As you prepare to become a successful real estate investor, I encourage you to take the following tips into consideration. They have helped me greatly as I have navigated my way through the world of real estate–and life in general. I hope these tips will make just as big of an impact on your life as they have had on mine.
Tip #1: Create a game plan.
Decide what you want to accomplish and outline the steps that you must take to get there. Who will be involved? How will you meet them and gain their cooperation? How much time will it take? Where will you find this time? How much will it cost, and where will you get this money? What’s the risk? How will you handle it?
This plan will serve as your guide each day, so you need to get it right. That brings us to the next tip…
Tip #2: Have an expert review your plan.
The first real estate investing plan I created involved me single-handedly buying 100 houses in a year. And it listed several different marketing strategies that were completely cost ineffective. I had a friend of mine (who isn’t even involved in real estate) review the plan, and he said it looked good. How silly of me!
About eight months into working this over-reaching and misguided plan, I had an expert investor review it. He tore it apart, and together we reconstructed a better plan with more realistic goals (buy 12 houses, not 100) and a more effective marketing plan.
Shortly thereafter, I bought 6 houses, and I actually felt good about my progress. Six out of twelve feels much better than six out of 100!
Tip #3: Don’t give up.
The life of a new real estate investor is filled with countless highs and lows. You’re on a high when you think you have a property all locked up to purchase, and then you hit a low when it suddenly falls though at closing.
Or you’re on a high when you finally do close on that house, but you hit a low when you hit a 3-week dry spell and it feels like you couldn’t get a seller to agree to your price–even if you paid double.
I hit a personal low when I was jobless and $5,500 in debt from fruitless marketing attempts. But I got up early each morning and worked toward my goal of financial freedom. Even though a voice in my head told me to give up, I never did.
That’s probably the #1 key to success: Don’t give up. Even someone who’s as dumb as a box of rocks will eventually succeed if he doesn’t give up.
Tip #4: Take baby steps.
When you break it all down, big goals, big dreams, and big plans are nothing more than a series of miniature action steps or “to do” items. When you dissect the daily life of a successful investor, you’ll find that he or she does 8 to 12 things each day that are real estate related.
One item might be “Watch DVD #5 in the new investing course I bought.” Another item might be “Call the title company about the name on the warranty deed” or “Meet the inspector at the house on Watson Street.”
All of these little tasks each day add up to what is, or what eventually will be, a large and highly profitable real estate investing operation. So don’t toss that “to do” list by the wayside, thinking that your small efforts today don’t mean much. They mean everything.
Tip #5: Become comfortable with discomfort.
I was actually nervous at the first real estate investing meeting that I attended. I was wondering if I would say something stupid or if I wouldn’t fit in. After all, most of the investors in the room were 40 or 50 years old, and I was 22.
But by the third meeting I attended, I became comfortable with the crowd. Had I quit after the first meeting, I would have missed out on the very information that enabled me to buy so many properties.
I’ve learned that one of the biggest keys to success is persisting though uncomfortable situations until they eventually become comfortable. This is where true growth occurs.
Tip #6: Do what you say you’re going to do.
As a real estate investor, your reputation means everything. They say it’s a small world, but the world of real estate investing is even smaller. So be honest, be courteous, and for heaven’s sake, do what you say you’re going to do. If you say you’re going to buy another investor’s house, by golly, you better move mountains–if that’s what it takes–to buy it!
Otherwise, your name will eventually become mud, and you’ll have a tough time buying from not only that investor, but just about every other investor in town. Believe me, I can count at least 10 local investors of the top of my head who I will NOT do business with because their word means nothing. And I know several other investors who won’t deal with them either. You DO NOT want to be black listed.
Tip #7: Be on time.
Showing up late is just about one of the most disrespectful things you can do to another real estate investor, inspector, contractor, or anyone for that matter. It shows them that you don’t value them or their time, and time is MUCH more valuable than money. Money can be replaced. Time cannot.
