2012-08_Commonwealth by Virginia REALTORS®

When a house isn’t a good investment (p.26) August/September 2012

A journal for real estate professionals published by the Virginia Association of REALTORS® • www.VARealtor.com

Signs of Life

Yes, Virginia, the recovery is here.

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Source: Information included in this report is based on data supplied by MRIS and its member Association(s) of REALTORS, who are not responsible for its accuracy. Does not reflect all activity in the marketplace. January 1, 2011 – December 31, 2011. Information contained in this report is deemed reliable but not guaranteed, should be independently verified, and does not constitute an opinion of MRIS or Long & Foster Real Estate, Inc. ©2012 All Rights Reserved. Exclusive affiliate of Christie’s International Real Estate in select areas.

EOE

firstword ANDREW KANTOR

PUBLISHED BY THE VIRGINIA ASSOCIATION OF REALTORS® The Business Advocate for Virginia Real Estate Professionals Trish Szego, CRB, CRS President Fairfax Mary Victoria Dykstra, ABR, CRS President-Elect Roanoke Bradley J. Boland Vice President Reston John Daly, SFR Treasurer Virginia Beach John Dickinson, CCIM, GRI Immediate Past President Union Hall R. Scott Brunner, CAE Chief Executive Officer scott@VARealtor.com Amanda Arwood Vice President of Marketing & Communications amanda@VARealtor.com Andrew Kantor Editor & Information Manager andrew@VARealtor.com For advertising information, Brittany Sullivan at (410) 584-1968 or e-mail var@networkmediapartners.com The mission of The Virginia Association of REALTORS® is to enhance its membership’s ability to achieve business success. Commonwealth magazine (ISSN#10888721) is published bi-monthly by the Virginia Association of REALTORS®, 10231 Telegraph Road, Glen Allen, VA 23059-4578; (804) 264-5033. Virginia Association of REALTORS® members pay annual dues with a one-year subscription included within their dues. Periodicals postage paid at the Glen Allen, VA post office and additional mailing offices. USPS Per. # 9604. Postmaster: Send address changes to: Commonwealth magazine, 10231 Telegraph Rd., Glen Allen, VA 23059-4578. Custom Publishing Services provided by Network Media Partners, Inc.

VARbuzz.com. Your virtual café for real estate news, views, and issues. Read the perspectives of your fellow Virginia REALTORS®. Join the conversation at VARbuzz.com today.

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WHEN A HOUSE ISN’T A GOOD INVESTMENT (P.26) August/September 2012

A journal for real estate professionals published by the Virginia Association of REALTORS® • www.VARealtor.com

Signs of Life

Yes, Virginia, the recovery is here.

VARealtor.com/commonwealth VOLUME 19 ● ISSUE 4 Fold

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The truth is in here BEFORE I CAME to VAR, I was a newspaper reporter on a business and technology beat. My job could have been summed up as “Go and find out what’s happening, then tell other people about it.” At least that was what I believed. Reporters were supposed to tell people about what was going on in the world. Yes, ‘civilians’ could attend meetings, make phone calls, dig through documents, and so on, but the point of a reporter was to save the public the trouble. In theory, members of a community would say, “I trust the people at the Post/Times/News/Journal to get the story and tell me what happened and what it means.” In other words, a reporter’s job was to tell people what really happened. They were, at the risk of a bit of hyperbole, seekers of truth. If someone claimed X and someone else claimed Y, a reporter’s job was to figure out which was actually true. Today, of course, they hardly ever do that. Instead, they simply report that ‘Some people say X, others say Y, and gosh darn it, you figure it out for yourself.’ Newspapers got themselves caught in a vicious cycle. Corporate interests took over for good journalism, and stories got blander, so as not to offend potential advertisers. At the same time, individuals began doing their own “journalism” in the form of blogs. They weren’t afraid to pull

punches. They made newspapers look bland. Newspaper readership dropped. Advertisers pulled out. The papers responded by getting even blander, and by trying all sorts of non-news tactics — more “life” features, more stuff about people and personality. Less explaining what was real, more just telling us what people said. Instead of telling people what’s real, they tell people what other people think or feel or believe is real. The entire scientific community could say that the moon is made of rock and dirt, but newspapers will give equal time to a loud enough group of yokels who say it’s made of green cheese. Why take chances? Which brings us to the real estate market. It’s getting better. Really. And in a big way, across the board. Yet so few news outlets seem willing to state that definitively and point out that yes, Virginia, we’re in a recovery. So let us do it for you (and them). Check out the cover story on page 20. That’s where we put the pieces together, from all sorts of sources measuring all sorts of metrics. The conclusion is pretty much inescapable. And we’re willing to say so.

Andrew Kantor, Editor andrew@VARealtor.com AUGUST/SEPTEMBER 2012

WHEN A HOUSE ISN’T A GOOD INVESTMENT (P.26)

august/september 2012 Volume 19 ● Issue 4

contents

August/Septem

A journal for real estate professionals published by the Virginia Association of REALTORS® • www.V

departments 4 quickhits The latest news and announcements for Virginia’s Realtors®

10 statswatch The numbers that shape your world

12 legallines Questions and answers about Virginia real estate law

16 lifelessons When real estate pros break the rules ... and get caught

18 formfactor

Video marketing — it’s easy, it’s hot, and it’s important

in every issue 1 firstword

Signs of Life

Even more forms to help you comply with the new agency law

29 accessibletech

features

Signs of Life

The housing recovery is here. But don’t take our word from it — see how the numbers tell the tale of a market that’s back from the dead (in a good way).

Yes, Virginia, the recovery

Is a house a good investment? Yes and no. With the housing bubble behind us, can anyone say that a home is a good investment? Yes, but not like it used to be.

32 rpacreport 39 contactvar 40 lastword APEX Award of Excellence winner 2

august/september 2012

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quickhits

ANDREW KANTOR

Regulation

Industry indicators

Remodeling is up, and that’s good and bad news

No QRM rules in 2012 Housing Wire is reporting that Federal officials have confirmed that qualified residential mortgage standards and rules won’t be released in 2012. Reminder: • QM = qualified mortgages; all mortgages will have to meet these broad standards • QRM = qualified residential mortgages; a stricter standard that a loan must meet if the lender wants it to be backed by the Federal government Proposed QRM standards have gotten a lot of press because there had been talk of a 20 percent down-payment requirement, but that’s pretty much off the table now. In fact, the whole thing is pretty much off the table for this year. The Consumer Financial Protection Bureau, which is leading the effort to develop the standards, has already said that QM rules won’t be in place in 2012. And today other regulators said that QRM rules would be developed after QM. Ergo, no QRM in 2012.

august/september 2012

Can we remodel it? Yes we can! The BuildFax Remodeling index for April just came out, and it found that major residential remodeling (the kind of stuff that requires a permit) was up nationwide by 12 percent over last year, and up 14 percent in the South. (It’s also up month to month.) So what? That’s bad news for Realtors in a sense because it’s reflective of consumers deciding to stay and fix up their existing homes, rather than looking to buy a new one. (Which means that those homes aren’t available for others to buy, too.) But it’s good news because it means an improvement in property values for those neighborhoods. Basically, the money and sweat put into a remodel is shared across the community. So in the long term that’s a good thing for prices, especially as all those REOs are going to have the opposite effect as they begin to deteriorate.

Home prices

Virginia home prices jump in May Virginia’s median sales price of $249,900 in May 2012 marks an 11% increase over a year ago, and is the second highest monthly median sales price we’ve seen in the past two years. It’s likely due to the continued increase in the pace of home sales in Virginia. • Monthly median sales pace increased 5% over the past year. • Monthly sales volume increased 13% over the past year. • Average days on market declined 14% year-over-year in May 2012. You can download the full May 2012 Virginia Home Sales Report at VARealtor.com/homesales.

www.VARealtor.com

Economic reports

Home equity skyrockets: Bloomberg A Bloomberg study found that Americans’ total home equity has hit the highest level since 2008, thanks to lower mortgage rates and more cash on the table. Total home equity in the US in the first quarter of the year: $6.7 trillion. That’s six-point-seven thousand billion. I just like big numbers. Bloomberg says that’s up 7.3 percent, but it doesn’t say from what. (I’m guessing the first quarter of 2011, but who knows?) This might be the money quote: The willingness of homeowners to carry housing debt has been radically altered,” said DeKaser, former chairman of the American Bankers Association’s Economic Advisory Committee. “When the market was booming, a mortgage was used as a leveraging tool, and now it’s seen as a risk.” In other words, home equity is up because mortgage borrowing is down. Either way, not a bad thing.

As homeowners feel they’re on more solid ground, they’ll spend more, do more, and otherwise speed the recovery. But the Bloomberg report has lots more going on. • Equity was 41 percent of total property value — the highest since Q3 2008 when it was 43 percent. • Residential mortgage debt peaked in 2007 at $10.6 trillion. Since then, it has fallen 7 percent. • Since 2007, residential property value has dropped 23 percent; Cash-Shiller says it’s down 35 percent from its peak. • More people are choosing shorter loans. The average length of a mortgage is now 27 years — down from 29 years in February. (Ergo, more people are opting for shorter mortgages, such as 15-year-fixedrate plans.) • About 23 percent of mortgage holders are underwater.

In memoriam Former VAR leader Ralph Anderson passes away Ralph Anderson, VAR’s executive vice president from 1979 to 1993, passed away Sunday, June 10, in Virginia Beach. He was, in the words of current VAR CEO Scott Brunner, “an iconic leader whose gentle influence on a generation of Virginia Realtor® leaders grew VAR’s reputation and leadership both in Virginia and nationally. He is fondly remembered by the volunteers, local association executives, and VAR staffers who worked with him. He was a dedicated servant to the association — a dedication shared by his late wife, Julia.” Mr. Anderson is the only member of the Virginia Realtor Hall of Fame who is not, in fact, a Realtor.

Volume 19 ● Issue 4

august/september 2012

quickhits Short sales

Mythbusting redux

Easier short sales for military with Fannie/ Freddie loans Sometimes folks in the military receive Permanent Change of Station (PCS) orders — essentially, it’s time for them to pack up and move, often on short notice. Of course, if they own a home they’ll have to sell it, and that’s not always easy. To help them, at least a little, servicers of Fannie and Freddie loans have received instructions from no fewer than five federal agencies — the Consumer Financial Protection Bureau, the FDIC, the Fed, the National Credit Union Administration, and the Office of the Comptroller of the Currency: Military members with PCS orders will be able to make short sales even if they’re current on their payments. Once a short sale is concluded, they can’t pursue a deﬁciency judgment — meaning they won’t try to recoup the difference between the mortgage owed and the amount of the short sale, which happens in some states. Those agencies aren’t making this policy just to help military families. According to the statement, it’s a result of mortgage servicers’ practices that “have the potential to mislead or otherwise cause harm to homeowners with PCS orders,” such as not explaining what all their refinance/assistance options are, asking them to waive their legal rights, instructing them to miss payments, and so on.

AUGUST/SEPTEMBER 2012

Once again: There is no 3.8% real estate tax Ah, election season — when the myths fly fast and furious, including an old classic. So let’s be clear: There is no 3.8% real estate sales tax taking effect. It’s a myth. It’s a lie. It’s not true. Ah, but rumors have basis in fact, right? There must be some kind of tax or something, right? Sure there is… sort of. In 2013, a handful of high-income earners will pay an additional Medicare tax on capital gains — that’s profits — above a half million dollars (or $250K for individuals). Does it apply to you or your clients? I’m betting no. • Do you have an income above $250,000? • Did you sell a property for a profit of more than $500,000 (note: that’s a half-million bucks profit, not sales price) — or $250,000 if you’re single? If you meet both those criteria (wealthy + large profit on a sale), you’ll pay a whopping 3.8% on the profit above $500,000 from real estate, stocks, and other capital gains. So let’s say you are wealthy. You and your wife bought a house back in the day for $200K and sell it for $725K today. That’s $525,000 profit. (Nice!) Your extra tax? Wait for it — $950. Yes, that’s right. Better call your accountant, huh? Time to hide some money in the Cayman Islands, lest you help a senior pay for medication or something. So say it with me, folks: There is no 3.8% real estate tax. And if you see someone spreading the rumor, point them to VARbuzz.com/mythbusting to get the facts.

