Monday, May 6, 2013
If you read my bio, you'll find that I came to real estate after a 20 year career in consumer financial services, 6 of which were in mortgages, 2.5 half of those as an underwriter. I obtained my real estate license in 2006 and started a property management company. It was in 2009 that I began brokering real estate.
The NJ Association of Realtors (NJAR) recognizes agents under its Circle of Excellence Awards program. The Circle of Excellence is a tiered system - Bronze, Silver, Gold and Platinum where the agent must meet a combination of unit and dollar volume sales in a given year. Agents must apply and NJAR evaluates the applications and awards agents by the end of January. NJAR changes the criteria based on market conditions and recipients represent approximately, the top 5% of all agents. NJAR does not publish the list of awardees and is only assessable to members of NJAR and the local Board of Realtors members. I believe this is done not to discourage those that are just starting out where they won't make the list.
In 2011, out of approximately, 3,000 agents who are members of the Hudson County MLS, 106 made Bronze, 41 made Silver, 4 made Gold, 7 made Platinum. In 2010, I made Bronze which I am very proud of given I started real estate sales in 2009. It was a tough year to begin in the business and I have built it quickly.
In 2011, I had more than 15 transactions and over $3.5MM in transaction volume which was the minimum criteria to meet Bronze however I missed the filing deadline because a number of my colleagues did not put my name in the MLS as the selling agent on a number of sales. MLS reporting is the most convenient way an applicant can evidence his/her annual production. It was my naivete` to assume that my colleagues would reliably enter that information and I now follow up immediately after closing to make sure the data is entered. I could have dug up all of the contracts and paystubs but I was up against the deadline and I was in the middle of launching the pending and sold listing databases so I let it go.
I made Silver in 2012 of which I am very proud. 58 out of approximately 3,000 agents made Silver - the top 2.8%. As of this posting, I also have the most recommendations on Trulia in Hudson County with 29 recommendations.
Buying or selling a home is generally the largest personal financial transaction that a person ever makes. It's infrequent and there are many things that you may not realize you should consider. The Circle of Excellence is one of several good discriminators when looking for an agent. You should ask the agent about how long they have been in the business, whether or not they are full-time and so on. Don't be shy about asking them for a report. It's actually a good reason to meet with the agent in his or her office. You can watch them pull it up from the MLS reporting system.
Recently, the state of NJ passed legislation that agents must take continuing education every 2 years. I see it as a very positive thing. Licensed Agents who do not do this can act as referral agents but cannot take clients out. A referral agent can refer you to another agent and take a cut of the commission for doing so. A person must be licensed to take a portion of the commission so if they are licensed but have not kept up with continuing education they can make referrals but cannot write contracts with clients. I believe the rationale for doing this was to make sure that clients are looking at real estate with people are committed to the business.
This December, I took the Broker's course and plan to take the state exam later this year. The Broker's license is the 'real' license. A person with an agent's license must work under a supervising Broker whereas a Broker can open his/her own office.
I personally feel that the licensing should be much harder and as such we should be allowed to do much more.
Clients want information. There is a lot that shows that more and more share of business is going to fewer and fewer agents. It's not the 80/20 rule but the 90/10 rule. I think it's because people want quality. The biggest thing I come across is that clients are always asking me about real estate related law. I have to tell clients that I am not a lawyer and cannot give legal advice. One area that I have written about frequently is rent control. I even get calls from real estate attorneys who want to know my understanding of the law. I believe real estate agents, if the test was harder, should be allowed to advise clients on real estate related laws just like a CPA can talk about IRS code.
There was a major lawsuit that changed real estate brokerage in NJ and in my opinion to the detriment of consumers. In the late 80's there was a class action lawsuit mounted by real estate attorneys against real estate agents that when settled substantially precluded agents from conducting real estate closings. In most other states, real estate closings are conducted by real estate agents. Now only the Broker of Record can conduct closings and regardless, I know of no Broker who does this because of the liability resulting from this lawsuit. I believe the real estate attorneys association did this because they wanted to drive business to them but again to the detriment of the consumer --- mostly when it comes to cost and due diligence.
As a result of this suit, NJ has the highest legal fees on closings in the country. I know this from my days as a Loan Officer with Chase. I closed about 1,000 transactions a year and NJ, even back then, legal fees were in excess of $1200 on average. In Hoboken, legal fees run $1500 to $2500. Many states don't have any legal fees for the buyer or seller. Where attorneys are used outside this area, fees are in the $300 to $600 range.
The other consequence is that consumers don't realize what agents can bring to the table. I think the closing would be a great way for agents to show another dimension, another knowledge base and more would realize what an agent can bring to the table. I feel this greater awareness would lead to better consumer understanding, earlier on in the transaction as clients are selecting properties.
Full time agents who have done a considerable amount of business, do know the local zoning laws, know what the towns plans are, understand things like rent control. If we were allowed to openly discuss these things without fear of being accused of acting as an attorney without a license, our clients would benefit.
In NJ, the real estate attorney is the clients "advocate". He/she is suppose to help them through the due diligence process including advising him on potential pitfalls of purchasing a specific property. By the time the client has signed a contract, they have already mentally committed to that property and I don't see the type of disclosure and explanation on these matters coming from the attorneys.
The state approved contract that we use asks the client to state how they would like to use the property: primary residence, second home, investment property, etc. Most are buying to live in it first so they ask us to fill-in 'primary'. What if they were buying to live it but were thinking of it as a long term investment where they want to rent it later? Shouldn't someone summarize how rent control works? I am precluded from interpreting the law. Will an attorney raise that when the contract clearly states that they plan on using the residence as a primary residence?
We, the agents, spend much more time with clients. We could easily explain many of these things while we are showing property. Although legal fees are high in NJ, for a lawyer to make the kind of money he/she expects, it's a volume business. They are doing 100s of transactions per year while a successful, full-time agent only has to do about 20 transactions to make over $100,000.
You should interview several agents when starting your search. Ask them if they made the Circle of Excellence and how recently. How many years have they been working full-time? What other related experience do they have? Ask others who bought recently for recommendations. I feel that a recommendation from a friend has your best interest in mind - someone who is not being paid in anyway for the advice. What better critique than someone who went through the entire process with an agent? I also like Angie's List. Consumers buy subscriptions and vendors cannot buy advertising on the site.
It's your investment and a good agent can do so much more than just open the door while you look at a unit. They can raise questions that you should consider, things that you should ask your attorney to ask the other side in attorney review. A good agent should be able to show you what the value of the property you are bidding on is really worth. Using a quantitative approach and really knowing the idiosyncrasies of the market or a particular building can save you 1,000s of dollars and help you make the right decision.
I want to thank all of my clients and readers for a great 2012. I look forward to meeting more of you in 2013.