particular buyers are interested in other properties, you may want to share that with the sellers. It's important for sellers to realize that if they reject an offer, the buyers may simply move on to their next choice, especially during a "buyer's market."

Servicing Listings - Open Houses

Agent Open House An open house for agents can give you important feedback on your listing as well as get the property in front of more agents. It's especially valuable for properties that are unusual. Agents typically like to attend these events. It gives them a chance to spend more concentrated time at a property that could very well meet the needs of one of their clients. An additional incentive that the hosting agent can use is to hold a drawing or raffle for a prize such as a set of free car washes or a gift certificate to a popular restaurant. The agents can deposit their business cards in a receptacle, from which the winning card will be drawn. Once you have the business cards from everyone who attended, you can contact the agents for feedback or to see if they have any interested buyers. Public Open House These types of open houses are the most familiar to agents, buyers and sellers alike. With any open house or home tour, encourage the sellers to have their home in the best possible condition - clean and uncluttered. Have each visitor sign in and let you know why they came. You can design your sign-in sheet to ask if the visitor is represented by another agent, so that you can determine if this person might be a potential client for you. Be sure to give each visitor a copy of the property flyer and your business card. You should also have flyers available for other comparable homes in this and lower price ranges. You should communicate any comments you get from the visitors to your sellers via your weekly activity report.

Introduction

Agents have the duty to promote the interests of their buyers with the utmost good faith as well as to counsel their principals on material benefits or risks of a transaction. A licensee working with a buyer has an obligation to explain the possible methods used by a listing broker and seller to show a particular property. These methods may include limitations on the buyer and selling broker being able to access a property due to the type of lock box placed on the property, the seller's choice to have the property shown by appointment only, etc. There should be no instances of a listing broker refusing to allow a property to be shown, unless the seller has given prior explicit, written authorization to do so.

Listing Basics

All listing must be in writing. You must never interfere with another's agent's exclusive listing. So be sure the sellers you are interviewing do not already have a listing agreement in place with another agent. Technically, net listings are legal in Illinois, but they are strongly discouraged. Note: We'll talk more about net listings in a later chapter of this course. You cannot do anything to encourage or persuade a seller to change the fee or commission of another licensee without that licensee's consent. All listing must be in writing. You must never interfere with another's agent's exclusive listing. So be sure the sellers you are interviewing do not already have a listing agreement in place with another agent. Technically, net listings are legal in Illinois, but they are strongly discouraged. Note: We'll talk more about net listings in a later chapter of this course. You cannot do anything to encourage or persuade a seller to change the fee or commission of another licensee without that licensee's consent.

Servicing Listings - Activity Reports

An important part of your seller communication is a weekly activity report. Many licensees prefer to send a monthly report because it looks like there has been more activity. But again, frequent communication with your sellers is critical, so the weekly contact is best. Let your sellers know that your weekly report will include, as applicable: Number of inquiries on the property that week Number of showings Advertising done that week Open houses held Number of open house visitors Comments made by other agents or prospective buyers You can also send along copies of any ads you placed that week, a copy of the MLS pages, copies of pages from any websites where the property has been listed and information about any emails that you sent to promote the home. Note: It's critically important to maintain communication with your sellers, even during weeks when there has been little or no interest in the property.

Income Analysis

An underwriter must do a careful analysis of the borrowers' income to determine if, in fact, the borrowers can afford the monthly payment for the property they want to buy. When an underwriter is looking at an applicant's income, he or she must decide: How much of the applicant's income is stable - Income that is not stable will not be used in the calculations for ability to repay the loan. If the applicant has enough stable income to make the monthly payment. Stable Income Income is considered stable if it comes from a consistent and reliable source. Depending on who the employer is, the income might hold a lot of weight or not so much. For example, let's say the applicant works for the State of Illinois. Working for the state is considered to be a reliable and consistent source of income, so the underwriter is apt to give income from this source a high score. On the other hand, what if the applicant works for a new, small business that is just starting up in the area? Since the new company does not have an established track record in the area, the underwriter will probably give this income a lower score. Income is also judged on its permanence - in other words, how long it can be expected to continue. Income that comes from permanent employment, government benefits, or some types of investment interest or dividends is favorably viewed. On the other hand, income from temporary employment or unemployment benefits is not considered stable enough for major consideration.

Servicing Listings - Advertising Plan

Another important piece of information to share with your sellers is your advertising plan. Sellers need to know the "schedule" of when their property will be advertised and the methods you'll use to do that advertising. For-Sale Sign Always carry at least one sign with you and put up the sign as soon as you leave the house after obtaining the listing. If you are putting up a temporary lawn sign, let the sellers know when you will bring the larger, more permanent sign. Flyers Also called property briefs, these print pieces describe the home's features. They contain at least one photo, sometimes several. They should also include an Internet address where potential buyers can get more information about the property. Leave a large supply of flyers at the home, so each visitor can pick one up. You can use the flyers in several other ways. Place in information boxes or tubes attached to the For Sale sign. Distribute at open houses. Deliver to agents from other offices. Distribute to your own firm's agents. Mail out in response to telephone or e-mail inquiries. Classified Ads Prepare several good classified ads so you can avoid repetition when you're on a tight deadline. Also prepare an open house ad and an ad that can be used in a home buyer's guide if your firm uses that as an advertising venue.

Explaining Compensation

As part of your duties to your buyer client, it's important that you take the time to go over each of the provisions of the buyer representation agreement. It's especially important that the buyer understand the issues surrounding compensation. As we said earlier, it is customary (and most buyers expect) that the seller will be paying the commission - either directly or through the listing agent. But there are circumstances where this may not be the case. One of the most common is in the case of a For Sale by Owner (FSBO) property. Buyers need to realize that if they see - or you find - a FSBO that meets their needs and they want to see it, you will have to try to negotiate your commission directly from the seller. Many FSBO sellers are not willing to pay the commission - that's one of the expenses they are trying to avoid by representing themselves in the first place. So, the only way your buyers may get to see the property is if they agree to pay your commission themselves. This in just one reason why the compensation issue needs to be covered clearly. Buyers need to know under what circumstances they may be paying all or part of the commission and need to agree to it at the time they sign the buyer representation agreement.

Deciding NOT to List

As strange as it may seem, you may find that there are times and/or circumstances when taking a particular listing is not a good idea. It's a good idea NOT to list a home: If the seller indicates to you that he or she will limit your showings based on one of the protected classes. Remember, this practice is illegal and can get you and your managing broker in a lot of trouble. It may be wise to turn down this listing. If a seller is unreasonable about what he or she thinks the property is worth. A listing that you cannot sell is worse than no listing at all. This will be a waste of your time and the managing broker's resources. It's also very frustrating for all parties, including the seller. A property listed too high makes the broker look less than professional. Check with your managing broker and look through the firm's office manual to see if there is an existing policy or guidelines for refusing a listing.

Duties

As we discussed in a previous chapter dealing with clients, customers, and consumers, the licensee owes several duties to his or her client. The duties come in two categories. One category is duties of action and the other is duties of protection. All six duties are designed to protect the client. Duties of Action The three duties of action require the broker and his agents to perform certain activities on behalf of the client. The acronym to remember these three activities is COD - Care, Obedience, Disclosure. Once the broker has a client, he or she is to take care of the client, obey the client, and disclose to the client. These are called duties of action because something must be done by the licensee to accomplish these three tasks. Once the potential buyer signs a buyer representation agreement, then all of three of these responsibilities come into play. Most buyers do not even realize that these duties are being performed by the licensee when it takes place. Most buyers are only looking for the end or the outcome of what the licensee does, and they do not see the detailed activities that licensees perform to make transactions happen.

Dual Agency Consent

As we discussed in a previous chapter on Seller Agency Duties, the listing agreement itself may advise the seller about the possibility of a dual agency situation arising during the listing period. The listing agreement will also state what a licensee can and cannot do for clients when the parties agree to a dual agency relationship. But the buyer does not sign a listing agreement. Therefore, the licensee must get the written consent from ALL parties to the transaction prior to acting as a dual agent. According to Illinois law, a licensee acting in a dual agency capacity in a transaction must obtain a written confirmation from the licensee's clients of their prior consent for the licensee to act as a dual agent in the transaction. This confirmation should be obtained at the time the clients are executing any offer or contract to purchase or lease in a transaction in which the licensee is acting as a dual agent. This confirmation may be included in another document, such as a contract to purchase, in which case the client must not only sign the document but also initial the confirmation of dual agency provision. That confirmation must state, at a minimum, the following: "The undersigned confirm that they have previously consented to (insert name(s)), ("Licensee"), acting as a Dual Agent in providing brokerage services on their behalf and specifically consent to Licensee acting as a Dual Agent in regard to the transaction referred to in this document."

Agency Disclosure

As we mentioned in a previous unit on agency relationships, a written document is not needed to create an agency relationship. Under Illinois law, a licensee is considered to be representing a consumer as a designated agent UNLESS there is a written agreement between the sponsoring broker and the consumer stating that there is a different relationship. According to Illinois law, no later than beginning to work as a designated agent on the consumer's behalf, a licensee must inform the consumer in writing of the following: That a designated agency relationship exists, unless there is written agreement between the sponsoring broker and the consumer providing for a different brokerage relationship. The name or names of his or her designated agent or agents. This written disclosure can be included in a brokerage agreement or be a separate document, a copy of which is retained by the sponsoring broker for the licensee. As you know, designated agency is standard in Illinois. So, unless there is a written agreement stating otherwise, the relationship the licensee has with the buyer is as a designated agent.

