THE FUTURE OF AREAA FUK UD A A I M S T O E X PA ND BUSIN ESS OPP ORT UNI T I E S F O R M E MBERS
Plus Las Vegas Chinatown AREAA Orange County
Making Home Affordable Options for Homeowners in Distress
Going Back to Basics
Fall 2009 5.95 USD
Now is a Great Time to Learn About Responsible Homeownership
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likes being prepared.
At Bank of America Home Loans®, we can help transform excited customers into fully informed borrowers. So the loan process can go more smoothly, and customers can close on time. • Clarity Commitment™ — a one-page loan summary written in plain language so your customers understand what they’re getting. • Home Loan Guide — a new interactive experience that helps prepare your customers by guiding them through affordability, loan options and process. • Mortgage loan officers — experts in thousands of locations across the country who are ready to serve your customers whenever and wherever they need us.
See your local Bank of America mortgage loan officer, call 1.800.344.9403 or visit bankofamerica.com/homeloans The Clarity Commitment™ is provided as a convenience, does not serve as a substitute for a borrower’s actual loan documents, and is not a commitment to lend. Borrowers should become fully informed by reviewing all of the loan and disclosure documentation provided. THIS INFORMATION IS INTENDED FOR MORTGAGE, REAL ESTATE AND/OR BUILDER PROFESSIONAL USE ONLY AND IS NOT AUTHORIZED FOR CONSUMER OR PUBLIC DISTRIBUTION. Bank of America, N.A., Member FDIC. Equal Housing Lender. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. © 2009 Bank of America Corporation. AR81425
AI AREAA ad 9 09 digital:Layout 1
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11:36 AM
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Knowledge. Experience. Integrity.
Look for the designated difference in residential real estate appraisal and consulting. Uncertainty and doubt about market value. They’re the last things you want when selling or buying a home. So, the first thing you should look for in your real estate appraiser is the Appraisal Institute SRA designation behind the name. An SRA designation represents advanced knowledge. It stands for years of proven, real-life real estate valuation experience. And, it always means a commitment to strict professional ethics and standards.
SRA. Look for the designated difference behind the name.
To learn more about finding an Appraisal Institute designated appraiser, visit: www.appraisalinstitute.org/findappraiser
Fall 2009 Volume 1, Issue 5 On the Cover: AREAA National Chairman and Founding President of AREAA Las Vegas, John Fukuda. Photo by Sam Son
Contents
18
6
Playing a Role in the Nation’s Economic Recovery
14
Going Back to the Basics
26
New Legislation Opens Doors to Expanded Homeownership
30
Ten Myths About Multicultural Real Estate Clients
18
A New Day Dawns in Las Vegas for AREAA
36
Overcoming Language Barriers
40
Las Vegas Chinatown
44
Diversify with Management Skills to Enhance Your Income
How the Making Home Affordable program is helping homeowners By Ingrid Beckles, Freddie Mac
Now is a great time to learn about responsible homeownership By Glenda Gabriel, Bank of America
Profile of 2010 AREAA National Chair John Fukuda By Gregan Wingert
An inside look at the center of the Las Vegas Asian community By Gregan Wingert
Pilot program to score underserved consumers holds promise By Barrett Burns
By Michael Soon Lee
An update on legislation impacting multicultural real estate marketing By Gary Sanders
By Michelle Wong
40 4 10 22 24 50
Letter from the Editor
Advertisers
AREAA Chapter Spotlight
AREAA Dragons www.AREAADragons.org
49
Appraisal Institute www.appraisalinstitute.org/findappraiser
01
Bank of America www.bankofamerica.com/homeloans
Inside Front Cover
Institute of Real Estate Management www.irem.org/AREAA
48
MBK Homes www.mbkhomes.com
Inside Back Cover
Multicultural Real Estate & Policy Conference www.areaa.org
Back Cover
Prudential www.Prudentialrealestate.com
13
California-Orange County
Banking on Diversity
Understanding and Working with cultures that negotiate every purchase By Maria Valentin
Stop Advertising and
Start Edutizing Learn how to become your clients’ “go to” resource By Marilyn Wilson
Become “THE” Local Market Expert with a Thorough Pricing Analysis Use MLS statistics to better understand your market By Alan Arora
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From the Editor A recent study by the Federal Reserve of San Francisco indicated that Asian Americans were 1.3 times more likely to fall delinquent on their home mortgages than White homeowners in the State. Many of AREAA’s members were shocked to hear this analysis. For many years, Asian Americans as a group had the lowest mortgage delinquency rates in the market. This new reality did not sync with their previous understanding of the market. More concerning was that the Asian homeownership rate suffered the steepest decline among all groups in 2008, according to the recently released American Community Survey. The survey, conducted by the U.S. Census Bureau, reveals that Asians have been disproportionately impacted by the current housing crisis, with homeownership rates dropping 1.24 percent to 59.4 percent. By comparison, African Americans faced a 0.88 percent decline to 45.6 percent, Hispanics fell 0.80 percent to 49.1 percent and the homeownership rate for Whites decreased 0.40 percent to 73.4 percent overall. What is the underlying this issue? And, more importantly, what actions must be taken to address this alarming trend? Clearly, some of the decline in Asian homeownership can be attributed to the regional impact of foreclosures--one third of Asian Americans live in the high foreclosure state of California which has been hit hard by the current real estate downturn. Secondly, Asian Americans saw the largest gain in homeownership beginning in the year 2000 -- which increased from 53% to 60% during the first half of the decade. Those recent homeowners have suffered the most from home price depreciation and are now facing negative home equity situations. With no or minimal equity left in their homes, these recent homeowners are facing tenuous financial options. Finally, many Asian American homeowners have a lack of understanding about their options and have traditionally avoided seeking outside help about their personal financial matters. Financial problems are typically handled within the confines of their own home, and not within the walls of large financial institutions. These are some of the factors that are contributing to the rapid deterioration of Asian American homeownership rates today. AREAA has championed efforts to reach out to distressed homeowners and has been working with our industry partners to deal with this crisis. But our efforts are not enough, and more needs to be done. One thing is clear: We need more trusted local partners to reach out to Asian American homeowners in distress. This outreach must meet them where they are, and not where we want them to be. By this I mean the following – Linguistic and social isolation creates a massive barrier for many in the Asian
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Fall 2009
Volume 1, Issue 5 American community. In fact, two-thirds of Asian Americans are foreign born and many of these individuals struggle to communicate effectively in the mainstream business environment, particularly for complicated transactions such as home finance. These social and language barriers will not disappear overnight, and the immediate and scalable solution to our current challenge can only come from the industry at this moment in time – both real estate professionals and mortgage servicers. Our solutions must directly account for where struggling Asian American and other immigrant homeowners are today – in terms of language, cultural and personal sensitivities. Unless AREAA’s members and the industry take action, the homeownership rate will continue to decline and we will have lost a generation of homeowners who will view homeownership as a burden and not the opportunity it can be for our communities. We need to put more of a spotlight on these solutions and we must work even harder to keep homeowners, regardless of their language and cultural challenges, in their homes. This will require change and new initiatives on part of everyone in the real estate industry. I believe this is a change worth fighting for. This issue of A|R|E looks at some of these and other issues facing the Asian American real estate community, and we usher in a new leader for AREAA: John Fukuda. I am certain that John will continue the great work of Allen Chiang, and bring added focus on our members and their future success. In this issue, you will get to know John better as an individual, businessman and as a leader.
Editor-in-Chief Jim J. Park
Creative Director Praveen K. Sharma
A|R|E is a publication of the Asian Real Estate Association of America (AREAA), a national nonprofit trade organization dedicated to increasing sustainable homeownership in the Asian American community. For more information visit: http://www.areaa.org. © 2009 by the Asian Real Estate Association of America. Reproduction in whole or part without permission is prohibited. Opinions expressed by individual authors are not necessarily the opinions held by AREAA.
Please direct article submissions and advertising inquiries to: Praveen Sharma psharma@areaa.org or by phone at 760-918-9162
A|R|E Office:
Asian Real Estate Association of America 5963 La Place Court, Suite 312 Carlsbad, California 92008 760-918-9162 Phone 760-918-6924 Fax
Jim Park Editor-in-Chief A|R|E Magazine
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PLAYING A ROLE IN THE
NATION’S ECONOMIC
RECOVERY
By Ingrid Beckles, Senior Vice President of Freddie Mac
In neighborhood
cafes across the country,
the economy is the topic of the day served with a side of falling
house prices, rising unemployment and the credit crunch. Creating much discussion, especially among homeowners and those in the market for a home, is the rising tide of foreclosures. Many families are seeking advice from real estate professionals on how to avoid foreclosure and prevent its potential spillover effects such as lower housing prices, increased crime and higher taxes. By directing homeowners to reliable resources for mortgage relief, real estate professionals can assist their 6
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past clients who want advice on how to avoid foreclosure. They also can help promote neighborhood stabilization by guiding prospective homeowners through the short sale or foreclosure purchase process. Whether you are working with firsttime homeowners who are eager to take advantage of affordable home prices or counseling sellers with negative equity, the most important step is to fully understand available programs and resources. Earlier this year, the Obama Administration announced The Making Home Affordable (MHA) Program, a plan to stabilize our housing market and help Americans refinance or modify their mortgages
to a payment that is affordable now and into the future. In doing so, MHA helps stop the damaging impacts of declining home prices across the country. Families who are struggling to make their mortgage payments can pursue one of two options under MHA: The Home Affordable Refinance Program or The Home Affordable Modification Program. The Home Affordable Refinance Program is intended to give eligible homeowners an opportunity to refinance into more affordable monthly payments. Through the Home Affordable Modification Program, eligible homeowners may modify their existing mortgages into a more sustainable payment plan.