When someone shows up late for a meeting with me, they instantly lose credibility. And there are countless other investors who feel the same way I do. On the other hand, when an investor or business associate shows up on time or early, it makes me want to smile, reach out my hand, and strike a win-win deal.
So be on time. You’re much more likely to create trusted allies who can help you along your path to success.
Tip #8: Eliminate certain activities.
I’ll wrap up with one more tip that is closely linked to the first tip, “Create a Game Plan.” That game plan will involve a series of goals and steps or “to do” items that you must follow to become successful. But what many people don’t seem to realize is that for all of these things to happen, certain activities in your current schedule must be REMOVED.
For example, if you’re going to attend two real estate meetings and make five offers per week, what must go? Possibly TV time. Possibly a friendship. Possibly your workout plan. Of course, what has to go is unique to each of us, but you must realize that if you’re an extremely busy person, you’ll have to make some TOUGH sacrifices.
But these sacrifices are only for the short run. If you have to quit your exercise program to have enough time for real estate, for example, then so be it. You can resume in two years after you’ve achieved financial freedom through real estate. And you’ll have more time to exercise than ever.
Early on in real estate, I gave up friendships, exercise, sleep, vacations, and leisure time. How much you give up depends on how quickly you want to become financially independent.
It can be a tough to integrate all of these tips into your daily routine at once. So for now, I encourage you to focus on the one tip that you think can benefit your investing business the most. After you’ve turned that tip into a habit that’s part of your daily routine, then move on to the next. Keep moving forward and never give up, and you’ll be a successful and financially free investor in no time!
Credit to Doug Smith
Doug Smith has bought and sold over 40 properties using almost every method–wholesaling, rehabbing, landlording, subject to, lease options, and more. He is the founder and president of MyHouseDeals, a company that provides a constantly-updated list of bargain-priced investment properties in some of the nation’s largest metro areas.
Thinking about moving to California?
There’s a reason 38.8 million people call California home. For some, it may be the lure of Hollywood or the desire to chase ocean waves. For others, California may mean big opportunities with one of the state’s many tech companies. Whatever the reason, one thing is clear – the Golden State simply has the size, beauty and opportunity other states seem to lack. If you’re thinking about living in California, one of these 10 places might be the perfect spot.
What are the best places to live in California?
These Californian cities, listed in no particular order, are some of the best places to call home.
1. San Diego, CA
This photo perfectly captures a daily view of the San Diego Bay.
Population: 1.356 million
Average Temperature: the annual high for San Diego is 69.8°F and the annual low is 57.5°F.
What it’s known for: beautiful beaches, Mexican food, the U.S. Navy (largest naval fleet in the world), proximity to Tijuana, major attractions (San Diego Zoo, SeaWorld, Legoland, Balboa Park), Comic-Con, craft beer and the Gaslamp District.
Who should move there: beach goers, young families, college students and health enthusiasts.
You’ll find locals: outside – the weather is always great!
Fun fact: San Diego produces more avocados than any other place in the United States.
2. Los Angeles, CA
A stunning photo of the downtown Los Angeles skyline
Population: 18.55 million
Average Temperature: the annual high for Los Angeles is 71.7°F and the annual low is 55.9°F.
What it’s known for: Hollywood, Beverly Hills, ethnic diversity (more than 140 ethnicities in the city), fashion, business, manufacturing, Santa Monica Pier, museums and pro sports teams (Lakers, Dodgers, Clippers and Kings).
Who should move there: creatives, singles, fashionistas and sports fanatics.
You’ll find locals: at the Los Angeles Farmer’s Market. You can bargain shop, people watch and maybe spot a celebrity or two. Plus, it’s usually tourist-free.
Fun fact: the city’s original name was “The Town of Our Lady the Queen of Angels of the River Porciúncula.”