Explaining Dual Agency

As we said earlier, the buyer representation agreement also contains a provision that explains at length the issues surrounding dual representation. This paragraph also warrants careful explanation. After outlining what a licensee can and cannot do when operating as a dual agent, the Dual Representation paragraph ends with a statement with language similar to this: "The Buyer acknowledges having read the provisions regarding the issue of dual representation. The Buyer is not required to accept this paragraph unless the Buyer wants to allow Licensee to proceed as a Dual Agent in this transaction. By checking 'yes,' initialing below, and signing this Agreement, Buyer acknowledges that Buyer has read and understands this Paragraph and voluntarily consents to Licensee acting as a Dual Agent (that is, to represent BOTH the seller and the buyer or the landlord and the tenant) should that become necessary." Under this paragraph is a place for the buyer to check Yes or No and then sign his or her initials. Yes or No If the buyer chooses "No," then it is obvious that he or she is not willing to consider a dual agency relationship under any circumstances for the purchase of a home. However, checking "yes" is not a guarantee that the buyer will ultimately agree to dual agency. By checking "yes" to this paragraph, the buyer is only acknowledging that the possibility of dual agency exists and that he or she has read the paragraph and understands what it means.

Conducting a Showing

As we said on a previous screen, plan the route you take from one showing to another. It's just as important to sell the neighborhood as it is to sell the home. If feasible, drive by those neighborhood features that you know will interest the buyers. Make positive comments about the neighborhood, attempting to educate the buyers about its unique characteristics. Ask the buyers questions to help sell the neighborhood's features. For example, if the parents told you that their son Johnny is avid in sports, ask Johnny what sports he plays as you drive by the new sports complex. Sometimes it's helpful to point out recent sales of similarly-priced properties in the neighborhood. It will increase the buyers' view of you as a successful agent and help solidify their price range. Once inside the home, point out those features that are important to the buyers and de-emphasize those that are not important. Remember, very few homes have all the features a buyer wants. If the buyers have brought their children along, involve them in the showing by asking questions like "Which bedroom would be yours Sally?" If the buyers have brought friends or extended family members along, treat them as allies in the sales process.

Understanding Your Buyers

As you are selecting and showing homes to prospective buyers, it is important to recognize and cater to the particular situation the buyer is facing. A first-time buyer is going to react very differently from a buyer who is being relocated from another city. You are not only a broker; you are also a counselor and need to be sensitive to these situations. By recognizing the motivations behind the buyer's intentions, you can greatly improve your chances of finding a home the buyer will want. Buyers fall into several main categories: First-time buyers Upsizing or downsizing buyers Relocation buyers Investors

Duties of Protection - Confidentiality

As you may remember from a previous seller chapter, the three duties of protection also have an acronym - CAL- Confidentiality, Accounting, Loyalty. Confidentiality The buyer-client may want to hide his or her identity from the seller. For example, if a famous person wanted to buy a property, most sellers would not come off the asking price because they think famous people have lots of money. The client, after consulting with his/her attorney, may write in someone else's name on the buyer's line of the offer, such as an assistant. Then the client would add the words "and/or assigns." The contract would be assigned to the famous person on closing day. In many cases famous people don't want their names to appear in the public tax records either, so they may form a family trust with a generic name to own the property so that no one can find them through the public records. A licensee representing a doctor as a buyer-client may have to convince the buyer to leave the letters MD from the end of his or her name. Those letters were hard to come by and the physician has to work hard for them, but sellers tend to think doctors have all the money in the world and they are not likely to come down on the asking price either if they know the buyer is a doctor. Note: Remember that confidentiality is the only fiduciary duty that continues beyond the agency relationship, unless a client gives a licensee permission to share the information with others.

Representing Buyers

Before you get a buyer to sign a buyer representation agreement, you must discuss several issues with the prospective buyer. You should make the same disclosures to the potential buyer client that you would make if you were doing a listing agreement with a seller. You must discuss the different forms of agency that are available and explain what the rights and responsibilities are of each type. You should clearly outline all of the services that the buyer could expect to receive from you. You must deal with any questions about compensation. In Illinois it is customary for the buyer's agent's brokerage firm to receive compensation from the seller. However, a licensee can negotiate a commission from the buyer the licensee is representing. Note: Remember that if the brokerage firm receives compensation from more than one party in the transaction, that licensee must disclose that fact in writing to all the involved parties. Once you have discussed all these issues, if the buyer agrees to sign a buyer representation agreement, then your brokerage firm has entered into an "employment" contract and you are now the buyer's designated agent. The buyer is now the principal to whom you owe duties. It's now your job to protect your buyer's interests throughout the entire transaction process.

Preparing for the Showings

Before you show any properties, you must be well prepared. First, determine your approach. After selecting the properties you will show, visit each one (if you have not already done so). Map out the best route from one property to another, keeping in mind the location of schools, parks, shopping malls and other neighborhood features that may interest your buyers. Make notes about what specific features of each property you want to emphasize when you show it. Some agents like to drive the prospects into the home's driveway to create the sense of "coming home." Other agents like to park across the street from the home to demonstrate the "curb appeal." Note: If after seeing the exterior of the home the prospects decide that they would rather not view it, drive off and call the listing agent immediately to let her know you will not be doing the showing. Many agents prefer to show no more than 3 or 4 properties at a time. This cuts down on confusion for the buyers and allows the agent to get specific feedback on the buyers' likes and dislikes of each of the viewed homes. However, there may be circumstances that dictate the need to show more than just 3 or 4 properties. For example, if the prospects have flown in from out of town to view property, you'll need to show as many homes as possible in the time you have. You can minimize confusion by giving the buyers fliers with photos of each property you show. Also, it's helps to schedule breaks between the showings of every 3 to 4 properties. Use this time to have a cup of coffee and get the buyers' feedback on the homes they just viewed while it's still fresh in their minds.

Last Minute Objections

Believe it or not, last minute objections are good because they are signs the buyer is ready to submit an offer. The objections signal they need reassurance. Being ready with reasonable answers to their objections will help pave the way to drafting the offer. Some of the more common objections will be that the price is too high, the kitchen needs to be updated, the taxes are too high, etc. The objections help you focus on overcoming the most pressing concerns of the buyer. It means they have narrowed down their concerns to the ones most important to them. The first thing you should do is acknowledge the buyer's concerns. Do not attempt to dismiss them; this will create an impression that you are trying to hard sell them and buyers do not like that. Objections About Price Most buyers are going to object to the price and will want to offer a lower price. It is almost a given in a real estate sale that buyers believe the listing price is set at a level for built-in negotiation. When buyers object to a price, ask the buyers what they believe a fair price would be and how they arrived at that price. Most often, they will respond that they just think they should go in at a low price and negotiate up from there. There are a couple of ways to handle this approach. You might point out to them that going in too low can put off a seller and make a seller not want to negotiate at all. Use your judgment as to whether you think the buyers' proposed offer is insulting. Perhaps you know that the seller is motivated and might entertain a low offer. If you think the buyers' price is so low as to be insulting, encourage them to start higher by suggesting that the comparables for recent sales indicate that the seller's price is not out of line. Be prepared to show the buyer that by quibbling over price, they stand to lose the home

More Details

Building Information - Capture details regarding the following: Sewer or septic Type of basement Type of parking available Builder name Style of construction Specific information about the home if it is a manufactured home Environmental certifications Foundation type Building condition Roof type Exterior finish Architecture Interior Features - Include information about items such as: Finished versus unfinished square footage Energy sources Heating and cooling type Floor coverings Interior features, including fireplace, ceiling fans, walk-in closets, sauna, etc. Appliances that stay Total number of fireplaces and full, three-quarter and half bathrooms Room Location - Indicate where each of the rooms is located relative to the main floor. Utility/Community - Describe information about the community features, the source of the drinking water supply, the names of the utility companies, and nearby bus line.

Types of Buyer Agency Agreements

Buyer agency agreements describe the terms of the relationship between the buyer's designated agent and his or her buyer client, and is a contract between the buyer and the brokerage firm that the buyer's designated agent represents. The agreement addresses such things as the duration of the agreement; the commission that will be paid; and the various rights, duties, and obligations of the parties. Similar to listing agreements, there are three common types of buyer agency agreements: Exclusive buyer agency agreement - This agreement is also known as the exclusive right to represent. With the signing of this agreement, the buyer is legally bound to compensate the brokerage firm when the buyer purchases any property of the same type as described in the agreement. The brokerage firm is entitled to payment regardless of who locates the property. This means that even if the buyer finds the property himself or herself, the buyer must still pay the agreed upon commission to the brokerage firm. Exclusive-agency buyer agency agreement - This exclusive agreement is between the brokerage firm and the buyer. However, with this type of agreement the brokerage firm is entitled to payment only if the designated agent or another brokerage company actually finds the property that the buyer purchases. If the buyer finds a property himself or herself, the buyer does not owe a commission to the brokerage firm. Open buyer agency agreement - This is a nonexclusive agency agreement between a buyer and a designated agent. A buyer can enter into similar agreements with an unlimited number of other designated agents. Only the brokerage firm whose designated agent actually locates the property that the buyer eventually purchases is entitled to the commission.

Duties of Action - Care

Caring for the buyer-client is more extensive than being with a customer. The care comes in by listening to what the buyer wants and then locating it for the buyer. Of course, there may be some adjustment in the understanding of what the buyer is looking for in the mind of the licensee as properties are viewed. The buyer will make statements about what he or she likes or doesn't like and other properties may have to be considered. The care also comes into play as the agent now gives the buyer a market analysis to see what other homes are selling for in the same area. The licensee will also use care when creating an offer to avoid being offensive to the seller while at the same time protecting the negotiating position of the buyer. Care will come in again as the agent leads the buyer through the "maze" from the offer to the close. By being professional in his or her conduct, the agent has taken care of the client. The client will be able to stay calm as the licensee walks the buyer through the transaction. Agents should look at themselves as counselors who lead the buyers to discover something about themselves or another person.

