All Forum Posts by: Robert Carmody

@Blake Bratcher:

No problem. Thanks for your insight as well. Real estate markets move slowly, and this "shifting market" is no exception for much of the country. When rates went up earlier this year, they did so very quickly, but there was an incredible amount of demand at the time. The higher rates didn't eliminate all of the demand, and so for months now, we've been working with buyers who have still been willing or eager to buy, or those that can't decide what to do. Agents, consumers, and anyone in the industry is kind of in a state of limbo right now. Eventually the dust will settle from the shift, and there will be a new tone to the market and probably better clarity as far as a path forward. Generally speaking, agents are resourceful people. If we need to regroup and find new ways of remaining relevant and meeting the needs of buyers and sellers, we'll do just that. Following the 2007 and 2008 meltdown of the mortgage market, and the boom that lead up to that, we navigated and mastered short sales, for example. Or, in the early days of the pandemic, it didn't take long before most agents and brokerages figured out how to offer contact-less showings, virtual showings, remote closings, etc. In doing so, we were able to address the health or safety concerns of many, comply with orders that varied state by state, and meet the demands of a very active market. 

I am in Albuquerque, NM. It would be hard to argue that there hasn't been a shift in the market, but it's also hard to consider the changes very drastic or too difficult to work around.

* Inventory up from Fall 2021, but about the same as Fall 2020, and about 40% lower than 2018 and 2019. We have a population of about 925,000 in the Albuquerque/Rio Rancho metro area, and there are currently about 1,400 homes actively listed throughout the areas that make up that population. This is about 25% of what it was in 2007 and 2008, when over 6000 homes were listed at once. And, it's less than half the number of listings that were on the market at once from 2012 - 2017. And, it's about 35-40% fewer than we had listed in 2018 and 2019.  

* The rapidly rising prices seem to have calmed a bit, but both our average and median prices are considerably higher than the same time last year, and year prior to that. We have a $335,000 median sale price currently, compared to $292,500 in Oct 2021, and $265,000 in Oct 2020. The average sale price has followed a similar trend, currently at $387,000, up from $337,000 in Oct 2021, and $309,000 in Oct 2020. 

* Inventory is sitting on the market a whopping 8 days longer than it did this time last year, with sellers averaging 23 days on the market currently. This is almost identical to the fall of 2020, and at least a couple of weeks faster than 2018 and 2019. During the 2008 - 2012 recession, the average # of days on the market was frequently in the 120-180 day range, as a point of reference. 

* The list-to-sale price ratio (average) is currently 99.4%, so most sellers are getting pretty close to what they are asking, compared to the April 2022 peak of 103.5%. This is still considerably higher than the 95% average list to sale price ratio back in 2009. 

* For buyers, they will see 2 big differences if buying today compared to last year. The first is the higher interest rates and higher monthly payments. The second is that they'll have less competition from other buyers and won't run into bidding wars and multiple offers nearly as often or to the extent that they would have in 2021 and early 2022. 

* For sellers, the big difference today will be less foot traffic right away/fewer showings, and they are less likely to receive multiple offers (sometimes 5 or 10 or 15+ offers) within hours or days of listing. For the vast majority of sellers in the market today, those days are behind us. This will need to be reflected in the pricing, the presentation, the way that they respond to offers, and the experience that the buyer has from contract to closing. There will always be those that cling on to a market that is in our rear-view mirror, believing that their house is the exception, and those will be your overpriced listings, sellers that fire and hire new agents frequently, that are quick to let their first offer go, or respond harshly in a counteroffer. Those that are savvier to the shift in the market and respond proactively will fare much better in comparison. 

Most brokerages allow agents to have certain number of "free" or "reduced" deals per year, if the transaction is a personal sale or purchase (you are named on the title or mortgage to the property), meaning you wouldn't owe them anything, or would owe a smaller amount than your typical commission split you'd pay if representing a client. Once the agent reaches their limit on free or reduced split transactions, they are responsible for paying their normal commission split, just as they would when representing another customer. If you plan to make a lot of purchases and sales each year, and don't mind paying the commission split, then the brokerage might not mind that you hang your license there and generate a little bit of revenue for them, even if you don't aspire to be their top salesperson.

