Welcome to The Melanie Group

To Blog or Not to Blog?

Question: Do you think this blogging stuff is just a fad? One of the younger agents at our office is into this big time. I'm not really a computer geek--so I don't know if I could even do it.

Answer: I think blogging is here to stay. It is part of the social networking going on with Gen X and Gen Y, which is how these consumers interact and decide who to do business with. As a real estate veteran, I can remember battles in the late 1980's with old time brokers who thought computers wouldn't last in real estate offices.  Blogging is useful to agents because the search engines (Google, Yahoo, etc.) search blogs. Keywords in blogs will move you up in the search engines, which helps consumers find you. Blogging is as easy as falling off a (b)log. (Sorry for the pun--I couldn't resist!) For a complete, step by step, easy as pie set of directions, email me and I'll send you "Blogging and You", which I prepared for the PA CRB Council Meeting at the PAR business meetings. Content is king. Blog about real estate, your area, what is going on, etc--any and every thing consumers would be interested in. Good luck!

Procuring Cause

Question: I am so confused about procuring cause! Why is it that some people say even having a contract with the buyer may not make you the procuring cause of the sale?

Answer: Great question! --Wish we had all day! Procuring cause is part of the arbitration process, which is what REALTORS® agree to do when they have a monetary dispute, as opposed to litigation. The two parties bring the issue to a true jury of their peers--in this case, fellow REALTORS®--who determine who is the procuring cause of the sale. One of the instructions to the panel is to look for the agent who has a clear, unbroken trail with the buyer leading to the sale. Among other things, the panel is instructed that there is no 'predetermined rule of entitlement' to a commission. In other words, just because Agent A showed the house first, does not in and of itself make Agent A the procuring cause of the sale. Or, as in your example, just because Agent B has a contract with the  buyer does not in and of itself make Agent B the procuring cause of the sale. Contracts, if they are in writing, and done in accordance with applicable state laws, are legally binding. In other words, a broker (remember, even though an agent may write a contract, all contracts in Pennsylvania are taken in the  name of the broker), may sue a buyer to legally recover a  commission due the broker, providing that the contract meets the requirements set out by the RELRA. Similar laws apply in other states; in some states, for instance, all agents are brokers and are thus able to pursue their own legal remedies.   However, just because someone is legally entitled to a commission does not make that person ethically entitled to the same commission. Consider this example: Buyer Betty has been working with Agent Amy, who (unfortunately) did not have Betty sign a buyer agency agreement. Amy introduces Betty to the listing, shows it to her, and Agent Al, upon finding out who the  buyer is, contacts Betty directly, and tells her: "If you want to get this house, you have to work through me." Among other things, Agent Al has Betty sign a buyer agency contract. In this case, a panel might well find that although Agent Al is legally entitled to a commission, he is not ethically entitled to one. Procuring cause is a complex issues; I often spend as long as 3-4 hours  on this topic when I am training members of the Professional Standards Committee, who will be hearing these cases. 

When am I no longer an agent?

I had a listing for six months which expired unsold. It was listed by a competitor. It is now on the market for a more reasonable price, and I have a buyer client who is interested in seeing it. What are my duties and obligations to both my old seller and my new buyer?

Great question! Under RELRA, your duties of confidentiality continue even though your agency relationship is at an end. So, any confidential information you got from the sellers while you had the property listed--for example, their 'bottom line', or the prices, terms and conditions of any offers made on the property--is, and must remain, confidential. You now have a new client, to whom you also owe duties. I would tell my buyer client that I had represented the sellers in the past, and that some things you know you cannot share with the buyer. I would point out to the buyer that if you personally had not had this listing, you would not have this information, period. In other words, if this listing had just come on the market with another agent, presuming that agent understands his agency duties, he would not tell you what the seller's bottom line is, nor would he tell you the price, terms and conditions of any other offers that were made on the property. So, your buyer is not at any greater disadvantage than many buyers are in the marketplace. All buyers would like to know the seller's bottom line; all buyers would like to know the price, terms and conditions of other offers made on the property. None of this information can be shared without the express consent and direction of the seller. There is nothing that would preclude you from doing a CMA on this property for your new client, especially if you use current market data. I would not use the CMA I prepared originally for the seller. Good luck--I hope this time you get to sell it.

Designated Agency and Office Procedure

Question: How does a company in Pennsylvania which is practicing Designated Agency run? What are the ground rules? I'm not sure we are doing it the right way at our office. This question came from more than one agent who was taking the ABR® course at LVAR in Allentown in July.