3. San Francisco, CA
A picturesque view of the houses in San Francisco, CA
Average Temperature: the annual high for San Francisco is 63.8°F and the annual low is 50.8°F.
What it’s known for: the San Francisco Bay, Golden Gate Bridge, Alcatraz, Chinatown, Lombard Street, pro sports (49ers and Giants), coffee, fog, cable cars, Fisherman’s Wharf, Ghirardelli Chocolate and steep hills.
Who should move there: techies, fitness fanatics and nature lovers.
You’ll find locals: at the parks – there are more than 200 in the city.
Fun fact: San Francisco was built on 43 hills!
4. Berkeley, CA
The UC Berkeley Sather Tower overlooks the San Francisco Bay
Average Temperature: the annual high for Berkeley is 67.8°F and the annual low is 48.4°F.
What it’s known for: the University of California at Berkeley, diversity, progressive government, locally-owned shops, San Francisco Bay views, Berkeley Rose Garden and Tilden Regional Park.
Who should move there: college students and teachers, bicyclists and outdoor enthusiasts.
You’ll find locals: at the festivals. The city hosts many festivals throughout the year including the Arts Festival, Kite Festival, Juggling and Unicycling Festival and even a “How Berkeley Can You Be” festival.
Fun fact: since 2000, Berkeley has gained more than 4,470 trees along streets and in parks. This movement is part of the city’s goal to improve air quality and reduce local air temps.
5. Irvine, CA
A photo of the Ferris wheel in Irvine, CA
Average Temperature: the annual high for Irvine is 65°F and the annual low is 47.5°F.
What it’s known for: good public schools, notable company headquarters (Taco Bell, In-N-Out Burger, Kia Motors and Toshiba), Irvine Spectrum Center, the University of California at Irvine, filming, bike trails and the Irvine Museum.
Who should move there: families, bicyclists, actors and college students.
You’ll find locals: at the parks, on the beach or on the trails.
Fun fact: There are more than 44 miles of bike trails and 200,000 acres of parks and preserves for outdoor sports and recreation.
6. San Jose, CA
A photo of beautiful downtown San Jose, CA
Average Temperature: the annual high for San Jose is 59.8°F and the annual low is 42.3°F.
What it’s known for: the Capital of Silicon Valley, The Tech Museum, Winchester Mystery House, Santana Row, festivals, educated workforce, parks and San Jose State University.
Who should move there: tech whizzes, college students and families.
You’ll find locals: cheering on the Sharks (NHL), the Giants (Minor League Baseball), the Earthquakes (Major League Soccer) and the Spartans (San Jose State athletics).
Fun fact: San Jose was the state’s capital before the switch to Sacramento in 1854.
7. Fresno, CA
Fresno, CA is close to Yosemite National Park
Average Temperature: The average annual high for Fresno is 76.7°F and the average annual low is 51.9°F.
What it’s known for: Close proximity to Yosemite National Park, lower cost of living, California State University at Fresno, fine arts and community parks.
Who should move there: Outdoor explorers, budget-conscious people, farmers and independent performers and artists.
You’ll find locals: in the Tower District. It’s the spot in Fresno for dining, arts and entertainment. Most restaurants and retail shops are locally-owned, too.
Fun fact: Fresno is known as the Raisin Capital of the World.
8. Santa Barbara, CA
Palm trees dot the landscape in Santa Barbara, CA
Average Temperature: the annual high for Santa Barbara is 69.9°F and the annual low is 53.5°F.
What it’s known for: beautiful scenery, Spanish architecture, wine, The Channel Islands National Park, hiking, the University of California at Santa Barbara and State Street.
Who should move there: wine connoisseurs, people who love the community, college students, shopaholics and hikers.
You’ll find locals: exploring the outdoors. With about 300 days of sunshine per year, the hardest part of living in Santa Barbara is staying inside.
Fun fact: the city is often referred to as the “American Riviera” because its climate feels Mediterranean.