On the other hand, if your real estate activity consists of 1 or 2 sales per year, and you also don't want to pay the brokerage any commission or commission split for them, they are probably not going to be very motivated or excited to bring you into their company. Keep in mind that in addition to not producing any notable revenue for the company, you come with a certain amount of risk or liability that they assume responsibility for. Newer agents, or those that aren't very active with sales, present a greater risk on the deals that they do have, or beyond risk, may require more of the broker's time and resources to navigate their own transactions towards closing. 

If you are planning on only a couple transactions each year, or less, having your license may not actually be saving you any money in the long run. There are a lot of expenses involved when getting your license, keeping your license, and having an active license. You've got association dues, MLS dues, E&O insurance, brokerage fees/franchise fees/admin fees, continuing ed classes, commission splits, testing fees, lockbox access, business cards, signs, materials, and the list goes on. On top of that, your Errors & Omissions Insurance does not usually cover a broker/agent's personal transactions outside of their own home that they occupy, so if you are representing yourself and the other party or the other agent has a claim against you, you don't have coverage for the legal fees and any damages awarded or fines imposed. Most claims are made against a seller by a buyer, or are made by a customer against an agent, so chances are that you aren't going to sue yourself when representing yourself, but there is the possibility that the other party or the other agent does. It's something to be aware of and to clarify with the broker you choose to work for, and have a clear understanding of their policies when it comes to personal investments.

If you have an active license, most states or associations require that you also have an Errors & Omissions Policy, which is basically malpractice insurance in the event that another party sues you for damages or files a complaint against your license. Most E&O Policies do not provide coverage for an agent selling their own investment property, and your property must be owner occupied to be covered. Real estate claims can be very expensive, and some don't have much merit but can absorb a lot of your time and money, especially if you don't have adequate E&O coverage. And, your own assets are at risk if another party is awarded money resulting from a lawsuit that your E&O policy doesn't provide coverage for. Be aware of this if you are licensed and most of your real estate activity involves flipping houses.

As a licensed agent or broker, you are held to a different standard, and expected to be an expert and to have a higher level of knowledge, duty to disclose, and are responsible for protecting the public's interest, not just your own. Your exposure or risk of a claim is greater when you flip houses regularly as an agent. There is a negative perception of flipping due to the bad apples out there that have done cheap flips, leaving the buyers to inherit the costs of fixing everything that was done poorly after the "flipper" cashed in on a quick profit. We know that isn't usually the case, and that most investors flip houses on a smaller profit margin that the flippers on reality shows like to boast about, and most care about the quality of their product. However, the perception that house flippers are greedy people with too much money, who take advantage of buyers that don't know any better, still exists and so an agent that is flipping houses can be a target. There are ways around the issues, such as having another broker in your office list the property. It's just something you might want to be aware of, and to make sure that you hang your license with a broker who knows you'll be flipping, and that you have adequate coverage in the event that the buyer of a home you flipped tried to make a claim. 

In order to appear "well put together", agents must be able to interpret data and housing market coverage in a way that is relevant and useful to your client and answers their questions without provoking unnecessary fear. Of course, every client has different questions and circumstances and understanding of the market, so the ability to deliver your interpretation of the market in a way that connects with the individual client is key. 

- USE LOCAL SALES DATA AND FACTS. Your local MLS or Realtor Association will usually publish monthly reports with the most recent sales data (or quarterly and annually). Study these reports, as well as those from previous years if available. Familiarize yourself with what the different terms and stats mean, and how they may affect your clients.

- Break your sales data or market trend reports down into 1 month, 3 month and 12 month and you should be able to see a pretty accurate snapshot of the market. Think of it as a camera that is zooming in and out. When you are zoomed all the way in, you are only looking at what's going on this month, which tells you a lot about how many houses are sold in specific price ranges and/or how many showings sellers received, and how many listings pended, which tells us about current demand and foot traffic. As you pan out and look at the sales data from the last 3 months or most recent quarter, you can start to make interpretations about sales activity and sale prices and listing activity. Continue to zoom out and you can compare those prices and number of homes on the market to the figures from the beginning of the year, or year over year. The more you know about your market, the better. You don't need to be an expert on the US housing market as much as you need to know which neighborhoods are holding their value better, or that rental prices are continuing to improve within, or which builders are building and where, and so on. 