ECONOMIC RECOVERY Helping Borrowers Through Home Affordable Modifications For years, Freddie Mac has been expanding, developing, and refining our offerings to help financially troubled borrowers. Freddie Mac increased its efforts dramatically in response to the economic crisis, and through Home Affordable Modifications we are reaching more borrowers than ever before. The Home Affordable Modification program is designed to help delinquent borrowers who are behind on their mortgage payments or facing foreclosure, as well as current borrowers who have recently experienced significant hardship and are in imminent danger of default. Requirements include: Homeowner is the owneroccupant of a 1- to 4-unit home. Mortgage was originated on or before January 1, 2009. The homeowner spends more than 31 percent of pre-tax income on mortgage payment (including principal, interest, taxes, insurance, and homeowners association dues). Mortgage is no longer affordable because of a financial hardship that can be documented and homeowner is about to default or already delinquent. Homeowners with a monthly total debt payment-to-income ratio equal to or greater than 55 percent are required to enter free HUD-approved credit counseling.
The goal is to create an affordable, sustainable housing payment as close as possible to 31 percent of a household’s monthly gross income. Servicers will apply a sequential process that may include capitalization of arrearages, interest rate reduction, term extension to no more than 40 years, and possibly principal forbearance to reduce a borrower’s monthly mortgage payment. The program has built-in incentives for borrowers. Borrowers who qualify for a Home Affordable Modification trial period plan will have a three-month trial period to demonstrate their capacity to stay current with their new estimated monthly mortgage payment. Upon successful completion of this trial period, the borrower’s loan may be permanently modified. Those borrowers who continue to make timely payments over the long term will receive a principal reduction of up to $1,000 a year for each of the first five years of their new mortgage. Borrowers who do not qualify for a Home Affordable Modification may still be able to get help through Freddie Mac’s other workout offerings. Borrowers with loans not owned by Freddie Mac may also qualify for help because participation incentives are also offered to private-label secu-
rities investors and mortgages owned by the banks. The participation of the private label securities investors is critical given the high proportion of delinquent loans currently held in those securities. Relief Refinance MortgageSM Helps Borrowers Who Couldn’t Otherwise Refinance The Relief Refinance Mortgage fills a serious unmet need. Programs were already in place for borrowers in default and at risk of foreclosure, but not for borrowers who were making their payments and wanted to continue making them. Many of these borrowers have existing mortgages with outstanding balances that are higher than the current value of their homes, and some have higherrisk mortgages such as adjustablerate and Balloon/Reset Mortgages with adjusting payments that could put them at higher risk of default. The Relief Refinance Mortgage offering has two options, a Same Servicer option (Servicer servicing the existing mortgage must originate the refinance) and an Open Access option (any Servicer may originate the refinance). Highlights of Freddie Mac’s Relief Refinance Mortgage include: Enables qualified borrowers who are current on their mortgages and have not been 30 days or more delinquent in the last 12 a| r | e
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months to refinance into loans that improve their financial position, even if their home has decreased in value, by either lowering the rate, moving from an adjustable-rate mortgage, interest-only mortgage or Balloon/Reset Mortgage to a fully amortizing fixed-rate mortgage, or shortening their mortgage term on a fixed-rate loan. Allows qualified borrowers to refinance up to a 125 percent LTV ratio, and permits them to finance closing costs, financing costs and prepaids/escrows up to $5,000 or 4 percent of the current unpaid principal balance of the mortgage being refinanced, whichever is less.
Value Explorer® automated collateral valuation tool to obtain a property valuation for many one-unit properties instead of requiring an appraisal, reducing homeowner cost. Keeps refinance costs lower by not requiring new or additional mortgage insurance (MI) coverage if the existing mortgage does not have MI. Otherwise, the percentage of MI coverage on the Relief Refinance Mortgage must be the same as the percentage of coverage on the mortgage being refinanced.
tance or information about Making Home Affordable from their lender or a HUD-approved housing counselor. Homeowners should beware of any person or organization that asks them to pay a fee in exchange for housing counseling services or modification of a delinquent loan. The best advice when approached by someone asking for money is “Do not pay – walk away!”
Homeowners should be especially wary of anyone who says they can “save” their home if the owners sign or transfer over the deed to their Beware of Foreclosure Rescue house. Homeowners should never Scams – Help Is Free! sign over the deed to their property One of the critical roles that real to any organization or individual estate professionals can play is helpThe Same Servicer option unless the homeowner is notified ing to steer families toward reliable provides a streamlined, lowerdirectly by their lender / servicer that resources and away from foreclosure cost underwriting process with simplified borrower qualificathe lender / servicer is working rescue scams. Although firms exist tions. directly with such organization to that promise to provide help for a resolve their debt. Also, homeownfee, homeowners should be advised Under the Same Servicer option, ers should never submit their mortthat there is never a fee to get assislenders may use our Home gage payments to anyone other than their mortgage Resources for AREAA Members and Consumers servicer without approval // Making Home Affordable information: from their mortgage http://www.makinghomeaffordable.gov/ or call 888-995-HOPE company. To determine if Freddie Mac owns the loan: Freddie Mac FreddieMac.com/avoidforeclosure or 1-800-FREDDIE (8 a.m. So, the next time a to 8 p.m. EST) conversation turns HUD-approved counselor list: www.hud.gov/foreclosure. // toward a discussion about // Foreclosure prevention workshops, dates and locations by state: neighborhood foreclowww.freddiemac.com/avoidforeclosure/workshops.html sures, be sure to serve up // List of Freddie Mac-owned foreclosed homes for sale: some sound advice about www.homesteps.com where homeowners can 8
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find help. At Freddie Mac, we’re proud to play a leading role in MHA, and as one of the nation’s real estate professionals, you can do your part to help bring relief to homeowners and America’s housing market too.
Ingrid Beckles is the senior vice president of Default Asset Management for Freddie Mac. She leads an area responsible for developing and implementing loss mitigation and foreclosure strategies, policies, procedures and technologies that enable Freddie Mac to mitigate and manage credit losses. Beckles has oversight and leadership responsibilities for the company's Non-Performing Loan Servicing, REO/Property Disposition, Default, Fees and Claims, plus Collateral Enhancement Operations.
Special Incentives for HomeSteps® Homebuyers Buyers of Freddie Mac-owned foreclosed homes could receive home warranty and closing cost incentives. Freddie Mac, through its HomeSteps® real estate sales unit, recently announced these incentives for people purchasing single-family homes as a primary residence. These incentives are part of its SmartBuy sales promotion to encourage property sales while protecting buyers against unexpected repair costs, which could interfere with their ability to meet their mortgage obligation. Those purchasing single family HomeSteps® homes as a primary residence will receive a comprehensive two-year home warranty paid for by Freddie Mac. In addition, for a limited time, Freddie Mac will pay up to 3.5 percent of the sales price in buyer's closing costs, potentially saving qualified buyers of HomeSteps homes thousands of dollars in transaction costs. The two-year warranty, called Home Protect, is provided by Cross Country Home Services and covers electrical, plumbing, air conditioning and heating
systems, as well as ductwork and many major appliances such as water heaters, stoves, washer & dryers, dishwashers and refrigerators. Freddie Mac pays for the first two years of the warranty after which buyers will have an option to continue the warranty on their own. Cross Country Home Services will also guarantee each repair made under the warranty for 180 days and will replace appliances that can't be repaired with comparable units. In addition, each Home Protect warranty includes a buying program providing discounts of up to 30 percent on the purchase of name brand appliances and up to 15 percent on their installation. To qualify for the limited-time buyer's closing cost offer, buyers must submit initial purchase offers by October 31, 2009 and complete the closing by December 31, 2009. The warranty program will be ongoing. For more information and to view homes for sale visit www.HomeSteps.com or call 1-800-972-7555.
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AREAA CHAPTER SPOTLIGHT
ORANGE COUNTY
O
range County, California is one of the most exciting destinations in the United States, with landmark attractions like Disneyland, Major League Baseball’s Angels of Anaheim and the world-famous “Surf City, U.S.A.,” Huntington Beach. The county is home to three million people, 16% of which are Asian and that percentage grows each year. The AREAA California-Orange County Chapter successfully launched in July of 2008 with the motivation to offer minority
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real estate professionals a place to network amongst their peers, host educational seminars, promote better business practices and bridge the gap between the different generations in the real estate industry. Leading the way was President Alice Tsang of Central Escrow, who played a key role in the chapter startup. Tasked with assembling a Board of Directors that would build the foundation of the chapter, Tsang reached out to qualified individuals in her personal network of contacts and industry experts that shared her vision for the chapter.
CHAPTER SPOTLIGHT
No matter what associations you belong to or decide to participate, Asian-Americans must become more involved in our communities. Now is the time to join organizations like AREAA and together with other non-profits, corporations, local and state government agencies voice the concerns of minority issues. ALICE TSANG President, AREAA Orange County Once established, the volunteer leadership determined that the chapter’s main goal would be to promote minority homeownership through its real estate professionals. In addition, they set out to build lasting relationships with banks, brokerages, community organizers and local and state government agencies, emphasizing the importance of sustainable homeownership in Asian communities.
Orange County members volunteered their time, energy and industry knowledge at these events, directly helping hundreds of homeowners facing foreclosure. In addition, the chapter continuously shares valuable industry news and homeownership resources with its members so they in turn can communicate this information to their clients, making for a more educated consumer base.
n its first year, AREAA Orange
Tsang and her leadership team have demonstrated a commitment to offering their members a variety of professional development opportunities throughout her term as President. Topics of past education sessions hosted by AREAA Orange County include: Feng Shui, FHA-Insured loans, the FHA 203(k) rehab program, foreclosures, network-
I
County has made great strides to unite real estate professionals and make an impact in the community, most notably, through its involvement in homeownership preservation events sponsored by Chase, Wells Fargo and the Home Ownership Preservation Collaborative (HOPC). AREAA
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CHAPTER SPOTLIGHT
Organizations like the Asian Real Estate Associate of America should be an essential part of all real estate professionals. The opportunity to gain leadership skills and network with your peers is invaluable in today’s industry and AREAA OC Chapter offers that to its members. AARON YU Treasurer, AREAA Orange County ing to grow your business, REOs and tax laws, including accounting tips. Going forward, the chapter is dedicated to offering more education opportunities and teaching real estate professionals of all experience levels how to effectively use new technologies to improve their business. AREAA Orange County is off to a great start as it establishes itself as the premier organization for real estate professionals serving Asian markets throughout the county. With the continued support of its industry partners and leadership, the chapter is sure to grow and prosper in the coming years.