9. San Mateo County, CA (includes San Mateo, Palo Alto, Redwood City, and Half Moon Bay…just to name a few).
Flowers and shoreline in San Mateo County, CA
Average Temperature: the annual temperature for San Mateo County is 57.4°F.
What it’s known for: close proximity to San Francisco and San Jose, friendly people, Coyote Point Park, Pillar Point Harbor, low unemployment rate, technology, Stanford University and the Filoli Gardens.
Who should move there: job seekers, students and those who want a short commute to San Jose or San Francisco.
You’ll find locals: on the golf course. The county is located on a 60-mile peninsula that features beautiful views and outstanding, year-round conditions on the area’s many courses.
Fun fact: YouTube originated in San Mateo.
10. Sacramento, CA
A photo of the Sacramento, CA skyline at dusk
Average Temperature: the annual high for Sacramento is 73.6°F and the annual low is 48.3°F.
What it’s known for: being the capital of California, California State University at Sacramento, the UC Davis Medical Center, festivals, Crocker Art Museum, locally-grown food, the Kings (NBA) and its proximity to Lake Tahoe, San Francisco and Yosemite National Park.
Who should move there: bicyclists, outdoor adventurers, families and college students.
You’ll find locals: at one of the many restaurants in the city. There are more than 1,200!
Fun fact: Sacramento is known as “America’s Farm-to-Fork Capital” because many restaurants get their food directly from local farms.
By Brittney Lee / UPack
When prospective agents come into Matt Schwind’s office, he asks them why they want to get into the real estate business. Many say they love houses or HGTV, but those answers are red flags, says Schwind, managing broker for the Bettendorf, Iowa, branch office of Ruhl & Ruhl, REALTORS®.
“The real estate business isn’t about houses. It’s about people. And if you can’t communicate with people — not by text or e-mail, but face to face and on the phone — then this isn’t the right business for you,” he says.
A big part of Schwind’s job is to recruit and coach new salespeople. Unfortunately, a high percentage of new agents barely make it through their first year.
Schwind and other brokers have some tips on how owners, managers, and team leaders can help newbies buck the trend and make it through year one:
1. Emphasize to them that they’re starting a small business. “I explain to them that if they were going to open a coffee shop, they wouldn’t expect to make money for the first three to six months,” Schwind says. “Real estate is the same way.”
Saving enough money ahead of time or having another source of income (like a spouse’s salary) is the only way to actually make it through those lean times.
The top 10 percent of earners in real estate made $178,770 in 2014, according to the U.S. Bureau of Labor Statistics. The median annual wage was $43,430 in May 2014. But the lowest 10 percent earned less than $23,880.
“It’s a tough business. New agents have to be realistic. They probably will go backwards a little financially before going forward,” Schwind says. “You will give up about two years of your life to enjoy the next 10.”
2. Be realistic about prospecting. David Bracy meets with his new agents every Tuesday. They talk about prospecting methods, and he offers advice and ideas for staying on track.
“If they come in and tell me they only had three appointments that week, I already know what is going to happen to them in six months: They won’t be in the business anymore,” says Bracy, vice president and managing broker of the Koenig/Rubloff Realty Group of Berkshire Hathaway HomeServices Magnificent Mile and Gold Coast offices in Chicago.
New agents need to understand that they’re not going to get paid if they’re not producing, says Eric Bramlett, broker-owner of Bramlett Residential in Austin, Texas.
“They see the TV shows and are looking for a quick buck in real estate,” he says. “But you actually have to pound the pavement and make lots of cold calls.”
3. Endorse office presence. As much as technology allows agents to do business outside of the office, there is a huge disadvantage if they aren’t involved in the synergy of the office atmosphere, Schwind says.
“If they stop coming into the office, they aren’t engaged in the business,” he says.
Schwind encourages his new agents to come to the office at least 40 hours a week and attend all the company trainings his brokerage has to offer.