Answer: In Pennsylvania, if your company is practicing designated agency, you must as the designated agent for the seller or the buyer, keep your client's confidential information confidential--from everyone else in your office. The broker, by statute, remains a dual agent, but has the obligation to keep both parties confidential information confidential. In practical terms, this means that you are "Joe Friday" at any office meeting--just the facts, ma'am, just the facts. Do not disclose things which would be a disadvantage to your client. This includes pending sales prices, how high a buyer would go, how motivated a seller is, etc. In offices practicing designated agency, there should not be a white board showing pending sales prices. The fax machine should be accessible only by clerical personnel, and they should deliver faxes in an envelope to the appropriate party. Each client should have a public and a private file. The private file should be under lock and key, accessible only by the designated agent and the broker. The public file is what it sounds like--it contains public information. For a seller, that would include MLS printouts, a copy of the Seller's Disclosure, a copy of the deed, map, assessment card and any other public information. What would not be in that file would be offers which were made and not accepted; contracts which did not make it to closing, and any other information, which if disclosed, could harm the seller's negotiating position. Typically, a buyer's file would only be merged with company files when the buyer buys a house and closes on it. If your company keeps files on buyers, it should contain the Consumer Notice, and the Buyer Agency Agreement. Keep in a private file your information about how much the buyer can afford--the buyer may be able to afford up to $300,000, but only wishes to pay $250,000; if the seller's agent knows that the buyer 'can go up', this information works against your client. Also, do not put past offers and counter-offers in a public file.  Too many agencies, in my observation, have adopted Designated Agency but are continuing to practice 'business as usual' by having inappropriate conduct and conversation within the office, both at meetings and elsewhere. 

The Code of Ethics & Designated Agency

A Realtor® asked this question: "I have a listing, which someone else in my office was showing. Without my permission, that agent contacted the seller (who was not present at the showing), and asked him to come to the property and answer many questions, some of them 'substantive'. The property is a commercial listing. I say my colleague has violated the Code of Ethics. He says, no, he's just trying to sell a property. What do you say?"

Answer: I answered this question with a question, because for Realtors® in Pennsylvania, it hinges on the type of agency practiced by your company. The Realtor® who asked the question indicated that not only does his company practice designated agency, but that he and the other agent work out of different offices. Regardless of the geography, because they are designated agents, this is a violation of the Code of Ethics. In the 2007 version, NAR took great pains to define "customer", "client", "agent" and other words commonly used in our business. The Code goes on to specify "agency or non-agency relationships" as defined by your state law.  Here in Pennsylvania, when Realtors® practice designated agency, they in effect treat their fellow agents (even those at the next desk) like the competition. By that I mean that they must take care to protect their clients confidential information. The second Realtor® was out of line because this would be the same as contacting the seller of a property listed by another company with substantive questions. The seller was not present (upon direction by the listing agent); the selling agent should have contacted the listing agent with his questions. One of the scary things about this scenario is that many agents don't understand agency well, let alone consumers.  Consumers often mistakenly believe that because agents work for the same company they are 'working for me, too'. In fact, in a designated agency scenario, the listing agent is working for the seller, and the selling agent is working for the buyer. The seller and buyer have different agendas--the seller wants to get the highest price; the buyer wants to get the lowest price.  By the way, in companies in Pennsylvania which do not practice designated agency, all the clients of all of the agents of the company are everybody's clients, which means that all the agents have to learn how to keep everybody's confidential information confidential.  Whew! Now you know why agents don't understand this well, let alone consumers. A good rule to live by as an agent: "Always assume no one else understands agency, and therefore, don't reveal any of your client's confidential information to another agent." 

Sold or not?

A Realtor® writes in: "A steak dinner is riding on this answer. I say, the Code of Ethics says we must disclose if a property is pending. My buddy says, no, if the seller tells us not to, we should not pend it in the MLS and just leave it on the market. Who is buying dinner?"

Answer: Tell your friend, it will be Ruth's Chris Steakhouse, because he's buying! Standard of Practice 3-6 of the Realtor® Code of Ethics states that a " Realtor® shall (emphasis added) disclose the existence of accepted offers, including offers with unresolved contingencies, to Realtors® seeking cooperation." This means pend it, plain and simple. Most MLS services allow an agent to pend a property in a number of ways, including, "Pending with contingencies, showing for back up offers", etc.  Some buyers do not want to look at properties where they will only be a 'back-up' buyer. Some agents don't want to take their own valuable time showing listings that are sold. And finally, this is what the Code of Ethics says, so regardless of what a seller wants us to do, if we are Realtors®, we abide by the Code of Ethics.  One final thought--if the offer looked so shaky that the seller wanted the house kept on the market--why did the agent allow the seller to get into that contract?