WWW.VAREALTOR.COM

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quickhits FHA certification

Mortgages

NAR to FHA: Loosen your condo rules Several dozen members of Congress, led by Reps. Emanuel Cleaver (D-Md.) and Michael Fitzpatrick (R-Pa.) sent a letter to HUD secretary Shaun Donovan, urging that FHA reconsider some of the standards it has set for condos to be certified — and thus allow potential buyers to finance their purchases with FHA loans. Thousands of condos across the country are no longer FHA certified, making units significantly harder to sell as many buyers can’t get financing. As we reported before, some of the requirements for certification include: • At least half the units must be owner-occupied. • At least 85% of owners must be current with their condo fees. • At least 75% of the total floor space must be residential. (That’s a problem in urban areas, where lower floors often have stores and offices.) Calling some of the rules “onerous,” the Congressfolk told Donovan: We strongly support the goals of ensuring the financial viability of these properties, and averting costs to American taxpayers; but we believe that some of these rules may not be justified by risk, and may eliminate options for qualified homebuyers, and further extend our nation’s housing crisis.

FHA mortgages

FHA rescinds “$1,000 dispute” rule The Federal Housing Administration has done an about-face, rescinding a rule that would have prevented anyone with credit disputes totaling more than $1,000 from getting a loan. When originally put in place in April, potential borrowers would either have to pay off their balances to bring them below $1,000, or provide documentation that a payment arrangement was in place. Not surprisingly, there was pushback. A few days after the rule took effect, FHA said that borrowers whose disputed amounts were the result of a “life event” (medical bill, divorce, etc.) could use that to get around the rule. Then, presumably because of the hue and cry, FHA said it would delay enforcement of the rule until it gathered more industry comments. Apparently, those comments were along the lines of “NO.” So finally, FHA rescinded the rule.

august/september 2012

New to town? Use an offer letter to get a mortgage Despite the tightening of credit, it’s still possible to qualify for a mortgage even if you haven’t earned much (or even anything) for a year. Lenders, according to mortgage expert Dan Green, are accepting offer letters — with certain caveats — as proof of income. The caveats? Here they are from Green himself: • Provide a non-contingent offer letter, signed by the applicant and the new employer • Provide evidence that the job start date is within 90 days of the mortgage closing date • Provide evidence that the subject home will be a primary residence • Provide evidence that the subject home is a detached singlefamily residence, townhome or condominium • [Have] sufficient reserves to pay mortgage payments plus real estate taxes and homeowners insurance during the gap between closing and the job start date, plus an additional 3 months of reserves l

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120018

statswatch Virginia vs. the USA NAR provided us with a detailed look at the business and demographic characteristics of our members, as well as Realtors® across the country. We found that in some cases you’re just like the rest of the country, but often enough there’s a noticeable difference.

How you’re alike • You typically had 10 transactions in 2010. • 80% of you specialize in residential real estate. • 75 percent are ‘very certain’ they will remain in the business for two more years. • You worked about 40 hours per week. • You were with your current firm a median of six years. • You are (typically) a 56-year-old white female who attended college and is a homeowner. l

How you’re different Annual vehicle expenses

Years of experience

Nationwide: $1,770

Nationwide: 11 years

Virginia: $2,040

Virginia: 12 years 0

0 0

Median gross household income

500 $500

1000 $1000

1500 $1500

2000 $2000

Median gross individual income Realtors® Nationwide: $34,900

Nationwide: $94,100

In Virginia: $43,500

Virginia: $106,200 0 0

$20000 $40000 $60000 $80000 $100,000 $100000 $120,000 $120000 $20,000 $40,000 $60,000 $80,000

$10000

$20000

$30000

$40000

Nationwide: 89 percent

20 20%

40 40%

60 60%

10 august/september 2012

80 80%

$50000

Nationwide: 28 percent

Virginia: 94 percent

$50000

Receive benefits (e.g., health insurance) from your firm

Own your primary residence

0 0

2500 $2500

100 100%

Virginia: 21 percent 0

5 5%

10%

15%

20 20%

25%

30 30%

www.VARealtor.com

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legallines BLAKE HEGEMAN

Eight is enough This Legal Lines is not focused on the July 1 agency changes. However, please remember that www.varealtor.com/agency contains numerous questions and answers on the new law. In this edition I want to focus on hot topics I am hearing about frequently, and other issues that keep coming up.

Do rental application deposits have to be deposited in escrow within five business days of receipt or when the lease commences?

A: The Virginia Real Estate Board’s policy is that the application deposit

must be deposited within five business days following receipt. A deposit received by a licensee — whether it’s a security deposit or an application deposit — must be deposited into an escrow account because they are funds belonging to a landlord or tenant and are part of a lease transaction that has not closed.

Must a local association turn in to the Real Estate Board a member found guilty of ethics violations?

A: Yes, if the violation involves a breach of the public trust. NAR has

defined this as (i) the demonstrated misappropriation of client or customer funds or property, (ii) willful discrimination, or (iii) fraud resulting in substantial economic harm.

May a team practice designated agency?

A: It is technically legal but I strongly

advise in any class I give that designated agency within a team is too risky and should be avoided. There is simply too much of an appearance of a conflict and the question would inevitably be raised: “Can the designated team members objectively represent the interests of the designated clients.” By the way, that goes double for a husband and wife team!

12 august/september 2012

The buyer’s agent sub mitted a purchase offer in which he increased his commission. Is that legal? A: No, this action is specifi-

cally prohibited by Article 16 of the Code of Ethics: Standard of Practice 16-16 Realtors®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/ tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation. In summary, never use the terms of an offer or the threat of withholding an executed offer to increase your commission.

www.VARealtor.com

A seller has his property listed with a broker under an exclusive authorization to sell. Then the seller himself finds a potential, unrepresented, buyer. The seller approaches a different broker and invites him to write an offer for the buyer, but in return for this the seller has asked the second broker to rebate to him one-half of the selling fee. What do you think of this offer? A: In the first place, the seller

is requesting an illegal referral fee; because the seller is not licensed, the seller may not accept a referral fee, and that is just what this is. Paying such a fee is also a violation of the VREB regulations, which provide that paying a commission or other valuable consideration to any person for an act in violation of the license laws constitutes payment of an improper brokerage commission. Furthermore, the second broker should probably not prevail in a procuring cause arbitration, as the second broker, on these facts, is hardly the procuring cause of the sale. Finally, and most important, this seller is just trying to cheat the listing agent, and no one should participate in such an effort.

Volume 19 â&#x2014;? Issue 4

Do I have to be licensed to practice property management?

A: Property management per se is not a licensed activity and no license is required. That statement only applies if property management is limited to duties like taking the rents, handling calls from tenants, making or arranging for repairs, etc. However, leasing is a licensed activity and all licensed activity must be done through a licensed firm. Therefore, no real estate license is required if someone is just doing property management without leasing. Brokers should have policies and procedures in place concerning agent activity outside the firm and a prohibition against commingling outside business with firm business.

august/september 2012 13

legallines

An agent in D.C. called a listing agent in Virginia to announce that she was sending a buyer to view a property. (The listing agent had run an ad in D.C. that the buyer had seen). The D.C. agent said she would not be accompanying the buyer. After a contract resulted, the D.C. agent insisted the listing agent split the fee. Must the listing agent compensate the D.C. agent? They are not in the same MLS. A: No. The listing agent never agreed to compensate the calling agent,

and such an agreement is necessary if the calling agent is to sustain a claim to a commission. It sounds to me as if the calling agent was a volunteer. The lesson here? Get an agreement to compensate before you turn over your buyer.

This keeps coming up, so it bears repeating. What if the listing agent puts the wrong commission offer in the MLS?

VAR Legal Hotline (804) 622-7955 Monday through Friday, 10 a.m. – 4 p.m. The VAR Legal Hotline is a free, members-only benefit for brokers. You can receive answers to questions about Virginia real estate law, and timely information on legal and regulatory issues concerning the real estate industry. The Legal Hotline provides legal information, not legal services. You should consult your attorney if you need representation or advice. You must register for the Hotline before you can call. Registration is free and quick. Go to www.VARealtor.com/legalhotline; you will need your NRDS ID number.

Who can use the Hotline?

Consider the following example: The MLS shows an offer of 2.5% to cooperating brokers, and the buyer’s agent responds by producing a buyer. The listing agreement stated that the listing firm’s compensation offer would be 3%, the HUD-1 actually showed 3%, and 3% was disbursed to the selling firm at closing. A month later, the listing firm called demanding the return of the half percent. Is the selling firm obligated to return the purloined half percent? A: Yes. Virginia law is very clear that with open-ended offers

(offers that are accepted by performance), the offer you respond to is binding. The selling firm responded to an offer of 2.5%, and that’s what it earned. Similarly, if the listing firm had offered 3% but had intended to offer only 2.5%, it will owe the 3%. Another example, let’s say I lost my dog and I put a $500 reward poster up for her return. You see the poster, find my dog and head over to my house. While you are on your way, I decide that my dog really isn’t worth that much to me and I change the poster to $350. What are you entitled to? $500, because that is the offer for which you performed. ●

Legal Lines is written by VAR legal counsel Blake Hegeman. Please note that answers to Legal Lines questions are informational only. Consult your own legal counsel for legal advice. You can ﬁnd more Q&A from the archives of our Legal Hotline in our Legal Resources Center at VARealtor.com/ legalresources.

14 AUGUST/SEPTEMBER 2012

• You must be a principal or supervising broker.* • You must be a VAR member. • You must have registered for the Hotline (see above). • You must have your NRDS ID number available when you call. (* Each office can have one other person designated by the principal broker for Hotline access.)

E-mailing the Hotline You can e-mail your questions to hotline@ VARealtor.com. • Responses will be by phone; we no longer provide written answers to Hotline questions. • You must include your full name, phone number, and NRDS ID. We cannot respond to messages that do not include all three. • We will try to respond within 24 hours, but response time depends on Hotline activity.

Not a broker or member? If you aren’t eligible to use the Hotline, you can browse and search our Hotline archives at www.VARealtor.com/hotlinearchive and find more legal and risk management information in VAR’s Legal Resources Center at www. VARealtor.com/legalresources. You will need your NRDS ID number to log into the site.

Questions? If you have questions about the Hotline, contact VAR at (800) 755-8271 or (804) 264-5033, or by e-mail at info@VARealtor.com The VAR Legal Hotline should not replace your own legal counsel. We will not answer questions on matters WWW.VAREALTOR.COM unrelated to real estate or real estate brokerage, nor can we help with pending arbitrations.

Does Your Client Need Real Answers About Homeownership? Here’s The Starting Line.

Looking for a way to help new clients take that first step with confidence? Tell them about VHDA’s free First-Time Homebuyer Class. It’s a great way to learn the entire homebuying process from start to finish, and how to stay on track as a responsible homeowner. The class is offered in English or Spanish, in person or online. And it’s free, with no obligation. For information, visit vhda.com or call 877-VHDA-123. Virginia Housing Development Authority | 877-VHDA-123 | vhda.com

lifelessons judy cook

Stop me if you’ve heard this one… In the area of screening tenants for residential rental properties, property managers often like to think of themselves as great judges of character. After all, as a property manager you deal with prospective tenants from all walks of life, don’t you? A few years in the business is likely to give us the feeling that we instinctively know who’s going to be a good tenant, and who isn’t.

A few years into my property management career, I was beginning to feel quite confident in my abilities. Things were going well. New accounts were coming in regularly, I was placing great tenants who paid their rent on time and took good care of the properties, and I considered myself to be pretty darned successful. One of the benefits of this success is that I had learned the value of observation. I believed that I could tell, just by looking at and listening to someone, whether he or she was sincere. This powerful tool was very useful to me, especially in tenant selection! One day, a pair of newlyweds came to view a property I had for rent. It was a quaint older home in

a well-established neighborhood, built during the days of brass doorknobs and crystal light fixtures. Every fixture in the home was original, and in superb condition. It was really important to me to get a tenant in that property who would fully appreciate the rare and beautiful condition of this home. The couple wasn’t your average pair of newlyweds, either. They were, I guessed, somewhere in their 80s. As I listened to their story, it warmed my heart. They had been high school sweethearts who’d lost track of one another many years before. They each went off to live their separate lives, married others, raised families, lost their respective spouses, and never heard from or saw each other until they were unexpectedly reunited through a mutual friend just a few short months ago. This darling pair was absolutely beaming with love — not only for one another, but for the little dollhouse! Finally! I’d found a tenant who could fully appreciate what that house had to offer. As we walked through the property and chatted about the home’s features, and the wonderful love story unfolding between that cute couple, my excitement grew. I couldn’t wait to tell the owner what a perfect match between property and tenant I’d found for him! So, what’s wrong with using our gut instincts when selecting a tenant for a rental property?

