Check out this new Single-family property that I just posted on my Web site. It is at 5638 E. Camelback Rd. in Phoenix.

By Dan Pinson, Designated Broker

This issue I offer a proposition that would turn the real estate business upside down because our current system of how we as agents and brokers get paid is flawed and outdated. It™s not easily understood, communicated, nor transparent to the consumer. It certainly doesn™t help us with the public perception of a flashy agent in a luxury car receiving fat commission checks. It™s no wonder we™re rated near the bottom on the trust scale, along with attorneys and used car salesmen (my apologies to you attorneys and car salesmen out there). We need to move from a selling to a consulting paradigm like other professional service providers. As the Borg said in Star Trek, œresistance is futile. We™d better start changing with the times else we become extinct, or worse yet, irrelevant!

A Brief History of Real Estate Representation

Our current real estate sales system dates back to the late 19^th century. From its beginnings, selling real estate was like selling anything else “ get the highest price possible and buyer beware. There was no disclosure and no agency, and therefore, no fiduciary responsibility.In 1908, states began licensing real estate salespeople and there was little change in our business until the 1980™s, when salespeople began having to disclose things like building defects and environmental issues. By the 1990™s, we began offering buyer representation (œAgency). Unfortunately, our new responsibilities coupled with an antiquated business model, created conflict in our system and in the consumer™s mind.

Anyone Can Be Licensed

Nearly anyone can obtain their real estate salesperson (agent) license. Attend some classes (90 hours in Arizona) and pass a State test. Want to be a broker? Acquire three years of experience, attend another 90 hours and pass a second State test. By the way, both tests have a passing score of only 70%! Would you hire an attorney or CPA with this level of training? Not if you knew it! Then why would consumers trust their largest financial transaction to someone woefully undertrained and motivated by a commission that increases as you spend more?

Agency “ The œWho Represents Whom of Real Estate

Agency is one of the most misunderstood parts of the real estate business. Simply put, agency is œwho represents whom. It means we have a fiduciary duty to protect the interests of our client. For a more detailed description of Agency, see my other Blog entries.

The question is how can we adequately represent a client™s fiduciary interest when we still operate with a commission-only paradigm? Regrettably, while real estate law, technology, and the consumer changed with the times, our business hasn™t.

Functionary vs. Fiduciary

Most consumers have little idea about everything we do. They often can™t distinguish between functionary and fiduciary tasks. While most functionary tasks can be accomplished by just about anyone, it™s the fiduciary tasks where we™re really needed.Functionary tasks include entering listing data into the MLS or creating a property flyer. Fiduciary tasks include negotiating a transaction, performing a market analysis or scouting properties.While you may not need all the functionary tasks we perform, most consumers need an agent for the fiduciary tasks “ those that help them use their money wisely and minimize liability.

An Inherent Conflict

Here™s the rub “ there™s an inherent conflict in our system. We™re limited to contingent-on-an-outcome compensation. If we want to pay our bills, we need to move the product as quickly and for as much money as possible. On the other hand, we™re required to provide fiduciary counsel that is in the best interest of our client even if it goes against our own. No amount of œethics training will take away this basic conflict. It™s inherently wrong, but it™s the system we have and over a million REALTORS ® nationwide go along with it. And our labor union, um, I mean œtrade organization, the National Association of REALTORS ® (NAR) continues to promote the same old business model and protectionist practices.

Gatekeepers of Information vs. Interpreters of Information

In the old days (pre-Internet), agents were the gatekeeper of the data. As a buyer, you had to use a real estate agent in order to have access to properties listed in the printed MLS books. It was difficult to buy a home without an agent and these books.Today, real estate information is everywhere. Anyone with an internet connection is suddenly a real estate expert. Or at least they think they are. Here™s my main point “ anyone can get the information, but few know how to interpret the information!

FREE Everything!

Free everything is our mantra – œFree Comparative Market Analysis, œFree Reports, and the list goes on. Free stuff is worth exactly that “ nothing. It™s either shoddily done and the consumer gets something of no value, or the great agent does a great job and unfortunately doesn™t get paid. A certain amount of this is our marketing, but regardless, we cost-shift these œfree services with the commissions we earn. Why should the commission you paid offset the freebie someone else received?

What™s The Solution?

·     Raise the bar to entry into our profession. Will it happen? Not until individual States strengthen licensing laws. And not until the National Association of REALTORS ® (NAR) emphasizes the quality of representation over a body count of dues-paying members. My proposals would likely shrink NAR™s enrollment and they™re not going to like that!

·     Expand consumer choice. Consumers should be able to choose from a pay-per-hour, fixed price, basket of services, or commission models. Each model should be easily communicated to and understood by the consumer. I imagine most consumers will still use the commission model, as it™s the lowest risk method for them “ pay nothing until something sells. But the point is offering choice.