CMAs all around--for no reason and any reason?

Kim Hillegass, an agent in Pennsylvania who has taken courses from me, emailed me this question:

"I was at a seminar with a national speaker. His recommendation was that agents offer free CMAs to owners in order to build good will and possibly get future business. He said an agent should pick a neighborhood, and offer to do them for everyone. I seemed to remember you saying that there were rules about an agent doing a CMA in Pennsylvania--and also that we cannot do a BPO. Can you refresh my memory?

Answer: Good for your memory--it is pretty solid.  The trouble with a national speaker's program (and I speak nationally, as well) is that the speaker must remember to add the words: "if this is allowed in your state". You are correct, Kim.  Here in Pennsylvania, real estate agents may prepare a CMA only under two circumstances. One is in anticipation of getting a listing, to assist the owner in setting a price, and the second situation is to assist a buyer in determining what to offer on a property. If you don't meet that criteria, you should not be doing the CMA.  Note that if someone asks you for a CMA, but indicates that they do not intend to sell, they are just curious, you are breaking PA law by preparing the CMA.  Agents get asked all the time to prepare CMAs for other uses, as in: "It's a friendly divorce, and my client is buying her husband out. I just need a value." or "The nursing home needs to know what Grandma's house is worth, but we're not going to sell it." In both examples, you have no reasonable chance of getting a listing, so you should NOT do a CMA. BPO, or Broker's Price Opinion, really doesn't exist in Pennsylvania.  It really does not exist, because neither the Real Estate Commission nor the Appraisal Board have recognized, or defined the term.  The Real Estate Commission has recognized and defined the term "CMA". and in addition to the limitations of when an agent can do one, have required agents to place a CMA notice on the front of the CMA stating that it is NOT an appraisal.  The appraisal board has defined an appraisal, as an estimate or opinion of value.  Since not all agents in Pennsylvania are brokers, and not all broker in Pennsylvania are appraisers, neither board will recognize and define a BPO.  If you get a call for a BPO, determine if you can legally do a CMA. If so, you may do a CMA, but remember to properly label it as such. 

I am NOT a Thief! --I didn't STEAL that listing!

A Realtor® called with this question: "I took a listing a couple of days ago. The next day, I had a terrible message in my voice mail from another Realtor®, accusing me of "stealing" the listing, of coercing the seller into signing the listing agreement, and actually screaming at me that I was unethical. Believe me, I did not coerce the seller; he did not say he had been working with any other agents; and I don't think I did anything unethical. I was really taken aback by the other agent's comments. I called her back and left a pretty terse message in her voice mail. What do you think?"

Answer: We had an extensive conversation when you called, and from the sound of what you said, you did not do anything unethical. This sounds like a case of sour grapes to me; for whatever reason, this agent thought she was going to get the listing, and when she didn't, she got angry. I asked you specifically if she had asked any questions, and she had not--she had just, as the kids say, "gone off on you". Accusing someone of coercing a client is a very serious charge, in my opinion, and certainly one that no one should make without proof.  There is no excuse for her leaving such a vituperative, nasty message in your voice mail. If this agent sincerely thought she had something going with these sellers, she should have called you and asked to discuss it--in a rational, adult manner. Real estate is a highly competitive business; buyers and sellers talk to many agents and often shop around before selecting an agent. She may well have had contact with this seller, and possibly even made a listing presentation. However, absent a written contract with the sellers, 1) they aren't her clients, and 2) you had no obligation to her.  Usually when someone gets this angry and mouths off, that person is really angry with herself, not you--you are just the handiest target. 

The Case of the Cut Commission

A REALTOR® called with this sad story: "I had listed a property, which the owners had to sell. We got a contract on it and THEN the sellers discovered that they would owe a large pre-payment penalty to their lender. They did not have enough money to clear the title on the house if they paid a full commission. With my broker's knowledge (and reluctant approval) the selling agency and I negotiated a reduced commission. We were at the closing table, the deed was signed, my commission check was in my hand, when the broker called me and said: "There's a fax coming in to the title office where you are. Give the fax to the sellers before they leave the table." The fax was a letter advising the sellers that they had signed a contract for a commission of X%, and that the broker intended to collect it. The sellers were furious. Mrs. Seller picked up the signed deed, ripped it up and they left! Of course, I had to return my commission check, as did the other agent. I had no idea my broker was going to do this. The broker said his attorney advised this course of action. Two weeks later, the sellers sold directly to the same buyers--and nobody got ANY commission. I'm pretty steamed at my broker --what do you think?"