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Visit AREAA CaliforniaOrange County Online:
http://www.areaa.org/caoc
1
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Do Not Print
Going Back to the
B A S I C S Now is a great time to learn about responsible homeownership
By Glenda Gabriel
Neighborhood Lending Executive Bank of America
The home is perhaps the most important purchase a person will make in their lifetime.
It still symbolizes a core American goal and remains a primary means of building a solid financial foundation for future security. Asian Americans are overwhelmingly positive about homeownership – according to the U.S. Census Bureau, 60% already own a home – but on the near horizon for AREAA real estate agents is a sobering statistic: less than 10% of potential first-time homebuyers would consider purchasing of a home in the next year.* That has implications for all of us in the housing market.
BACK TO THE BASICS
The events of the past few years have taught homeowners and potential homebuyers the value of understanding the full scope of purchasing and owning a home. They have also prompted changes, innovation, and a return to basics among mortgage lenders in many ways. For example, lenders are increasingly committed to clarity and transparency in the home buying process in an effort to help educate and prepare customers to be successful homeowners. We’ve seen improvements in certain aspects of the housing market in recent months. Housing is more affordable now to families with a moderate level of income, and mortgage rates continue to remain at near historic low levels. What is important for your clients to realize is that homeownership is still a great consideration for them, now. The median household income for Asian Americans is the highest among all race groups. The number of single-race Asians 25 and older who have a bachelor’s degree or higher level of education is more than 20% more than all Americans 25 and older (U.S. Census). Combine these factors with the up to $8,000 first-time homebuyer federal tax credit that is set to expire on November 30, and now may be the right time for your clients to consider homeownership. Lenders and state and local housing agencies are working together to provide education,
resources and programs to help potential homebuyers become successful homeowners. Here are several tips to share with your potential homebuyers to help them gain the knowledge and confidence to select a home loan that is right for them.
GET EDUCATED
While the focus is most often placed on the affordability of a monthly mortgage payment, it is certainly not the only factor potential homeowners must take into account when considering if owning a home is right for them. First-time homebuyers should strongly consider home buyer education courses to help understand what is involved in owning a home. Bank of America works actively with more than 500 non-profit organizations across the U.S. to provide home buyer education and counseling services that help potential buyers understand the full scope of homeownership benefits and responsibilities, as well as what to do if they become delinquent or are at risk of losing their home.
MAKE SURE YOUR CLIENT KNOWS WHAT THEY CAN COMFORTABLY AFFORD
One of the most effective ways to see how much a customer can borrow is to prequalify. It’s easy and quick, and borrowers can even do it online. But, they should never take a prequalification as a loan commitment or guarantee. It’s simply a first step to see the
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HOW TO BEST SERVE YOUR CUSTOMERS: Know the affordable housing programs available in your area Introduce yourself and get to know the people in your city that design and implement affordable housing programs Talk about your commitment and demonstrate it to your community Sponsor homebuyer education workshops Partner with a community focused loan officer How do you learn more about helping your first-time home buyer clients prepare for homeownership? Visit the learning center at www.bankofamerica.com/homeloans.
amount and type of loan a lender could offer. Once the borrower understands roughly how much he or she can borrow, they should work out a monthly household budget according to that limit, as well as any additional expenses that come with homeownership and standard living expenses such as utility bills, any homeowners association dues, groceries and gas. If possible, the borrower should live according to that budget for a few weeks or even months to get an accurate view of how owning a home would impact their lifestyle.
START SAVING DOWN PAYMENT
FOR
A
Down payments often range between as low as 5% and more typically around 20% of the sales price depending on many factors, including the loan, lender and credit history. Unfortunately, with unemployment and underemployment at record high rates, many potential homebuyers may have difficulty coming up with the required down payment. According to the National Association of REALTOR’s 2009 National Housing Pulse Survey, most Americans still consider having enough money for a down payment and closing costs to be the biggest obstacles to buying a home. Fortunately, down payment and closing cost assistance is offered by many state and local housing agencies and nonprofits. Each agency structures programs to meet the needs of their specific community, so it’s important for borrowers to get in touch with their mortgage
lender and Realtor to learn more about what assistance is available. Other options include Federal Home Administration (FHA) and other government loans, which may only require a 3.5% down payment for qualified borrowers.
Glenda Gabriel is the Neighborhood Lending executive for Bank of America Home Loans. She is responsible for identifying opportunities to drive homeownership among lowto-moderate income borrowers, minorities, immigrants and underserved communities across the nation.
*Source: 2008-09 MacroMonitor, SRI Consulting Business Intelligence ** The summary is provided as a convenience, does not serve as a substitute for a borrower's actual loan documents, and is not a commitment to lend. Borrowers should become fully informed by reviewing all of the loan and disclosure documentation provided. Bank of America, N.A. Member FDIC © 2009 Bank of America Corporation.
Equal Housing Lender
A COMMITMENT TO CLARITY In today’s tumultuous economic environment, we know how important it is to your clients to work with a lender they trust. That’s why we created the Clarity Commitment™, a simple, one-page summary of key mortgage terms written in easy-to-understand language so your client knows what they’re getting.** The Clarity Commitment is currently available on 97% of our first mortgage products. This, coupled with the expertise of Bank of America’s nationwide network of loan officers, is our commitment to you and your clients that we will always be a responsible lender. How do you learn more about helping your first-time home buyer clients prepare for homeownership? Visit the learning center at www.bankofamerica.com/homeloans.
A NEW DAY DAWNS IN LAS VEGAS FOR AREAA By Gregan Wingert Photos by Sam Son
John Fukuda will look out into a crowded Las Vegas
banquet room in October, at the Asian Real Estate Association of America (AREAA) convention and say, “if these are my friends, then my future is bright.” Fukuda is ready to serve as AREAA’s National Chairman.
Associated with Venta Financial Group Inc. (VFG) since March of 2008, Fukuda is currently President of Alterra Home Loans, the Retail Division of VFG. The company ranks in the top 7 lenders in its primary marketplace and is Nevada’s fastest growing mortgage lender. The significance of owning land and the determination to earn success are deeply rooted in John’s family history. Fukuda is a Sansei, a third generation Japanese-American. “Both of my sets of grandparents are immigrants from Japan,” Fukuda said. Being immigrants in the U.S. during the early 1900s, his grandparents were denied landownership; but in the 1910’s the family was able to lease land to start a farm, using an America citizen friend to sign the lease. The family was very successful until World War II hit. “Both my mom and dad and their entire families were put into internment camps [during WWII],” Fukuda explained. The families returned to nothing. All their farm equipment had been sold and their land abandoned. They were forced to start over. In 1948, they purchased a 60-acre parcel in Orange County, CA using the oldest son as
the title holder. John’s paternal grandparents farmed strawberries and chili peppers while his maternal grandfather owned a nursery and is widely credited with introducing bonsai to the U.S. It wasn’t until 1952 when the Alien Land Act was declared unconstitutional in California that Fukuda’s grandparents could own land. With a family that has met, faced, and overcome adversity, it’s not surprising that Fukuda’s values lie in land and homeownership. The value of owning property combined with the importance of education were both instilled in Fukuda by his family and those values have ignited a passion in John for helping the minority and underserved communities facing homeownership
barriers. In Fukuda’s career, his passion is always apparent. “I’ve always had a passion for serving the Japanese community.” Fukuda said. “I’m very proud that I’m Japanese. I’m very proud of the fact my grandparents realized the American Dream, having started from essentially nothing.” Fukuda hopes to pass on his family pride and values of landownership and education to his two sons. Family means a great deal to John. As a support system, he said his wife and kids pick him up and dust him off when he needs it – or kick him in the butt if he needs that. John’s high regard for family shows even in the office; he’ll pick up a phone call from his kids even during a meeting. “I’m probably like every other parent in the universe, but I think my kids are pretty special,” he added. Fukuda continues to live by his values and gives back by playing his part to narrow the homeownership gap that
“I’ve always had a passion for serving the Japanese community. I’m very proud that I’m Japanese.” exists between the general population and the Asian communities. In Asian communities you’ll find more than one family living under one roof, he said. Those families would support one another as they earned the resources to buy another home. “In the Asian community it’s always been the ‘American Dream’ to own a home and live in it,” Fukuda said. Fukuda has made great strides serving as Chair-Elect for the past year in AREAA, a nonprofit professional trade organization dedicated to promoting homeownership opportunities in Asian American communities, with a national membership base of over 12,000 practitioners. Charismatic yet humble, Fukuda is not one to brag. Fortunately, those who know him aren’t so modest about John. Fukuda’s friends within AREAA, in business and in other circles believe him to be a dynamic individual and perfect for the leadership position. Jim Park, President of AREAA, helped Fukuda transition into the world of nonprofit.