·     Place value on what we do. If we don™t, who will?In the next issue, I™ll discuss my new business model. I™ll still offer the standard commission model, but you™ll also be able to hire me for the myriad of fiduciary and functionary tasks that buying and selling real estate entails, while choosing how you want to pay for the services. Most importantly, I™ll present my case for why you should hire me using my new model.

You REALTORS ® out there reading this can start hating me now. Maybe I™ll be out of business soon because no one wants my business model. Or maybe I™ll make more money while offering my clients more choices, representing their interests without conflict, and saving them money. I want to know what you think.

Imagine yourself perched high atop your private penthouse in downtown Panama City. Live in pampered luxury while just steps away from to everything offered by one of the most vibrant cities in the Western Hemisphere. Here™s a few photos of this amazing property:                                            

This 3 bedroom, 4 bath rooftop penthouse features amazing views, rooftop pool, gourmet kitchen, TV room, separate laundry, and excellent craftsmanship. The asking price for this beautiful property is only $595,000, a small fraction of its original $3,000,000+ cost.

Why Panama? Panama is a stable country, uses the US Dollar as its currency, a rapidly expanding economy, a large tourism base, and a thriving expatriate community.

How Do I Represent You In Panama?

• I put you in contact with reputable real estate agents, title companies, attorneys, banks, and other service providers.
• I recommend and help you select the Panamanian broker that best suits your style.
• I track the purchase process and work with the selected broker to help you successfully complete the purchase. I™ve designed this program to help you buy with confidence.

Contact Dan Pinson at 602-332-3499 for more information about this property.

I™ve just sold a Single-family property at 43911 N. 13th Avenue in New River. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

People that know me know that I™m not one to constantly beat the drum of œnow is the time to buy. But I think I need to change my tune for 2011.Back in 2008, when the National Association of REALTORS and many economists predicted a quick turnaround in the economy, I wasn™t.

I™m no Adam Smith, but I don™t think they were looking at the history of past economic and housing œbubbles like I was. It takes at least as long to recover from a bubble as it did to create the bubble. So I knew that a 2009 or 2010 recovery, at least in our market, was wishful thinking.

Last issue I discussed affordability, and that the Phoenix-Mesa areas are currently two of the top five most affordable places in the country. Now that we™re into our prime real estate season (spring and summer) here in Phoenix, I can™t help but see that this year is the best buying opportunity we™ve ever had. Consider these March 2011 statistics:

• 9,901 closed sales, the 5^th highest monthly total ever recorded on our MLS;
• Median Price sales price has stabilized at $110,000 for the last three months;
• Demand is accelerating while supply is falling, especially below $150,000;
• Overall inventory is at 4.2 month, considered a normal market supply for this time of year; and,
• Extremely affordable mortgage interest rates.

When viewed as straight dollar amounts, we™re buying at 1990™s prices. But then I thought I™d take it a step further, by looking at the historical value of the U.S. Dollar. The dollar has lost over 7% of its purchasing power since 2006 alone, and we™ve sold homes at as little as .25 ¢ on the dollar (75% off), from their high in 2006. Added together, that means we™re selling homes at 1980™s prices!

This is great news for you home buyers, but what about Commercial Property? Same thing! Look at these graphs:  

Commercial lease rate graphs look similar to these sales graphs as well. Lease rates are down and for-sale property is very affordable. The data for the first quarter of 2011 shows a flattening, with absorption up in industrial and office categories, and vacancies down in industrial, office, and retail segments.I do believe that prices may trend slightly down this year. But with current prices even well below replacement cost in many cases, I find it difficult to see prices going severely lower. What do you think?

I™ve been posting on ActiveRain for some time now. One thing that always strikes me about the posts and comments are the spelling errors and incorrect grammar. Isn™t it important to show in our writings that we can express a coherent thought?

I™ve resisted writing this blog because it may make me look mean or intolerant. But some of the mistakes I see are inexcusable and would have kept me from graduating from elementary school.

It™s not my intent to show how perfect I am (I™m not), nor to disparage my fellow REALTOR ® (a violation of our Code of Ethics). It is my intention to improve the public perception of REALTORS ® and our industry as a whole. We are often viewed as one of the least trustworthy professions. We also look uneducated when we don™t know the difference between œto and œtoo, or œtheir, œthere, and œthey™re.

So please, pick up a dictionary, thesaurus, and Strunk and White™s œThe Elements of Style and improve your written communications while also impressing your clients.