More Agreement Provisions

Commission This paragraph states that if the broker produces a "ready, willing and able buyer" to close the property on the terms outlined in the listing agreement, the seller will pay a commission. There is space to indicate a percentage amount of the purchase price, plus room to add an "additional fee." This paragraph also states that the broker would be entitled to the commission if, within 180 days of the termination of the listing agreement, the property sells to any person to whom the broker showed the property prior to termination, unless the property was listed with another brokerage firm after termination. Dual Representation This paragraph explains dual representation to the seller. It outlines what a licensee can do for clients if they agree to dual representation as well as what a licensee cannot do for clients under this form of representation. The seller is asked to check "yes" at the bottom of the paragraph IF he or she acknowledges and agrees that the licensee may undertake dual representation should the situation arise. The seller may choose to check "no." Additional Terms and Property Information This paragraph addresses such items as: Exemptions - Homeowners, Senior citizens, or Senior Freeze Monthly assessments Percentage of interest in common elements Lot size Heating costs R Factor of walls and ceiling Ordinances for smoke and carbon monoxide detectors

Other Listing Issues

Compensation As you know, after the concern over setting the listing price for the home, most sellers are next concerned about the amount of commission they will have to pay the broker. For this reason, it is imperative that the issue of compensation be thoroughly discussed and then stated specifically in the listing agreement. Critical issues to discuss: Does the broker earn commission solely on the sale of the property or on any transfer of interest the broker creates? Will the seller pay the commission as a percentage of the purchase price or as a flat fee? When will the seller pay the commission? If this discussion doesn't go well, the licensee may not get the listing after all. So, it's important to let the sellers know that the commission amount is fully negotiable between the parties. Note: Remember that telling a seller that there is a set or standard commission violates antitrust laws. Home Warranties It's often a good selling point for a seller to offer a home warranty with the property. Licensees should be able to explain the different types of packages available, as sellers are not always aware that they exist or how they work. If a seller chooses to offer one of these warranty packages, the listing contract should have information such as: What items the warranty covers Whether the seller will pay for it If the buyer can purchase the warranty at his or her own expense if the seller is not willing to pay What the deductibles are

Agreement Provisions

Compensation This paragraph - contained in every agreement - must be carefully explained to the buyer. The buyer's broker could receive commission in one of three different ways: The seller could pay the commission. The buyer could pay the commission. The seller and the buyer could both pay the commission. The compensation paragraph states that the buyer's broker will receive the commission from the listing broker under a cooperative brokerage arrangement or from the seller if there is no listing broker. However, this paragraph also indicates that if the seller or the listing broker does not pay the required commission, the buyer will pay a set percentage to the broker. There is a space to write in what that percentage will be. This paragraph also goes on to say: If the buyer purchases a property that was shown by the broker during the term of the agreement within some number of days or months after the termination of the agreement, the buyer will owe the broker the percentage commission indicated earlier in the paragraph. There is space to indicate how many days/months the buyer will be liable for the commission. If the buyer has an agreement for a purchase and the transaction does not close due to some fault of the buyer, the broker is still entitled to the commission set forth earlier in the paragraph. There is also a place to indicate if the buyer will pay the broker a non-refundable retainer fee and, if so, how much the fee will be.

Ask the Right Questions

Don't "state the obvious" with comments like "This is the kitchen." Instead make comments and ask questions that will sell the features of the kitchen. For example, point out that the kitchen has 27 spacious cabinets and a large pantry or ask a question like "Would you use these slide-out drawers for spices or kitchen utensils?" A sales technique called a "tie-down" is particularly useful when showing houses. A "tie-down" is a statement that elicits a positive response. For example: "You really need a workroom for your woodworking, don't you?" "You really need to be close to the middle school, don't you?" "This kitchen is big enough to accommodate your large family, isn't it? The idea is that a lot of small "yes" answers create a positive imprint on the buyer's mind. Selling the home by asking who, what, where or how questions for each room and feature helps the buyers see themselves in the home. A helpful technique when showing property is to invite comparisons from one property to another. For example, ask questions like: "Did you like the workshop in the garage of the last home or does this home's basement workshop suit you better?" "Did you like the double vanity in the last home's master bath or would you prefer having the whirlpool this home offers?" These kinds of questions help surface what is really important to the buyers and get them prepared for making that big decision.

Dual Agency

Dual agency exists when a real estate licensee represents both the seller and the buyer or the landlord and the tenant in the same transaction. Because the goals of the buyer and the seller (or the landlord and tenant) are different, this type of representation can easily result in a conflict of interest for the broker. For example, if John signs a buyer's agency agreement with broker Tim and then John becomes interested in a home that is listed by Tim, Tim becomes a dual agent. Being a dual agent is extremely difficult, if not impossible. Since an agent owes statutory duties to the principal, a dual agency situation puts the agent in the middle of a situation where he or she has to balance the interests of two principals. The interests of each client could be vastly different, if not completely opposite. The confidential information of one client may be vital to the bargaining position of the other. What if the seller tells the agent that he is willing to take $5,000 less than the asking price? This is key information for the buyer, but can the agent share it? Even the fairest and most careful of agents would have extreme difficulty in giving undivided loyalty to both parties, or in other words, representing the interests of both parties fully and equally.

Consenting to Dual Agency

Even though the buyer has checked "Yes" to the Dual Representation paragraph of the Buyer Representation Agreement, the licensee must still get the written consent from ALL parties to the transaction prior to acting as a dual agent. According to Illinois law, a licensee acting in a dual agency capacity in a transaction must obtain a written confirmation from the licensee's clients of their prior consent for the licensee to act as a dual agent in the transaction. This confirmation should be obtained at the time the clients are executing any offer or contract to purchase or lease in a transaction in which the licensee is acting as a dual agent. This confirmation may be included in another document, such as a contract to purchase, in which case the client must not only sign the document but also initial the confirmation of dual agency provision. That confirmation must state, at a minimum, the following: "The undersigned confirm that they have previously consented to (insert name(s)), ("Licensee"), acting as a Dual Agent in providing brokerage services on their behalf and specifically consent to Licensee acting as a Dual Agent in regard to the transaction referred to in this document." Again, it's important that your buyer client understand the ramifications of agreeing to the potential of a dual agency situation.

Assessing the Buyer's Needs

Finding the right home is not simply a function of affordability. Your buyers' lifestyle, family needs, and other factors will play a large part in their decision about the size and type of home they want, the location, and the physical condition of the property. If the buyer enjoys repairing and remodeling and has the time for it, an older "fixer-upper" might be just the ticket. On the other hand, if the buyer leads an active life away from home and has little time for yard work and maintenance, that buyer might be a good candidate for a condo or townhouse. Using a buyer's needs analysis form can help the buyer narrow down and categorize property features into needs and wants. A NEED is something the buyer must have; something he or she can't do without. For example, if a buyer has a physical disability, he or she will need a one-story accessible home. A WANT is something the buyer would like to have. It is not absolutely necessary, but it would be a good thing to have. In our example of the person with the physical disability, he or she might want a fireplace, but a fireplace is not absolutely necessary. You can put together a worksheet to help you learn about your buyers needs and wants and have them fill it out before you start locating properties for them to see. Your managing broker might already have a form that you can use.

More Provisions

Fixtures and Personal Property This paragraph provides an extensive list of property items with a place for the seller to check each item that will be included in the sale of the property. There is also space to write in any items that will be included that are not represented in the list and those items that will be excluded from the sale. Seller's Information The above paragraphs are followed by a section for the sellers' and the managing broker's signatures and dates. (The date of the broker's signature becomes the effective date of the contract.) Then follows space for detailed information about the sellers the brokerage company and the designated agent. General Provisions The last page of the listing agreement outlines a number of provisions that you will need to explain to your sellers. Some of the more important items addressed include, but are not limited to, the following: Fair Housing Act - The seller must know and understand that it is illegal for a licensee to refuse to show, negotiate for sale, or otherwise make a property unavailable to any potential buyer based on the protected classes. Disbursement of Earnest Money - The seller needs to understand what will happen to the earnest money in the event of a default. Commission - This paragraph states that no amendment to the compensation can be made unless done so in writing.

Duties of Protection - Accounting

For all buyers, customers, and clients, a wise licensee will keep a list of properties that the buyer has seen. It would be a good idea to place the date and time on each MLS sheet after showing the property to the buyer and filing it away. Some buyers have been known to come back three weeks later and want to see the 4th house again. How is the agent supposed to know which one that is unless he or she has kept good notes? Being out with so many people it is hard to keep up sometimes with what people have seen. Another aspect of accounting is that once the earnest money check has been written, the buyer's agent should know where the check is at all times. Remember that according to Illinois law, all earnest money checks must be deposited in the managing broker's escrow account on the next business day.

Introduction

For many years brokers represented sellers only in residential real estate, but not buyers. Buyers were customers and did not receive the protection offered in agency representation. In some cases, buyers were represented in commercial real estate transactions. Real estate licensees often implied buyer representation by their actions, leading consumers to believe the agent showing them property, writing an offer, and generally assisting them through negotiations and on to closing was indeed their agent. Buyers have not been accustomed to entering into a written agreement with a real estate agent to purchase property. The transition time has been long and still many buyers are reluctant to sign a contract to be represented. Buyer agency is created by the designated agent and the buyer when entering into an express Buyer Representation Agreement with the designated agent's brokerage firm, just as seller agency is created in a Listing Agreement. A careful study of the representation agreement is a sure way to be able to correctly explain the process and benefits to your prospective buyers.

Other Requirements

HUD Radon and Mold Notice All buyers with HUD-backed sales contracts must sign a Radon Gas and Mold Notice and Release Agreement (Form HUD-9548-E). Click on the link below to view and print a sample copy of the form. Radon Gas and Mold Disclosure - HUD The form notifies prospective purchasers of single-family property that "radon gas and some molds have the potential to cause serious health problems," and encourages them "to obtain the services of a qualified and experience professional to conduct inspections and tests regarding radon and mold prior to closing." All purchasers are required to sign the form to "release, indemnify, hold harmless and forever discharge" the seller and the seller's marketing and management contractor (M&M Contractor) from any and all claims and liabilities resulting from the presence of radon or mold on the property. Carbon Monoxide Detectors Illinois homes are required to have at least one carbon monoxide alarm in operating condition within 15 feet of every room used for sleeping purposes. Homes that do not burn fuel for heat, ventilation or hot water; are not connected to a garage; and are not near a source of carbon monoxide (as determined by the local building commissioner) are not required to install carbon monoxide detectors.

