Time is of the Essence

I had to smile the other day when I was teaching a class on the new NVAR Sales Contract to be released January 1st 2012.

Among the changes I noticed was the inclusion of clause 30; “TIME IS OF THE ESSENCE AS TO ALL THE TERMS OF THIS CONTRACT”.

In my 34 plus years in Real Estate this clause has appeared and disappeared in our contract iterations several times.  Most recently it was not part of the main contract but inserted in the various Jurisdictional addenda’s.  This got me thinking about how sales associates go about explaining this clause if their client asks, or holding to it.

We spend time reviewing and commenting on contracts, with stock words or phrases that should mean a lot to us – but oftentimes little, if anything, to our clients. Some of those words or phrases are absolutely essential; others have lost their impact over time. One of the latter is the phrase: “time is of the essence,” which Black’s Law Dictionary defines as, “performance by one party at [a] time or within [a] period specified in [the] contract is essential to enable him to require performance by [the] other party.”

So can we explain this? What does it mean in plain English? Well, by including this phrase it simply means that one party to a contract is automatically entitled to terminate the contract if the other party fails to perform upon the time and conditions specified in the contract.

And that’s important, right? Ok… let’s explore the possibilities.

Most lawyers I know dislike vagueness in any contract language and “time is of the essence as to all the terms of this contract” certainly qualifies. Inclusion of the phrase provides a judge with evidence of your intentions when you entered into the contract, but in and of itself, and without further specificity, this may not be sufficiently strong enough to support a verdict in your favor, if a contract problem ever gets that far. Given all that, I would encourage you not to rely too heavily on the simple existence of this stock phrase in your contracts. Instead be sure your requirements for performance are accurate, specific and time-constrained.

In practice, since no one ever wants to spend the time, money and emotional angst trying to prove their case in court, here are three recommendations to strengthen intent and give it some enforcement:

1. Clearly state your expectations – both time and quality, for performance or delivery. Do not fall victim to vagueness, either yours or that of your client. This will not serve either party well in the end.
2. Confirm that all dates and deadlines are accurate. Do not allow for assumptions, or performance, to be qualified as “best efforts.” You want the terms plain and clear to both parties.
3. Put on your judge’s hat. If it’s vague, or unclear to you, chances are, it would be to a judge as well. Step back from your contract and try to see it through a third party’s eyes.  Consider how a judge, months or years down the line, might interpret the language which documents this contractual agreement.

Know your contract, be accurate, be precise and be clear.

- Scott Avery, President, Avery-Hess Realtors

Find your home, Plan your life: www.averyhess.com

2011: The First-Time Buyer Re-Emerges (Again)

Spring time in Real Estate usually heralds the unofficial opening of the “Real Estate Season.” But six years into a protracted downturn, there is finally activity bubbling, and it began bubbling in January. Buyer activity – emerging triumphantly – like blades of grass through thick layers of industry permafrost.

Much of this activity is generated by first-time buyers –  uncertain, but hopeful.

Rent prices, climbing. Home prices, stable. Interest rates, low.

A perfect mix of market conditions and circumstance. But these buyers are different. Cautiously optimistic, data-driven, and hungry for collaboration.

And these first-timers are OUT IN FORCE. 50% of buyers in 2010 were first-time homebuyers, up from 47% in 2009. An all-time high. And the projections for 2011 are even greater, with upticks between 3% and 5% expected.

On-Line, All the Time

This “new-breed” of first-time buyer is spending time on-line. A lot of time on-line. According to the National Association of Realtors (NAR) 2010 study of home buyers and sellers, on-line is definitely where it’s at:

…Buyers use a wide variety of resources in searching for a home: 89 percent surf the Internet, 88 percent use real estate agents… Although buyers also use other resources, they generally start the search process online and then contact an agent…

These buyers are researching homes. They are researching you. They are researching your Company. They are researching the area(s) they want to live in. They are researching market stats, market data and market conditions. And they want an agent who is an expert, not a hobbyist. First impressions mean a lot – and buyers – first-time or repeat – are many times creating their first impression on-line.