- Avoid making predictions of the future, regardless of the direction the market is headed. It's impossible to predict the future of the market with much accuracy, and most people that try end up being wrong. There are too many different factors that affect the market, and predictions for the overall US housing market are even more likely to be way off or not applicable to your local market. Of course, every client wishes you could tell them what the future for a property holds, but in reality, nobody expects their agent to be a fortune teller. Making inaccurate predictions and statements about what will or will not happen could cost you the business down the road. 

- If you have clients asking you about the state of the market, find out why they are asking. It might be because they've seen coverage on the news or read blurbs about the market online and are worried about the value of their property, or worried about losing money, or wanting to buy something below market, or they are just making small talk.

Just as important as the facts and figures and insight you offer is the way that it is delivered to the client.   

I started my real estate career when I was 22 years old and had just graduated from college. Prior to that, I had been a lifeguard and pool manager at a local country club and also had waited tables and served drinks at a restaurant & bar. That was the extent of my work experience. I also had no personal experience as a buyer or seller. I told my parents that I wanted to get my real estate license and become an agent. I think they were surprised and concerned, and my dad asked me who I knew that needed to buy or sell a house? The truthful answer was nobody. Many of my friends were still in school or maybe just starting their first real jobs, and therefore were not going to be in the market. And, my parent's friends that I grew up with knew me as the lifeguard at the pool, not someone they were ready to take seriously when it came to a large asset, like their house. But, ignorance is bliss to a certain degree, and I dove into the business full time. 17+ years later, I'm still a full time agent. 

It absolutely can be done at a young age, even though it is not a very conventional "first" career path that younger people follow. Just because it can be done doesn't mean that it can be done easily. Real estate is hard business to be successful with. I was very aware of the same concerns that you are when I started, and it took me longer to get my first couple of sales compared to older agents that started at the same time as me. My broker and other established agents all suggested that I target the first-time buyer market because I was young and recently graduated from the university, so I had a personal connection to the neighborhoods in that part of the city. They said I'd be better off working with buyers over sellers. That turned out to be terrible advice. Young first-time buyers don't want another young person that's never bought, sold, built or owned a house. They want someone like their parents to guide them along the pathway to homeownership, to hold their hand, and to reassure them. I couldn't that. I didn't like working with them and they probably didn't like me. I did great with older people instead, and many of my clients my first and second year in the business were in their 60s or 70s, or older. There was a mutual respect there. They liked seeing a young person that worked hard, and I appreciated the wisdom and life experience that they shared or that I witnessed working with them. They didn't need their hand held. It wasn't their first home sale or purchase. They lived in nicer neighborhoods, took better care of their houses, were available to meet during normal business hours compared to evenings and weekends, and they didn't care if I was the #1 agent in my office, or how many assistants and buyer's agents I didn't have. Instead, they cared a lot about my market knowledge, what the other houses for sale near theirs look like in person, what marketing I was doing, what the contracts they'd sign said and meant, and how I was looking out for their best interests. Several of those earlier customers ended up referring their adult children to me, followed by their grandchildren.  All that said, if I had just taken the advice of everyone around me or bought into my dad's fear that I wouldn't have an outlet for business, I would have probably sold a couple houses after a year or so, then would have gotten out of the business entirely, just like a lot of new agents to. As a young person, I had more time to learn the business, the contracts, the inventory, the new developments. I could work weekends, evenings, 7 days a week, and was usually happy to do so. And, I wasn't reliant on all of my business coming from people that I already knew, from family friends, neighbors, former coworkers. While it took me about 4 or 5 months to make my first sale, I ended up selling 21 houses my first year. 

Don't ignore your concerns or fears altogether, or dwell on them either. Instead, study the market harder, become more knowledgeable, ask questions and advice from experts in your market, and it won't be long before you are one of them too. 

Agree. Prepare an invoice for professional services provided, with invoice from brokerage, payment due to brokerage, and the customer can pay the brokerage with check or cash or whatever form of payment theyll allow. As an agent working on behalf of your brokerage, you just want to make sure that the invoice is from the brokerage to the customer,  and that the money received comes from the customer to the brokerage, then to you, with paper trail, just like it would if a resale transaction was closing normally. You may want to have them sign something, even if its just the invoice, that shows that they agreed to pay you $___ in exchange for _______ services. 