Counseling the Seller Through an Offer

Hopefully at some point during the listing period, you will have an offer to present to your sellers. You will set up a meeting with the sellers at which point you should be well prepared to present the offer. We will discuss presenting and negotiating offers in detail in a later chapter, but for now, let's do a synopsis of what may be expected of you. When you arrive for your meeting with the sellers, choose a comfortable place to make your presentation where you can lay out your documents and sit close to your sellers. Organize your presentation to cover: A brief review of what has happened over the life of the listing Information about the buyers The offer itself Review the Listing Take a few minutes to review what has happened over the life of the listing, including such things as: Advertising efforts Open houses Showings Responses to showings Previous offers that may have been received on the property Make sure this part of the presentation is brief, because the sellers will be anxious to hear the offer. However, this review is important because it helps set the stage for the sellers' reaction to the offer you're about to present.

Planning the Showings

If the buyer is actually going to be looking at your listing, make sure they agree to dual agency (if the seller has already agreed to dual agency). If they do not agree to dual agency, or if you did not have the seller's permission to be a dual agent, then be sure to treat the buyer as a CUSTOMER and give them a notice that you will NOT be their agent. For illustration purposes, in this unit, we will presume that you are showing properties that are listed by others. Don't forget to give the buyer a written notice that you are a Designated Agent, as required by Illinois License Law. Organization is the key to successful showings. Clients will become irritated if a broker has not thought through the showing process. If the clients have a home they must sell before they can buy, you probably should minimize the number of showings. Few sellers will accept a contingency for the buyers to sell their houses, unless the sellers have a particularly difficult house to sell. Be sure to spend a sufficient amount of time with the buyers to find out what they really are looking for. Listen to them carefully, ask probing questions, and understand who they are and what they need. Buyers will usually tell you the "deal killers." Presentation Package It takes a little work, but buyers will appreciate your preparing a presentation package for them. For a sample presentation package, go to www.realtytools.com. Good presentation packages have a property information sheet, photos, a map and a place for the buyers to make notes. Other important things to note in the presentation package are the school districts the properties are in, shopping and recreational facilities, proximity to sporting venues, strong neighborhood associations, and transportation routes. School districts can be a terrific selling point, so be sure to emphasize

Prepare for Showing Calls

If you have done your homework and placed effective ads in the newspaper, updated your website, and posted your signs, you will receive phone calls about the property you have listed. When you receive these calls, the most important thing to remember is to get an appointment with the caller. You are not going to sell the property over the phone. There is no excuse, however, for not getting an appointment when a prospective buyer calls to inquire about a house. That is why they are calling, after all. Be prepared to take an inquiry call at all hours. Keep information sheets about the listings in a handy binder, and refresh your memory about them from time to time. A caller might call and ask about one property, and there might be several that would suit his needs. You do not want to be stumbling around trying to gather information when the person calls. In particular, be aware of other listings in the same neighborhood for which the caller is inquiring. Most often, it's the neighborhood the callers are interested in. When the call comes in, ask the caller how he or she found the property. If he saw it in a drive-by, he might not know the price on the property. Be prepared with a lower priced alternative in the same neighborhood. Once you tell him the price of the house about which he called, you will know whether he can afford it. If you give him an alternative, you keep him on the line long enough to get the appointment. If the caller found the house on the Internet, the caller already knows about the price and the features of the house. The caller would not bother seeing a house if it were not in the price range. Some callers may have a list of houses they have seen on the Internet. If the caller saw an advertisement in the newspaper or elsewhere and saw the price of the house, he is probably interested becaus

Anticipation Objections

If your buyer is interested in a house, and you have spent time with the buyer reviewing the features of the house, you will be aware of the objections the buyer will be raising. Perhaps the house has an older roof on it. You know that the buyer is going to object to the house because of the roof. You could address the objection before the buyer has time to raise it as you are discussing the offer. Say something like, "Would you like to take the roof condition into account when you make an offer?" This way you address the buyer's concern and keep the buyer from turning the objection into a reason not to make an offer. You should also attempt to minimize the objection if the property has most of the features the buyer is seeking in a home. For example, a buyer likes a home that has almost everything the buyer wants, except a swimming pool. You could minimize the objection by pointing out the features that meet the buyer's criteria and by pointing out that the buyer can install a pool or that a community pool is close by. Overcoming the Reluctant Buyer Buyers sometimes have the philosophy that there is no rush to make an offer -- the property will wait. This may be true in a down market, but if the home is a nice home in a good area, it can turn over in a matter of days after being listed. You need to create the urgency to get these buyers to act. You can do it with facts about how long homes in the area stay on the market, how many showings the property has had, and other facts that will point out to the buyer that the home may not be around tomorrow.

Motivation and Urgency

It's also important to find out the buyers' motivation and urgency so you can get an idea of how serious these buyers are. Motivation Ask questions such as: Do you currently own or rent? How long have you lived at your current address? How long have you been looking for a home? Have you seen any homes you liked? If so, why didn't you make the purchase? Will you be financing or paying cash? Have you been preapproved for a loan? Urgency Ask questions such as: How soon do you want to move? Why is that timeframe important? How would it affect you if you did not find a home you liked by then? What would you do if we found you the right home today? Is there anything you need to take care of before you could purchase a home? If you have a home to sell, is it on the market now? Could you purchase a home without selling your current home?

Additional Provisions

Illinois Buyer Representation Agreements also include these provisions: Limitation on Broker's Liability - This paragraph says that the brokerage firm or designated agent cannot be liable for any amount greater than the amount of compensation the broker receives from the listing broker or seller. RESPA Compliance - The buyer will furnish all information required to comply with the Real Estate Settlement Procedures Act. Dual Representation - This paragraph explains dual representation to the buyer. It outlines what a licensee can do for clients if they agree to dual representation as well as what a licensee cannot do for clients under this form of representation. The buyer is asked to check "yes" at the bottom of the paragraph IF he or she acknowledges and agrees that the licensee may undertake dual representation should the situation arise. The buyer may choose to check "no." Nondiscrimination - This paragraph states that the broker and licensees will not act in any way to either induce the buyer to acquire or discourage a buyer from acquiring a property based on issues of protected classes. Miscellaneous Provisions - Other issues such as amendments, successors and assigns, and a definition of "days" are addressed in this paragraph. These paragraphs are followed by a section for the buyers' and the managing broker's signatures and dates. (The date of the managing broker's signature becomes the effective date of the contract.) Then follows space for detailed information about the buyers the brokerage company and the designated agent.

Loan Processing

In order for you to counsel your buyers accurately, it's important for you to have some understanding of how lenders qualify buyers for loans. Lenders qualify buyers using what are called qualifying standards or loan underwriting standards. When a lender is processing a loan, there are four critical procedures involved. The lender must: Determine the ability of the borrower to repay the loan. Estimate the value of the property that is collateral for the loan. Research and analyze the marketability of the title. Prepare the documents necessary to approve the loan and close the transaction. On the following screens, we'll discuss how the lender determines the borrower's ability to repay the loan and estimates the value of the property. Lenders use loan underwriters to process the applications and decide whether to accept or reject the loan. All mortgage loans are risky for the lender. Lenders run the risk that: The borrower will not be able to repay the loan. If the borrower defaults on the loan, the property will be worth less than what is still owed on the loan.

Servicing Listings - Advertising Plan

It's important to remember that there are both federal and state restrictions on real estate advertising. According to license law, all advertising must be honest and cannot be misleading in any way. You must use the managing broker's name (as licensed) in the ad, unless you are advertising your own personally-owned property - in which case you must state in the ad that the owner is a licensed real estate professional. The federal Truth in Lending Act also has provisions that pertain to advertising that licensees who advertise private homes for sale must follow. These provisions pertain to the advertising of credit terms and certain other disclosures that must be made in certain types of advertisements. We will discuss the Truth in Lending Act in detail in a later chapter. Important Reminder: All advertising done for a property is also subject to fair housing laws. We will discuss Fair Housing in detail in an upcoming chapter.

Making Recommendations

Keep in mind that once you present an offer, the seller can take one of three actions. Accept the offer exactly as it is written. Reject the offer totally. Reject the offer and submit a counteroffer to the buyer for his or her consideration. If you believe that the offer you are presenting is a reasonable and fair offer, your goal should be to seek the sellers' acceptance rather than a counteroffer. Rejection There are not too many instances when you would recommend an absolute offer rejection; however, they do exist. If you feel that the offer is ridiculously low or the buyers are seeking to take advantage of the sellers in some way, you might recommend rejection. But do make it clear to the sellers that once an offer is rejected, it's "dead in the water." The sellers have lost their right to enter into a contract with those buyers. Counteroffers It's important for you to make it clear to the sellers that a counteroffer is in effect a rejection of the original offer and submitting a counteroffer gives the buyers a way out.

Lead Effects

Lead is a heavy metal that is naturally distributed in small amounts on the surface of the earth. Lead can be present in air, drinking water, food, contaminated soil, deteriorating paint, and dust. Lead-based paint cannot be absorbed through the skin. However, it is dangerous when it enters the bloodstream through ingestion or inhalation. That means a person is not at risk unless he or she eats lead-based paint or inhales lead-based paint dust. Airborne lead enters the body when someone breathes or swallows lead particles or dust. Unfortunately, before it was found to be so dangerous, lead was used in paint, gasoline, water pipes, and many other products. Health Effects Lead is known to cause difficulties during pregnancy, reproductive problems in women and men, high blood pressure, and muscle and joint pain. Other health problems that have been seen include: Memory Problems Seizures Confusion Clumsiness Changes in behavior Severe abdominal pain Constipation Kidney failure In children, studies have shown that lead alters the development of growing brain cells. Also, children are more likely to show adverse health effects at much lower levels of exposure than adults. Illinois has higher rates of lead poisoning among its children than any other state in the nation. In 2008, more than 5,000 Illinois children were identified with elevated blood lead levels.