That said, it is critically important to remember that engagement does not start and stop with having an effective suite of on-line assets. After making the initial connection, substance is key. In fact, findings from the same 2010 NAR study point out that these same home buyers thought the most important services agents offer are helping find the right house, and negotiating sales terms and price. And this requires a deep knowledge of local market conditions, pricing trends and market health. In other words, a STRONG professional skill set.

So how do I engage this “new-breed” of first-time buyers?

Step one, know your market. Know the trends. Know your local communities – Intimately. Be the EXPERT. The resource the consumer craves.

Step two, get the on-line you in tip-top shape. On the web and the social sphere:

• Get your website up to snuff (a great example can be seen at www.meehanvirginia.com)
• Update your profile on your company website
• Pay attention to your social assets (Facebook, Twitter etc) – ensure the content is fresh, updated and relevant (www.Facebook.com/AveryHess)
• Refresh your LinkedIn profile. Turn it into your Real Estate resume. Add client testimonials. Tell your prospective clients Why they Should Work with YOU.

The signs of a Real Estate recovery are on the horizon. And first-time buyers are leading the charge. So let’s do our part. Let’s engage. Let’s collaborate. Let’s communicate.

And most of all, let’s help. Here’s to a terrific 2011.

-Amit

Find your home, Plan your life: www.averyhess.com

AVMs? What do we do with AVMs?

Automated Valuation Models. AVMs for short. A lot of talk in Real Estate this year has swirled around the various AVMs available and their importance/impact on the industry. There are quite a few available, the most recent, and possibly most polarizing, being NAR’s RPR initiative – an initiative that provides possibly the most accurate AVM ever (which has recently been licensed to LPS for resale to the banking and mortgage industry – more on this in a later post).

Are AVMs a good thing for the industry? A bad thing? Are they to be ignored?

If pressed for an answer, I think ultimately, AVMs are a good thing. Any tool designed to assist professionals in making more accurate judgments is never a bad thing in my opinion. This can be a win for consumers and professionals alike. However, I do not believe AVMs are quite the “game changer” that many predict.

The Real Estate Market and How it Relates

Yesterday I sat through a Wells Fargo training session on short sales and their impact on the local Real Estate market (Avery-Hess’ mortgage company is a joint venture with Wells Fargo Home Mortgage). This training session was not only one of the best I have ever attended, but a lot of the topics covered were very relevant to the context of this post.

There were a lot of facts and figures shared by our presenter, a Short Sale Regional Manager at Wells Fargo, but there were a couple statistics shared that were especially germane to the discussion about AVMs:

• About 36% of the market here locally is distressed inventory (short sales, REO etc.). Folks, that is a large number, with over 1/3 of the local inventory classified as “distressed.” But that’s nothing…
• …Because over 75% of the inventory in California is classified as “distressed” – that number is absolutely staggering.

This Real Estate, and subsequent economic downturn, has been deeper and more protracted than anyone could have predicted. Even though many indicators point to a stabilization and strengthening of our local market (this is relevant to the Washington DC Metro/Northern VA/MD region), distressed properties are going to be prevalent in our market for quite some time.

And accurate pricing and valuation are going to be critical for both the homeowners in need and the banks carrying the distressed assets on their balance sheets.

So what does this mean? How does this relate to the discussion about AVMs?

Our Wells Fargo presenter mentioned that AVMs are indeed utilized as part of the short sale remediation process. And he also mentioned that AVMs tend to be fairly useless when used to price these properties.

Interesting.

With all of the hype and hoopla surrounding AVMs, here is a high-level decision maker stating that there is a marginal, if any, benefit to the use of AVMs during the sale of his asset(s).

Why?

What if a neighborhood has an average sale price of $300,000, recent sale comps that support a list price of $290,000 – $310,000, an AVM that suggests a price of $303,000 – but a Real Estate professional, representing a homeowner in need during a short sale, submits a suggested list price of $175,000 in that very neighborhood?

Why? Why the low list price? Why when the AVM and comps generated through the on-line systems being utilized support a $303,000 sale price?