Answer: I think you need a new broker. You negotiated a reduced commission in good faith, with your broker's knowledge. He obviously had second thoughts, and concocted a plan to get the full commission. Instead, he ended up with nothing. Guess that did not work well! Instead of settling for a reduced commission, he has nothing.  In addition, he put you in a terrible spot with both the sellers and the other agents. Realtors® are only as good as their professional reputations--which means if you say you are going to do something you do it. He can rely on the fact that these sellers, and the other agency, will probably tell more than five people (that's the average) about how unhappy they were with his performance. And, you work there, so you are tainted by association.  I'd be looking for a new company--one with an honest broker!

Can I do this part time?

A (brand new) REALTOR®  called with this question:

I finally got my real estate license, after I took the test for the third time. I'm all set to go into the business part time. I don't really need to make a lot of money; I'd just like to make a little bit of money and have some fun. I'm not going to quit my real job. What do you think?

Answer: Well, I'll tell you--but you may not like it.  First of all, it offends me (and many of my colleagues) to have anyone think that this job can be competently, completely, and professionally done "part time". Second of all, if your goal is to make a "little bit of money", trust me, working part time that's exactly what you will make--a  little bit of money.  But you will be spending more than a little bit of money--on gas, REALTOR® dues, Continuing Education, business cards, E & O insurance, etc.  As far as fun goes, real estate is fun. I've often said that the day I stop having fun is the day I will quit the business. But (here's another but again) your colleagues in the office will not consider it "fun" to pick up the pieces of things that are going wrong with your transactions while you are at your "real job".

Believe me, when you are not there is when things will need attention--home inspection issues, title issues, contract issues, etc. I'd encourage you to rethink this and commit to becoming a full time REALTOR®. Part time agents remind me of the old story about the pig and the chicken. The chicken said to the pig one day: "The farmer has been really good to us--giving us a place to live, food to eat, etc. I think we should reward him with a ham and eggs breakfast. What do you think?" The pig replied: "That's easy for you to say. For you, it's just a donation--for me, it's a total commitment. A totally committed REALTOR® has much greater chance of success than a Luke-warm "I think I'll try it" kind of agent. Good luck!

Should I open my own brokerage?

"I'm thinking of going out on my own and opening my own brokerage.  I know you had a brokerage of your own once, and then sold it. What are the pros and cons of running my own business?"

Answer: First, in the interests of full disclosure, I believe what I told my family was: "If I ever decide I want to open a real estate brokerage again, take me out to the woods and tie me to a tree until the craze passes." Seriously, it is a huge jump.  Let me start with why I sold my brokerage: 1) I did not have time to properly run the office; 2) Small companies have been steadily losing profitability (not just here--everywhere, according to NAR); 3) I really wanted to pursue other goals, e.g., teaching and writing. Having said that, there are pros and cons. Here are the pros: 1) You get your name in lights (literally or figuratively). You name the business, you own the business, everyone knows it is you. 2) You have control. You decide how and where the advertising dollars will be spent; what the commission rate should be; how the office will operate. 3) You are not sharing your commissions with another broker--all the money you earn is yours--but here are the cons: 1) You are also in charge of bills--which means that all that money must first go to the light bill, the phone bill, internet access, etc.  2) With freedom, comes awesome responsibility. You need to recruit, hire, train and supervise agents--and they pray daily that they are doing what you told them to do. In Pennsylvania, you can still be cited as a broker for what your agents do wrong--it is called "Failure to Supervise". 3). The buck stops here.  Whatever problems there are, you have to solve them.  You will find that you are running a small business, and spending a lot of your time (at least in the early stages) doing things that do NOT make you money--filing paperwork, doing financial reports, etc.  Can I tell you if it is right for you? Of course not. Free advice: 1. Have a least a six to twelve month cushion. Most small businesses fail because they are undercapitalized.  If you don't have at least 6 to 12 months worth of office expenses in the bank, and no need to take any money out of the business for the same length of time, rethink this until you do. 2. Consult with, and surround yourself, with experts.  If you are not already networking with other professionals who are not your competitors, learn to do so. These people can advise you on how to recruit, train, hire and retain agents; market a new business, etc.3.  Read up on it. NAR has a library of articles; some are able to be downloaded off the web; some they will actually loan you, like a library.4. Set realistic goals, and keep on top of them. Generally, they will put two things together, as in: "Earn enough after tax income to hire an assistant within 12 months." 5. Educate yourself.  The CRB (Certified Residential Brokerage Manager) courses are excellent.  Finally, before you leap--look--that grass may or may not be greener.  If you think starting your own business will end all the problems you have in your current job, you may be kidding yourself. 