No guts, no glory? First and foremost, contrary to what most of us like to believe about ourselves, we really don’t know how any tenant is going to behave once he’s in the rental property. We can evaluate many indicators of financial stability, rental history, and references, but these are only indicators. They are not guarantees of future 16 august/september 2012

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performance. Hence, the temptation to use gut instinct to supplement the evaluation of objective criteria is always there. loCaTe, eXplore and sourCe THe BesT produCTs The thing is, no matter how experienced you are, and serviCes, from indusTry vendors and parTners. your “gut” doesn’t always tell you the truth. When we’re speaking of our instincts as property managers, we’re really speaking about our experience. Once you experience a situation, that experience sticks with you and clouds your judgment, either for the good or the bad. Unquestionably, using subjective evaluation (“gut instinct”) when deciding who to rent to and who to decline opens the property manager up to a number of risks, including fair housing claims. Imagine this, for a moment: An attorney in federal court (where any fair housing claim might end up) asks you, “So, Mr. Property Manager, on what basis did you decline my client’s application to rent your property?” You answer, “I could tell by the way he kept his car — it was very dirty — I knew he would not be a good renter.” Really? Are you really comfortable with that kind of answer? (Disclosure: if you could see my vehicle right now, you’d never rent to me.) Fair housing risks aside, subjective decision making is pretty hard to justify when things go south. Can you guess the rest of the story? Not only did my perfect tenants quit paying rent almost immediately, by the time I finally got them out of the dollhouse, it was no longer a dollhouse. Every single doorknob was missing. All the light fixtures were gone. The place was loaded with trash and absolutely filthy. Save up to $100 by registering early for the Real Show 2012. Reserving your spot is easy—just visit www.realsHoWva.com right now to register. online By 9/24

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The moral of the story Had I remained objective, rather than becoming emotionally attached to the notion of that cute couple being such a perfect fit for the house, I might have discovered the truth. The cute elderly couple was a pair of scam artists. This was not the first time they’d moved into a property, quit paying rent, and trashed the place before moving out. Because I relied on my gut instincts, and those instincts were wrong, it cost my owner a small fortune, and cost me a good client. It was a mistake I never repeated. ● VoLuME 19 ● ISSuE 4

Judy Cook Brian Copeland, CRS TrisTa Curzydlo Property Management Real Estate Writer Real Estate Extraordinaire & TV Celebrity Educator & Attorney

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What is the minimum duration of a brokerage agreement? A. There is none B. 24 hours C. One week for residential property, 30 days for commercial D. 30 days or until an offer is made on a property

See the answer below.

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The answer is A — an agreement can even be for a single property.

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AuGuST/SEPTEMBER 2012 17

formfactor blaKe HegemaN

More new agency forms and documents VIRGINIA ASSOCIATION OF REALTORS® DISCLOSURE OF DUAL AGENCY OR DUAL REPRESENTATION* IN A RESIDENTIAL REAL ESTATE TRANSACTION The undersigned do hereby acknowledge disclosure that the licensee ________________________ (Broker or Salesperson) associated with ______________________________________ (Brokerage Firm) represents more than one party in this residential real estate transaction as follows:

A. The Licensee represents the 

Seller

as a (select one below):

 Standard Agent

B. The Licensee represents the 

Buyer

as a (select one below):

 Standard Agent

 Limited Service Agent OR

 Landlord OR 

Independent Contractor

 Tenant

VIRGINIA ASSOCIATION OF REALTORS®  Limited Service Agent OR  Independent Contractor DISCLOSURE OF DESIGNATED AGENCY OR REPRESENTATION*

*“Dual Agency” means representing a client as a standard agent or as a limited service agent. “Dual Representation” means representing a client as independent contractor. The undersigned doanhereby acknowledge disclosure that _____________________________________

(Brokerage Firm) represents more than one party in this real estate transaction:

C. Brokerage Firm disclosure and client acknowledgement of the following (select one):  Seller(s) and Buyer(s)  Landlord(s) and Tenant(s) BOTH CLIENTS ARE EXISTING CLIENTS  Brokerage Firm represents two existing clients in the transaction and the undersigned disclose to either client or such client's designated agent or representative any information that has acknowledge the following:

The undersigned understand that the foregoing dual agent or representative (Broker) may not

been given to the dual agent or representative by the other client within the confidence and trust of the

brokerage relationship that information which otherwise The undersigned understand that the foregoing dualexcept agent orfor dual representative may notisdisclose to required or permitted by Article 3 54.1-2130 seq.) 21 or of representative Title 54.1 of the Code of Virginia to be disclosed. either client any information(§that has beenetgiven theChapter dual agent by the other client to of within the confidence and trust of the brokerage relationship except for that information which is otherwise required or permitted by § 54.1-2130 et seq. of the Code of Virginia to be disclosed. The principal or supervising broker has assigned ____________________________ (Broker or Salesperson) to act as Designated Agent or Representative for the  Seller OR  Landlord as a (select one below):

ONE EXISTING CLIENT ONE NEW CLIENT existing client and one new transaction and the  Brokerage Firm represents  oneStandard Agent OR clientin the Limited Service Agent undersigned acknowledge the following:

OR 

Independent Contractor

The principal or supervising broker has assigned ____________________________ (Broker or

The undersigned understand: Salesperson) to act as Designated Agent or Representative for the  Buyer OR  Tenant

as a (select one below):

1. That following the commencement of dual agency or representation, the licensee cannot advise either party as to the terms to offer or accept in any offer or counteroffer; however, the licensee may Standard OR of dual Limited Service have advised one party as  to such terms priorAgent to the commencement agency or Agent OR  representation; VIRGINIA ASSOCIATION OF REALTORS®

Independent Contractor

DISCLOSURE OF DUAL AGENCY OR REPRESENTATION* TheDUAL undersigned byclient signing this do hereby acknowledge their consent to the disclosed That the licensee advise the buyer as to thenotice suitability of the property, its condition IN A2.COMMERCIAL REALcannot ESTATE TRANSACTION designated representation thelicensee licensee. (other than to make any disclosures as required by law ofbyany representing a seller), and cannot advise either party as to what repairs of the property to make or request; SELLER/LANDLORD BUYER/TENANT The undersigned do hereby acknowledge disclosure that the licensee _________ (Broker or Salesperson) associated with ____________________________________ (Brokerage Firm) / transaction as follows: / represents more than one party in this commercial real estate Date Signature Date Signature VAR Form 101 (rev. 07/12)

A. The Licensee represents the as a (select one below): Standard Agent



B. The Licensee represents the as a (select one below): Standard Agent



 Seller 

 Buyer 

OR 

Landlord Page 1 of 2

SELLER/LANDLORD Independent Contractor OR Date



Tenant Signature

BUYER/TENANT Date

as discussed in the June/July issue of Commonwealth, Var has adopted four new disclosure of brokerage relationship forms: • Disclosure of Brokerage Relationship for unrepresented party(ies); • Disclosure of Dual Agency or Dual representation in a residential real estate transaction; • Disclosure of Designated Agency or representation; and • Disclosure of Dual Agency or Dual representation in a Commercial transaction.

Signature

recently, Var adopted some additional forms to assist members with the July 1 agency changes. Check them out on the right.

*“Designated Agency” means representing a client as a standard agent or as a limited service agent. Independent Contractor “Designated Representation” means representing a client as an independent contractor.

2012representative by the Virginia Association REALTORS®. All rights reserved. This form may be used only by members The undersigned understand that the foregoing dualCopyright© agent or dual may not of disclose good standing with the Virginia Association of REALTORS®. The reproduction of this form, in whole or in part, or the use to either client any information that has been given toin the dual agent or representative by the other of the name “Virginia Association of REALTORS®”, in connection with any other form, is prohibited without the priopr client within the confidence and trust of the brokerage relationship that information which consent from theexcept Virginia for Association of REALTORS®. is otherwise required or permitted by § 54.1-2130 et seq. of the Code of Virginia to be disclosed. VAR Form 103 (rev.consent 07/12) to the disclosed dual The undersigned by signing this notice do hereby acknowledge their representation by the licensee.

SELLER/LANDLORD Date

Signature

SELLER/LANDLORD Date

Signature

BUYER/TENANT Date

Signature

BUYER/TENANT Date

Signature

*“Dual Agency” means representing a client as a standard agent. “Dual Representation” means representing a client as an independent contractor.

Copyright© 2012 by the Virginia Association of REALTORS®. All rights reserved. This form may be used only by members in good standing with the Virginia Association of REALTORS®. The reproduction of this form, in whole or in part, or the use of the name “Virginia Association of REALTORS®”, in connection with any other form, is prohibited without the prior consent from the Virginia Association of REALTORS®.

VAR Form 102 (rev. 07/12)

Forms — they’re the bread and butter of a deal. they’re full of ﬁne print and legalese, and not everyone “gets” the details. and that often ends up as a call to our legal Hotline. (shameless plug: (804) 622-7955.) so we asked our intrepid legal

Not shown: Notice to Consumers About Written Brokerage Agreements

In our Forms Center you’ll also ﬁnd a “Notice to Consumers about Written brokerage agreements.” (It’s not pictured here.) It’s a consumer information piece designed to help explain to clients and potential clients about the new requirement that all brokerage agreements be in writing. use it as a standalone piece or attach it to a buyer-broker agreement.

counsel (read: lawyer), blake Hegeman, to take one of the forms the Hotline gets the most questions about and illuminate it for us. They’re all available, free for download, at www.VARealtor.com/standardforms.

18 august/september 2012

WWW.Varealtor.Com

NON-EXCLUSIVE RIGHT TO REPRESENT BUYER AGREEMENT Short Form---Standard Agency (This Form Does Not Include Dual or Designated Agency Disclosures)

VIRGINIA ASSOCIATION OF REALTORS® EXCLUSIVE RIGHT TO REPRESENT BUYER AGREEMENT (Standard Agency)

(This is a legally binding contract. If not understood, seek competent advice before signing.) This Agreement (the “Agreement”) is made as of _____________________, 20_____ between _______________________ ____________________________ (“Buyer”) and [insert name of firm]_____________________________________________(“Broker”). 1. In consideration of services and facilities, Broker is herby granted the NON-EXCLUSIVE right to represent Buyer in the acquisition of real property. As used in this Agreement, “acquisition of real property” shall include any purchase, option, exchange or lease of property or OF REALTORS® an agreement to do so. Buyer is retaining Broker toVIRGINIA acquire ASSOCIATION the following specific property or type of property: NON-EXCLUSIVE RIGHT TO REPRESENT BUYER AGREEMENT ___________________________________________________________________________________.

(Standard Agency)

2. TERM. This Agreement shall commence on _____________, 20___ and terminate at midnight on _____________, 20___.

(This is a legally binding contract; if not understood, seek competent advice before signing.)