That’s because there is nothing normal or average about distressed properties. Properties and homeowners in need. What if there is structural damage to the home? Cosmetic deficiencies affecting the masonry and facade? Mold issues? The list can go on and on and on and on. And ladies and gentlemen, these are REAL ISSUES in today’s market. And tomorrow’s market. And the market for the next (insert number here) years. AVMs and on-line valuation algorithms alone are not going to cut it when there is nothing standard about this market, this industry.

And with over 1/3 of our LOCAL market comprised of these very properties that cannot be properly benchmarked and valued by an algorithm (I also contend that most properties – distressed or otherwise –  cannot be shoved through a computer model for truly accurate pricing), there needs to be something more. There HAS to be something more.

The Takeaway

These banks, Short Sale Managers, REO Asset Managers – and most importantly – Homeowners, are relying on Real Estate professionals to guide them, advise them. Help them make decisions that are not easy, but necessary. They are relying on the knowledge, expertise, cognitive reasoning, savvy and experience possessed by these professionals that cannot be provided solely by an AVM.

There is so much more to Real Estate than pricing through a valuation model. There’s helping people through difficult and emotional homeownership situations. There’s counseling your clients on the concerns associated with incomplete settlements. The importance of title insurance. The different types of title insurance. The merits of 203K financing and how this product has helped with purchase of many distressed properties. Again, this list could go on and on and on and on…

AVMs can be a good tool for consumers and professionals alike. In fact, they can be a great tool. But again, there is so much more to Real Estate than valuation and pricing; AVMs should not be the only tool used in the pricing an valuation process, rather, AVMs should be utilized as a starting point in the pricing and valuation process.

Ultimately, what really separates the wheat from the chaff in this industry – the professional from the hobbyist – is the application and implementation of the data generated by AVMs into an overall Real Estate experience that is far more complex than simply associating a price with a property.

-Amit

Find your home, Plan your life: www.averyhess.com

The On-line Quandary

A lot of attention is being given to on-line in Real Estate right now. It’s the topic of conversation that dominates Real Estate blogs and twitter streams. You won’t hear much of an argument from anybody if you assert that maintaining on-line assets are critically important for the long-term prospects of any business, not just Real Estate.

Yet, for many folks in our industry, it is still a big mystery on what “On-Line” means, let alone how to facilitate seamless integration of “On-Line” into their personal business model(s). Based on the electronic flotsam that gets delivered to my once sacrosanct inbox, I can see why. These are just three of the “invitations” I received this past week:

• Learn the 3 Most Effective Real Estate Ads to Run on Craigslist
• The Missing Piece of Your Social Media Strategy
• Welcome to the world of YouTube and Video on the Internet.

And this is just a tiny sampling of the dozens upon dozens of solicitations delivered to me every single week. A business could create a full-time position dedicated to just reading the solicitations and watching the webinars, implementation notwithstanding. There is just too much “On-Line” thrown at Real Estate practitioners on a daily basis. Too much from too many vendors selling too many products for any of it to make sense. It’s almost as if we are being force-fed On-Line “stuff” from a never-ending buffet of technological mediocrity. A buffet that satiates our social media appetite while leaving our Real Estate larder empty.

Lessons Learned from another Small Business

When not making me delicious double chocolate chip cookies and homemade minestrone, my mother-in-law Nancy spends her time running a successful small business. Much like many Real Estate agents she is a sole practitioner. Much like many Real Estate agents, she is fully dependent on herself to generate leads, service clients and generate revenue. While her business is one of database creation and administration on the FileMaker platform, she faces many of the same challenges we do in Real Estate; marketing and lead generation being one of them. So how does she do it? How was this woman able to raise 3 children, be a sole-supporter, and maintain a successful business for many, many years? It’s because she doesn’t watch webinars, read e-mail solicitations or depend on questionable third-party vendors to help define her business’ growth strategy. She has a plan and she sticks to it.