Applying Income Ratios - Example

Let's look at the process using a sample set of buyers. Jim and Linda Kent are buyers with these income sources. Jim works for the US Postal Service and makes an annual salary of $48,000. Linda has been selling household cleaning supplies as an independent company representative for Amway and has made about $1,500 a month for the past four years. She also has been cleaning homes for the past six months, bringing in an additional $500 a month. First, let's determine which of the Kent's income would be considered stable. Obviously, Jim's salary is stable. The income from Linda's cleaning supply sales would also be considered stable, but not the housecleaning money. So, we'll calculate Jim's monthly income first. $48,000 ÷ 12 = $4,000 per month Then we'll add Linda's monthly income to Jim's. $4,000 + $1,500 = $5,500 So, it appears that the Kent's monthly income is $5,500. To find out the approximate maximum loan payment they would qualify for, we'll multiply their combined monthly income by 28%. $5,500 X .28 = $1,540 The maximum monthly payment the Jim and Linda could afford would be $1,540. If we figure that about 20% of that amount would be for taxes and insurance, their maximum principal and interest payment would be approximately $1,230. Note: The down payment money the buyers' have available also plays a role in affordability. If the down payment is less than 20%, the buyers will likely have to pay private mortgage insurance (PMI). We'll discuss many of these issues in more detail in a later chapter on financing.

Review the Offer

Make sure your sellers fully understand every provision of the offer. Provide a copy of the offer to every seller present at the meeting, so that they will not have to look over one another's shoulders. Go through the offer one line at a time and answer the sellers' questions as they come up. If any of the questions involve legal matters, be sure to advise the sellers to consult a lawyer. You should never attempt to answer any legal questions yourself. Remember to advise the sellers that price is not the only important option. The other terms are equally, and sometimes even more, important. Although every provision of the offer is important to explain and discuss, these are particularly important: Proposed closing date Proposed possession date Included items list - this includes personal property that transfers with the sale Contingencies - financing, inspections, sale of buyers' home or others Seller actions prior to closing - repairs, trash cleanup, etc. Once you have explained every paragraph, ask the sellers to approve the agreement by signing it. If it's a full price offer, it should be easy to process through the purchase and sale agreement and obtain the signatures.

Duties of Action - Obedience

Many of the instructions a buyer's agent gets from the buyer are the same ones received from a customer. "I want the price to be under $..." "I want the house to be in that neighborhood." "I want my kids to go to that school." These are easy things to obey because if the licensee does not, then the buyer will go somewhere else. The buyer may have a health request that needs to be addressed. For example, "I have asthma. Don't show me any houses with dusty carpets." That is going to be a difficult request to obey. The MLS does not say whether there are dusty carpets or not in the house. Just as with sellers, the buyer-client could make a request that cannot be legally fulfilled. "Don't show me houses with THOSE kinds of people as sellers because I won't buy from them." The agent will have to explain what can and cannot be done. Then the licensee and the client may have to decide to withdraw from the agency relationship. The buyer may request to see homes after 7pm because that is when the buyer gets off work. The licensee may have just a small number of homes to show under those circumstances because owner-occupied homes are not easy to show at that time of night.

Modifying or Extending a Listing

Modifying a Listing If at any time during the course of the listing period, you decide that you made an error in your assessment of what the property is worth or if the market conditions change in such a way as to suggest the price should be modified, you'll need to let the sellers know immediately. The sellers may respond negatively to suggestions about a price modification, but it is possible to persuade them to your point of view, especially if you can support your recommendations with a solid argument. Sellers don't want to see their homes on the market for a long stretch with no activity and little chance of a sale. Also, alert the members of your MLS of the price change through an email rather than hoping they will notice it on the MLS site. Extending a Listing Schedule a meeting with your sellers a few weeks before the listing is set to expire. Review with them everything you have done to market their property and let them know what other marketing plans or ideas you may have. If you have done a good job for your sellers and have kept them informed, chances are good they will decide to extend the listing. If you are successful in obtaining an extension, be sure a "thank you" letter goes out to them from your broker and let the MLS know about the extension.

Qualifying Activities for Buyers

Most home buyers, especially those buying for the first time, have little idea of what they can really afford to pay for a home. Some buyers are certain that they know what they could afford in a monthly payment. However, what a buyer may be willing to pay per month on a mortgage loan may be too high a percentage of his or her monthly income to be acceptable to a lender. Making the payments on a mortgage falls squarely on the shoulders of the home buyers. However, it's the lender who will make the decision as to whether or not the buyers qualify for a loan and how much that loan will be. When working with buyers, it's critical for both you and them to have a solid idea of what they can afford before you start showing them homes in a particular price range. By having your buyers preapproved, you can avoid wasting a lot of time showing them homes that are outside of their price range - either too high or too low. And more importantly, you can help the buyers avoid the embarrassment and disappointment of having their loan application rejected, if they make an offer on a home that it turns out is not within their means.

Servicing Listings - Advertising Plan

Multiple Listing Service (MLS) Send the information on your new listings to the MLS as soon as possible, so that other agents will have the information quickly. Once the listing is uploaded to the MLS, print a copy and send it to your sellers as part of your weekly activity report. Your Internet Site Place your new listing on your own or your company's Internet site as soon as possible after getting the listing. As with the MLS, as soon as the information on the property has been uploaded to your site, print off a copy and send it to the sellers with the weekly activity report. Home Tours Also referred to as caravans, these tours are very beneficial to familiarize brokers and agents with the new listings. They are usually set up as morning tours on a weekly basis. There are two types of home tours. Office Tours - The agents from your firm tour the property. It would be beneficial to have the licensees fill out a property evaluation form after they do their walkthrough. These evaluations will give you valuable information to share with your sellers - both the positive aspects and those things the other professionals see as areas needing improvement. MLS Tours - Many listing services set up tours for agents by area, since there are usually too many listings for any agent to see in a morning's time. If your listing is on an MLS tour, have property evaluations available for the agents to fill out.

Radon

Of all the environmental hazards facing us, the easiest to detect and mitigate is radon. Radon is an odorless, colorless, tasteless, and radioactive gas created in the ground where uranium and radium exist. In certain homes, it can build to dangerous levels. Because radon cannot be seen or smelled, it's impossible to sense the presence of radon without testing for it. The potential for elevated radon levels within a building rises with the more uranium found beneath the soil upon which the home is constructed. The uranium breaks down into radium, which then decays into radon gas. The radon gas moves up through the soil into the atmosphere, where it dilutes and is of little concern. The problem exists when it enters the building constructed on top of the soil, where it can accumulate and present a health concern for occupants. A radon problem can develop, surprisingly, from a very small amount of radium, which makes it even more difficult to predict which areas and homes might have a problem. Depending on what driving forces help move the radon, and the nature of the pathways open to it, radon can travel varying distances. Houses actually draw radon inside them by acting as a vacuum. Radon can enter the house through: Cavities in walls Joints in construction materials Gaps in suspended floors Gaps around utility pipes and wires Crawl spaces that open directly into the building Openings around pipes or sump pumps Cracks in concrete floors or foundation Radon can be detected by testing for it. Any homeowner can test for radon gas in his or her home simply and easily. Or, the homeowner can hire a professional company to perform a test.

Offer Acceptance

Once an offer (or a subsequent counteroffer) is accepted, a contract is legally formed. Both parties are bound to complete the contract. When accepting an offer, these three things are of paramount importance. The person or persons who made the offer or counteroffer must receive notice of the acceptance. The acceptance must be made in a certain manner. None of the terms of the offer can change as a result of the acceptance. Moving Towards Closing Many agents may think their job is over once an offer is accepted. But in many cases, the most difficult tasks are yet to be done. Since the broker doesn't receive the commission until the transaction closes, it's important to work diligently to ensure that the closing actually happens. Many people are involved during the escrow period and we all know that the more persons that are involved in an activity, the more chances exist for something to go wrong. During this period, you should check frequently to see that things are happening on schedule and keep your clients informed about how things are progressing. If you discover small problems, you can get them addressed before they blossom into bigger problems. Keep in mind that many deals fail during escrow, so paying attention during this period can reap great rewards. We'll discuss the details of the escrow period in a later chapter.

Qualifying the Property

Once the lender has determined that the borrower is qualified to receive a loan, the lender will move on to the job of qualifying the property to determine if the property is a good risk. Qualifying the property involves considering the following issues: The type of property (residential, commercial, agricultural) Location Area zoning Value range Neighborhood Actual age/Effective age/Remaining economic life Condition (repairs and any needed upgrades) Special clearances (code compliance, well and septic certifications, etc.) Overall marketability It is important for the lender to determine the market value of a particular piece of property at any given point in time. Since the value of a piece of property changes from one point in time to another, each piece of property must be inspected and appraised carefully to get a proper estimate of its fair market value. Depending on what type of loan the lender wants to issue and the current loan to value ratio, the lender will base the loan amount on either the amount of the appraisal or the purchase price, whichever is less. Lenders who are active in the real estate market usually have experienced appraisers on their staff who are charged with estimating and verifying property values. Lenders who are not as active in the real estate market hire professional appraisers to get an opinion of the property. The information about the borrower's net worth is important to the lender as it gives an indication of the borrower's ability to keep up the payments on the loan in the event that the borrower would lose his or her job.

Income Ratios

Once the lender has established the applicant's monthly income, it's time to determine if that income is enough to pay a loan. The lender will do this by establishing an income ratio and a debt ratio. The income ratio establishes the borrower's capacity to pay by limiting the percent of gross income a borrower may spend on housing costs. Housing costs include the principal, the interest, the taxes and homeowner's insurance, and also may include some monthly assessments for mortgage insurance and utilities. Conventional loans typically require this ratio to be under 28 percent, but FHA guidelines require the income ratio to be no more than 29 percent. A borrower's debt ratio is calculated based on all of the monthly obligations the borrower has, including those items or payments the borrower must make for other debts. These debts could be car payments, revolving charge accounts, etc. Conventional loans usually require the debt ratio be 36 percent or lower, but FHA guidelines state the debt ratio may not be greater than 41 percent.

