Illegal Behavior


How to Win Over Buyers

No matter how well educated your buyers are, they still need information on how a real estate transaction works. Use consultation appointments to inform them and become a trusted resource in the process.

May 2011 | By Rich Levin
 
Buyers are more educated in today’s market. They have more access to information regarding properties and their value. Plus there are practically unlimited real estate resources online for practitioners.

These combined factors should make the real estate professional’s job easier, but for many, they don’t. Why? There are two problems:

  • The information may not be accurate or relevant to a specific market.
  • The information is almost certainly incomplete.

“An Educated Consumer Is Our Best Customer”

Two adages speak to today’s buyer:

Whether the real estate pro finds buyers easier or more difficult to work with depends on whether that practitioner respects and completes the buyers’ education.

Have the buyers obtained a copy of the contract and paperwork online? Probably not, and most paperwork has many pages plus addenda. Do the buyers know what real estate trends apply to their market? Do they know what to do when the inspection reveals a problem?

Contracts, inspections, financing, negotiation — there are far too many steps in the transaction process for most buyers to pick up on their own.

A Simple and Powerful Process

The most successful buyer’s agents learn to ask a few simple questions (adjust to the circumstances of you and your buyer accordingly):

“The purchase documents in our area are six pages, plus disclosures and addenda. Has anyone given you a copy of the latest documents and reviewed with you the parts that are going to be relevant for your purchase? I find it helps a lot to be familiar with the documents so you aren’t seeing them for the first time when you’re making that $200,000 decision. Would you like to get a copy and take a look at those together?”

“There are inspectors, appraisers, attorneys, title companies, lenders, and real estate agents involved in the transaction. Would it be helpful to go through the process step-by-step so you know what to expect and get some idea of what might come up? It often reduces some pressure and allows you to enjoy the process with greater confidence. Would that be helpful to you?”

These simple questions lead buyers to make a consultation appointment, which can establish enormous confidence and trust in you, the agent. Buyers subsequently go along more easily with your recommendations through the negotiations, which actually can reduce the number of homes they need to view. They find the experience so valuable that they begin to refer you to friends and relatives.

At the consultation appointment, review each step of the process, educating and preparing buyers. Do they understand the type of financing they’re trying to get? Do they have any questions about it? Even if you don’t have the answers, you can take the lead getting a clarification and making sure buyers are aware of what’s included in their closing costs and their payments, and in reducing cash needed with seller contributions.

You also should explain what buyers can expect: Describe problems that could arise and how you’ve solved them and protected buyers’ interests in the past.

As you conduct these presentations, you’ll quickly discover two things: how much buyers don’t know — even the educated ones — and how much they misunderstand. As you realize the value and power of these consultations, you’ll learn to go into deep detail, continuously confirming buyers’ understanding.

Changing laws and financing situations — such as explaining short sales and foreclosure procedures — are just a few reasons that the time you spend preparing buyers works to everyone’s benefit.

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American mortgages

Not quite settled

Bank of America’s settlement will worry other lenders

Jun 30th 2011 | NEW YORK | from the print edition

  • NOT for the first time, the tough talk was merely a prelude to a hefty settlement. Brian Moynihan, Bank of America’s boss, had vowed to engage in “hand to hand combat” with investors suing to recover losses on mortgage-backed securities (MBSs) peddled before the housing market collapsed. He had even likened them, none too diplomatically, to buyers of a Chevy who wanted it to be a Mercedes. In the end, though, BofA rolled over surprisingly quickly in order to relieve the worst of its housing-related headaches, a product of its ill-advised purchase of Countrywide, a gung-ho mortgage lender.

The bank will pay $8.5 billion to investors in more than 500 Countrywide-linked securitisations who had claimed the loans breached basic underwriting standards. The deal is backed by the loans’ trustee, Bank of New York Mellon, and 22 of the biggest out-of-pocket money managers, including BlackRock and PIMCO.

The forceful involvement of these big investors—lucrative BofA clients in a host of areas—was an incentive for the bank to agree terms. So was the fact that the Federal Reserve Bank of New York was a plaintiff, thanks to securities inherited in the rescue of AIG. And for all his combative rhetoric, Mr Moynihan has been keen to draw a line under BofA’s problems since taking over from the hapless Ken Lewis 18 months ago. He has shoved dodgy loans into a “bad bank” and restructured key businesses, while completing the integration of Merrill Lynch, an investment bank acquired during the crisis. Analysts saw MBS lawsuits as the biggest of the legacy risks dragging the bank’s share price below its book value.

Some dangers remain. The settlement deals with much of the Countrywide dross but it doesn’t cover loans handled by other BofA units or those securitised after being sold to third parties. Merrill faces $11 billion of residential-mortgage claims, reckons Christopher Whalen of Institutional Risk Analytics, a ratings firm.

BofA still has lots of haggling to do with Fannie Mae and Freddie Mac, the housing-finance agencies that guaranteed piles of duff loans, and with private bond insurers. The final bill will be far higher than the cheque written this week. The bank plans to set aside a further $12 billion for mortgage-related charges and thinks another $5 billion may be needed on top of that, though given the waywardness of BofA’s past estimates, it could be more. The prices paid at the time for Countrywide and Merrill were, it turns out, just deposits.

The capitulation will worry other large banks even though they are less exposed than BofA, which services one in five American mortgages. The two most vulnerable are Wells Fargo and JPMorgan Chase—again, largely thanks to crisis-era acquisitions (of Wachovia and Bear Stearns, respectively). Bear Stearns alone faces $18 billion in securities-fraud claims out of an industry total of roughly $200 billion, calculates Mr Whalen.

Worse, new legal challenges are emerging all the time, the latest from the federal agency that oversees credit unions, some of which were felled by bad mortgage investments. Mortgage servicers are also bracing for combined fines of between $5 billion and $20 billion as part of a settlement with state attorneys-general over foreclosure practices (remember robosigning?). And that’s to say nothing of further loan losses as house prices fall.

Mr Moynihan deserves praise for biting the bullet on MBSs. He is determined to end talk of his firm having replaced Citigroup as America’s clumsiest bank. Still, it will be quite some time before BofA itself looks more like a gleaming S-Class than a lumbering old banger.

‘Mastermind’ of $2.9B Scam Gets 30 Years

Lee B. Farkas, who federal prosecutors have considered the “mastermind” behind one of the largest bank fraud schemes in history, was sentenced on Thursday to 30 years in prison.

Farkas, the former chairman of the mortgage firm Taylor, Bean & Whitaker, is the single largest prosecution from the financial crisis, The New York Times reports.

Prosecutors say the $2.9 billion scheme, which began in 2002, led to the collapse of Colonial Bank and cheated investors and the government out of billions of dollars. Prosecutors claimed that TBW executives secretly overdrew the mortgage lending company’s accounts with Colonial Bank and to cover up the overdrafts, sold Colonial about $1.5 billion in “fake” and “worthless” mortgages, some of which already had been purchased by other investors. Ultimately, Colonial filed for bankruptcy in August 2009, making it one of the largest bank failures in history.

The government, in wanting to send a warning to the financial industry, had originally asked for a 385-year prison sentence for Farkas.

Source: “Former Chairman of Mortgage Firm Sentenced to 30 Years in Bank Fraud,” The New York Times (July 1, 2011)