The Plan

1. Be the Expert: This is the most critically important part of Nancy’s business plan. Know her business inside out. Be able to talk FileMaker in her sleep. Attend training seminars and conferences dedicated specifically to improving her FileMaker skill set. And let me tell you, this woman IS an expert. I am of the mind if FileMaker did not exist, she would invent it. That’s how good she is.
2. Service Clients IMPECCABLY: Nancy’s clients LOVE her. Absolutely LOVE her. Even the difficult ones. Nancy makes sure that she doesn’t just have satisfied clients, she has clients that rave about her – clients that refer her additional business and new clients.
3. Have a Website: Nancy has a website, and it’s mostly there to deliver information to people who are interested in FileMaker. There isn’t any forced registration or fancy capture form – there is just a site that tells the visitor about the company, what they do, clients they service and how to get in touch with her should they want some more information. It’s not even a particularly good website, but it works. It works because a) Nancy is an expert and b) Nancy’s clients love her.

And this plan is working for her. Last week, over a meal of minestrone, sourdough and double-chocolate chip cookies, I recall Nancy sharing with me how someone contacted her while standing in the Apple store. This gentleman found her website (why it is so important to have a website), scanned her services and client list, and contacted her to discuss whether or not FileMaker would be a good fit for his company before he purchased it. After speaking with Nancy, he purchased it. And hired her. Why? Not because she had a sweet social media campaign, posted videos to YouTube and tweeted uncontrollably (in fact, she does none of that). It’s because she a) is an expert and b) her clients love her.

The Real Estate Takeaway

Instead of focusing on becoming Social Media “experts” (What does that mean anyway? Are we also experts at breathing and walking?), or Craigslist junkies, we as Real Estate practitioners should focus our energies and efforts on improving our core skill sets. Contracts. Negotiations. Valuations. Then we can can use messaging platforms such as a website, a blog, or Social Media to share our expertise with our clients and consumers as a whole.

Don’t get me wrong, I think on-line is important in Real Estate. Very important. Social Media can be VERY effective and great for your business growth. But losing sight of what it is that we truly deliver to our clients and consumers can be disastrous.

Remember, all the “On-Line” in the world won’t matter if a) you are not an expert and b) your clients do not love you.

-Amit

Find Your Home. Plan Your Life: www.averyhess.com

Yahoo!, Zillow, and the Local Opportunity

This week has been big in the on-line Real Estate space. Something unexpected happened: Yahoo! Real Estate eclipsed Realtor.com as the most heavily trafficked Real Estate website in August.

Yahoo for YAHOO!

Yahoo’s Real Estate Portal edged ahead of Realtor.com last month, ending a 3-year reign atop the list for Move Inc’s NAR backed juggernaut. According to HitWise, Yahoo garnered 5.9% of Real Estate traffic while Realtor.com saw its traffic drop to 5.74% of overall visits. Yahoo’s Real Estate platform seems poised for even more success as they push forward with a partnership with HitWise’s #3 Real Estate site Zillow.com (4.26% market share in August). The Yahoo!/Zillow partnership calls for Zillow.com to provide the listings feed for both on-line portals, and combined, the two will command over 10% of on-line eyeballs for the Real Estate category. But while Move, Yahoo! and Zillow jockey for supremacy in National Real Estate search, there is a tremendous amount of opportunity here locally, on two fronts. On-line and Off-line.

This is where it starts to get interesting.

The Local Opportunity: On-Line

5.9%. That’s a number to keep in mind. That’s the percentage of traffic sent to the #1 Real Estate site in the month of August. That’s a large number of eyeballs. But 94.1% of the rest of us used some other site to search for Real Estate. And in most cases, more than one other site to search for Real Estate. The truth of the matter is that on-line Real Estate search is very fragmented; Real Estate consumers utilize anywhere between 5-7 websites during their home search. Unfortunately, a lot of that fragmented traffic goes to myriad of large national sites replete with data latency issues and inaccurate information. Therein lies our local opportunity.

Many of the national sites experience data latency issues due to the lack of direct feeds from local MLS’ into their sites, which gives an inherent advantage to local brokerage sites because of what we have – accurate and up to date listing information. But here’s the problem. Most local Brokerage sites are terrible. Most also fail to provide a rich, deep consumer experience.

That’s where the national sites make their mark. They deliver deep, rich user experiences that have the consumer coming back for more.

But that’s changing.