Information Needed for a Listing Agreement

Once you and your potential sellers have agreed on the listing price, it's time to start collecting information about the property. The more information you collect, the better prepared you will be in anticipating events during the listing period. Collecting a lot of information is particularly important when you will be posting the listing to a local MLS. All the other brokers in the area will be relying on your information to present to their prospective buyers. Information to Collect Information you will need for your listing include the following: County in which the property is located Tax ID of the property Area, community or district Street number and street name City and zip code Listing price Number of bedrooms and sizes Total number of bathrooms and sizes Plat information Lot size (in square feet or acres) Year built School district and names of the schools Occupant type: owner-occupied, presale, tenant or vacant Owner's name, phone number, city and state (if different from property address) Occupant's name (if not owner) Size, type, age and construction of improvements Age of all mechanicals

Moving Forward

Once you have a clear picture of what your buyers say they want and/or need in a property, you have a good starting point for selecting properties to show. However, be aware that as you show properties, you may see a change in the features your buyers find attractive. What a buyer indicated as a need could turn into a want or vice versa. Or some things the buyer said he or she needed or wanted could fall off the list entirely. Watch your buyer's reactions carefully as you show them those properties that fit the profile they gave you. Be prepared to revise that list based on the buyers' feedback about the properties they are seeing. Don't be surprised if that buyer who was adamant about having a "two-story home on no less than 15 acres" falls in love with the one-story home on 5 acres, because he came to realize that the outdoor maintenance would be so much easier, as would having no stairs to climb. It happens - and more often than you might think! But by the same token, be sure that you make changes to the buyer's list based on THEIR feedback and not on what YOU think would be best for them. Making that mistake would put you in jeopardy of losing that buyer.

Servicing Listings

Once you have secured the listing, let your sellers know what to expect in the first few days. Tell the sellers they will be receiving a letter from your broker. Most brokers send a "thank you for listing with our firm" letter to new clients to introduce themselves and to invite the sellers to call the broker directly if any problems arise. Before you leave the house, if the sellers have given you written permission, you'll want to install a lockbox. The lockbox holds the key to the home. Agents can access the lockbox either by using a special lockbox key, entering a code, or with an electronic keycard. Install the lockbox on the doorknob, a metal railing or some other stationary object. Meet with the sellers a day or two after the listing appointment to go over your specific marketing plan with them. At this meeting, go through the home again to re-familiarize yourself with its features and make note of any particular suggestions you might have. Give the sellers some tips, ideas or suggestions on what they can do to help market the property. Let them know that selling their home is a team effort. When you meet with your sellers, you should share important information on the following topics. Homeowner Tips Activity Reports Advertising Plan Showings Open Houses

More on Radon Disclosure

The Act also requires acknowledgement the purchaser to initial each of the following which applies: Purchaser has received copies of all information the seller indicated was provided. Purchaser has received the IEMA approved Radon Disclosure Pamphlet. The agent's then acknowledges by initialing (if applicable) that he or she has informed the seller of the seller's obligations under Illinois law. To comply with the "Certification of Accuracy" section of the form, the seller, purchaser, and agent must all have reviewed the disclosure information and certify, to the best of his or her knowledge, that the information he or she provided is true and accurate. Compliance requires a signature and date by all parties. Note: If any of the disclosures required above occurs after the buyer has made an offer to purchase the residential real property, the seller must complete the required disclosure activities prior to accepting the buyer's offer and allow the buyer an opportunity to review the information and possibly amend the offer. Exemptions New construction is NOT exempt. Recommended actions for tenants: https://iema.illinois.gov/content/dam/soi/en/web/iema/nrs/radon/documents/radonguidefortenants.pdf Also, this Act does not apply to units that are located on a third story or higher above ground level. This includes condominiums and residential cooperative dwellings.

Agent Responsibilities

The Act also states, "A licensee engaged by a seller client shall timely disclose to customers who are prospective buyers all latent material adverse facts pertaining to the physical condition of the property that are actually known by the licensee and that could not be discovered by a reasonably diligent inspection of the property by the customer." Under Illinois law, this means the licensee must disclose any material facts about the physical condition of the property OR the transaction about which the licensee has ACTUAL knowledge. A licensee is NOT considered liable for false information provided to him by the customer, if the licensee did not know the information was false. This rule is not the same in all states, so be sure to remember this IS the rule in Illinois! Note: Stigmatized property does not require disclosure by law. Licensees are directed to check their broker's policies regarding stigmatized property.

Lead-Based Paint

The Environmental Protection Agency and the Department of Housing and Urban Development say that approximately seventy-five percent of homes built before 1978 contain some lead-based paint. The most common exposure to lead by children is through the ingestion of paint chips and contaminated dust from deteriorated or disturbed lead-based paint in these homes. Although lead-based paint can be properly maintained and managed, there are still an estimated 1.7 million children with blood-lead levels above safe limits, mostly due to exposure to these lead-based paint hazards. The U.S. Government and many states have regulations regarding lead-based paint. Many of them apply to evaluating a property for lead-based paint. There are two different testing procedures that are similar but yield different information. Lead-based paint inspections will evaluate all painted surfaces in a complex to determine where lead-based paint, if any, is present. The procedures for lead inspections are outlined by HUD. A lead-based paint risk assessment tests only deteriorated painted surfaces. Dust wipe samples are also collected. This information will help the risk assessor determine if there are any lead hazards. Many property owners decide to get a combination of both tests to determine where on the property lead-based paint is present, as well as what hazards exist. If a child is found to have been poisoned in a property, Illinois may require the owner to perform abatement (permanent elimination of the lead hazard). The Illinois Department of Health has a Lead Program which licenses lead paint inspectors, lead risk assessors, lead abatement contractors, lead supervisors, and lead workers. Note: Anyone who performs lead abatement in Illinois without a license is guilty of a Class A misdemeanor.

Listing Agreement Provisions

The Price This is the place to write in the listing price (or the rental price). This paragraph notes that the Seller may change the price "from time to time" at his or her discretion. The Property This is the place to write the address of the subject property. Possession This paragraph states that the Seller will surrender possession of the property and remove all debris and personal property not included in the sale no later than the closing date that is set in the purchase and sale agreement. Designated Agent This is the paragraph to indicate by name the broker who will be representing the seller. Minimum Services This paragraph describes the three services brokers are required to provide to all customers. We have described these services in other chapters of the course. Seller Obligations Just as the agent has duties to the seller, so does the seller to the agent. This paragraph addresses such items as cooperation, referral of inquiries, property inspections, negotiations, handling of broker's out-of-pocket expenses, etc.

Lead-Based Paint Hazard Reduction Act

The Residential Lead-Based Paint Hazard Reduction Act of 1992 set procedures for disclosing the presence of lead-based paint when selling properties built before 1978. HUD and the EPA released rules to implement section of the Act in 1996. These regulations require that home sellers provide lead disclosures to home buyers who are purchasing a home built before 1978. According to the regulations: Sellers must disclose in writing any information about known lead paint in the home. The seller or landlord must also disclose information such as the location of the lead-based paint and/or lead-based paint hazards, and the condition of the painted surfaces. If sellers have performed lead tests, they must share the test results. For multi-unit buildings, this requirement includes records and reports concerning common areas and other units, when such information was obtained as a result of a building-wide evaluation. Sales or lease contracts must give buyers up to 10 days to check for lead hazards. Home buyers or lessors are not required to test for lead - but they must be given the opportunity to do so. This information may be contained in a special addendum attached to the contract. Include an attachment to the contract or lease which includes a Lead Warning Statement and confirms that the seller or landlord has complied with all notification requirements. This attachment is to be provided in the same language used in the rest of the contract. Sellers or landlords, and agents, as well as homebuyers or tenants, must sign and date the attachment. Home sellers or real estate agents must give home buyers or lessors a copy of the EPA publication "Protect Your Family From Lead in Your Home." (This pamphlet is available in English, Spanish, Vietnamese, Russian, Arabic and Somali.)

Duties of Action - Disclosure

The buyer-client will get all of the same disclosures that the buyer-customer will receive concerning the condition of the property. But the buyer-client will receive so much more. For example, now the buyer can be shown the market analysis on what other properties have sold for in the area. The buyer will also be given a basic game plan of negotiations in order to obtain an acceptable price. The buyer-client will also be told how long the house has been on the market, if the seller will take less, and why he is selling if the information is known. The buyer will become the center of the transaction for the agent representing the buyer. All the details of the transaction will be dealt with in a manner designed to save the buyer money, time, and energy. The buyer will be in a stronger negotiating position when being represented, and will grow comfortable knowing that the agent will disclose all important information that is needed for a decision to be made. The licensee representing the buyer, under an exclusive buyer-brokerage agreement, will also be in a more secure position because she can devote more time to the client, knowing that it is unlikely that the buyer will drift away to another broker the way customers could do, or the way clients, who have not signed an exclusive buyer-brokerage agreement, could do. Note: A licensee representing a client does not breach a duty or obligation to the client by showing alternative properties to prospective buyers or tenants, by showing properties in which the client is interested to other prospective buyers or tenants, or by making or preparing contemporaneous offers or contracts to purchase or lease the same property. However, a licensee shall provide written disclosure to all clients for whom the licensee is preparing or making contemporaneous offers or contract

Underwriting

The evaluation process used to determine the borrower's ability to repay a loan and estimating the value of the property being used as collateral is called underwriting. Underwriting will determine whether a borrower and property meet the minimum requirements established by the lender, the investor, or the secondary market (into which the lender will probably sell the loan). Underwriting Process Once the borrower has submitted a loan application to a lender, the actual underwriting process begins. The underwriter must evaluate the borrower's ability to repay the loan. As we said earlier, one of the principal risks a lender undertakes is the fact that the borrower might default on repayment of the loan and that the borrower will damage the value of the property as security. In addition, the lender runs the risk that, in the event of a foreclosure, the sales proceeds from the property will not be enough to cover the lender's loss. To qualify for a mortgage loan, a borrower must meet the lender's qualifications in terms of income, debt, cash, and net worth. In addition, the borrower must demonstrate sufficient creditworthiness to be an acceptable risk. After you answer a few questions, we'll look at each of the lender's criteria and see how it is analyzed

Investors

The key to satisfying the investor buyers is to find out exactly what kind of property they are searching for and then find it. There are different types of investors. Some want to buy houses that need renovation and then sell them. Some want to buy rental properties. Others want a combination of these factors. These investors do not care about the warm and fuzzy features of a property; they care about the bottom line. They do not need to be sold on a house; they just need to be presented with properties that meet their specific criteria. Interview the investors thoroughly to be sure you know their criteria. Do not try to get them to change their minds.