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“I’m kind of a for-profit guy, not a nonprofit guy,” said Fukuda, explaining how he wasn’t sold on the idea of heading a local chapter of AREAA. “I’m very new to the association world,” Fukuda admits. Two and a half years ago, there was no local chapter in Las Vegas. “I didn’t know how to spell AREAA.” But Park was sure John would be the right person to help launch a chapter in Las Vegas. “He understands what it takes to build something from the ground up,” Park said. “He is exactly what the organization needs.” As for Fukuda’s new position Park said, “He’ll be the face and the voice of AREAA nationally. He’ll represent us on a lot of important issues.” Park believes Fukuda wants to make the organization more relevant to practitioners on the ground by estab-
lishing a larger technology presence for the group. Fukuda’s experience with technology goes back to his college days. During the time he was working on his Bachelor’s Degree in Economics from the University of California, Los Angeles, John worked for IBM. He also helped found, launch, consult, and direct a number of Internet companies between 1996 and 2005. “I cut my teeth in the corporate world with Fortune 200 companies, all while launching these small-medium sized companies,” Fukuda said. He hopes to use technology to connect members of AREAA nationwide. The members Fukuda represents will be able to make connections and find deals year-round, not just during a conference every six months. “I feel AREAA and the real estate industry as a whole is in the hands of the practitioners,” he said. “It’s a very grass-rootsy type of thing—built by the members for the members.” Alex Garza, executive board member for the Las Vegas Latin Chamber of Commerce and a friend of Fukuda’s, said, “Creativity in new directions generates positive results.”
Fukuda moderates a panel of short sale experts at an AREAA/NAHREP event
“Everything we do has to be member-centric,” Garza added about minority organizations. “[Fukuda] cares about that individual member.” With Fukuda’s dynamic leadership attributes, Garza believes the sky is the limit for Fukuda. “What we’re seeing in AREAA National right now is this shift to young, dynamic minority leaders,” Garza said. “It’s almost like a passing of the baton…and John is the best person to be passing it to.” Allen M. Okamoto, who sits on the board of directors for AREAA, is one of the founders for the organization. “[Fukuda’s] job is to lead us out of this real estate recession,” said Okamoto, “not cure it.” Because of his age, leadership abilities and his know-how in technology, Okamoto feels sure Fukuda will be successful. “He’s young; he’s dynamic; he’s personable. Plus, he’s a good looking guy,” Okamoto said. “He’s going to drag us kicking and screaming into the 21st century.” Juan Martinez, a close business friend of Fukuda’s, is the President of the Nevada Chapter of the National Association of Hispanic Real Estate Professionals (NAHREP). Being a part of NAHREP, Martinez and Fukuda collaborate often on what’s happening within their own organizations and the issues impacting the minority communities they serve. Martinez, Fukuda, and other leaders get together every Monday night for a
mastermind meeting, they call “The Firm,” to brainstorm ideas on how their chapters can better help the Hispanic and Asian communities and the practitioners that serve them on a local level, as well as on the national stage. “We try to help each other out. It’s for the betterment of the community,” Martinez said. Having organizations like NAHREP and AREAA “helps build morale,” said Martinez, especially in a tough economic climate. Martinez is confident that Fukuda will be a great leader for AREAA National. “He’s going to do a phenomenal job,” Martinez said. “His talent and his ability to surround himself with big thinkers is incredible. But more importantly, is his innate ability to take action. That’s where he’s going to shine the most … that will be key for AREAA … leadership that is going to take massive action in times where most are thinking of cutting back.”
However, Fukuda isn’t just interested in the possibilities of his own ideas. “He is a listener. He allows the people around him to grow their ideas,” Garza said. “Wherever he is, he’s there – he’s there in the moment. If you could have a best friend, it would be John Fukuda.” Fukuda has a positive disposition about his career. “I’m sure there have been bad things that have happened,” he said, “but I’m always forward thinking.” There are several ideals he believes in, one of which is to whom much has been given, much is expected. “I plan to do pretty special things with and for AREAA,” Fukuda said. “Where I am now is the most important time in my life.”
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BANKING ON DIVERSITY: Understanding and Working With Cultures That Negotiate Every Purchase By Maria Valentin, V.P. Strategic Markets, First American Title Company MARKET POTENTIAL Given the changing demographics of the United States, it becomes more and more important to tailor our approach to a largely diversified customer base. It makes sense for real estate agents and lenders to understand the purchasing customs of the significant numbers of immigrants in the United States whose dream of homeownership make them great client targets in this growing market.
PURCHASING EXPECTATIONS Targeting customers from diverse cultural backgrounds involves a mutual learning process and many misunderstandings can be resolved when expectations are clearly understood before a transaction. Bargaining styles are highly culture-dependent and should be discussed with customers. While the German culture is averse to bargaining in general, the Asian, Hispanic, Russian, Armenian, and Turkish cultures among others see hard bargaining not only as a valuable and necessary skill but also as a way of life. People from negotiating countries must believe they got a good deal or they simply will not go
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through with the transaction. (It is important to understand that although “a good deal” implies a lower fee, many times what the client really wants to understand is what “value” they will receive). They take great pride in their bargaining skills and if they believe that they are overpaying, they will start renegotiating. Since it is not uncommon to continue asking for concessions even after an agreement has been reached, sellers and agents become quickly irritated. More often than not, clients from other nationalities are completely unfamiliar with the real estate process and with home values in the area.
take place early on. If you do so after they have become enamored with a home, they will suspect your advice to be only commission-driven.
EDUCATION, EDUCATION, EDUCATION
A misconception held by many homebuyers and sellers is that real estate agents and brokers do very little to earn ridiculously high brokerage fees. Multicultural clients see this as an opportunity to negotiate and will do so until the very end unless the education process by the real estate agent is thorough and constant. Make it transparent who pays your commission and list everything you handle throughout the transaction. If you don’t, your fee will become part of the negotiation process.
In order to avoid endless negotiations, it is advisable to set realistic expectations with customers. A discussion of an agreeable purchasing strategy should address bargaining limitations and an understanding that additional demands will require mutual concessions. Prior to showing clients any property, and certainly before they find a home they like, make sure that they understand how pricing is determined. Once again, this conversation has to
It is a good practice to invest time in educating your customers on the real estate business and process. Show them actual listing sheets of comparable active, pending and sold properties to set realistic expectations. Point out listing dates, sold dates, and time on the market to help the client understand the market dynamics. Talk to them about the appraisal process and the possible scenarios if a property does not appraise for the contract price.
Keep in mind that with the Hispanic culture developing a person to person relationship is of utmost importance. In general, they are not overly impressed with production awards, credentials and designations. Developing a friendship where they feel that they like and trust you must come before business is transacted. With the Asian cultures, however, credentials, titles, degrees and designations tend to be very important. Under-promising and over delivering are highly admired qualities. Consistency in your communication is a vital part of integrity. Humility is greatly admired in the Asian cultures. Saving face or avoiding embarrassment is extremely important. Trust between parties is decisive to successful negotiations but how we establish that trust is different in the diverse cultures. Some, like Hispanics, rely on intuition and emotion, while others look to past experience and performance. Even though each culture has its own style, the most obvious difference in negotiating with diverse cultures is the pace at which things move. While in the United States time is money and business moves at a very fast pace, in Asia and Latin America negotiations move excruciatingly slow. This is part of the process and if real estate agents are to be successful in selling to multicultural clients, they must understand this concept.
CONCISE TAKE AWAYS FOR SUCCESS WORKING IN A MULTICULTURAL WORLD: 1. Determine the demographics, median income and homeownership rates of the communities that surround you. 2. Remember that language capability is not as important as cultural competency, which can be developed by involving yourself in the target community. 3. An honest interest in another culture can be sensed and will be deeply respected and honored by the client. 4. Understand that real estate in foreign countries has no resemblance to the way we conduct our transactions and therefore your first time buyer or seller will have no point of reference. Avoid acronyms (MLS, CMA, etc.); they mean nothing to the client but culturally it is not common to admit they don’t know, explain each step clearly and refer the client to informational websites that confirm the information you provide. 5. When discussing a reduction in price, commissions, fees, etc., always bring it back to comparables, market conditions, value and security.
Maria Valentin is Vice President, Strategic Markets for First American Title Company and has been in the real estate industry for over 20 years. In this capacity, her goal is to educate real estate professionals, and the industry at large, on how to understand, better serve and market to the fastest growing multicultural segments. Recognized for her leadership efforts in the community, she is the 2007 recipient of the Latino Business Leadership Award in San Francisco for the corporate category.
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&
STOP ADVERTISING START EDUTIZING
C
onsumers simply do not want to be “sold” anymore. They have become cynical about advertising claims and “it’s all about me” advertising. Edutizing is a term describing a new method of promoting your services to potential customers. Instead of overtly promoting your photo and property listings, edutizing is much more subtle. It’s time to put all of those personalized pens and calendars back on the shelf! But what edutizing information will be the most effective? You must first decide what you can uniquely deliver in your real estate business. An agent focused on the luxury market, for example, may include information on luxury events, news
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from luxury brands and economic information interesting to high net-worth individuals. Marquette Turner Real Estate in Australia (http://marquetteturner.com/), for example, does a great job highlighting unique and interesting luxury content on their website, blog and newsletter. For agents targeting green consumers, your edutizing focus would be consistent with your positioning. You could talk about energy-saving tips, green building materials and retailers, green legislation and other relevant green topics. Agents with a focus in a particular neighborhood or subdivision would likely talk about neighbor-
hood issues like school activities, zoning changes, town events, etc. The more specific and the more “inside” information shared, the more valuable the edutizing will be. It is also important to share neighborhood real estate market statistics. With strong local market statistics tools, you can provide monthly updates to your sphere of influence. You may review the information and interpret the positive trends you’re seeing. The data might show a particular neighborhood is heating up or that days on market are decreasing. This will position you as the “go to” resource. Local market statistics and housing trends are one of the most impor-
tant elements for any edutizing campaign. Real estate professionals have a key advantage over consumers; their multiple listing service data. MLS activity is the best and most accurate tracking method of market activity. There are several market statistics programs available now, many the reside directly in your MLS, that can help you provide localized, relevant, and easy to understand information to consumers. One such tool, Clarus MarketMetrics® (www.clarusresource.com), integrates with MLS data nightly and provides trending information for local neighborhoods. Easily share local market pricing trends, days on market, percentage of original list price at sale, supply/demand ratios and other important statistics. There are a variety of tools that can be used to convert your advertising efforts into edutizing programs. First, it makes sense to use your website and blog to share your unique insights about the market. If you write a blog, you can then post it on Twitter, LinkedIn, Facebook and other places where you connect with your client base.
http://www.twitter.com http://www.linkedin.com http://www.facebook.com
So how do you start your edutizing campaign? Here are 5 easy steps to get you going:
1 2 3 4 5
Identify your unique position in the marketplace and stick to it Focus on the marketing tools you think will be best for your audience Provide valuable information to your readers Give your client a way they can share you with people they know Deliver great service and the rest will follow
Learn more about edutizing at the AREAA/NAHREP Real Estate and Marketing Conference in Las Vegas. Excerpts for this article taken from “Edutizing - Dramatically increase the effectiveness of your marketing approach” a white paper by Marilyn Wilson of WAV Group. For more information visit http://waves.wavgroup.com.