4. Consider setting up mentorships. By officially placing new agents side by side with senior agents, they’ll not only get on-the-job training but also connect with an established pro. Rookies can go out on home tours, assist at open houses, and tag along on listing appointments before they do it on their own, Schwind explains. Make sure the mentors are rewarded for their time too.
5. Value customer service first. Schwind doesn’t hang photos of his top salespeople in his office lobby. Instead, you’ll find pictures of his company’s top-rated agents in customer satisfaction.
“It’s one of the things we value highly,” he says. “Those rewards are given quarterly, and they can’t be bought.”
New agents are eligible for the award, which are based on customer surveys and feedback, and Schwind finds it motivates his team.
6. Teach them the ins and outs of open houses. An open house is an opportunity to meet potential clients, so tell your new agents to invite the neighbors, Bracy says. “Eighty-two percent of those who walk into an open house buy real estate in the next 12 months,” he adds.
Don’t talk about the dishwasher; instead, coach agents on how to get open house guests to talk about themselves, Bracy says. He gives his rookies a script and series of questions for interacting with open-house guests.
“They need to create the condition where that person is talking twice as much as they are,” he says. And for safety, Bracy always has multiple agents at every open house.
7. Help newbies connect with an experienced closing team. A new real estate agent and a new mortgage broker are a bad combination, says Bramlett. Ideally, a new agent should be paired with a closing team that can answer questions or quietly step in if they see a potential mistake.
“A good closing team will typically know more than their role in the transaction,” Bramlett says, adding that it’s a key part of giving new agents the tools and resources to stay on track.
“I can’t make a new agent be committed,” he says, “but I can show them the way.”
Lee Nelson is a freelance journalist from the Chicago area. She has written for Yahoo! Homes, TravelNursing, MyMortgageInsider, and ChicagoStyle Weddings Magazine. She also writes a bi-monthly blog on Unigo
During the economic downturn, real estate pros were on high alert for scams by perpetrators who preyed on cash-strapped home owners desperate to stave off foreclosure. Today, a new wave of scammers is breaking into people’s e-mail accounts to cull information about pending deals.
The hackers—posing as sellers, title company representatives, or even other real estate agents—instruct buyers, agents, or attorneys to transfer funds related to the purchase to accounts belonging to the scammers, potentially swindling victims out of sizable sums. In addition, agents lately have been the target of ruses involving overseas cash “buyers” who ask for bank account information so they can supposedly wire deposits.
Whatever the technique, hackers are finding ways to trick buyers, sellers, and practitioners by e-mail or phone to hand over large amounts of money. In many cases, the heists could have been prevented if the victim had verified that the instructions were legitimate before proceeding. “For anyone involved in real estate transactions, the key is vigilance and making sure that what is happening should be happening,” says Peter Bolac, trust account compliance counsel for the North Carolina State Bar, which has received multiple reports of fraud involving wired funds in real estate transactions, including one involving a loss of $200,000. “Everyone involved in handling [transactions] has a duty to be sure their accounts are secure” and the procedures they follow include safeguards to protect clients.
Hacking incidents, sometimes referred to as “spear phishing,” have disrupted transactions in a number of states, including California, New Jersey, and North Carolina.
Any e-mail seeking a funds transfer from you or your client should be examined carefully. In one North Carolina case, the hacker used an e-mail address that varied from the actual seller’s address by a single letter—but the discrepancy went unnoticed until after the unsuspecting buyer had sent over money.
The best way to foil e-mail hackers is to keep them from getting into your account in the first place. “The nature of threats on the Internet is that you don’t always know whether your systems are getting attacked,” says Les Sease, information technology director for Carolina One Real Estate in Charleston, S.C., underscoring the importance of paying close attention to how you manage your e-mail accounts.