3. BROKER’S DUTIES. Broker shall represent Buyer as a standard agent in this brokerage relationship and locate property available for purchase and suitable to Buyer. Unless otherwise by law or Buyer in writing to the release information, Broker shall This Agreement (the provided “Agreement”) is made as consents of ___________________, 20____ ofbetween ____________________________ maintain the confidentiality of__________________________ personal information, financial(“Buyer”) information and other identified as confidential by Buyer that is and [insert name matters of firm]_________________________________________(“Broker”). received from Buyer in the course of the brokerage relationship. If Broker is not the listing firm of the seller (the “Listing Firm”), Broker shall represent solely the interest of1.Buyer in all negotiations and transactions regarding thehereby acquisition of real and shall right repudiate any In consideration of services and facilities, Broker is granted the property, NON-EXCLUSIVE to represent Buyer in the agency relationship with the seller unless consented to in writing by Buyer. Broker shall have no obligation to search out such properties acquisition of real property. As used in this Agreement, “acquisition of real property” shall include any purchase, option, exchange or beyond those that come to the attention of Broker the ordinary of Broker’s business. may other buyers who lease of property or aninagreement to docourse so. Buyer is retaining Broker toBroker acquire the represent following specific property or type of property: may be interested in the same___________________________________________________________________________________. property as Buyer. 4. BUYER’S DUTIES. Buyer2.shall: comply the reasonable requests Broker to supply anyand pertinent information data TERM. This with Agreement shall commence on of _____________, 20___ terminate at midnightoronpersonal _____________, 20___. needed to fulfill the terms of this Agreement; pay Broker the compensation set forth below; be available during Broker’s regular working hours to view properties; and notify Broker promptly in writing if Buyer enters into any written agreement for the acquisition of real property; 3. BROKER’S DUTIES. Broker shall represent Buyer as a standard agent in this brokerage relationship and represent Buyer in a and notify Broker promptly in writing if Buyer enters into any written agreement by which Buyer agrees to work exclusively with another diligent and effective manner to locate property available for purchase and suitable to Buyer. Unless otherwise provided by law or broker. Such notice shall terminate agreement. Buyerthis consents in writing to the release of information, Broker shall maintain the confidentiality of personal information, financial

information and other matters identified as confidential by Buyer that is received from Buyer in the course of the brokerage

5. COMPENSATION. Broker relationship. is authorizedIftoBroker receive thethe compensation by (the the Listing to Broker a buyer’s or paid by the a seller, is not listing firm ofoffered the seller “Listing Firm Firm”), shallbroker represent solely interest of Buyer in all which compensation will be credited against Fee (defined below)the dueacquisition by Buyeroftoreal Broker. For and the services rendered Broker, Buyer with the seller negotiations andthe transactions regarding property, shall repudiate any by agency relationship agrees to pay Broker a fee (theunless “Fee”)consented equal to: to in writing by Buyer. Broker shall have no obligation to search out such properties beyond those that come to ____% of the gross price of the property acquired Buyer; AND/OR thepurchase attention of Broker in the ordinary course by of Broker’s business. Broker may represent other buyers who may be interested in the the compensationsame offered by theasListing property Buyer.Firm or by a seller to a buyer’s broker on property acquired by Buyer, but such compensation shall not be less than ___________________________________________________; AND/OR the sum of $________________. 4. BUYER’S DUTIES. Buyer shall: comply with the reasonable requests of Broker to supply any pertinent information or personal

Non-Exclusive Right to Represent Buyer Agreement (Form 460); and Non-Exclusive Right to Represent Buyer Agreement (Form 465)

data needed to fulfill the terms of this Agreement; pay Broker the compensation set forth below; be available during Broker’s regular working view properties; notify Broker promptly in writing if Buyer enters into written agreement for the acquisition of The Fee shall be due during the term hours of thistoAgreement if Buyer enters into a contract to acquire a property of any the type described above property; and notify Broker promptly in writing if Buyer enters agreement which Buyer through the services of Broker,real or the material conditions of such contract are subsequently met. into Theany Feewritten shall also be due by to Broker if the agrees to work exclusively with by another broker. noticeofshall thisand agreement. real property is shown or described to Buyer Broker duringSuch the term this terminate Agreement Buyer obtains title thereto within _____ days

after the expiration of this Agreement (the “Protection Period”) unless Buyer has entered into a subsequent buyer brokerage agreement 5. COMPENSATION. Broker authorized to receive offered theorListing Firm toora default buyer’s by broker or paid by a with another real estate brokerage firm. The Fee shall beispayable to Broker on the thecompensation earlier of transfer ofby title any action which compensation will be credited against the Fee (defined due byfor Buyer Broker. For rendered by Buyer which results in Buyer’sseller, not obtaining title to the Property after the material conditions ofbelow) the contract the to acquisition of the services real Broker,to Buyer pay Broker fee termination (the “Fee”) equal property are met. Buyer’s obligation pay agrees the Feetoshall surviveathe of thisto:Agreement. Any compensation received by Broker ____% of the grossinpurchase price theshall property acquired by Buyer; from the Listing Firm or seller (including any selling bonus) excess of theofFee be paid to and retainedAND/OR by Broker even though said the compensation offered by the Listing Firm or by a seller to a buyer’s broker on property acquired by Buyer, but such amount may exceed the Fee. Broker shall promptly disclose any selling bonus to Buyer, but in all events prior to contract ratification. After not beFirm less than _____________________________________________________; crediting any compensation received bycompensation Broker from shall the Listing or the seller, Buyer shall be responsible for the balance of the Fee dueAND/OR of $________________. to Broker. Buyer shall not modify Broker’s the Feesum in any real estate purchase contract. Fee shall due during theparties, term of then this Agreement if Buyer into a contract to acquire a property the type described 6. E-SIGN: ____/____. If thisThe paragraph is be initialed by both in accordance withenters the Uniform Electronic Transactions Act of and above through the services Broker, or the conditions of suchascontract are subsequently The Fee shall also be due other law, the parties do hereby expressly authorize and of agree to the usematerial of electronic signatures an additional method of met. signing and/or to Broker if the real property is shown or described to Buyer by Broker during the term of this Agreement and Buyer obtains title initialing this Agreement and that either party may sign electronically by utilizing an electronic signature service.

thereto within _____ days after the expiration of this Agreement (the “Protection Period”) unless Buyer has entered into a subsequent buyer brokerage agreement with another real estate brokerage firm. The Fee shall be payable to Broker on the earlier

Witness the following duly authorized signatures: of transfer of title or any action or default by Buyer which results in Buyer’s not obtaining title to the Property after the material

conditions of the contract for the acquisition of the real property are met. Buyer’s obligation to pay the Fee shall survive the Broker: termination of this Agreement. Any compensation received by Broker from the Listing Firm or seller (including any selling bonus) in Date Buyer (inserteven name of firmsaid above) excess of the Fee shall be paid to and retained by Broker though amount may exceed the Fee. Broker shall promptly disclose any selling bonus to Buyer, but in By all (signature): events prior to contract ratification. After crediting any compensation received by Broker from the Listing Firm or the seller, Buyer shall be responsible for the balance of the Fee due to Broker. Buyer shall not ____________/_________________________________ Print name: modify Broker’s Fee in any real estate purchase contract. Date Buyer Date:

6. DUAL/DESIGNATED AGENTS. Buyer acknowledges that Broker may represent sellers of property as a listing agent, and certain properties listed by Broker may be of reserved. interest toThis Buyer. Broker to bring to Buyer’s any properties COPYRIGHT©2012 by the VIRGINIA ASSOCIATION OF REALTORS®. All rights form Buyer may beauthorizes used only by members in good standingattention with by Broker which may suitofBuyer’s andorhereby to inform Buyer ASSOCIATION at the time of its the VIRGINIA ASSOCIATION OF listed REALTORS®. The reproduction this form,needs in whole in part, instructs or the useBroker of the name "VIRGINIA OFrepresentation of the If Buyer elects to view or consider property listed bythe Broker and to make an offerOF onREALTORS®. such property, then dual agency by the REALTORS®", in connection with seller. any other form, is prohibited without prior written consent from VIRGINIA ASSOCIATION Broker will exist, and Broker must either obtain the written consent of Buyer and Broker’s seller client to: (i) assign different VAR Form 465 (rev. 07 12) licensees of Broker as designated agents to represent Buyer and seller; or (b) act as a dual agent for Buyer and seller in the same transaction. Under Virginia law, designated agents shall not be considered dual agents and shall not be limited in their ability to represent the client to whom they are designated in the transaction. The principal or supervising broker who is supervising the transaction is considered a dual agent of both Buyer and seller, and such broker’s ability to represent both clients will be limited. Broker shall not disclose to either client or such client’s designated agent any information that has been given to Broker by the other VAR FORM 460 REV. 7/12

Page 1 of 2

(This is a legally binding contract; if not understood, seek competent advice before signing.) This Agreement (the “Agreement”) is made as of ___________________, 20____ between ____________________________ __________________________ (“Buyer”) and [insert name of firm] __________________________________________(“Broker”). 1. In consideration of the mutual covenants contained in this Agreement, Buyer hereby appoints Broker to represent Buyer in the acquisition of real property. As used in this Agreement, “acquisition of real property” shall include any purchase, option, exchange or lease of property or an agreement to do so. Buyer is retaining Broker to acquire the following specific property or type of property: ________________________________________________________________________________________________________. 2. TERM. This Agreement shall commence on _____________, 20___ and terminate at midnight on _____________, 20___. 3. BROKER’S DUTIES. Broker shall represent Buyer as a standard agent in this brokerage relationship and represent Buyer in a diligent and effective manner to locate property available for purchase and suitable to Buyer. Unless otherwise provided by law or Buyer consents in writing to the release of information, Broker shall maintain the confidentiality of personal information, financial information and other matters identified as confidential by Buyer that is received from Buyer in the course of the brokerage relationship. If Broker is not the listing firm of the seller (the “Listing Firm”), Broker shall represent solely the interest of Buyer in all negotiations and transactions regarding the acquisition of real property, and shall repudiate any agency relationship with the seller unless consented to in writing by Buyer. Broker shall have no obligation to search out such properties beyond those that come to the attention of Broker in the ordinary course of Broker’s business. Broker may represent other buyers who may be interested in the same property as Buyer.

4. BUYER’S DUTIES. Buyer shall: work exclusively with Broker during the term of this Agreement; comply with the reasonable requests of Broker to supply any pertinent information or personal data needed to fulfill the terms of this Agreement; pay Broker the compensation set forth below; be available during Broker’s regular working hours to view properties; consult with Broker before visiting any resale or new homes or contacting any other real estate licensees or property owners to avoid confusion over the brokerage relationships and liability for payment of the compensation due to Broker; and inform all sellers and licensees whom Buyer contacts of Buyer’s brokerage relationship with Broker.

Exclusive Right to Represent Buyer Agreement (Form 450)

5. COMPENSATION. Broker is authorized to receive the compensation offered by the Listing Firm to a buyer’s broker or paid by a seller, which compensation will be credited against the Fee (defined below) due by Buyer to Broker. For the services rendered by Broker, Buyer agrees to pay Broker a fee (the “Fee”) equal to: % of the gross purchase price of the property acquired by Buyer; AND/OR the compensation offered by the Listing Firm or by a seller to a buyer’s broker on property acquired by Buyer, but such ; AND/OR compensation shall not be less than the sum of $ . The Fee shall be due during the term of this Agreement if Buyer enters into a contract to acquire a property of the type described above through services of Broker or otherwise, or the material conditions of such contract are subsequently met. The Fee shall also be due to Broker if the real property is shown or described to Buyer by Broker during the term of this Agreement and Buyer obtains title thereto within _____ days after the expiration of this Agreement (the “Protection Period”) unless Buyer has entered into a subsequent buyer brokerage agreement with another real estate brokerage firm. The Fee shall be payable to Broker on the earlier of transfer of title or any action or default by Buyer which results in Buyer’s not obtaining title to the Property after the material conditions of the contract for the acquisition of the real property are met. Buyer’s obligation to pay the Fee shall survive the termination of this Agreement. Any compensation received by Broker from the Listing Firm or seller (including any selling bonus) in excess of the Fee shall be paid to and retained by Broker even though said amount may exceed the Fee. Broker shall promptly disclose any selling bonus to Buyer, but in all events prior to contract ratification. After crediting any compensation received by Broker from the Listing Firm or the seller, Buyer shall be responsible for the balance of the Fee due to Broker. Buyer shall not modify Broker’s Fee in any real estate purchase contract.

6. DUAL/DESIGNATED AGENTS. Buyer acknowledges that Broker may represent sellers of property as a listing agent, and certain properties listed by Broker may be of interest to Buyer. Buyer authorizes Broker to bring to Buyer’s attention any properties listed by Broker which may suit Buyer’s needs and hereby instructs Broker to inform Buyer at the time of its representation of the seller. If Buyer elects to view or consider property listed by Broker and to make an offer on such property, then dual agency by the Broker will exist, and Broker must either obtain the written consent of Buyer and Broker’s seller client to: (i) assign different licensees of Broker as designated agents to represent Buyer and seller; or (b) act as a dual agent for Buyer and seller in the same transaction. Under Virginia law, designated agents shall not be considered dual agents and shall not be limited in their ability to represent the client to whom they are designated in the transaction. The principal or supervising broker who is supervising the transaction is considered a dual agent of both Buyer and seller, and such broker’s ability to represent both clients will be limited. Broker shall not disclose to either client or such client’s designated agent any information that has been given to Broker by the other VAR FORM 450 REV. 07/12

VAR RESIDENTIAL LISTING AGREEMENT (For Non-Agency—Independent Contractor Relationship)

DISCLOSURE OF BROKERAGE RELATIONSHIP EXPLANATION TO CONSUMERS Real estate licensees in Virginia are required by law to make prompt written disclosure of any brokerage relationship to members of the public who are unrepresented. Licensees must also make written disclosures and obtain timely written consents from their clients before entering into other brokerage relationships. The attached form is provided to you to satisfy these requirements and to help you understand the nature of the brokerage relationship of the licensee. THE LICENSEE’S DUTIES

A licensee must have a written brokerage agreement to represent a client and a licensee owes his client certain duties. A licensee who is not representing you in a transaction can nonetheless provide you other valuable information and assistance. However, you should always keep in mind whom the licensee represents in your transaction, and thus to whom that licensee owes the duties described below.