Whose listing is it?

"I have an owner who called me to list his property.  He was currently listed with another company, but the listing was due to expire, and he wished to change companies.  My appointment was set for five days after his listing had expired.  That morning, when I pulled up the hot sheet in MLS, his property had been "Brought back from expired" by the other agent.  I called the seller, and he said that was incorrect, that he had not renewed his listing.   In fact, when I went to list his house, he showed me the agreement to extend the listing that the agent had sent him, which he had not signed. He  listed the property with me, and I put it into the MLS.  Our MLS/Board Staff had to delete the other agent's listing, as he would not do so.  Isn't this wrong?"

Answer:  Yes, in many ways.  First of all, an agent should not renew or place a listing in the MLS service without written authority.  Both RELRA and the Code of Ethics require that any agreement with a consumer be in writing. Second of all, by bringing the property back from expired in the MLS, the agent was violating Article 1 of the Code of Ethics, which requires an agent to be honest; Article 3, which is about cooperation (he was implying to other agents, through the MLS, that he could cooperate on a listing he didn't really have); Article 9, which requires that all agreements be in writing and copies furnished to clients; and finally, Article 12, which states that Realtors® must not misrepresent in their advertising. The MLS is a form of advertising (the listings go from MLS to Realtor.com, and onto the MLS public site), so placing a listing he didn't really have there was a misrepresentation.  He managed to get into all this trouble by assuming that the seller was going to renew; which he did not; and by jumping the gun on putting the extension into the MLS. 

I WANT MY COMMISSION!

"I showed a property listed by another company, and wrote a full price contract, cash, with no contingencies. The owner would not sign the Agreement of Sale, and in fact, withdrew the property from the market. I want my commission and the buyer wants the property--what can be done?"

Answer: The question of whether or not a listing contract constitutes a unilateral contract has been to the State Supreme Court in most states.  In Pennsylvania, the ruling is that an owner does not have to do anything he or she deems is not in his or her best interest--in other words, the seller can reject a full price, no contingency offer. The listing broker could sue for a commission; it sounds as if you produced a "ready, willing and able" buyer. However, that decision is entirely the listing broker's. You cannot sue because you have no contract with the seller. As is often true in real estate, you may have just expended time and energy and will not get paid--much like the agent who produces a buyer in a multiple offer situation and his offer is not accepted. 

It's a Family Affair!

A REALTOR®  called with this question:

"I have a listing in my office that one of my agents wants to buy. Additionally, this  agent is my daughter's boyfriend. While I was listing the home, the seller blurted out  what his bottom line would be.  I have not disclosed that information to my daughter or my agent. Where and how do I go from here? Can the agent buy it, if disclosed? Are there any problems I'm not seeing?"

First of all, congratulations on keeping a cool head and not disclosing the sellers' bottom line to your agent or your daughter.  Of course, you need to hope that independent of your knowledge, the agent and your daughter don't come up with that  number as their offer! Disclose, disclose, disclose is the order of the day. You need to tell the sellers that your agent is interested, that he is in a significant relationship with your daughter, and that you certainly have a 'conflict of interest' with respect to these buyers. If the seller is not comfortable about going forward with the transaction, offer him the opportunity to rescind the contract with you and list with another agent. As long as you are honest with the seller and fulfill your fiduciary responsibilities as well follow RELRA, you should be okay.  Nothing forbids you from purchasing (or having a family member purchase) a home listed with your company. But, both the Code of Ethics and RELRA require you to disclose your true position to the client. As the broker of record in the office, in Pennsylvania, you are by statute a dual agent, which requires you to keep both parties' information confidential. The agent can act as a designated agent for himself and your daughter; you may feel more comfortable asking them not to discuss their confidential information with you. In theory, as broker of record, you have that confidential information; practically speaking, you often do not have confidential information because either the client or a designated agent have not shared it with you. Specifically, if I were you, I would not  want to know during the negotiations what the buyers' 'top price' is. 

Leaving One Office to Go to Another--Whose Listing is it?