Getting the Appointment

The main thing to remember when someone calls about a listing is to get as much information you can in the shortest time possible. All you are trying to do is get the caller to set an appointment with you. Ask her what time she would like to meet you. Do not answer her yes and no questions with a yes or no; ask a question in return. You don't want her to receive an answer she doesn't like and hang up without setting an appointment. If Mrs. Jones calls and asks whether the house has an attached garage, respond by asking her if an attached garage is a requirement. If the house does not have the attached garage, be sure to have another listing handy that does. Tell her you would like to show her the house she called about and another that has an attached garage. Before the person can get away, set the appointment and set the location. Some brokers like to pick up their clients and some like to meet the clients at the office. By picking them up at their homes, you do reduce the likelihood of no shows. Regardless, clients do expect to be driven around; do not make them follow you around in their car. By asking questions of the caller, you stay in control of the call. Give the caller a couple of times when you could meet him/her. Ask which time would be better.

Meeting and Qualifying Buyers

The primary purpose of the first meeting with prospective buyers is to pre-qualify them. You need to know their financial resources and needs before you waste their time and yours setting appointments to view houses that are out of their price range or lacking in the features they need. Make a form with questions you want to ask so that you do not forget to ask them during the first meeting. You might ask them whether they currently own or rent, whether their house is on the market, why they are looking for a new home, what features they are seeking, what are the most important factors in their search and whether they have pre-qualified for a loan. Ask them open-ended questions that will lead you to understand their motivation. In the previous unit, we discussed the need for buyers to obtain pre-qualification letters from their lenders to assist them in buying a new home. As the broker, you can also pre-qualify them in terms of finding out the price range of the houses you will show them. The rule of thumb is that the total monthly payment of a mortgage ÷ gross monthly income should not exceed 28 per cent. You will have to find out what amount the buyers will expect to put down and how much will be financed to use the formula. Buyers may be reluctant to give you this information. Explain to the buyers that it is important to know this information so that you can properly identify homes that are in their price range. Of course, the best option is to actually send the information to a lender to obtain a lender's letter of pre-qualification as we talked about in the earlier unit. You can fax the information to the lender from your office on the day of the appointment.

Other Underwriting Considerations

The underwriter will examine the assets and liabilities section of the borrower's application very carefully. The information about the borrower's net worth is important to the lender as it gives an indication of the borrower's ability to keep up the payments on the loan in the event that the borrower would lose his or her job. The lender determines a borrower's net worth by subtracting liabilities from assets. Assets Assets can be financial, such as stocks or bonds; they can be tangible or intangible - an intangible asset would be the cash value of a life insurance policy; or they can be physical, such as jewelry, real estate, cars or furniture. Underwriters typically give more weight to assets that are liquid. Liquid assets are cash or anything that can be quickly converted to cash, such as stocks. When you are dealing with buyers who currently own a home, more than likely they will be counting on the proceeds from the sale of their current home to help finance the purchase of the new home. These proceeds are referred to as net equity. Lenders often treat the net equity of a home as a liquid asset. Liabilities Liabilities include everything a person owes, including credit card debt, charge accounts, student loans, car loans, other installment loans, medical bills, and outstanding taxes. Credit History At the same time the underwriter is reviewing financial and employment information, the underwriter will also send a request for a borrower's credit reports. The credit report indicates the status of current and past accounts. The borrower's payment history is the most important part of the report. The credit reporting agencies use past payment history, the types of credit the borrower has used, outstanding debt, and other factors to evaluate and score a particular borrower. Lenders use these credit sco

Finding the Right Price Range

The upper limit of the buyers' price range consists of the maximum amount of the loan they can secure, plus whatever money they have available to make the down payment and pay the closing costs. Obviously, the buyers know for certain how much cash they have available for the down payment and closing costs. So, to determine the upper limit of their price range, they need to know just how much of a loan they can qualify for. Buyers can find out how much of a loan they can qualify for in one of two ways: Pre-qualification Pre-approval Let's examine the difference. Pre-qualification This process is informal. It can be done by a real estate agent or by a lender. A real estate agent can prequalify his or her buyers by meeting with them and asking a series of questions about their financial status - income, assets, debts and credit history. Once the agent has collected this information, he or she can establish the price range of homes the buyers can afford. Note: Prequalification by a lender is also an informal process in that the lender is not committing to making the loan. The lender is only saying how much the buyers would qualify for, based on the answers to the same kinds of questions regarding their financial status.

First-Time Buyers

These buyers are just plain terrified. Buying a home is the biggest investment they have ever made. The process is confusing and scary because the numbers are so large compared to previous financial commitments. They are afraid of the responsibility and unknowns associated with buying a house. Will the house be a good investment or will they be saddled with a dog for the rest of their lives? Will the house be a money pit? What if they can't get a loan? As a broker, you must recognize these universal fears of the first-time buyer and address them. What these buyers need is information and hand-holding. Let's address their fears one by one. Financial concerns The buyers are probably afraid they will not qualify for a loan. The way to address this is to have them pre-qualify with a lender. If they can obtain a pre-qualification letter stating they will qualify for a loan up to $__________, then it puts the buyer back in control. They will know they CAN qualify and for how much. It takes the guesswork out of the equation for them and for you. Addressing the money pit phobia We have all probably seen the movie, "The Money Pit." Most home buyers have some concern about this nightmare coming true for them. First-time buyers are particularly susceptible. The way to address this concern is to explain that they will have time during the inspection period to obtain all the inspections they want. You can go through the list of inspections with them and suggest they get specific inspections by roofing, foundation, and electrical contractors. Another way to address this is by suggesting the buyers negotiate for a home warranty. Many times, this will alleviate concerns about appliances.

Professional Courtesy

These professional tips are important to remember and follow when showing property. Knock on the door or ring the doorbell before entering with the lockbox key, just in case the owners are at home. Leave the home the way you found it. If interior doors were closed, close them when you leave the room. If music is playing, leave it playing. If the home has pets, be sure you don't let them in if they are outside or let them out if they are inside. Double-check that all outside doors are locked before you leave. If you discover a problem, notify the listing office immediately. If the listing specifies that agents must call first, don't show up at the door without calling. Check for specific showing instructions and honor them. For example, if the seller requests that visitors remove their shoes at the door, be sure you and the buyers comply. Always leave your business card at each property, if requested in the showing instructions, even if the sellers are at home. Writing the date and time of showing on the back of the card is a nice touch. Never enter a home with a lit cigarette, cigar or pipe and never smoke in a seller's home. Avoid making negative comments about a home while you are still inside. It could be hurtful or embarrassing to the owners if they are within earshot.

Moving Up or Down

This next category of buyers includes those in the process of upsizing or downsizing. They are not in a hurry to move, so reeling them in is a bit more of a challenge. The upsizers are probably looking for their dream home. The downsizers may be leaving their dream home. Both situations are emotional but unlikely to engender the reactions felt by first-time home buyers. In both situations, the buyers may want to find their new home before selling their existing home. This is never a good idea. It puts the buyers in a bad bargaining position because they are pressured into selling their home in order to get the new home. It is better for them not to even look for a new home until they have a contract on their old home. Point out to them the disadvantages of a contingency contract. Usually by giving them the facts about the financial consequences of taking this course of action, they will back down. The good news about upsizers is they usually know what they want. They are looking for the best neighborhood with the best schools. They want the houses with all the bells and whistles. You will cater to them by finding them the houses they want. Just be sure to pre-qualify them to see if they have the finances to support their desires. The downsizers will probably be more practical, and they are driven by convenience. They want smaller, more efficient houses that do not need work done. They will not be ego-driven and will be more objective about the houses. They will have a list of features that are important. The problem with downsizers is their emotional attachment to their existing homes. They may be slow to actually make a decision to leave the home where they raised their families. You can help them by providing facts showing how much money, time and energy they will save by moving into a smaller, maintenance-free home.

First-Time Buyers - Over Thinking

Too many options Some people simply become paralyzed when faced with a decision that forecloses all other options. This may happen with first-time homebuyers who feel they need to spend months searching for the perfect house. Even if the first house you show them is perfect, they will be suspicious of their decision-making abilities. They will bounce back and forth among the available choices without selecting any of them. The way to address this situation is to make them select the three best choices and throw away the rest. Having the other options dancing in front of them is distracting. Panic We have all panicked at some point in our lives. It happens when we are walking down the aisle to get married, it happens when we are plucked down in stressful situations, and it happens when we are getting ready to buy our first house. As a broker, you need to be prepared for this and expect it. You should probably even discuss it when you first start showing houses to a first-time buyer. Tell them to expect the feeling and to call you when it happens. They will appreciate having you as a lifeline and not feeling ridiculous when it happens.