Disclosure of Brokerage Relationship: Explanation to Consumers WHOM DOES THE LICENSEE REPRESENT?

In any real estate transaction, a licensee may represent the seller, the buyer, or, under certain circumstances, both seller and buyer. The Seller

A licensee represents a seller via a written brokerage agreement called a listing agreement, in which case the licensee owes his primary responsibilities to the seller. The licensee must disclose his relationship with the seller whenever dealing with an unrepresented buyer. The licensee is also allowed to assist an unrepresented buyer with ministerial duties – such as filling in the blanks of a contract and holding the escrow deposit.

The “Disclosure of Brokerage Relationship: Explanation to Consumers” is designed to explain to consumers the types of brokerage relationships in Virginia and educate them about various licensee duties

The Buyer

The Buyer and The Seller

Designated Licensees

If a buyer desires to be represented by a licensee, then the buyer and the licensee must enter into a written brokerage agreement by which the licensee agrees to represent the interests of the buyer. The licensee must disclose his relationship with the buyer whenever dealing with an unrepresented seller. Furthermore, the licensee may perform ministerial duties for an unrepresented seller – such as delivering offers and counteroffers. A licensee and his firm may represent both the buyer and the seller in a particular transaction, but only with the informed written consent of both the buyer and the seller. A licensee representing both the buyer and seller in a dual capacity is necessarily limited in his ability to represent either the buyer or seller fully and exclusively. The licensee must safeguard the confidentiality of any information obtained within the confidentiality and trust of the brokerage relationship, unless disclosure of such information is required by law. Specifically, the licensee must not tell the buyer that the seller will accept a price lower than the listing price, nor tell the seller that the buyer will pay a price higher than the price offered. Virginia law also permits a principal or supervising broker to designate different licensees affiliated with the broker to represent different clients in the same transaction. Designated agency/representation requires informed written consent from both parties. Unlike the dual relationship discussed in the previous paragraph, these designated licensees represent only the interest of their respective clients, and may therefore represent those interests fully. The principal or supervising broker who is supervising the transaction will be considered dual broker of both seller and buyer. Designated licensees may not disclose, except to their broker, personal or financial information received from the clients during the brokerage relationship and any other information a client requests to be kept confidential, unless required by law to be disclosed or the client consents to its disclosure in writing.

COPYRIGHT©2012 by the VIRGINIA ASSOCIATION OF REALTORS®. All rights reserved. This form may be used only by members in good standing with the VIRGINIA ASSOCIATION OF REALTORS®. The reproduction of this form, in whole or in part, or the use of the name "VIRGINIA ASSOCIATION OF REALTORS®", in connection with any other form, is prohibited without prior written consent from the VIRGINIA ASSOCIATION OF REALTORS®.

Volume 19 ● Issue 4

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(This is a legally binding contract, if not understood, seek competent advice before signing.)

Firm Name Address City/State/Zip This Listing Agreement is entered into on

, 20 by and between (collectively the “Owner”) and the abovereferenced real estate firm (the “Broker”). Owner acknowledges that Broker is acting only as an independent contractor in this brokerage relationship, and not an agent, pursuant to Va. Code Section 54.1-2130 et seq. and will not provide any other services to Owner, except as provided in this Agreement or as may be required by law. Owner warrants that all legal owners of the Property are stated above and have executed this Agreement.

VAR Residential Listing Agreement (For Non-Agency— Independent Contractor Relationship) (Form 420)

1. Property. For and in consideration of the services to be rendered by Broker, Owner hereby appoints Broker as an independent contractor to provide the following services with respect to the real property described below: , Virginia, commonly known as: Property located in City/County (Street Address) (Legal Description) (“the “Property”). Unless otherwise specified in the real estate purchase agreement, all improvements, fixtures and the following additional described property, if any, are included in the sales price: 2. Term. The term of this Agreement shall commence with the date of the last Owner’s signature obtained on , 20 . this Agreement and terminate at 11:59 p.m. on 3. Broker Obligations. Owner acknowledges that Broker has the following mandatory obligations according to Virginia law: Broker must maintain client confidentiality, exercise ordinary care, account for a client’s money and property, disclose material facts to the client regarding the property and/or the transaction, disclose material adverse facts and defective drywall the broker has knowledge of to prospective purchasers, and treat all parties honestly.

We developed the independent contractor agreement because we recognized how much attention this type of brokerage relationship was receiving as a result of the new agency law.

4. Broker Services. Broker agrees to provide the following services to Owner during the term of this Agreement (select all applicable boxes): List Owner’s Property for sale in the Multiple Listing Service.

Prepare a comparable Market Analysis (CMA) of Owner’s Property summarizing current listing prices and recent sales. Prepare a fact sheet describing the Property (copies made by Owner) to present to prospective purchasers. Owner must provide information to be used in the fact sheet.

Provide the following signs: Broker’s “For Sale” yard sign (if Broker is accepting inquires) Fact sheet holder to attach to “For Sale” yard sign. Other sign(s) (describe):

Conduct the following marketing activities on behalf of Owner with respect to the Property:

Install a lockbox on the Property. Accept and discuss inquires from real estate licensees regarding the Property listing; provide Property VAR FORM 420 REV. 07/12

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august/september 2012 19

Yes, Virginia, the recovery is here.

Andrew Kantor

The endless tide of negative news has been replaced, bit by bit, with positives. We’ve passed bottom.

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Yes, Virginia, the housing recovery is here, it’s well past the beginning, and it’s moving strongly and steadily. But I don’t expect you to believe that. Back in March 2005, the cover story for this very magazine was “No Boom, No Bust, No Bubble.” In it, various respected economists — including then-chairman of the Fed Alan Greenspan — insisted there was no immediate danger to the housing economy. There was no bubble to worry about. A year later, that non-existent bubble burst. You know the rest. What that means is that you’re expected to take everything you read here with a sizeable chunk of salt. You should, in fact, take everything with that same piece of salt, because it’s obvious that even “foremost economists” don’t always have a clue. And a Realtor® association saying “The recovery is here” may not carry a lot of credibility. But don’t dismiss it. Read this story and check for yourselves. See if you see the same things. There’s no sugarcoating here. VAR has enthusiastically called shenanigans on everything from journalists’ stories to NAR’s stats to government figures — whether they’re too positive or too

negative. We realize that the extremes of breathless enthusiasm or Eeyorelike negativity are sure ways to lose your credibility. But when the news is good, we’re darned sure going to tell you about it. The news is good. You won’t find reams of statistics here, or pages of charts comparing this year with the Great Housing Crisis of 1825 or whatever. It’s not about individual pieces of data. Instead, it’s a look at the gestalt — the bigger picture — based on the housing news coming through the wire. And that news is more often good than bad. The endless tide of negative news has been replaced, bit by bit, with positives. You can certainly argue something like, “Well, the inversely-correlated regressive dollar-value figures show that housing still has 28.412 percent (+/- 3.54%) to fall,” but numbers don’t tell the whole story. Context does. Consider hockey’s Gretzky brothers: Wayne and Brent Gretsky are the highest scoring pair of brothers in NHL history. But Brent only scored a single goal. Numbers can be accurate and misleading. We’ve passed bottom. We are in a recovery. www.VARealtor.com

Good news When I say we’ve passed bottom I don’t mean that every metric will now be going up. Prices, for example, have a bit of ways to go down, and won’t be back to 2006, bubble-peak levels for a while. I mean that the overall bottom of the housing crisis is past us. You’ll see this if you look at the broader economic news, and if you drill down to housing-specific data — as housing goes, so goes the economy… and vice-versa. Unemployment is down. Sure it’s not as low as we’d like, but it’s well below its peak and has been dropping steadily. More jobs means fewer delinquencies (and thus fewer foreclosures and REOs). HARP is working. Letting more people refinance at lower rates puts more money back into the economy, and the Obama administration’s Home Affordable Refinance Program (now on its second iteration) is doing just that. It’s got traction, too: Refinancing jumped in the first quarter, and if HARP expands again (to allow borrowers with FHA loans to take advantage of the program), even more people will get a lower rate — and Volume 19 ● Issue 4

more money in their pockets. Granted, they aren’t using that money to buy a new house, but they will spend it — and that means jobs, and jobs means housing. Delinquencies are down. Thanks in part to these first items, more people are able to pay their mortgages. Fannie Mae and Freddie Mac’s single-family serious delinquency rates have been dropping since early 2010, and the Mortgage Bankers Association says the delinquency rate for multifamily mortgages is also dropping. Meanwhile, since January the national consumer credit default rate — which measures how good a job consumers are doing paying credit card bills, car loans, and so on — has been falling. People are getting back on solid ground, albeit slowly. Interest rates are still crazy low. Despite some economists’ predictions of rates beginning to climb any day now, it hasn’t happened. And even if they did begin to inch up, it’ll take a while for that to affect buyers. The average consumer isn’t going to say, “I would have bought at 3.95%, but not at 4.1%.” In fact, if rates start to inch up it may pull some iffy buyers off the august/september 2012 21

fence — they won’t want to miss out on record-low mortgages.

Borrower demand for mortgages is increasing. The pendulum is starting to swing back.

Lending is loosening. The Federal Reserve Board found that borrower demand for mortgages is increasing, and thus lenders are preparing to “increase their exposure to such loans.” Put another way, the pendulum is starting to swing back. It’s not just the Fed recognizing the increasing demand. Credit information service Experian just released a white paper aimed at lenders, “Expanding the marketable universe.” Its goal is to help those lenders expand their offerings beyond top-tier borrowers — to find and target “near-prime” clients — because Experian sees that lenders are finally ready to get back in the game. Rents are rising. At one point, people turned to renting as a less-expensive (at least in the short term) alternative, especially when they couldn’t afford or qualify for a mortgage. But thanks to that increased demand, rental rates are going up. And up. In some places they’re setting records, and they’re making home ownership look like a better option — something that bodes well for the long-term. Short sales are getting more efficient. Earlier this year, the Federal Housing Finance Agency had had enough of lenders taking forever to process short sales. It released a set of rules to speed the process, requiring mortgage servicers to respond to short-sale requests within 30 days. (They can take up to 60 days in certain circumstances.) Soon after the government gave them what-for, RealtyTrac reported that short sales were up significantly.

22 august/september 2012

And in May, in MRIS territory (which includes a large portion of Virginia), there were more short sales than foreclosures — and that’s good for everyone, especially as the total number of distressed sales is going down. Inventory is down. Nationwide, listings are down more than 20 percent from a year ago, and continue to drop. Virginia’s inventory was down more than 37 percent in May from a year before, although some areas are seeing larger drops than others — Northern Virginia had 16 percent fewer listings in May, for example, while the Richmond-Petersburg area saw a 27 percent drop. “Shadow inventory” never flooded the market. When banks finally paid the piper for the robo-signing scandal, conventional wisdom held that there was going to be a rush of foreclosures and REOs flooding the market, driving prices down and pushing underwater sellers further out of the market. It never happened. (And Virginia didn’t have much of a backlog anyway.) In fact, CoreLogic found that shadow inventory — homes not on the market, but soon expected to be — was down almost 15 percent from a year ago. As housing expert Bill McBride (who writes the well-respected Calculated Risk blog) put it, “[I]t is hard to imagine a huge wave of foreclosures. If anything it will be more like a sustained high tide in certain judicial foreclosure areas.” Buyers are returning. Maybe they aren’t coming at the rate we all want to see, but buyers are coming back. Whether it’s because people can’t resist www.VARealtor.com

Despite all the good news, this is economics, and there are plenty of things that could slow or derail the recovery. Political gridlock. Once upon a time, our leaders made decisions based on what they thought was best for the country. They disagreed about the details, but we were pretty sure they all had our common good in mind. These days, though, it’s all about partisan bickering. If someone from The Other Side has an idea, it must be bad. Votes that should take hours take weeks. Simple decisions are bogged down in minutiae. The result: The private sector is faced with long-term uncertainty about what’s going to come out of Washington. That’s no good for a market trying to stabilize. Consumer confidence could falter. Yes, how people feel about a situation can affect what actually happens. As consumers become more confident in the market they’re more likely to go out and buy — the spectre of a property-value crash is no longer over them. The reverse is also true, and while consumer confidence has in general been going up, it’s not a steady rise. If consumers lose faith in the markets, it will take a while for it to be restored. Europe. It’s a financial mess over there. Will Greek leave the euro? Will Spain need another bailout? Will Italy? What does it all mean, anyway? Some of these may be answered by the time you read this, others will remain up in the air. But European messes have a tendency to spill over to this side of the pond — although how it would affect things here is everyone’s guess. Student loans are a drag on the future. Young folks are the buyers of tomorrow. In theory. Trouble is, they’re finding themselves under a load of crippling debt from student loans that will take many years to pay off — years when they could be saving for a down payment or paying a mortgage. That means that as we predict the market going forward we have to assume a generation with much less disposable income.