One of the strategies Sease recommends for keeping intruders out of your e-mail involves two-step verification, which requires you to log in using a unique code provided by text message or through a mobile app in addition to your password. The advantage of this method is that even if a hacker is able to figure out your password, he or she won’t be able to enter your account without also knowing the code. E-mail providers such as Google and Yahoo offer this option.
Password strength is another factor to consider. Create passwords that are difficult to crack and change them often, says Robert Siciliano, a Boston-based personal security and identity theft expert. In addition, resist the temptation to use the same password for more than one account, and use passcodes to protect your smartphone and other mobile devices, he says.
Some real estate pros say reliance on electronic communications in business has contributed to the slackness. By contrast, the personal relationships that define the real estate industry are a powerful deterrent to fraud. Cameron Platt, owner of Platt Inc. Real Estate, in Oakland, Calif., says, when it comes to preventing information theft, “nothing beats face-to-face and voice contact” between parties in a transaction.
As a writer-producer for the National Association of REALTORS® based in Washington, Sam Silverstein develops articles and videos for NAR’s members and others interested in its activities, statistics and research.
Imagine a new way to transport your out-of-town buyers to the living room of a home for sale without them ever having to leave their desk. Or how about ways to show the expanse of a property from above rooftops? Maybe you dare to dream of a easier way to move smoothly from property to property as you work with your clients. Technology has the potential to shake up the real estate business and overhaul how you conduct showings in the future.
CES 2016, the world’s largest consumer electronics trade show, kicked off Jan. 6 in Las Vegas, touting some of the potential game-changers coming to market in 2016 and beyond.
This year’s conference breaks records in terms of size and scope: Companies show off products in 2.4 million square feet of exhibit space throughout Las Vegas convention centers and hotels (the equivalent of 50 football fields). About 20,000 new products are expected to launch during this year’s conference.
What developments at CES 2016 could potentially shake up your real estate business? Here are four big tech trends coming out of CES 2016 and how they could affect you.
1. Virtual reality headsets
These offer the capability of transporting you into a 3-D world, which could even include a home that’s for sale thousands of miles from where you are. You’ll feel like you are there as you look around the space. While virtual reality headsets have mostly been geared to the gaming industry in recent years, that could change in 2016.
Facebook’s Oculus Rift, Samsung’s VR Gear, and HTC Vive are among the VR products debuting at CES this year. More than 40 VR exhibitors are present at this year’s conference.
As these headsets are paired with more smartphones and other tech tools, businesses likely will unlock more practical applications for them. For example, some VR headsets could be used in conjunction with 3-D video cameras to capture virtual reality content, which could then be viewed with a Google Cardboard VR viewer or Samsung Gear VR.
In real estate, unmanned aerial vehicles could soon help you market your listings from above rooftops, offering aerial photos and videos of homes and the surrounding property. While FAA rules regarding the commercial use of such drones have not yet been released, some real estate professionals have obtained Section 333 waivers permitting them to use drones in their business. For more on this evolving topic, check out NAR’s frequently asked questions on drones.
FAA guidelines for commercial use are expected to be released this summer. While the industry waits for the FAA’s full approval, drone manufacturers have been sharpening their line-ups. Those at CES this year are showing off more sophisticated models that can be controlled by smartphones, offer longer flight times, are easier to pilot, and boast cameras capable of recording high-definition photos and videos.
Some manufacturers are also touting drones that could one day become your showing buddy too. For example, the Lily Camera is a $799 drone, available in February of this year, that tracks you and then films you as you move about. Throw the 2.9-pound drone into the air and it’ll instantly take flight and start recording in high definition. It flies itself and could even follow you and your buyers as you tour a space.
3. Smarter homes
Home showings of the future may be more about demonstrating what a home can do than showing the spaces that comprise it.
Appliances and other home components are getting more intertwined. Nearly half of 4,000 U.S. adults recently surveyed by Coldwell Banker say they own smart-home technology or plan to invest in it this year. The main factors driving adoption rates, they say, are safety and security, temperature control and monitoring, and the ability to control the lights, usually via a smartphone.