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NEW LEGISLATION OPENS DOORS TO EXPANDED HOME OWNERSHIP PILOT PROGRAM TO SCORE UNDERSERVED CONSUMERS HOLDS PROMISE
BY BARRETT BURNS
DEEP WITHIN THE "HOUSING AND ECONOMIC RECOVERY ACT OF 2008" IS A LITTLE-NOTED SECTION WITH THE ABILITY TO BENEFIT THOUSANDS OF POTENTIAL ASIAN AND HISPANIC HOMEBUYERS. The legislation mandates the Department of Housing and Urban Development conduct a pilot program for automating credit scoring for certain borrowers applying for Federal Housing Administration (FHA) mortgages, focusing on individuals who otherwise might not receive a credit score under some traditional credit scoring systems because of insufficient credit histories. Deemed unscoreable, these consumers may have a credit record that isn’t long enough, contains too few credit accounts or has credit activity that is too infrequent. Since the passage of the “Housing and Economic Recovery Act” last summer, the FHA has been busy preparing for this effort and has recently been accepting comments on the pilot program. As
the Sept. 28 deadline for input approaches, it is a good time to examine this program and why it’s a winning proposition for consumers. A June 2008 study for the Center for Financial Services Innovation conducted by Experian Consumer Research estimates that 40 million U.S. households, consisting predominantly of low income individuals, immigrants, elderly and ethnic minorities, are “unbanked” or “underbanked.” The legislation affirms what we have known for years - that the market has needed a credit score model that reaches those “unbanked” or “underbanked” consumers using traditional credit data. Many creditworthy Americans might achieve their dreams of home or business ownership if lenders use a credit score that relies on “traditional” credit data
applied in new analytical ways. Some current credit score models incorporate criteria that winds up excluding consumers who use credit in non-traditional ways. VantageScore’s model is more inclusive, allowing many more consumers the potential to access mainstream credit. Similarly, other borrowers who, in the past, had been deemed subprime by traditional credit scoring models were actually quite creditworthy and deserved prime or near-prime loans. A recent analysis conducted by Experian found that 21 percent of 11.9 million sub-prime consumers examined in the study could have been reclassified to higher score intervals had lenders been using VantageScore. According to the Joint Center for Housing Studies’ report “The State of the Nation's Housing 2009,” the incidence of high-cost loans and foreclosures is much higher in minority than in white neighborhoods, and highest in low-income minority neighborhoods. That is why it is crucial to more accurately assess every consumer’s credit-worthiness.
CREDIT SCORING
More predictive credit scoring will benefit the financial institutions that make home ownership possible, as the pool of applicants will greatly expand. Despite the current upheaval in the mortgage lending markets, 56 percent of Americans believe home ownership is still attainable for most, according to a 2008 AOL Real Estate and Zogby International Online Survey. Home ownership rates in the first quarter of 2009 stood at 67.3 percent, up steadily since 1988 but down from an all-time high of 69.1 percent in 2005. Reversing this decline is important because owning a home is a major contributor to building wealth. Statistics from America Saves, a coalition of nonprofit, corporate, and government organizations that assists and educates individuals about saving, show that home equity accounts for more than four-fifths of the typical family's wealth. As of 2008, 74.9 percent of whites owned homes, compared with 59.1 percent of Asians and 48.9 percent of Hispanics, according to the Pew Hispanic Center’s “Through Boom and Bust: 28
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Minorities, Immigrants and Homeownership.” These statistics show the gap between whites, Asians and Hispanic is still too wide. Without a credit score, however, homeownership is a dream deferred, if not denied completely. Finding a way to score potential homeowners who are overlooked by traditional credit scoring is a worthy endeavor and there are ways it can be done. In the absence of a credit score, some lenders resort to scoring borrowers manually and recovering the additional underwriting costs by placing these consumers in higher-priced loans for which they otherwise might qualify. One can only guess how many borrowers now caught in the sub-prime tangle might have avoided that situation if more credit scoring options had been available.
One of the champions of the automated program, Jim Park, president and CEO of the Asian Real Estate Association of America (AREAA) can attest to the need to streamline the underwriting process and enable more immigrant and first-time homebuyers to qualify for affordable mortgage products. Park points out that first-time and immigrant home buyers often lack the credit depth necessary to qualify for lowinterest rate mortgages, which means they have to obtain other financing at higher rates or forego purchasing a home altogether. The underserved use credit differently than others and reliable, accurate scoring of these consumers is one of the ways to help reopen the capital markets. Access to the capital markets drives down the cost of credit and increases availability of affordable credit for all consumers and the pilot
ONE CAN ONLY GUESS HOW MANY BORROWERS NOW CAUGHT IN THE SUB-PRIME TANGLE MIGHT HAVE AVOIDED THAT SITUATION IF MORE CREDIT SCORING OPTIONS HAD BEEN AVAILABLE.
CREDIT SCORING
program will create an automated process that blazes a trail to the capital markets. A viable solution that should be included in the pilot program involves utilizing traditional credit files in new ways when calculating credit scores. This can involve incorporating more predictive capabilities and new scoring methodologies to overcome the criteria in some scoring methodologies discussed earlier that prevents people from receiving a score. In doing this, lenders can provide a credit score even when only a single credit account exists. Additionally, individuals with a credit history of less than six months or when the most recent activity is beyond six months can also receive scores.
THE GOOD NEWS
is that the mortgage market needs a boost and using different scoring techniques is a method that is open and available to lenders today. Regulators could assist by sending a clear and unwavering signal to the market that they are willing to accept new, innovative and highly predictive methods of credit scoring.
With the ability to obtain a credit score, more lower income and minority households have achieved the dream of home ownership, and with it, the ability to build a more secure future for themselves and their families. This automated scoring section of the “Housing and Economic Recovery Act of 2008� can help ensure the pipeline to available capital is widened, in an equitable and responsible way. Having more creditworthy Americans is good for the nation, its lenders and consumers.
BARRETT BURNS is president and chief executive officer of Stamford, Conn.-based VantageScore Solutions, LLC, an independently managed company that holds the intellectual property rights to VantageScore - a generic scoring
model
introduced
in
March 2006.
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TEN MYTHS ABOUT MULTICULTURAL REAL ESTATE CLIENTS
MICHAEL SOON LEE
MULTICULTURAL MYTHS
O
ver 60% of all first-time homebuyers in America today are minorities according to the National Association of REALTORS®. There are over one million people from overseas coming into the United States every year and they all want to show friends and family they are successful by buying an American home. In addition, there are 80 million multicultural Americans already here. As a result, minorities are currently one-third of the population and by 2042 will be half. This is a huge market for real estate agents all across the country – if you know how to meet the unique needs of the fastest-growing group of homebuyers.
1 “PEOPLE FROM OTHER CULTURES ONLY WANT TO WORK WITH AN AGENT FROM THEIR OWN CULTURE.” Nothing could be further from the truth. In fact, many cultural groups would prefer to work with an agent from outside their own culture. Asians, for example, are very private about their financial affairs and many are afraid that if they use an Asian agent they might disclose their income and real estate holdings with others in the community. It does take bit more time to sell to multicultural clients because they may know little about American real estate, construction or finance. However, if you are patient they are likely to refer friends and family to you for a lifetime.
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2 “MULTICULTURAL PEOPLE HAVE SUPERSTITIONS AND BELIEFS THAT ARE TOTALLY INCOMPREHENSIBLE TO AMERICANS.” Remember that people in the United States have beliefs that often baffle outsiders such as the fact that black cats, walking under ladders and the number thirteen are unlucky. Most other cultures have their own beliefs but they are just different. Many cultural beliefs happen to directly affect the purchase of real estate such as the direction a home faces or the numbers in the address. For instance, many Asians believe that the number four is unlucky because when pronounced in Japanese or Chinese it sounds very similar to those cultures’ word for “death”. Just as there are very few hospitals or hotels with a thirteenth floor in America the same buildings in Asia
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lack a fourth floor for the same reason. You can see that this belief is similar in both countries.
3
“SOME PEOPLE FROM OUTSIDE THE U.S. ARE UNETHICAL BECAUSE THEY INSIST ON RENEGOTIATING A PURCHASE CONTRACT AFTER IT HAS BEEN SIGNED.” While it’s true that people from other cultures often try to renegotiate a purchase agreement after it has been signed it’s not a matter of ethics. America is a “low context” country where everything is spelled out between people either verbally or in contracts. Other countries are “high context” where much more information is derived from the context of the communication and less is spelled out. In high context countries it is understood that signing a contract
only begins a relationship which can change as the parties get to know each other. As a result, the parties are obligated to help each other “adjust” the contract to their needs until it is completed.