Volume 19 ● Issue 4

Expensive rentals won’t last forever. Although the high demand for rentals has made them more expensive, that won’t last forever. Investors are buying up foreclosures to turn them into rentals (they, too, can read the writing on the wall). That means supply will eventually increase to meet demand and, possibly, drive rents down and make them more attractive. Lower supply could be a bad thing. Normally after the past few years we’d be glad to see all that excess inventory absorbed by the market, whether by individuals or investors. But low supply is also caused by people being unable or unwilling to sell their homes; if someone is deep enough underwater, he won’t bother listing his home even if he wants to move. CoreLogic’s economists looked at this very issue and found that yes, there was a solid correlation between an area’s negative equity and how many homes are for sale. More underwater owners means less inventory. It gets worse. Even as people get out of negative equity situations, they’ll have less money for a down payment on their next home. That means many owners will opt to become renters. So when we see months of supply go down, we’re seeing a symptom — we don’t know how much of it is caused by something good (more sales) and how much is because of something bad (underwater owners). Unemployment figures lie. The way the federal government has measured unemployment for the past decade or so is misleading. It doesn’t count people who want a full-time job but have run out of unemployment benefits, nor those who are working part-time because that’s all they could get. Real unemployment is actually two or three points higher than the number you hear on the news. And when you read about unemployment going down, that just means people are coming off the unemployment rolls — not necessarily that they’ve found full-time work.

august/september 2012 23

Harvard’s Joint Center for Housing Studies: “While too soon to tell with confidence, the worst may be over. [snip] The FHFA Home Price Index…also showed a year-over-year increase in the first quarter 2012, providing further evidence that home prices are finally stabilizing.” Tom Lawler, independent housing economist: “As always, of course, real estate is local. Nationally, however, I believe the housing market has bottomed, both in terms of production (starts), sales, and, with a lag, prices. Don’t expect rapid rebound…” Zillow: “With stronger home sales, we’ll see a reduction in the amount of vacant housing inventory and an improved ability to absorb foreclosed homes. This increased demand will eventually start to put a floor under home values.” Brad Hunter, chief economist for housing-information service Metrostudy: “I think we reached the bottom at least a year and a half ago for housing starts and housing demands. For prices, in some markets we have reached bottom – but not all.” Glenn Kelman, CEO of Redfin: “We hit the bottom last year. I don’t think that means it’s going to be a V-shaped recovery. There will be ups and downs and sales volume isn’t going to recover in any meaningful way.” Bill McBride, economist at CalculatedRisk: “Clearly new home sales have bottomed. Although sales are still historically very weak, sales are up 25% from the low, and up about 15% from the May 2010 through September 2011 average.” Rick Sharga, executive vice president, Carrington Mortgage Holdings: “I think we’re either at or very, very near the bottom, and that prices will stabilize on a national basis this year.” Budge Huskey, president and COO of Coldwell Banker Real Estate: Besides the obvious improvement in the labor market, “there are some fundamental things that are shifting in the real estate space that bode well for the balance of the year,” says Budge Huskey. “We’ve had several straight months of positive housing data [that’s] really been in line with the more positive economic data. They are going in lockstep.” 24 august/september 2012

the low prices or the low mortgage rates, or simply because they’re feeling more confident, more people are out looking. In some areas, as the Wall Street Journal explained in a headline, “Stunned Home Buyers Find the Bidding Wars Are Back.” In others, it reported, “Buyers Frustrated by Low Inventory, Rising Prices.” Investors are investing. Housing as an investment — in the sense of creating rentals, not flipping — is catching on. Investors are pouring money into the market, both by buying single-family homes and by building multi-family ones. The Wall Street Journal called it a “gold rush” to buy foreclosures and turn them into rentals. After all, eventually all those 20-somethings who moved back with mom and dad will have to leave the nest again. Forward-looking indicators are up. Whether you’re viewing stats from homebuilders (whose confidence level is rising, by the way), or the Census Bureau, or Virginia Tech (which does its own monthly study), the trend is the same: Permits and construction are both rising. So, too, are mortgage applications; in June they hit their highest level since 2009. Housing starts have risen more than 36% from the market bottom, and homebuilders report a big boost in order growth. Oh, and construction employment is up, too — more than 100,000 jobs from the bottom.

Does it all mean anything? Yes, yes it does. Sales are going up. That simple. Some places are seeing faster gains than others, and the overall shift isn’t as fast as we’d like, but the numbers are there. (Remember, www.VARealtor.com

things drop quickly but they tend to rise slowly.) In Virginia, since 2010 almost every month’s sales have been above those of the year before. The latest figures (from May 2012) show statewide sales up six percent from 2011; in April the year-onyear gain was 10 percent. In Southwest Virginia, sales were up a whopping 38.2 percent from 2011 to 2012. Of course it’s possible that your area isn’t seeing any bright spots. Recoveries are uneven. But the market as a whole is improving, and the tide will eventually raise all our boats. Yes, but what about prices? Prices are down, and they seem to keep dropping (at least nationally) — 2.9% over the past year. This isn’t surprising. This is what it looks like when the market gets back to normal. Remember that the housing bubble inflated prices above realistic and rational levels. In other words, we shouldn’t expect them to get back to that level — not for some time, at least. Instead, they’ll drop till they hit historical norms, then roll along with ups and downs, generally tracking inflation. (Case and Shiller have shown that home prices haven’t really changed much — in terms of affordability — in more than a century.) A recovered market won’t have prices rising every month. They’ll go up and down, month to month, with a bit more on the upside over the longer term. Of note is the fact that REO prices have actually risen — 5.5 percent over the past year. Investors know good deals when they see them, as do individual home buyers. Higher demand means higher prices, and that in turn means less drag on the prices of non-REO property. Volume 19 ● Issue 4

There are also more short sales happening than foreclosures. That’s better for property values, and it’s another parachute keeping declining prices from dropping too fast. And listing prices, according to Trulia, are inching up. Still, what we saw in 2006 and 2007 wasn’t the norm, so don’t expect prices to get back there any time soon. Talk of prices hitting “bottom” is really talk about prices returning to their normal level. These changes aren’t always huge or earthshaking or headline making. But they’re consistent and they’re across the board, from lenders to builders to buyers. And they all point to a turnaround in the market. Is it a guarantee? Of course not — just check out the “Downsides” sidebar. But there is enough good news coming in and coming in regularly to make it fairly clear that the worst of the market is behind us. l Writer’s note: In the process of researching and writing this piece, every day seemed to bring yet another study or survey or news story about the current and future state of the housing economy. I’ve incorporated as much as was reasonable, but the realities of publishing mean there had to be a cutoff. Keep up with the latest, of course, at VARbuzz. —AK

august/september 2012 25

Is a house a good investment? Yes and no. Andrew Kantor

Is a house a good investment? The answer is no. And yes. And you and your clients should be very clear about when each of those answers apply. There’s been a lot in the news lately about investors snapping up properties, especially REOs. That might lead some people to conclude — incorrectly, as you’re about to see — that they should think about purchasing real estate as an investment. Not long ago, a financier/investor/ portfolio manager named Romeo Fayette published a story tackling that very issue. It reflects the sentiment of a good number of economists and financial planners — that residential real estate is a bad investment.

Fayette’s argument, which he puts forward quite clearly and in detail, is that, when you take into account inflation and all the various costs associated with ownership — taxes, insurance, upkeep — real estate values remain basically flat. “Real Estate and housing are not terrific investments,” he writes. “Nonincome-producing, residential real estate is broadly a money pit.” The reason is simple: When you look at home prices adjusted for inflation, you realize that, with the exception of the recent housing bubble, property values are pretty flat. Look at Figure 1, which shows residential property prices when adjusted for inflation.

Figure 1. Over the past 40 years (aside from the recent bubble), home prices have been essentially flat.

Real Home Prices Adjusted for Inflation, 1970-2011 250,000 200,000 150,000 19

70 19 Q 71 1 19 Q 72 2 19 Q 73 3 19 Q 75 4 19 Q 76 1 19 Q 77 2 19 Q 78 3 19 Q 80 4 19 Q 81 1 19 Q 82 2 19 Q 83 3 19 Q 85 4 19 Q 86 1 19 Q 87 2 19 Q 88 3 19 Q 90 4 19 Q 91 1 19 Q 92 2 19 Q 93 3 19 Q 95 4 19 Q 96 1 19 Q 97 2 19 Q 98 3 20 Q 00 4 20 Q 01 1 20 Q 02 2 20 Q 03 3 20 Q 05 4 20 Q 06 1 20 Q 07 2 20 Q 08 3 20 Q 10 4 20 Q 11 1 Q 2

100,000

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www.VARealtor.com

That’s just going back to 1970. If, as Robert Shiller has, you look back to 1890, you see the same thing:

Home Price Index 1890 to 2011 200 150

Unless there’s a bubble, home values pretty much hold a straight line. That’s just looking at the value of the property. Even if you assume that property values increase by two percent each year (over and above inflation), once you take into account all the money you put into it — principal, interest, taxes, insurance, upkeep — you’ll find it takes decades (Fayette says 38 years) for the value of the house to equal the amount of money put into it. Not a great investment, right?

Mathematics vs. reality Thing is, looking at the math a home isn’t a good investment. But. Volume 19 ● Issue 4

That “but” is crucial. If you look at property as strictly a financial investment — like gold bars or corporate stock — that you purchase for X dollars, then sell later for Y dollars, well, from that narrow perspective, yes, a house isn’t a good investment. But a house is very different than other investments, and not just for touchy-feely reasons, either. You can’t live in a stock portfolio, or in a gold brick, or in an oil future. A house has value beyond being a material object. In simple terms, you need to consider what it’s worth as a living space while it appreciates in value. Every dollar you don’t pay in

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Unless there’s a bubble, home values pretty much hold a straight line.

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Imagine you could buy a car, make payments, and in 10 years sell it for more than you paid for it.

rent, for example, counts towards what a house is worth to you. Many investments gain value over time, but not many of them are usable while they grow; a house has value from appreciation and while it appreciates. Nothing else does that. Imagine you could buy a car, make payments, and in 10 years sell it for more than you paid for it. And during those 10 years you used it to commute, for vacations, on road trips, and so on. Doesn’t that sound like a good deal? Even when you include your payments, gas and oil, repairs, and so on, when you tally up what you eventually sell it for, plus all the use you got from it, you really can’t complain. This is especially true because (various disasters notwithstanding), unlike a car, a house doesn’t wear out. It’s an object you own, use, and pass on to your heirs. And unlike a car, you’re passing on something that continues to have and maintain value. Which is why this argument only works if you look at a house strictly as an investment — if it sits vacant for all those years. Then yes, there are probably better ways to invest your money.

But for most people, that’s not what homes are used for. Even that argument — that a house’s value doesn’t deteriorate like, say, a car’s — is an appeal to math. But when calculating the value of a home, you can’t ignore the intangibles, touchy-feely or not. You’ve seen the statistics: Homeowners’ kids do better in school, they’re healthier, they’re happier — and so on. People who own are more connected to their towns and cities, and they develop longer-lasting relationships. No, you can’t put a price on those things, but that doesn’t mean they don’t have value. They certainly do in the real world. So what is it with all these “investors” entering the market? Unlike other years, when flipping homes was supposed to be a path to riches, today’s investors are buying property with the intent of renting it out. So if you have clients who are looking to become landlords, that’s one thing. But if they’re thinking of buying, selling, and profiting — you might want to suggest they think again. l

Your mileage may vary It’s unfair to say that in no case, in no place, does it make financial sense to buy a house strictly as an investment. In some areas of the country and of the state there is rapid growth and property values increasing well faster than the pace of inflation. It’s kind of like saying, “The median stock on the NYSE increased by only two percent last year, therefore stocks aren’t a good investment.” Maybe it’s true in a broad sense, but that doesn’t mean that certain stocks aren’t very much worth buying. Saying that a house is not a good investment might be accurate from a certain mathematical perspective: The value of a given piece of property is not likely to increase much over time once you take inflation into account. But you cannot look at houses the way you would look at other investments — they aren’t like other investments. Whether you’re buying one to live in or to rent out, owning a home is more than owning an object. And when considering its value, you have to consider that as well.