Several companies will be launching systems at CES this year that hold promise for communicating with various products from one central command post. For example, LG’s Smart ThinQ hub connects the home’s appliances and monitors, controls, and collects information from home appliances such as washing machines, refrigerators, air conditioners, ovens, and more, displaying the information on a central LCD screen. Samsung’s SmartThings hub allows control over lights, locks, and temperature all from a home’s TV.
Also at CES, tech companies are showing off smarter appliances. For example, Samsung wants the refrigerator to become a central hub in the kitchen with its new Family Hub Refrigerator, which features a 21.5-inch HD monitor and stereo speakers on the fridge door. The display can show recipes, the family’s calendar, and photos and can even use the refrigerator’s interior camera to show what’s inside (a view also accessible via smartphone).
4. Self-driving cars
Hands-free driving may be closer to reality than you think. That would allow you to take your eyes off the road and focus on your prospects as you prepare them for the next home to tour. The technology already exists, but testing, refinement, and public acceptance will likely keep autonomous vehicles from becoming mainstream for the next four years.
Shawn DuBravac, chief economist and director of research at the Consumer Technology Association, said at a session on Tuesday that he expects full self-driving automation to be available to consumers by 2020. By 2030, he says he expects 1 million autonomous vehicles will be on the road, and between 2040 and 2050, about half of all vehicles sold will be autonomous.
More than 115 auto tech companies and nine automakers are debuting products at CES this year. The car technology at this year’s show is showing off not only driverless capabilities but also new advances in energy-efficient vehicles and even home-car connectivity.
But the ambitions to get a driving-free era underway are stealing most of the center stage again at CES. On Tuesday, Ford announced that it’s tripling its fleet of autonomous vehicles in development and testing its Fusion Hybrid autonomous vehicles on roads in California, Arizona, and Michigan. It will add 20, totaling 30 autonomous vehicles — the largest autonomous vehicle fleet of all automakers. The company is promising a wide range of options as well. “When we do come out with an autonomous car [for consumers], it won’t be something just for luxury buyers,” Ford CEO Mark Fields said at a CES press conference Tuesday.
Melissa Dittmann Tracey is a contributing editor for REALTOR® magazine.
Q. I am representing a buyer for a property listed in my MLS. The full-price offer my client submitted was countered, and the listing agent lowered the cooperative compensation listed in the MLS by half a percent. I made a copy of the MLS listing showing the cooperative compensation when the offer was first submitted. What is the rule on making changes to cooperative compensation after a purchase offer has been submitted?
A. Changes in cooperative compensation are covered by Article 3 and Standard of Practice 3-2. However, it’s worth keeping in mind that sharing commissions, as opposed to the details of cooperation, is not itself an ethical obligation. Article 3’s duty requires that “REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.”
Standard of Practice 3-2 provides direction on how and when cooperative compensation can be changed, both to be effective and to determine whether a violation of Article 3 might have occurred. “Any change in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that REALTOR® submits an offer to purchase/lease the property. After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction.”
While an ethics or arbitration hearing panel would make the decision, it seems clear from your situation that the change in cooperative compensation made by the listing broker after you submitted the purchase offer would not change the amount you were already entitled to in this transaction. It also seems that the listing broker attempted to unilaterally lower the offered compensation and would be in violation of Article 3. Once you have submitted the offer to purchase, the cooperative compensation in that transaction can’t be changed without your agreement. That understood, it’s equally important to remember that simply asking selling agents if they’d be agreeable to renegotiation of the cooperative compensation payable isn’t a Code violation.
Columnist Bruce Aydt, ABR, CRB, is senior vice president and general counsel of Berkshire-Hathaway HomeServices Alliance Real Estate in St. Louis and a former chair of the Professional Standards Committee for the NATIONAL ASSOCIATION OF REALTORS®.