Smart brokerages are creating sites that deliver accurate, up-to-date data along with rich user experiences (AveryHess.com is one of these sites, more to come as the year progresses). As Real Estate Brokerages get their on-line act together, local eyeballs will follow.  (Read a comprehensive analysis of the “Property Search Delta” by the Wav Group here).

To the Heart of the Matter: Off-Line

Here’s another number. 80%. That’s the percentage of business Realtors® acquired from their personal Spheres of Influence (SOI) in 2009. That percentage has remained relatively unchanged over the course of two decades. The Internet boom of the 2000′s and the ensuing emergence of on-line sites, on-line lead capture programs and third-party aggregators have had little to no impact on this number.

Consumers whet their appetite online; they still satiate their hunger through the 5 course Real Estate meal offered by local Real Estate professionals. And therein lies the off-line opportunity. Connect with consumers at a hyper-local level, and you offer something far more valuable than a fluffy user experience from an on-line aggregator or valuation model.

The jostling at the national level between Move, Yahoo! and Zillow will be interesting to watch, but for us here locally, it really shouldn’t have any bearing on how we conduct our business. Understanding each market at a hyper-local level, from pricing and market conditions to neighborhoods and local lifestyle is what the consumer craves, what the consumer expects from the professional they choose.

Couple that expertise with a local Real Estate broker who understands the importance of initial on-line engagement with the consumer, and WHAM! You have a recipe for not just local opportunity, but long-term local success.

-Amit

Find Your Home, Plan Your Life: www.averyhess.com

Social Media Geo-Location Services. For Real Estate?

Foursquare. Gowalla. And as of this week, Facebook Places (To learn how to manage Facebook Places on your Facbook account, read this post by Kristin Maynard).

Applications that allow a user to check into a location, blaring their whereabouts to anyone who cares. The fact that there are huge personal security issues involved notwithstanding, the nagging question I can’t seem to shake is: As a Real Estate consumer, do I care?

Do I care if my agent checked into Chipotle? Or the car wash? Movie Theater? Starbucks? Anywhere?

I know my answer, and it’s a resounding NO.

It seems to me that every time something new is unleashed in the Social Media space, a wave of hype and sensationalism hits the Real Estate industry. A tidal wave. Of epic proportions. And Real Estate dives in headfirst, without understanding the practical uses, if any, of the application(s) whose virtues they espouse. It’s almost as if the introduction of a shiny new widget heralds the start of an unofficial Real Estate social media joust. “Facebook! Foursquare! Twitter! I am the best!” “No, I am the best!” the refrain is heard over, and over, and over, and over…

The reality is that most of this stuff has marginal (if any) value to helping Real Estate Professionals do their jobs better or more efficiently.

This post is a bit of a rant, I know.

But let’s not forget, that at its core, Real Estate is not a whimsical game tailor made for social media. Or an outlet for geo-tagging, commenting or expanding one’s reach into the social universe. At its core, Real Estate, and more specifically, an individual purchase or sale is at many times, a seismic, life-changing event involving hundreds of thousands of dollars for the parties involved.

Because of this, I am of the opinion that it is far more important for a Real Estate professional to have a deep well of local real estate knowledge. Down to the neighborhood and street level of markets serviced.

That it is critical for a Real Estate professional to know how to accurately price a property in order to get it sold, something that is far more complicated than the +/- 20%-25% accuracy provided to consumers by on-line valuation models (and as an aside, +/- 25% is not very accurate; one of the most popular on-line valuation models utilized by consumers has my home valued at more than $100,000 over what it could actually sell for).

That it is imperative for a Real Estate professional to have a thorough understanding of contracts, laws and procedures so that they can help navigate the often time complicated journey from contract to settlement.

I think these things are far more important than knowing if my agent is at Dunkin’ Donuts grabbing a cup of coffee, or if they have finally achieved the rank of fictitious mayor of a chain restaurant or retail shop.

You can have all of that nonsense. I will take a solid Real Estate professional and leave the four-squaring to children on the playground with a red bouncy ball and a bit of chalk on the pavement.

-Amit

Find your Home. Plan Your Life: www.averyhess.com