28 august/september 2012

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accessibletech Mark Porter

Show them what you’ve got Fact: If you’re not using video in your marketing, you are behind the trend. People love video, and if your listings don’t include it, you’re missing out on an excellent — free — opportunity to promote your business. Not surprisingly, I’ve found the biggest challenge for real estate agents is getting past the shyness of being in front of the camera. So the most valuable lesson I can share is the simple fact that you have nothing to lose, yet everything to gain, from video marketing. Two facts to start off with: 1. Most people start their real estate search online — NAR’s 2011 Profile of Home Buyers and Sellers found that 88 percent of buyers used the Internet in their home buying process, and 32 percent of first-time buyers actually found their real estate agent online. 2. Video is becoming more popular all the time. Alexa rankings show that almost a third of people surfing the Internet go to YouTube, and spend an average of more than 17 minutes there — an eternity in Internet time. These things in mind, it makes sense to take advantage of video to attract customers, reinforce your reputation, and stand out from the crowd. Video-hosting sites like Vimeo and YouTube make it easy to include those videos on your own website and in e-mail (the term is actually “embed”). Consider my top 10 benefits to launching a video marketing campaign for your real estate business: 1. Answer it once. Videos offer a great platform to answer frequent buyer and seller questions efficiently, while making yourself stand out from the crowd. If one of your clients asks a question, the reality is other buyers and sellers are probably wondering the same thing. Create short videos answering these frequently asked questions and post them to your website. Then when the question comes up, you can reply by sharing the video. (After all, wouldn’t you love to get a video response to an e-mail question?) 2. Differentiate yourself from the competition. While in general consumers want to do business with Volume 19 ● Issue 4

people they know, the fact is that many are still taking their real estate search online. By adding videos to your marketing, you are offering a more personalized approach, and giving consumers a sense that they know you before they even meet you. 3. Establish yourself as an expert. Using video to educate consumers is a great way to establish yourself as a real estate expert, and gain more business in return. NAR found that a whopping 91 percent of buyers and sellers cited “knowledge of real estate market” as a skill they look for in an agent; 93 percent said “knowledge of [the] purchase process” was very important. What better way to establish your credibility than by demonstrating both through educational online video? 4. Increase your rankings with Google. When someone searches for an agent, you want your name to be as close to the top of the list as possible. When Google purchased YouTube it changed how it ranks video results in its searches. So a properly tagged YouTube video can increase your chances of a high ranking with Google. 5. Show up in as many places as possible. Knowing that consumers are spending so much time on YouTube, don’t you want to be there? If someone searches for a real estate-related video, wouldn’t it be great for them to find you. If you’re not using video and you’re not on YouTube, you are not marketing! 6. Include calls to action (without the heavy sales pitch). No one likes to be pushed into a sale. More and more people are moving their real estate search online and beginning their research months before they actually reach out to a real estate agent. Why? Probably in part because consumers don’t want to share their information with an agent before they’re actually ready to purchase or sell. Offering educational videos will enable you to provide customers with the information they want, but also provide you with an opportunity to broadcast your call to action (e.g., “Visit my website!” or “Call august/september 2012 29

me when you’re ready to start looking”) and promote your brand without the heavy sales pitch. 7. It’s affordable. Beyond the initial investment of equipment (which doesn’t have to be expensive) and your time, video marketing is free. That means more money in your pocket. 8. It’s long lasting. As they say, once you upload content online it’s there forever. When compared to e-mail and postcard mailings, the shelf life you receive for online video marketing will be well worth your time and effort. 9. It’s more successful than text. We all know that people generally do not like to read lengthy blocks of text in an e-mail. Captivate your audience and get better success out of your e-mail blasts and online marketing efforts with video content. 10. It increases your branding. Online video marketing offers a great way to maintain a “top of mind awareness,” so when customers are in need of your services, they’ll remember to reach out to you.

Camera shy Reaping the benefits of video marketing doesn’t have to mean spending a lot of time in front of a camera, especially if you aren’t comfortable there. Here are some great options. Video slideshows. Not comfortable even shooting video? You don’t have to. You can make video slide shows using still images. Free software like Microsoft Photo Story 3 lets you take your pictures, add audio (music or a voice over), and save the result as a video you can put on YouTube. This a great way to turn your still images into videos — create tours of your listings or even make a slideshow highlighting you and your business that you can feature on your website. The software makes it incredibly easy. (While Photo Story is free, if you want more control over the process, check out Photodex’s $70 ProShow Gold — there’s even a free trial (photodex. com/proshow).) Neighborhood tours. Highlight the homes and community including local amenities, shopping, schools, popular functions (e.g., farmer’s markets and events), and more. You can even add video testimonials of people who live in the area discussing why they

NEW VIEWS People are watching more—and longer—videos online. Hours per viewer

14.8 21.7

Change From Previous Year

+ 47% Average daily unique viewers (millions)

81 105

+ 30% Videos per viewer

171 204

+ 20% Minutes per video

5.2 6.4 Note: Percentage change may not calculate precisely due to rounding Source: comScore

30 august/september 2012

+ 23% The Wall Street Journal

www.VARealtor.com

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THANK YOU TO ALL OUR SPONSORS: FEES how long they’ve bought a home in REGISTRATION the area, lived there, and what they like most about their community. Client testimonials. Ask your clients to share what they enjoyed most about working withloCaTe,you and the eXplore and sourCe THe BesT produCTs and serviCes, from indusTry vendors and parTners. benefits of using you as their real estate agent. Be sure to keep the videos unscripted and candid, as you want the testimonials to come across genuine to consumers. These are just some of the easy ways to incorporate video into your marketing efforts without having to be in front of the camera. If, like so many agents, you find yourself avoiding online video marketing, let these easy tips be the stepping stone to letting go of your fear of video and taking advantage of the technology that can help grow your business. And remember, the benefits of video internet marketing far outweigh any fears you may have about being on camera. There is no avoiding the trend. Video marketing is a real solution to connecting with today’s consumer and the longer you delay, the further behind you’ll be in the technology and the harder it will be to catch up to your competition. ● Save up to $100 by registering early for the Real Show 2012. Reserving your spot is easy—just visit www.realsHoWva.com right now to register. online By 8/13

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VoLUMe 19 ● ISSUe 4

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Mark Porter hasearly! been reGisTer a real estate agent, broker, trainer, keynote speaker, and professional coach for more everyTHinG you need for smarT GroWTH than two decades. Don’t just read it, learn it! See senior CRS instructor Mark Porter’s sessions on video internet marketing and cloud computing at the Real Show 2012 on October 5. Register at RealShow2012.com today! keynoTe speaker Bill rancic

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The virginia association of realTors® 10231 Telegraph Road Glen Allen, VA 23059 (800) 755-8271 | Fax (804) 262-0497 www.REALSHOWVA.com VARConferences@VARealtor.com

Judy Cook Brian Copeland, CRS TrisTa Curzydlo Property Management Real Estate Writer Real Estate Extraordinaire & TV Celebrity Educator & Attorney

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Gee dunsTen, CRS pam ermen, CRS Wildly Popular Real Long-time Real Estate Estate Instructor Coach

mike lafayeTTe Virginia Real Estate Attorney & Instructor

Blake HeGeman VAR Legal Counsel & Speaker

Brian lyTle Attorney & Noted Speaker

mark porTer Real Estate Trainer, Speaker, & Professional Coach

lynn madison Educator, Author, & REBAC Specialist

rod sanTomossimo Terry WaTson, ABR, ABRM, CRS, GRI Commercial World-Renowned Real Estate Instructor & Motivational Expert Speaker

6/26/12 9:20 AM

aUGUSt/SePteMBer 2012 31

rpacreport As of July 15, 2012, the following REALTORS® and local associations have joined RPAC of Virginia as Major Investors. For more information on the value of RPAC and how your investment works to protect your business, contact Jay DeBoer at jay@VARealtor.com or (804) 264-5033. Or, if you want to get invested today, please visit www.realtorschoose.com/contribute.

Golden R Investors ($5,000)

Crystal R Investors ($2,500)

Charles Burnette Burnette Real Estate Sales, Blacksburg

Billy Chorey Chorey & Associates Realty, Suffolk

Dennis Cronk Poe & Cronk Real Estate Group, Roanoke

John Dickinson Hall Associates Inc., Union Hall

Joe Funkhouser Coldwell Banker Funkhouser, Harrisonburg

Cindy Hawks Keller Williams Realty Virginia Beach

Forrest Odend’hal Long & Foster Real Estate, Gainesville

Dorcas HelfantBrowning, Coldwell Banker Professional, Virginia Beach

Steve Hoover MKB, Realtors® Roanoke

Thomas Jefferson, III Joyner Fine Properties Richmond

John McEnearney McEnearney Associates, Inc., Alexandria

John Powell Long & Foster Real Estate, Inc. Colonial Heights

Jane Quill RE/MAX Presidential Fairfax

Trish Szego ERA-Elite Group, Realtors®, Fairfax

Golden R Associations ($5,000) •N orthern Virginia Association of

Tom Stevens Coldwell Banker Residential, Vienna

Melanie Thompson Century 21 AdVenture Realty, Fredericksburg

Jack Torza Long & Foster, Realtors® Mechanicsville

Realtors®, Fairfax • R ichmond Association of Realtors®, Richmond • R oanoke Valley Association of Realtors®, Roanoke • W illiamsburg Area Association of Realtors®, Williamsburg

Bill White Joyner Fine Properties Richmond

Hall of Famers have contributed a cumulative amount of at least $25,000 to RPAC.

32 august/september 2012

www.VARealtor.com

WHY I INVEST

Sterling R Investors ($1,000)

Bob Adamson McEnearney Associates, Inc., Arlington

Guy Allen One Stop Realty Woodbridge

Katy AllenbaughRichards First American Home Buyers Protection, Midlothian

Betsy Atkinson ERA Atkinson Realty, Virginia Beach

Deborah Baisden Prudential Towne Realty Virginia Beach

Jim Barb Jim Barb Realty, Inc. Winchester

CC Bartholomew Long & Foster Real Estate, Inc., Manassas

Mary Bayat Bayat Realty, Inc. Alexandria

RPAC is the muscle behind everything we do to protect our industry and our businesses” Mary Ann Bendinelli Weichert, Realtors® Manassas

Laura Benjamin Roanoke Valley Association of Realtors® Roanoke

Brad Boland Keller Williams Realty Reston

David Bridges ERA Blue Diamond Woodbridge

— Henry Scholz, MKB, REALTORS®, Roanoke Longtime Sterling R VAR’s lobbying can only be as effective as the REALTOR® support behind it. RPAC and VAR work everyday to ensure that your business, and your clients, are protected from laws that threaten the American dream of homeownership.