4
“IT’S IMPOSSIBLE TO GET PERSONAL FINANCIAL INFORMATION FROM MULTICULTURAL PEOPLE BECAUSE THEY’RE SO SECRETIVE.” This is one of those myths that is actually true. Many people who are new to this country are extremely private about their finances. Remember that they are unfamiliar with the banking and legal system in America and do not yet know whom to trust. In addition, merely asking a question as innocent as “How much do you have for a down payment” can actually endanger the lives of your clients. Why is that? Many new
MULTICULTURAL MYTHS immigrants do not believe in banks and keep much of their money hidden under the mattress or buried in the back yard. Have you ever heard of “home invasion robberies” where the occupants are threatened until they reveal the whereabouts of their valuables? These kinds of crimes are commonly committed against Asians or Hispanics, not because they have nicer furniture or stereos than everyone else but because that’s where the cash is. I know of one Hispanic client who lost $75,000 in cash to a home robbery. The best way to find out how much new immigrant clients have for a down payment is to give them a “menu” of choices. Show them the required investment and resulting monthly payments for ten percent down, twenty percent down, etc. The client may also be interested in a “quick qualifier” loan so be sure to explain the requirements for this as well. Usually, the loan that the client expresses the most interest in is the one they will likely have saved the down payment for.
5 “PEOPLE FROM OUTSIDE THIS COUNTRY ARE UNREASONABLE WHEN IT COMES TO NEGOTIATING.” Remember, there are two types of countries in the world – negotiating and non-negotiating. The United States is a non-negotiating country where we generally pay the price asked by vendors without question because it saves us time. In most other countries around the world people haggle on everything from groceries to clothing to homes. To expect someone from one of these places not to bargain is tantamount to asked them not to breathe. Experienced negotiators know that when they first make an offer on a home it is the lowest they will ever be able to go. They can only go in one direction from there – up. This is why they will start embarrassingly low with their initial offer even if they might be willing to pay full price. Also, veteran hagglers are aware that they have the
most bargaining power just before close of escrow. This is when they will usually ask for one extra concession to show their skill. Smart agents will tell their sellers to set something aside for this time otherwise it will likely come out of the agent’s commission. For instance, if the seller was willing to concede a refrigerator or clothes washer or dryer it’s best not to include it in any purchase. At close of escrow it can be thrown in to “sweeten the deal” as long as there is no more negotiating.
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“PEOPLE FROM OTHER CULTURES ARE JUST TOO MUCH TROUBLE TO BOTHER WITH.” The author hears this statement from agents throughout the country. Too bad for them because if you know how to meet the special needs of multicultural clients they can be just as loyal and enjoyable to work with as anyone else. In addition, people from other cultures are very good about referring their friends and family if you serve them with sensitivity and patience.
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An added bonus when working with people from outside the United States is the opportunity to learn about other cultures. Just imagine - you can take a round-the-world trip without getting seasick or losing one piece of luggage.
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Also, if we want a little piece of business from the fastest-growing segment of the real estate market it is we who will have to adjust – just a little. Take the time to learn about other cultures, languages and foods. As a bonus you will become a much more interesting person to talk to in the process.
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“PEOPLE SHOULD DO AS AMERICANS DO “HOME BUYERS FROM WHEN THEY’RE IN OTHER COUNTRIES THIS COUNTRY.” ARE DISLOYAL AND Did you ever wonder why we are USUALLY END-UP called the “Ugly Americans” when we WORKING WITH THE travel outside our borders? We will fly to Germany, France or China and LISTING AGENT.” expect the people there to accommodate us in terms of providing the food and other amenities we are comfortable with. We expect to be served pizza in Asia and to speak English in France. Just as it’s difficult for we Americans to leave our 200-year-old culture at the gate when we travel abroad it’s even harder for those coming here with cultures that are thousands of years old to do as we do here. While they do try it is hard because it’s so ingrained.
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People who are buying homes don’t understand how real estate agents get paid in this country. If you educate all of your clients about how hard you work and the fact that they must buy from you to get paid you will get more loyalty. It’s a sad fact that almost everyone in America thinks that all agents who represent buyers do very little to earn a lot of money. If this is the case why
should anyone be loyal to the selling agent? By going directly to the listing agent there is a good chance to get a kick-back since their commission is now doubled. We must educate our buyers from all cultures what we do for a living and how valuable it is for them to have separate representation.
9 “WE SHOULD TREAT EVERYONE EQUALLY, REGARDLESS OF CULTURE.” Yes, it’s true that we should treat every client fairly but this does not necessarily mean equally. For instance, if a buyer who is blind comes into your office would you simply hand them a contract to “read”? This is equal but is it fair? Hardly. Similarly, by taking into account the unique needs of every client aren’t we serving them better? This would be equally true for being culturally sensitive.
MULTICULTURAL MYTHS
10 “PEOPLE DON’T WANT TO TALK ABOUT THEIR CULTURE – THEY JUST WANT TO BE TREATED LIKE EVERYONE ELSE.” This is probably the biggest myth when dealing with people from other cultures. We who are from diverse cultures know we are different and unless something is mentioned early in your relationship with a multicultural client it will always stand as a barrier to building true rapport. Once you take a sincere interest in your client’s cultural background they are usually more than happy to tell you about their language, food and even beliefs. Get into the habit of asking every client, “Where do your ancestors come from?” Notice, this can get the conversation started with someone from Ireland just as easily as Thailand.
You may be slightly embarrassed as you struggle with their language but they’ll love you for it because now you know how they feel trying to speak English. If you want to be truly successful with people from other cultures you must make an agreement with each and every one of them. “I will teach you about American real estate, contracts and related laws. In exchange, I want you to teach me about your cultural background.” In this way, you develop a mutually-beneficial relationship which will hopefully last a lifetime.
ABOUT THE AUTHOR MICHAEL SOON LEE, CRS, GRI, has been a real estate professional for over thirty years. He is a nationally-recognized professional speaker and the author of the best-selling book OPENING DOORS: Selling To Multicultural Real Estate Clients. Michael speaks to real estate groups throughout the country on selling to diverse home buyers and can be reached at (800) 41-SPEAK and his website is: www.EthnoConnect.com.
Try asking clients how to say “hello” or even your name in their native tongue.
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Overcoming Language Barriers An Update on Legislation Impacting Multicultural Real Estate Marketing By Gary Sanders, The Language Factor
LANGUAGE LAW UPDATE
he US population now exceeds 307M citizens who speak over 175 languages. Five of the Top 10 non-English languages spoken are Mandarin, Cantonese, Vietnamese, Korean and Japanese. The non-English speaking segment of the population is growing 6x times faster than the any other population segment. Most importantly, the legal rights of citizens who are limited English proficient (“LEP”) continue to expand every day across the country. For instance: New York City’s recent passage of a law requiring all retail pharmacies (with more than four locations in the City) to provide free translation and oral interpretation services in the seven most frequently used languages. New York State now prohibits the use of the label “Oriental” on all state publications – deeming that label as an ethnic slur. The state is also the first to require that all voting documents be printed in Russian. Federal Civil Rights laws require that any healthcare organization receiving federal funding must provide language access for their LEP patients. California enacted a law in January 2009 which mandates that all healthcare providers must provide language access to LEP patients in at least 5 languages. Further, the rights of LEP patients have been noticeably strengthened in several other states – HI, MD, NJ, NM, NY, TX and WA.
In the Real Estate Industry
Are similar trends and new laws emerging in real estate? Yes!
It’s not unusual to hear news reports detailing the plight of LEP homeowners who find themselves in drastic financial situations … often because their lack of language skills affected their understanding of important details of their home purchase. Such problems are made worse by the fact that a Realtor, lender or escrow agent could have eliminated most, if not all, of the factors contributing to the language barrier which caused the financial problem. What does the law say about how language access issues affect the various parties involved in real estate transactions? According to Adria Cheng, Real Estate attorney/partner at Manatt, Phelps and Philips LLP in San Francisco, “This area of real estate finance law is an emerging arena, especially in California and at the federal levels.” Cheng cites several examples: The Federal Truth In Lending Act (15 U.S.C. § 1601) describes how the costs of credit must be described for borrowers and mandates that lenders use plain language in a conspicuous manner – known as the “ordinary consumer standard.” Unfortunately, this law lacks any reference to how lenders should address borrowers who are not proficient in English. As a result, there is a lack of clarity as to how costs and disclosures of key loan information can or should be communicated to an LEP borrower by a lender. In California, § 1632 of the Civil Code covering Truth-in-Lending requires companies entering into credit agreements to deliver to consumers a translated copy of a
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LANGUAGE LAW UPDATE
contract if a lender “negotiates” the terms of the loan in Spanish, Chinese, Tagalog, Vietnamese or Korean. The law specifically excluded loans secured by real property from this requirement unless the loans were made or arranged by real estate brokers. Banks, credit unions or residential mortgage lenders were exempted from this law. This law was affirmed in a 1981 case involving a car loan (Reyes v. Superior Court). While this law was untested in state court since the Reyes case, it was extended to encompass mortgage loans negotiated by mortgage brokers in 2006 in Ruiz v. Decision One Mortgage Co. in the 9th Circuit of the Northern California federal court. In 2007, a bill (AB1160) was introduced in the California legislature to amend §1632 to require mortgage lenders to provide a translated summary of a loan to a borrower in the language in which it was negotiated. Federally chartered depository institutions remain exempted. In addition, if a borrower uses their own interpreter during the negotiations, the translation requirement is eliminated. Cheng notes that while AB1160 takes some steps in addressing the language access issues affecting mortgage loans, it does not go far enough. The proposed law is a clear portent of consumer rights inside truth-in-lender laws. However, the larger issue regarding enforcement of the loan documents fails to be addressed. While consumers may be entitled to loan documents in their native language, the enforceable contract is still the English version, not the translated version.
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Cheng also notes that AB1160 has not been without controversy. The bill has been amended several times over the course of 2+ years of review by legislators. The bill was finally adopted by the California legislature on September 25 and at the time of publication, the governor has not signed the bill into law. If and when this law is signed by the governor, it will be interesting to see how the new law will impact the mortgage lending market.