Is your agent with a larger company, possibly with multiple offices in your area, or region? If so, you may want to contact one of the other locations and ask to speak to the broker of that office, or the owner of the franchise if it is a franchised office, like a Re/Max or Berkshire Hathaway or Century 21. If the brokerage has more than one location, you might be able to get help if you explain the situation and that you've tried to reach the other broker and agent, and neither are communicating with you. If not, and it's just a small office with one broker and no other leadership, you might have to step above them to the local Realtor association or state licensing department. If you are going to reach out to the buyer's agent directly, you might want to send your agent and their broker an email, so it's in writing, and tell them that you are doing that because neither has responded to your calls. Maybe that will get their attention. 

If you cannot reach the agent that you hired, you should be able to reach the broker that they work for. The broker, which may have different titles depending on the market or state that you are in, is the one that is ultimately responsible for your transaction, and for the actions or inactions of the agents that work them. If you have tried to reach them, left voicemails, but have not had any response, you might be able to see if you can speak to them in person at their office, or ask the receptionist if they have a cell phone that they can connect you to. If you've tried to reach them, and your agent, and neither are responsive at all, you may want to contact the local Realtor Association or state licensing/regulations department that issues, renews and oversees real estate licenses. They will usually try to assist in resolving a matter like this without having to have you file formal complaints. If you have the cell phone number for the broker, you may also want to try sending a text message to the agent and broker together, on the same message, and just ask for a conference call regarding the transaction. It's a little harder to avoid you when they are both on the message thread, and it's in writing, and you are making a reasonable request. Don't get into any of the details and expressing anger over the matter via text message, just ask for a brief conference call when they are both available to discuss the status of the closing, and possible next steps. 

I'd encourage you to "stay in your lane" as much as possible, and not overstep traditional boundaries within the transaction, such as trying to contact the buyer, buyer's agent, or buyer's lender directly. The lender will not provide you with any information since the buyer's loan, details of their loan application, outstanding conditions, etc is all confidential information, and not even shared with their own agent. When transactions aren't going smoothly right before closing, it is easy for one or more of the people involved to become emotionally charged and react in ways that either anger or embarrass one or more of the others involved and can be inappropriate or unprofessional. Transactions can unravel right before closing, as a result, and the damage from losing a sale like that can be costly. If you are uncomfortable about any advice you receive from your agent or the broker, as far as getting out of this sale and into another, or replacing the agent, or what options you have, you may want to contact an experienced real estate attorney in the area where the property is located. 

If your sales contract or purchase agreement, which you and the buyer both signed, is similar to many different states, there will be a series of deadlines within the agreement. Each of the deadlines will have to do with a condition of the sale, which must be satisfied, waived, or resolved, in order for the sale to continue moving towards closing. The contract is structured to protect the buyer from the seller, not the seller from the buyer in nearly every aspect of the contract. The exceptions being odd situations where the buyer simply fails to show up to closing, or blatantly ignores deadlines, or changes their type of loan to one that delays closing and/or adds to the seller's expenses. Most contracts allow the buyer to do their due diligence prior to closing on the property, including conduct inspections, review disclosure documents and public records, receive title work showing clear & marketable title, have the property appraised, secure financing, obtain homeowner's insurance, make sure the property is in the same condition at closing as when the offer was accepted, and a variety of others. Each condition must be satisfied by a certain date, or # of days into the sale. Conditions are usually deemed to be satisfied when any issues that come up are resolved between the 2 parties, both having signed off on whatever the resolution was. If a buyer is satisfied with something, they normally do not need to take action, and when the deadline passes, the condition is considered resolved. If, for example, one of the conditions is a termite inspection with a final deadline of 8/15. The report is delivered to the buyer, and house does not have any termites. They do not need to do anything, and once 8/15 has passed, the sale is no longer conditioned upon the termite inspection. On the other hand, let's say that the report came back, and the inspector found termites, and recommended termite treatment. The buyer sent a request to the seller, asking them to have the house treated before closing. On 8/13, 2 days before the deadline, the seller rejected the buyer's request and said they weren't paying for any treatments. If the buyer didn't want to proceed with the purchase based on that, it would be their responsibility to notify the seller in writing by the end of the day on 8/15. An unresolved request does not automatically terminate the transaction. The buyer could also ask for more time, and if the seller agreed, both parties would sign an extension before the end of 8/15. If the buyer received the seller's rejection in response to their request, didn't get an extension on the deadline, then decided they wanted to cancel the purchase and get out of the sale on 8/20, 5 days after the deadline, they may be in default on the agreement and jeopardize some or all of their deposit, or be on the hook for other expenses. Final loan approval must usually be received several days or more before the closing date, and if your contract has a clause like this in it, it is usually towards the end. Even if it does not have a specific deadline for final loan approval, the lender and escrow officer must balance the closing statement (ALTA), a few days before closing, and buyer has to approve their "Closing Disclosure" (verifying that fees charged by the lender are the same as what was quoted) 3 business days before they sign their closing documents. In order for the title company/escrow to prepare the ALTA Settlement Statement, which you will sign at closing, they will have to have received the closing instructions from the buyer's lender. If the buyer was not planning on closing, most likely the instructions would have never been sent to the lender and the title company would not be able to prepare a final ALTA statement for your closing. If you are within a few days of closing, or even 4, 5 or  6 days, you may want to call the escrow officer handling the closing and ask them if you can schedule your closing appointment, review a copy of the ALTA Statement, and if they are aware of any delays or issues with your closing. You are a customer of the escrow company, as is the buyer, so there is nothing wrong with you contacting the escrow officer and finding out where they are at with the file or closing. 