I™ve just sold a Single-family property at 5702 E. Camelback Rd. in Phoenix. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

Check out this new Single-family property that I just posted on my Web site. It is at 43911 N. 13th Avenue in New River. This Single-family property has 2 bedrooms and 1 baths.

Many International buyers consider Arizona a great place for a vacation or second home. Arizona has great weather, professional football, basketball, baseball, and hockey, numerous golf courses, spring training baseball, restaurants, and upscale shopping. Is it time for you to consider a second home here in Arizona? Now is a “buyer™s market. Prices have dropped over 50% from our market peak. We™ve even sold property at 75% off!Here™s a brief overview of what you can expect and the order of its occurrence when purchasing property in Arizona:

Determine your Financing

Cash. If you plan to purchase in Arizona home using cash, have your local banker or investment manager prepare a letter that states you have liquid funds in excess of the amount you plan to spend as cash for the home. This proof of funds document is usually included with your purchase contract when an offer is being made, or must be supplied shortly after contract acceptance.

Mortgage Loan. Some foreigners have the option to obtain financing in the U.S. We can refer you to a lender who can discuss your options before you come to Arizona to actually buy a home. Apply well in advance prior to beginning your home search.When purchasing a vacation or second home a minimum of 25-30% down is usually needed.

For the purposes of obtaining a loan, the definition of a vacation home is that it will be used for recreational or vacation purposes during a portion of the year and there will not be any monetary benefits from ownership. This means the home can™t be rented to a tenant during the time is it not being used for vacation.  A disclosure statement to this effect is often required.

Typically, three months (or more) of bank statements are usually required by the lender, as well as documentation of the down payment funds. Additional reserves of up to 6 months are often required and must be substantiated. If bank accounts show large depositions beyond regular income, these amounts will have to be explained. Credit is checked through an international credit reporting agency. Any credit issues may make it next to impossible to obtain a loan from a lender in the USA. Full income verification is needed which means a letter verifying employment, relevant bank statements, and a passport and/or driver™s license. Lenders verify all of this information before they make a credit decision.

Foreigners can expect to pay interest rates higher than “market” for loans when buying second homes here in the USA. Interest rates change often.Buying more than a second home in Arizona makes the buyer an œinvestor. Third, fourth and more properties would be considered investment properties, and additional requirements, including the amount of down payment, and interest rates may vary, including additional down payment amounts, and possibly additional reserves.

Execute Pre-Purchase Documents

A prospective buyer will be asked to sign a number of documents before buying a home in Arizona. Pre-purchase forms do not obligate you to buy a home. These are simply disclosures, advisories, and employment forms. These forms include an Agency Disclosure, Buyer-Broker Agreement, and a Buyer Advisory among others.

Research Properties

Work with your agent to select some properties. Use the Property Search feature found on many real estate websites including your agent™s site and Realtor.com. These are typically more current than other sites such as Zillow or Trulia. There are four main types of properties:  

œNormal. These are properties that can be purchased without lender approval (not a short sale or REO). The owner either owns the property outright or their mortgage balance is less than the asking price. These properties are usually in better condition than a REO or Short Sale property. A sale can be completed in as little as 2-3 weeks, but typically take 30-45 days.

Foreclosure (œREO). A foreclosure, sometimes referred to as a Real Estate Owned (œREO) property, is owned by the lender. The Phoenix market currently has a large number of REO properties. REO properties typically need repairs and in many cases a complete remodel is needed. It is possible to find a œgood deal on a REO property, but these properties will likely have defects needing correction.These sales take longer than a œnormal sale as all negotiation is done with the lender, which may require multiple approvals before the property is sold. These sales typically take 45-90 days (or more) to complete.

Short Sale. A short sale is a home that has more money owed on it than the offered purchase price, thus the owner is œshort. A buyer makes an offer to the seller who then takes that offer to one (or more) lender(s) for approval. If the lender approves the offer, then the sale can be consummated. Short sales often take longer than other types of sales because there are multiple parties involved in the approval process. Short sales are not a good choice if you want to take title on a property on a fixed schedule. Short sales typically have a lower probability of closing escrow, and many end up being foreclosed upon.Short sales often have deferred maintenance on the property and may be offered œas-is, meaning no repairs will be made. Short sales can take from 60-180 days (or more) to complete.

Probate & Bankruptcy. Probate and Bankruptcy are two other types of distressed property. A probate sale is when the heirs to a property liquidate it as part of a probate settlement. Probate sales can usually be completed in a time frame similar to a œnormal sale. A bankruptcy sale is typically required at the direction of a bankruptcy court. Bankruptcy sales can take months, depending on the speed of the bankruptcy court™s approval.