Relocation Buyers

We love the relocation buyers because we know they are going to buy a home and they are going to do it quickly. However, you should recognize that they will have their own set of issues. They will know nothing about the area and will need your help to decide which neighborhood is right for them. The house itself becomes almost secondary to selecting the right neighborhood. Although these buyers may be used to relocating, it is still stressful and disorienting. Their main motivation is to minimize the disruption in their lives. They have new jobs to start and new lives in a new location. Their motivation is to create normalcy as quickly as possible. The broker can help by providing them with relocation packages prior to their move. If they are flying in to search for a new home, have the relocation package at their hotel when they get there. Do something that will make them feel at home. Find out when they arrive, and call them soon after. They will appreciate a familiar voice in a strange city. Because the relocation buyer may be moving again, they will be looking for houses with good resale value. Focus on the good neighborhoods with the good schools. Find the houses that have good curb appeal and do not need much work. Be prepared with form contracts when you take these buyers on showings. They will want to make an offer as soon as they find a house that reasonably approaches what they are looking for. Speed and efficiency are the keys to making these buyers happy.

Information to Collect

When doing a buyer needs analysis, there are several types of information that would be helpful to collect. You could ask your buyer to rank order factors that are important in their buying decision. These factors would include (but are not limited to): Price Neighborhood/location Security (gated community) Proximity to work School district Style of home Square footage of home Number of rooms Garage size Workshop Type of yard/lot Maintenance issues (maintenance-free) Kitchen size/design Environmental issues Property Type You need to find out what type of property the buyer is interested in: single-family home, condo, multi-family unit, duplex, townhouse, investment property, or rural acreage.

Introduction

When it comes to counseling sellers, there seems to be a volume of information available to licensees to help them. But unfortunately, that volume of information is not available for working with buyers. Many times, licensees are "on their own" in terms of dealing with buyer clients and keeping those clients happy. When meeting with your buyer client, you can be certain they want to talk about their own wants, needs and desires and only then find out how you can be of benefit to them. If you arm yourself with a good set of questions, while you are collecting important information that will help you do your job well, you will also be establishing critical rapport with your buyer. Good rapport leads to a committed client. Qualifying Buyers The qualifying process you choose to put in place an essential procedure to determine if your buyer has: A need to buy The capacity to buy Some knowledge of the market Qualifying buyers is a major function of your job. But before we get into how to qualify, let's look at the types of buyers you will be dealing with.

Seller's Disclosures

When listing a property for sale, the seller also has a number of legal disclosure requirements. These disclosures are based on the use of the property and not on zoning. Areas for disclosure are: Property condition Lead-based paint Radon and mold Let's look at each in more detail. Property Condition We covered the Property Condition Disclosure in detail in a previous unit. So, let's just recap what the requirement is for this disclosure. The Residential Real Property Disclosure Act requires that when a seller signs the standard listing agreement, he or she must attach a disclosure document. Disclosure documents must be completed by the seller or seller's attorney or power of attorney. The licensee must never complete the disclosure forms. This document must disclose to the buyer any material defects, which are known hazards or problems with the structure or the heating, plumbing, mechanical, or electrical systems. Under the Residential Real Property Disclosure Act, the seller of residential real property is required to complete all applicable items in the disclosure document. Once the seller has completed the disclosure form, it is the seller's responsibility to deliver the written disclosure statement to the prospective buyer before the signing of a written agreement by the seller and prospective buyer that would (subject to the satisfaction of other negotiated contingencies) require the prospective buyer to accept a transfer of the residential real property.

Initially Qualifying Buyers

When you first meet with a buyer, how you handle that contact is important in securing him or her as a client. One successful approach would be to: Establish a good rapport by finding some common ground. Be sincere and friendly and genuinely LISTEN to what the prospect is telling you. Find the buyer's emotional needs and address those first. Discuss practical needs last. Always separate the buyer's needs from his or her wants. Some of the important steps to take to qualify your prospect include the following: Determine the buyer's needs for his or her family (number of bedrooms, number of bathrooms, finished basement, three-car garage, etc.) Determine the buyer's neighborhood needs (schools, churches, shopping, etc.) Establish the buyer's timetable (When would he or she want to take possession?) Ascertain the buyer's wants versus his or her needs. Determine the buyer's financial ability to make the initial investment and then make monthly payments. Find out if the buyer is currently renting or owns another home. Determine if others will be involved in the buyer's decision making process (i.e., parents, grandparents) We will discuss financially qualifying a buyer in the next chapter. For now, we'll focus on qualifying the buyer's needs.

The Buyer Representation Agreement

You will be using listing forms that are provided by your local MLS or Association of Realtors®. Since these forms are legal, binding contracts, it's important that you understand them and be able to fill them out correctly. Depending on the details of a particular transaction, the wording on a form may vary. However, most buyer representation agreements contain several components in common. Let's look at a sample copy of an Exclusive Buyer Representation Agreement and discuss some of the provisions it contains. Click on this link to see and print a copy of the form. Exclusive Buyer Representation Agreement The Parties Most agreements start out by designating who the agreement is between - that is the Brokerage firm and the Buyer. There are spaces to write in the names of each party in this paragraph. The Term This paragraph allows the designated agent to write in the time period during which the agreement will be effective. The "Commencement Date" is the date the agreement is signed. The "Termination Date" written in this paragraph is the date on which the agreement will automatically expire.

The Listing Agreement

You will need to explain each of the provisions of the agreement to the client, so you will need to become familiar with what each section of the document means. Let's look at a sample copy of an Exclusive Listing Agreement and discuss some of the provisions it contains. Note: The listing agreement form your firm uses may look different, but it should have many of the same provisions. Click on this link to see and print a copy of the form. Exclusive Listing Agreement The Broker Most agreements start out by designating who the agreement is between - that is the Broker and the Seller. There are spaces to write in the names of each party in this paragraph. The Term This paragraph allows the broker to write in the time period during which the agreement will be effective. The "Commencement Date" is the date the agreement is signed. The "Termination Date" written in this paragraph is the date on which the agreement will automatically expire.

More Information Needed

You'll also need to collect the following information: Existing loans, including lender, type of loan, balance, interest rate, and monthly payment Whether an existing loan can be assumed and under what circumstances and whether there would be a prepayment penalty Seller financing - if possible Special assessments and who would be responsible for paying them Zoning classification Existing easements Current property taxes Any restrictive covenants If flood insurance is required Neighborhood amenities, such as schools, churches, parks, shopping centers, public transportation, etc. List of real property the seller would remove from the property upon sale List of personal property the seller would be willing to include in the sale Any other information that would make the property more attractive to a buyer Required Property Condition Disclosure Statement (which we covered at length in a previous chapter) Possible Red Flags Be certain you documents items that could potentially be red flags during the negotiations. These items include: An older furnace An older roof A damp basement

Detail - The More, The Better

it's helpful to get as much detail about the property as possible right up front. Make up a checklist for yourself to use when you are interviewing a seller for the listing. These details will come in handy when you are filling out the listing form and also when you are compiling the information you need to submit to your MLS. Here are some suggested categories and their associated details. Note: Some of these items were listed on the previous screens, but are worth repeating. Location - Write down the lot number, block number, and plat/subdivision/building name. Also indicate whether or not the preliminary title search has been ordered. Listing Information - Capture information regarding: Possession Showing parameters, such as when the property can be shown and under what conditions Whether or not you have obtained a copy of the Property Condition Disclosure Report Tax year and tax amount Homeowner dues or rental amounts, if applicable Potential financing terms Site information - Describe a wide variety of property features and amenities, such as: Lot dimensions Waterfront footage Zoning code and jurisdiction Topography, such as level or pasture View, such as golf course or mountain Lot details, such as cul-de-sac, paved street, corner lot. Waterfront features - ocean, lake, high bank, etc. Site features - indoor/outdoor arena, fenced, outbuildings, etc. Pool - if so, what kind

Servicing Listings - Homeowner Tips

it's helpful to give the sellers tips or suggestions to help with the marketing effort. These suggestions should be written and include information about the cosmetic aspects of the exterior and interior of the home. Some tips for the exterior include: Keep grass and shrubs trimmed. Repair fencing and repaint if needed. Place blooming flowers on the patio or near the front door. Check condition of the finish on the front door and trim. Redo if peeling or worn. Place lawn furniture attractively. Make any roof repairs that may be necessary. If there are outdoor pets, make sure pet area is clean and neat. Some tips for the home interior include: Keep the home neat and "picked up." Be sure floors, bathrooms, kitchen and appliances sparkle. Be careful about cooking "aromas" - avoid vinegar and fried food smells; but blueberry muffins or other home-baked items can create the right atmosphere. Repair leaky kitchen or bathroom faucets. Clean carpets. Make sure rooms are well lit - either through natural lighting or higher watt light bulbs. Declutter closets. Remove excess furniture to make rooms look bigger. Straighten and de-clutter the garage and basement. Move items to storage if necessary.

Servicing Listings

might seem logical that the major dissatisfaction sellers have with real estate agents is failing to sell the property during the listing period. However, the truth is that the primary criticism sellers have about their agents is lack of communication. Sellers often complain that once the listing agreement is signed, the agent "puts a sign on the lawn" and then "disappears." Their home becomes one of dozens of properties on the market that may be shown occasionally. A business card may be left on a table to show that someone came through, or the seller has been called to arrange the appointment, but the owners often don't get feedback on how the showing went. Owners can feel cheated or resentful when the person who so eloquently presented the reasons why he or she should get their listing seems to be so unavailable once the papers have been signed. One of the reasons that owners may start having these negative feelings is because the agent did not adequately prepare them for what would be happening during the first days of the listing period and beyond. During the first few days, you are doing multiple property marketing tasks - preparing flyers and ads, getting the property information into the MLS, etc. - which your sellers may not be fully aware of. While you are "busy being busy," your sellers are home waiting for the onslaught of prospective buyers, which usually doesn't happen in the first days. With a little planning and forethought, you can make your sellers feel like partners in the selling process, while keeping the lines of communication open and flowing.

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