The Newest Developments – HUD Guidelines
The final rule to reform the RESPA, the new Good Faith Estimate and HUD-1 Settlement Statement forms are to take effect on January 1, 2010. The full impact of the final RESPA rule is uncertain in many ways. Indeed, HUD offered assistance in the form of responses to 89 FAQ’s in mid-August to assist settlement services providers and all others in the real estate market. Related to the issues of addressing interests of LEP homebuyers, in one of the FAQ responses, HUD affirmed that the disclosure documents can be translated into languages other than English and that the forms must be translated accurately. This announcement is important since it reflects an acknowledgement that some homebuyers do not speak English, but it opens the door to other questions: Which languages can be requested? Who can ask for a translated document? Are there repercussions if a homebuyer is not provided a translated disclosure form? What happens if the document is not translated 100% accurately?
It is anticipated that more clarifications will be publicized by HUD as the starting date of January 1st approaches. What do these new rules mean to a Realtor? While the federal law is unclear as to the detailed requirements for assisting LEP homebuyers (for now), become an advocate for your client! When a language barrier arises, help them find an interpreter. Homebuyers can request a translated disclosure form, so take a proactive approach. Partner with your lenders and escrow agents to provide translated disclosure forms and publicize your offer! Your investment will pay off. While there is a risk for offering a form that is not translated accurately, there’s a risk (of lost business opportunities) for not providing assistance to an LEP home buyer. There are many experienced translation companies able to handle the task of creating a database of translated forms that you can confidently use. As with other parts of society in America, the rights of LEP citizens are attracting more attention everyday in the news and by legislators. Updates to these laws and others affecting the rights of LEP citizens will be provided in the future to AREAA members.
Additional Questions? Legal Adria Cheng acheng@manatt.com 415-291-7438 Manatt, Phelps, Philips LLP www.manatt.com Multicultural Planning Gary Sanders gsanders@thelanguagefactor.com 1-877-669-8899, ext. 501 The Language Factor www.thelanguagefactor.com Translations courtesy of: thebigwordGroup www.thebigword.com Translate Central www.translatecentral.com
LAS VEGAS
CHINATOWN BY GREGAN WINGERT PHOTOS BY SAM SON
J
ust a mile separates the flashy Las Vegas Strip from the city’s Chinatown, but culturally they’re worlds apart.
Chinatown Plaza, located at 4255 Spring Mountain Road, is a shopping center founded in 1994 by James Chen and is the hub of a commercial neighborhood with a thriving community, a mix of cultural influences and authentic atmosphere. Being rich in culture is just one of the reasons Las Vegas’ Chinatown is a popular destination not only among locals but for tourists as well. Locals frequent Chinatown to indulge in Asian cuisine and to shop in a friendly environment. Chinese shops such as T & T Ginseng, Diamond Bakery and Nevada’s only Chinese bookstore, Great Wall Books, are all reasons for the local Chinatown community to return.
Those same shops and restaurants like Emperor’s Garden, Harbor Palace Seafood, Sushi Moto Japanese Restaurant and Sam Woo BBQ are also the reasons tourists make the effort to travel away from the glow of casinos and resorts. “It was my idea to develop this property,” Chen said. “I saw that lots of tourists and Chinese Americans had no good Chinese restaurants to accommodate them.” So Chen conceived a vision to galvanize and connect the local Chinese population, which was roughly 10,000 at the time. “I think the Chinese would travel 100 miles for their food,” Chen said. With tourists from all over the world visiting Chinatown, traveling 100 miles for a quality meal happens quite often. Constructing a Chinatown “was a big gamble at the time,” Chen said.
Chen was aiming to create a town for the people to gather instead of letting people gather to form a town. “Most of Chinatown is natural gathering place, and that may take 100 years to develop,” Chen said, “We didn’t have time to wait.” “Chinatown was developed around the time several large hotels were being constructed on the Strip, such as the Luxor,” Chen said. So to keep up with the city’s expansion, construction plans for Chinatown Plaza needed to be fast-tracked. But first Chen had to pick a place where people of Chinese and other Asian heritages, such as Japanese, Korean and Vietnamese, could flourish. Spring Mountain Road was chosen because “it’s a narrow street, good for community business,” Chen said. Add the friendliness of the area with the close proximity to the Strip and this Chinatown was sure to entice tourists to visit—and it has.
LAS VEGAS CHINATOWN
The Las Vegas-Paradise metropolitan area is home to approximately 132,000 Asians (2007 data), the fastest growing ethnic group in the area. Adding those numbers to the number of tourists traveling to Las Vegas has maintained Chinatown’s business at a stable level. What was once a single commercial plaza now extends four miles, on both sides of Spring Mountain Road. Sue Fawn Chung, a professor at the University of Nevada, Las Vegas, has published work about the booming Chinese population in Las Vegas. “There were several other Chinatowns that needed to be established in town,” Chung said. Usually Chinatowns develop in the downtown area of a city, Chung explains. The Chinatown on Spring Mountain Road is a commercial Chinatown where Asian-based businesses are the primary connecting factor of the area unlike other Chinatowns in other parts of the country, which are more residential. “They decided to make it PanAsian,” Chung said. “It caters to all the Pacific Islander groups.” Since its creation, Chinatown has expanded both east and west, Chung explained.
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“One of the main feeds to this is Asian tourists by the busload,” Chung said. With the number of visitors comes population increase and predictions of 10 percent to 25 percent increase by 2015, Chung said. “People are interested culture,” Chen said.
in
Tina Lee, event coordinator for Chinatown explained how Chinatown is connecting both the Chinese populations and other Asian communities as well through traditional events. The largest event held at Chinatown is the Chinese New Year. This past February over 6,000 attendees participated in the celebration by watching traditional dance performances and martial arts demonstrations all while enjoying the tastes of authentic foods prepared by local vendors. “People come here to eat and shop,” Lee said. Even people from other states come to participate in the Chinese New Year event. Lee remembers a woman from Arizona who travels every year to celebrate the Chinese New Year in Chinatown. Lee explained that the woman was reminded of her childhood.
For tourists with roots in an Asian heritage, it’s the people who make culture exist, not so much the way the structure looks. However, for someone new to the customs, art and architecture, the design of Chinatown was important. Colorful arches and unique Tong Dynasty architecture embellishes the city’s largest cluster of Asian businesses, according to the Chinatown Plaza Web site. A statue of the Journey to the West of Xuan Zang and the Monkey God, two classic figures of Tong Dynasty-era Chinese literature, stand at the front of Chinatown Plaza as a landmark welcoming travelers to the town.
LAS VEGAS CHINATOWN
Cultural music drifts through passageways outside businesses, luring in customers. Framed art hangs along the structure’s interior walls illustrating Chinese traditions in art and entertainment, all while large windows display with eyecatching trinkets and ornaments beckon visitors to come inside to buy a souvenir or a gift. Chinatown is an untainted representation of varied Asian influences. Chinese art and history are retold in the signs hanging throughout the area. “We are different from the casinos on the Strip,” Lee said. “We are both for the tourists and the locals.” “Those unaccustomed to Asian traditions are able to experience a
different lifestyle,” she said. Those who are of Asian ancestry and upbringing “feel that they are at home,” Lee said. Chinatown goers will also find the largest Asian supermarket in the city, 99 Ranch Market. Perhaps most desired and an aspect in which Chinatown is well-equipped is the variety of restaurants serving delicious and customary Chinese, Filipino, Korean, Japanese and Vietnamese cuisine that can all be found within Chinatown.
thing not found along the Las Vegas Strip, it’s no wonder locals with Asian lineage reminisce about their childhoods and it’s no wonder people would come to experience something real. Chen said the reason Chinatown is able to compete in a tourist driven city is because “it’s the culture. This is authentic—it’s protecting us.”
From the dining, to the shopping and the events to the community members that congregate in and outside of the businesses that compose Chinatown, it’s no wonder people would come to enjoy some-
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DIVERSIFY WITH MANAGEMENT SKILLS TO ENHANCE YOUR INCOME BY MICHELLE WONG, CPM速
As real estate owners and investors endure the drastically reduced value of their properties in today’s truncated economy, earnings from operations of their properties becomes increasingly critical to them. More
and more, they are recognizing the benefits of retaining competent real estate managers who have the skills to improve their return on investment by optimizing operating revenue and controlling expenses. Despite their natural inclination to cut costs in a recession, owners and investors involved in all property categories – commercial, industrial, retail and multifamily – are increasingly willing to pay for managers who have the professional-level capabilities to market, operate and maintain their investments in a fiercely competitive marketplace.
menu of professional service offerings to broaden your base of opportunities for maintaining and augmenting your income. By the way, real estate management ranked 23rd among the best jobs in America, according to a recent Money magazine survey. The survey evaluated hundreds of jobs in terms of growth prospects, pay, stress levels and other factors.
Furthermore, so many real estate managers are reaching retirement age these days that a shortage is developing for this reason alone.
WHAT DO THEY REALLY DO?
The result of these persistent trends is that the demand for skilled real estate managers is presenting new career opportunities, especially for you who are already in real estate. Indeed, you can expand your income by diversifying your skills to include real estate management. The need is there as long as properties exist, meaning that enhancing your professional worth by acquiring real estate management skills can help you stabilize your income in an uncertain market. Also, the field welcomes folks from all backgrounds, especially underrepresented groups.