As others have stated, it can be done and it's important to not overlook the technicalities or accidentally overstep the boundaries, finding yourself brokering transactions when you didn't intend to. Most contracts have an assignment clause, so you may want to work with a good real estate attorney initially and have them review documents, provide representation, or possibly prepare a statement or addendum for you to use on any wholesale deal that you are participating in. Practicing attorneys can assist clients purchase or sell property for a fee in NM. 

The practice of wholesaling is not new here, but also not widely known about or understood, and is an idea or approach to investing that many dabble in, but few stick with it. Be proactive about connecting with experienced professionals, whether legal, real estate or otherwise; and stay in your lane. That can be easier said when there aren't a lot of clearly defined rules. Over the years, I've been contacted a few times by homeowners who had been in contact with wholesalers, who had definitely overstepped boundaries and were offering services that require a real estate license or other professional services. I don't think it was due to bad intentions on the part of the wholesaler, but that they found themselves working with a willing homeowner with some hurdles to clear. Without intending to, the wholesaler was in the position of having to help the homeowner find housing to move to or was handing out legal advice in instances where the homeowner had a financial hardship or when the property was part of an estate with beneficiaries that had differing opinions. Obtaining your real estate license in NM, if you planned to mostly invest here, can help expand the boundaries that you can legally work within, but does not eliminate them or the related risks altogether. 

1) In order to activate your real estate license, you'll be required to purchase an Errors & Omission Policy, which is insurance coverage for agents and brokers and is intended to help pay most legal fees and claims made against you by a third party for damages and malpractices. Most E&O policies do not provide coverage for an agent's personal dealings outside of their personal property that they occupy. Sometimes additional coverages can be purchased, and I'm not sure if or how this might impact a licensed agent who was wholesaling their own deals. Claims made against agents, related to personal dealings, have an average award or settlement amount that is 5 times greater than claims made against an agent, related the property of a 3rd party. That is why there are limitations or exclusions on coverages there, and also why there is a greater financial risk for continuing to handle them yourself when you don't actually have E&O coverage.

2) You will also be required to "hang" the license with an actively licensed qualifying broker and brokerage in NM, who essentially oversees your real estate transactions and is responsible for making sure that you are practicing real estate within the state & federal laws & regulations. Brokerages have policies on handling personal transactions and dealings, so you'll want to explore options there and be upfront with how you intend to use your license. After a couple of years and certain amount of experience, combined with additional training, testing and fees, you can become a qualifying broker yourself, and have your own brokerage, but initially you are required to work at a brokerage, for another broker. There are continuing education requirements and fees to maintain and renew your real estate license, as well as fees to join the local Realtor associations, MLS, etc.

If you are mostly interested in becoming an investor, and using wholesaling as your way of getting there, I'd start by connecting with a good real estate attorney first, and then there is lots that can be learned online as far as best practices.