Write an Offer

Writing an offer consists of determining a price and terms, and signing the contract. The offer also includes:

• Copies of the necessary pre-purchase documents.
• Earnest Money. Earnest Money is “good faith” money. Earnest money is usually somewhere between 1-3% (or more) of the purchase price of the home. Earnest Money is deposited with a title/escrow company (a third-party company licensed by the State of Arizona to handle monies and documents) when a contract is accepted. Should the contract be cancelled during the inspection (œdue diligence) period, or due to Title, Home Owners Association, Financing, or other contingencies, the buyer is returned their earnest money. In cases where the buyer is in breach of contract, the buyers Earnest Money may be awarded to the seller as liquidated damages.
• Proof of Funds (cash) or a Loan Status Report or Approval Letter (financing).
• Contract addendums (as necessary). We recommend that foreign buyers wanting to purchase an Arizona home establish a U.S. bank account early in the process. This speeds the process writing earnest money checks and in obtaining cashier™s checks and wiring funds.

The Escrow Process

In many foreign countries, and in some U.S. states, a lawyer is hired to facilitate a property sale. In Arizona it is rare that attorneys are involved in the process for residential property. Purchasing property in Arizona involves the process called œEscrow.

The time between the mutual acceptance of an offer to purchase and the date set for closing and title transfer is called “Escrow” in Arizona.The escrow company handles the monies and documents (the contract, title insurance, HOA, etc.) related to the transaction while carrying out the agreed to contract instructions.

There are a number of ways a person, persons, or legal entity, can take title of property in Arizona. Each method of obtaining title has legal or tax implications which the buyer will want to investigate. This can be determined at any time up to the closing.

Inspection/Due Diligence Period

After a contract offer is accepted, the agreed-upon inspection period starts. Inspection periods typically last from 5-30 days depending on the type of property, and may be negotiated between buyer and seller.During this time the buyer may make any inspection they deem necessary to make sure the property is suitable for their purpose. Inspections include, but are not limited to:

• Physical inspection. We highly recommend an inspection by a State-licensed inspector. The seller will provide a Seller Property Disclosure Statement (œSPDS) that states the known property information and defects. REO and Short Sale properties are often offered without this disclosure. However, the lack of an SPDS in no way relieves the seller from disclosing known material defects.
• Termite inspection. Termite inspections are performed by a State-licensed inspector. You must have this inspection and be free from termites (œwood-destroying insects) if you are financing a property. As Arizona has a high incidence of termite infestation, a termite inspection is a must under any circumstances.
• Environmental (mold, asbestos, radon, etc.) inspections.
• Sewers, Septic and Well system inspections.
• Property Surveys.
• Insurability. Insurance should be obtained for all transactions, and must be obtained for financed transactions. Insurers participate in a national database that tracks people, homes, and claims. This information is compiled into a œCLUE (Certified Loss Underwriting Experience) report. A buyer can expect to receive a CLUE report or Letter of Insurability when purchasing a property. œTraditional sales (not short-sales or foreclosures) customarily supply a CLUE. report. REO homes typically do not supply this report. The insurability of a property is a due diligence item performed in the inspection period.
• Reviewing schools, neighborhoods, crime reports, etc.
• Reviewing  zoning and planning data.

During this period, buyers may also receive a Seller Property Disclosure Statement (listing known property defects) and a CLUE report (evidence of insurability). Most foreclosure properties and many short sale properties are offered without these documents.

Once a buyer has completed their inspections (within the agreed-upon timeframe), a œBuyer Inspection Notice and Seller Response notice is issued where a buyer either accepts the property, rejects the property (and receives a refund of the earnest money), or asks the seller to make the necessary repairs to satisfy the buyer.

Buyers also receive separate inspections (and inspection periods) of the Title Commitment and Home Owners Association documents. Buyers using financing typically have a financing contingency. This means that should their loan not be approved, the contract is cancelled and the earnest money is returned.

Good Funds Law

Arizona law requires all funds be cleared by the escrow company prior to the actual closing. We recommend that a buyer wire the needed funds to the escrow company three days prior to the close of escrow.

Closing Escrow

In Arizona, buyers and sellers usually do not meet to close a transaction. Neither buyer nor seller need be in Arizona when the transaction occurs.

Foreigners in Arizona to close an escrow should make sure to bring their passports and obtain a stamp at Customs upon entrance to the USA to show legal entry.In many cases, foreigners decide not to come to Arizona for the closing. In these cases, original documents are sent to you for your notarized signature.

Title changes in Arizona when the deed is recorded with the County. Only after property has been recorded with the County can the actual keys be turned over to the new owner.

The Last Word

We always recommend consulting with your legal, financial, and tax advisors as to the feasibility and suitability of any purchase.

I™ve just sold a Single-family property at 2121 W. Shaw Butte in Phoenix. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.