CAPITALIZE ON YOUR BUILT-IN ADVANTAGE If you are already working in real estate, you enjoy a special advantage. That is that you already know your way around the industry. And you certainly know a lot of people in the field, too. So real estate management savvy is much easier for you to pick up quickly, even while maintaining your current position in the industry. Think, then, about adding real estate management to your personal
What do real estate managers really do? For income producing properties, broadly speaking, their primary goal is to help the properties they manage to reach their highest and best use, meaning that they generate the highest net operating income (NOI) possible based on location, size and design. Investors often credit the success of their investments to the quality of their real estate managers. More specifically, managers are responsible for managing the physical property (operations, inspections, maintenance, improvements, and security), human resources (employee assignments, training and discipline as well as hiring, firing and regulatory compliance), finances (collections, budgeting, accounting and analysis) and marketing (advertising and showing properties, and negotiating leases). They optimize revenues and control expenses. And they are becoming environmentally aware, embracing the movement to “go green” with their properties. They do all this for owners or their representatives, who may be property management firms, full-service
DIVERSIFY WITH MANAGEMENT
NEVER BORING Experienced real estate managers are quick to say that no two days on the job are the same. So while it can be extremely challenging from time to time, real estate management is never boring. It’s kind of like being a jack-ofall trades according to many pros in the field – with lots of specific problem solving – from personal situations involving prospective or current tenants, special leasing negotiations, human resources matters, collections and record keeping, untimely repairs, modernizations, decorating, landscaping, snow removal, code compliance and security. Not to mention accidents, fires, acts of nature and other surprises. Real estate managers are the link between owners and tenants, on-site staff, contractors, suppliers and, often, the community at large. This makes people skills bordering on diplomacy a principal capability required of property managers. If you are already in the industry, your most likely point of entry into property management would be residential properties – condominiums, coopera46
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tives, homeowner associations, small multi-housing properties, single family homes in foreclosure or vacation homes.
Opportunities in Property Management Occupational Title
HOW TO START
Property, real estate, and community association managers
Employment How can you get into real 329,000 2006 estate management intelligently and efficiently? A Projected number of industry and 379,000 Employment 2016 professional organizations are available to help you 50,000 Number with education and credentialing programs – includPercent 15 ing the Institute of Real Estate Management These findings are supported by U.S. Department of (IREM®), Building Owners Labor data that indicates that the need for real estate managers is expected to increase by 15% during the and Managers Association 2006-16 decade, which is faster than the average for (BOMA), the Community all occupations. Source: U.S. Department of Labor Projection Data Association Institute (CAI), the International Council of Shopping Centers (ICSC), about seven hours to finish, and is and the National Apartment Associaavailable completely online through tion (NAA). IREM, an affiliate of the any personal computer. National Association of The course provides a comprehenREALTORS®, has been the “gold stansive overview of the real estate mandard” source for education, resources, agement function – including its information and membership for real history as well as a description of estate management professionals property types and typical owner engaged in all classes of properties for goals and objectives. It also addresses more than 75 years. maintenance, human resources, Consider preparing to diversify your financial management, marketing, skills, at your own pace, by taking and legal and risk management. It IREM’s online course titled “Introcovers current trends and challenges duction to Real Estate Management” as well as emerging opportunities. (IREM01). It is self-guided, takes Enrollment is available whenever Change 2006-2016
real estate companies, real estate developers, commercial banks, real estate investment trusts, corporations, government agencies, insurance companies, mortgage brokerage firms, and religious or charitable organizations.
DIVERSIFY WITH MANAGEMENT
Real Estate Manager Responsibilities Physical Property
Operations Inspections Maintenance Improvements Security
Human Resources
Employee Assignments Training Discipline Hiring Firing Regulatory Compliance
offer courses locally in classroom settings. And all courses are regularly updated to reflect impending trends and feedback actively solicited from its 18,000-plus members.
Among the most popular and accessible IREM resources is its unique, interactive www.IREMFIRST.org website, a comprehensive online information source for IREM Collections Finances Members and the real estate Budgeting industry at large. Frequently Accounting referred to as the “Google of Analysis real estate management Advertising Marketing knowledge,” it contains the Showing Properties information and tools that Negotiating Leases real estate managers across all property sectors need to you’re ready and you can finish at any maximize their professional perfortime. mance. It also includes user-driven, community-building features that IREM offers a wide array of other encourage online professional courses – online, home study, and in a networking and information sharing classroom setting – as well as readily among industry peers. available books and additional learning resources. Its educational offer- Starting out, also consider an Associings cover budgeting and financial ate membership in IREM. This could operations, asset management, mar- make a lot of sense for you because it keting and leasing, leadership and would give you access to almost all of human resources strategies, mainte- IREM’s resources, including the nance and physical operations, risk bi-monthly Journal of Property Manmanagement, business development, agement (JPM®) magazine as well as ethics, and much more. Many of deep member discounts on courses, IREM’s 80 chapters coast to coast publications and other materials.
Long term, you may consider earning a professional designation through one of the credentialing programs offered by most of the previously mentioned organizations. These professional credentials give you a competitive advantage because they provide credible, third-party validation of your competence and ethical commitment. And history shows that credentialed real estate managers earn more than those who are not. For example, consider IREM’s Certified Property Manager® (CPM®) designation for managers of large portfolios of all property types. IREM also offers the Accredited Residential Manager® (ARM®) accreditation for front-line managers of residential properties including apartments, condominiums and single-family homes, and the Accredited Commercial Manager (ACoM) accreditation for office buildings, retail, industrial and other commercial properties. Real estate properties are unique, so economic, political and social forces will affect each one differently. Managers must be sensitive to the effects of these forces on their properties and on their competitive position in the marketplace. And as the business and investment world gets more a| r | e
47
DIVERSIFY WITH MANAGEMENT legally complex and technologically sophisticated, the required skill sets become more sophisticated as well. Real estate management is much more than collecting rents and changing light bulbs these days. And it’s more and more rewarding for those who prepare for it.
IREM®
Let Us Be Your Career Partner
About the Author: Michelle Wong, CPM®, is affiliated with Realty Group Properties, Honolulu, HI. She also is a member of the Diversity Advisory Board of the Institute of Real Estate Management (IREM®) and is vice chair of IREM's International Business Practices Forum.
For more than seven decades, IREM® has been the source for education, resources, information, membership and professional credentials for both multi-family and commercial real estate management professionals. SPECIAL FOR AREAA MEMBERS! Save 50% on Associate Membership Enter coupon code ARE50 when you apply at www.irem.org/AREAA by December 1, 2009! Want to learn more? Visit www.irem.org today!
Editors Note: “Introduction to Real Estate Management” (IREM01) tuition is $100 through the IREM Web site at www.irem.org; click on “Education” section or telephone 1-800-837-0706, Ext. 4650.
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IREM® is an Affiliate of the NATIONAL ASSOCIATION OF REALTORS®
Join the areaa online community where top producers meet
dragons
www.areaadragons.org
Become “THE” Local Market Expert with a Thorough Pricing Analysis
T
he marketplace is competitive. Many times agents forget to best utilize the one tool that they have and
consumers don’t - access to market statistics directly from their MLS.
Using an analysis of home price vs. days on market analysis, you can demonstrate an intimate pricing knowledge of your local marketplace. You can also show how homes you have personally listed have sold more quickly because of the thorough pricing analysis you offered. Understanding “days on market” will also help your seller to determine their pricing strategy more effectively. If the seller understands that the average DOM is 110, and they need to show up for work in a new town in 60, they may want to more aggressively price their home. Let’s say a client wanted to list their home because they are relocating and they need to sell it within 60 days. How would you best price that home while
By Alan Arora Real Estate Business Services
involving the seller in the process so that it is a collaboration between you both? Agents must utilize their MLS data and the related technology products to help them track and interpret the data appropriately. Focus on the market locally. One such tool, Clarus MarketMetrics® (http://www.clarusresource.com), is an online program that generates market and price-point analysis charts and reports derived from MLS data. You can easily run the pricing analysis for those properties that have sold within the last 45-90 days and discuss DOM for those with conforming prices and attributes compared to those which took much longer to sell. It gives you a much bigger spectrum than simply pulling two or three CMA’s to discuss.
You can easily share these reports with your clients during the listing presentation or send them electronically after your initial meeting. This type of intelligence can help position you as the expert in the market as well as convince the home seller to price the home competitively without having to take price reductions down the road. Agents will often overvalue a home during a CMA to win a listing contract, then quickly ask for a price reduction after the first open house. But you can never overcome an overpriced property. For those sellers that think they can follow the market down, there is a rude awakening when we take a look at the MLS statistics and the sales price vs. original price ratio.
DOM
Using Clarus MarketMetrics®, let’s take a look at an example in Salinas, California, to illustrate how local market statistics can help an agent price a home precisely. In this example, homes without price reductions sold for an average of $332,222 and sold in approximately 43 days for $158 per square foot. The SP/OP ratio was 101.5%.
Price in Thousands Sold
# with % with # Properties Average Price Average DOM Price Changes Price Changes Sold Last 45 Days 9 332,222 43
SP/OP 101.5
Lot Size BD BA SQFT (Acres) $/SQFT 3 2 2,088 0 158
PRICING ANALYSIS
DOM
Conversely, homes priced above the average price per square foot ultimately sold for a slightly lower cost per foot ($153) and took 235 days on average to sell. It took almost 5 times as long to sell a home that was priced out of the standard pricing range! The SP/OP ratio was 79.7%.
Price in Thousands Sold
# with % with # Properties Average Price Average DOM Price Changes Price Changes Sold Last 45 Days 8 325,000 235
This type of pricing analysis is also very valuable to a buyer. When dealing with out-of-area investors or first-time home buyers there is usually an acclamation period where the agent must educate the buyer as to what is happening locally. Many times the buyer will have to see it with their own eyes – go through a variety of offers – before relenting. “Top producing agents in my office are submitting an average of 16 offers per client and are hoping to get one accepted,” said Darel Handley, a REALTOR® with Windermere Pacific Coast Properties in La Mesa (http://www.windermerepacificcoast.com/), California. “By using Clarus MarketMetrics® I’m now 52
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SP/OP 79.7
Lot Size BD BA SQFT (Acres) $/SQFT 4 2 2,128 0 153
bypassing the 10% below asking price stage and jumping to writing offers typically above the asking price. It’s all about establishing realistic expectations with my clients.” Whether it’s working with a seller to set something realistic or a buyer that wants the best deal but still wants to beat the other offers, local market statistics will give them the true picture of their local market. Clarus MarketMetrics® is offered on an individual and member benefit subscription basis. For more information and to create an account, visit http://www.clarusresource.com/mm.
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9/10/09
4:10 PM
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