R. Scott Brunner Virginia Association of Realtors® Glen Allen

Pat Buck McEnearney Associates, Inc. McLean

Volume 19 ● Issue 4

Robyn Burdett RE/MAX Allegiance Fairfax

Peggy Burke Long & Foster Real Estate, Woodbridge

Visit RealtorsChoose.com/RPAC-101 to hear about what inspired Henry to become an RPAC investor.

august/september 2012 33

Sterling R Investors ($1,000)

Joe Carney William E. Wood & Associates Virginia Beach

Dale Chandler Greg Garrett Realty Newport News

David Charron MRIS Rockville, MD

Flo Chittenden Long & Foster Real Estate Inc., Manassas

Moon Choi RE/MAX Presidential Fairfax

Vic Coffey Re/Max All Stars Realty, LLC., Daleville

Billy Coons Olde Virginia Realty Suffolk

Tracy Comstock Comstock Realty and Investment, Alexandria

Hugh Cross Cross Management Suffolk

Beth Dalton Long & Foster Real Estate, Inc., Blacksburg

John Daly Rose & Womble Realty Company Virginia Beach

Benton Downer Downer & Associates Charlottesville

Mary Dykstra MKB, Realtors速 Roanoke

Sandee Ferebee Prudential Towne Realty, Virginia Beach

Claire ForcierRowe Coldwell Banker Elite Fredericksburg

Virgil Frizzell Long & Foster Real Estate, Reston

Bev Frowen Long & Foster Real Estate, Inc. Manassas

Libby Gatewood ERA Realtors速 Napier Colonial Heights

Bill Gearhart Coldwell Banker Townside, Roanoke

Charlee Gowin Prudential Towne Realty, Virginia Beach

Art Grace Hunzeker & Lyon, PC Manassas

Lynn Grimsley RE/MAX Peninsula Newport News

George Grundy George Grundy & Associates Realty Petersburg

Kit Hale MKB, Realtors速 Roanoke

Delk Hamaker K.D. Hamaker Properties Arlington

Margaret Handley M.C. Handley, Ltd. Falls Church

Terrylynn Harrell Exit 1st Choice Realty Woodbridge

Bill Hernandez Keller Williams Realty Manassas

34 august/september 2012

www.VARealtor.com

Sterling R Investors ($1,000)

Liz Hernandez Keller Williams Realty Manassas

Jeanne Hockaday Virginia Country Real Estate, Gloucester

Nathan Hughes Bandazian & Holden Richmond

Rusty Hulett Keller Williams Realty Chesapeake

Phillip Innes RE/MAX Commonwealth, Richmond

Tom Innes RE/MAX Commonwealth, Richmond

Donn Irby Rose & Womble Realty Chesapeake

Tom Jewell Carter Braxton Preferred Properties Leesburg

Jo Anne Johnson Westgate Realty Group, Inc. Falls Church

Patricia Johnson

Sita Kapur Arlington Premier Realty, Arlington

Kathleen Kennedy Long & Foster Real Estate, Vienna

Karen Kidwell Long & Foster Real Estate, Reston

Betty Kingery Mountain to Lake Realty, Rocky Mount

Pat Kline Avery Hess, Realtors® Springfield

Jody Korman RE/MAX Commonwealth, Richmond

Ed Krauze, Greater

Vonda Lacey Lacey Real Estate Group, Fishersville

Natalie Langford Realty Negotiations Winchester

George Lyons Long & Foster Real Estate, Woodbridge

Nakita Mattocks Vision Real Estate Services, Woodbridge

Tom Meyer Condo 1, Inc. Arlington

Brooke Miller Long and Foster Fredericksburg

Jay Mitchell William E. Wood & Associates Chesapeake

Percy Montague Montague Miller & Co., Charlottesville

Washington Commercial Association of Realtors®, Silver Spring, MD

Keith May Kline May Realty Harrisonburg

Glenda McDaniel Long & Foster Hales Ford Bridge, Moneta

Volume 19 ● Issue 4

Susan Mekenney RE/MAX Allegiance Fairfax

august/september 2012 35

Sterling R Investors ($1,000)

Thomas Moore Olde Virginia Realty, Suffolk

Fred Morgan 1st Choice Real Estate Staunton

Roger Nakazawa Olympic Realty, Inc. Vienna

Thai Nguyen Westgate Realty Falls Church

Vin Nguyen Westgate Realty Falls Church

Gwen Pangle Pangle & Associates Leesburg

Gail Penman William E. Wood & Associates Virginia Beach

Fatima PereiraShepherd Long & Foster Real Estate, Inc., Manassas

Bobby Perkins Long & Foster Real Estate, Inc., Colonial Heights

Tracy Pless Long & Foster Real Estate, Reston

Anne Rector Long & Foster Real Estate, Alexandria

Zinta RodgersRickert, RE/MAX Allegiance, Fairfax

Mario Rubio Rubio Real Estate Annandale

Fetneh Schacht Long & Foster Real Estate, Vienna

Henry Scholz MKB, REALTORS速 Roanoke

Scott Shaheen Long & Foster Richmond

Jean Siebert Siebert Realty Virginia Beach

Karen Smith RE/MAX Commonwealth, Richmond

Katrina Smith Long & Foster/Webber & Associates Winchester

Kimber Smith Prudential Towne Realty Williamsburg

Trish Snyder Coldwell Banker Four Seasons, Mt. Jackson

Cindy Stackhouse Century 21 Stackhouse & Associates, Dumfries

Vickie Stamper Keller Williams Realty Marion

Wes Stearns MO Wilson Properties, Inc., Woodbridge

John Stedman Commission Express Woodbridge

Minnie Stevenson 1st Choice Real Estate Staunton

Suzy Stone Century 21 AdVenture Realty Fredericksburg

Mack Strickland Strickland Realty Chester

36 august/september 2012

www.VARealtor.com

Sterling R Investors ($1,000)

Pat Sury Montague Miller & Co. Charlottesville

Richard “Dick” Thurmond, William E. Wood & Associates Virginia Beach

Christine Todd Northern Virginia Association of Realtors® Fairfax

Karen Trainor Weichert Realtors® Ashburn

INVEST IN RPAC, INVEST IN YOUR BUSINESS Kevin Turner Century 21 All-Service Bedford

Sandra Wagner William E. Wood & Associates Poquoson

David Wilkey William E. Wood & Associates Chesapeake

John Wilson Coldwell Banker Traditions Williamsburg

Sterling R Associations ($1,000) • B lue Ridge Association of

Shanna Wiseman Parr & Abernathy Hopewell

Jon Wolford Long & Foster Real Estate, Springfield

Realtors® • G reater Augusta Association of Realtors®, Staunton • H arrisonburg-Rockingham Association of Realtors® Harrisonburg • L ynchburg Association of Realtors®, Lynchburg

See how your RPAC investment is paying off: Visit www.RealtorsChoose.com! Contributions are not deductible for income tax purposes. Contributions to RPAC are voluntary and are used for political purposes. The amount suggested is merely a guideline and you may contribute more or less than the suggested amount. You may refuse to contribute without reprisal and the National Association of Realtors® or any of its state associations or local boards will not favor or disfavor any member because of the amount contributed. 70% of each contribution is used by your state PAC to support state and local political candidates. Until your state PAC reaches its RPAC goal 30% is sent to National RPAC to support federal candidates and is charged against your limits.

Volume 19 ● Issue 4

CHILDREN FAMILY FUTURE NEIGHBORHOOD SCHOOLS COMMUNITY FRIENDS CLIENTS FELLOW REALTORS AMERICAN DREAM

VISIT REALTORSCHOOSE.COM FOR MORE INFORMATION. Contributions are not deductible for federal or state income tax purposes. Contributions to RPAC are voluntary and are used for political purposes. You may contribute more or less than the suggested amount. You may refuse to contribute without reprisal and the National Association of REALTORS® or any of its state associations or local boards will not favor or disfavor any member because of the amount contributed. Up to 100% of your contribution is sent to National RPAC and is charged against your limits under federal law (2 U.S.C. 441a); National RPAC returns up to 70% of your contribution to Virginia RPAC for use in connection with the election of state and local candidates in Virginia.

august/september 2012 37

contactvar

We’d love to hear from you

We’re online at www.VARealtor.com Our official blog is VARbuzz, at www.VARbuzz.com If you have questions, we’re ready to help. During normal business days, our receptionist is available from 8:30 a.m. to 5:00 p.m.

Our phone number is

(804) 264 -5033 For membership and dues questions Ask for Amy Hafer Membership Records Manager amy@varealtor.com

For questions about professional standards and the Code of Ethics Ask for Erika Almstead Professional Standards Administrator erica@VARealtor.com

If you’re interested in marketing or advertising opportunities Ask for Christine Hodges Marketing and Communications Mgr. christine@varealtor.com

To reach our Legal Hotline

If you’d like to have someone speak at your association or brokerage

To find out about conferences, seminars, and professional education

Ask for Lynne Wherry Director of Member Outreach lynne@varealtor.com

Ask for Glenda Puryear Conferences Specialist or Lili Paulk, Director of Education glenda or lili @varealtor.com

If you need to know about professional designations Ask for Kim Martin, Specialties and Chapter Manager kim@varealtor.com

If you have comments or questions about Commonwealth magazine or our Web sites Ask for Andrew Kantor, Editor and Information Analyst andrew@varealtor.com

See your member discounts at www.VARealtor.com/ discounts

Liberty Mutual, home, auto, and renters insurance Pearl Insurance, E&O, medical, life, and dental insurance

* You must register first at

Phone Tag, voice to e-mail transcription Realtors Federal Credit Union T-Mobile, wireless service UPS, shipping and more

Our CEO is Scott Brunner (804) 249-5702 scott@varealtor.com

Volume 19 ● Issue 4

Ask for Jay DeBoer Vice President of Law and Policy jay@varealtor.com VAR 2012 Leadership Team

Trish Szego, CRB, CRS President ERA-Elite Group, Haymarket (703) 359-7800; trishszego@gmail.com

VAR Member Service Partners

Call (804) 622-7955* VARealtor.com/LegalHotline

For information about RPAC

Zipform, electronic forms solutions Roost, social media management platform

Mary Victoria Dykstra, ABR, CRS President-Elect MKB, Realtors®, Roanoke (540) 989-4555 mary@varealtor.com Bradley Boland Vice President Keller Williams Realty, Reston (703) 926-6189 bradleyboland@gmail.com John Daly, SFR Treasurer Rose & Womble, Virginia Beach (757) 486-8800 jdaly@roseandwomble.com John Dickinson, CCIM, GRI Immediate Past President Hall Associates, Union Hall (540) 982-0011; jrdickinson@cs.com R. Scott Brunner, CAE Chief Executive Officer (804) 264-5033; scott@varealtor.com

august/september 2012 39

lastword SCOTT BRUNNER

Some things I miss: • Carports. Lucille Ball. • Civility. • Meat ’n’ three diners, locally-owned. • Saturday night wrestling on TV. • School-aged young men with tucked-in shirttails (and the school principals who made sure those shirttails stayed tucked in). Facts. • Nosy neighbors. • Lawrence Welk.

The musty smell of the card catalog at the public library back when people used to use card catalogs and public libraries, rather than Google and Wikipedia, for research. Cary Grant. • Young ladies who knew to stand like young ladies instead of like farmers in a cornfield.

40 AUGUST/SEPTEMBER 2012

Having time to read.

• When folks dressed-up for church or dinner or concerts or shows. • Ronald Reagan and Tip O’Neill Having a limited number of TV channels. • Long, chatty, handwritten letters that came in the mail. • Running behind the mosquito truck as it cruised down the street at dusk on a summer evening. (No telling what we inhaled doing that.) Penny candy. • The benefit of the doubt. • “Star Trek” (the original series). • Public respect for religious faith. • Bear Bryant. • Patience. • Local radio, before Clear Channel homogenized everything. Spending the night at my grandparents’ and the smell of breakfast when I woke the next morning.

A dependable enemy like the Soviet Union. • The spontaneity to go to a late movie and not care about being sleepy the next day. • The Hardy Boys Destin, Florida, circa 1972. • Manners. • Walter Cronkite. • The Electric Light Orchestra. • Scuppernongs. Going to a doctor who remembered my name without referring to the chart. • The Five Baby Burger Special from the Dairy Delight in Montevallo, Ala., where I attended college. • White-wall tires. • Screen doors. • Red Skelton. • Youth. Memory. A full head of hair. ●

Scott Brunner is VAR’s chief executive officer. E-mail him at scott@varealtor.com

WWW.VAREALTOR.COM

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The Millionaire Real Estate Investor Reveals the models, strategies and truths for becoming wealthy through real estate investing.

Flip: How to Find, Fix, and Sell Houses for Profit Shares a step-by step guide to successfully finding, fixing and selling investment properties.

THE BIG PLAYS AND STRATEGIES NEEDED TO WIN THE GAME OF REAL ESTATE SALES. BIG PLAY

BIG PLAY

DOMINATE THE FIELD

Become a champion at real estate sales and earn all the money you deserve.

BIG PLAY

DEVELOP A GAME PLAN THAT GETS REFERRALS

Know the strategies to uncover what’s really happening in your area.

EQUIP YOURSELF WITH NEW WEALTH BUILDING STRATEGIES

Distinguish great investment properties and help your clients–and yourself–build wealth.

We invite you to join us. Find out if Keller Williams is right for you as an agent or as an owner. Call or email your confidential inquiry today!

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