Don't be afraid--Be aware

If you understand the title of this blog, chances are you are in a real estate related business. When buying real estate in Alabama the words “Caveat Emptor” is of utmost importance.  Let’s take a look at the meaning of the term and how it affects Alabama real estate buyers.

Caveat emptor (ˌkæviːɑːt ˈɛmptɔr) is Latin for “Let the buyer beware.”Generally, caveat emptor is the property law doctrine that controls the sale of real property after the date of closing. Under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects or otherwise made material misrepresentations amounting to fraud.

Before statutory law, the buyer had no warranty of the quality of goods. In many jurisdictions now, the law requires that goods must be of “merchantable quality.” However, this implied warranty can be difficult to enforce and may not apply to all products. Hence, buyers are still advised to be cautious.

Not all states are Caveat Emptor states. There are three states that I am certain of and they are Alabama, Arkansas, and Virginia. This article only applies to the use of caveat emptor in Alabama. For other states, you must search the statutory law with that particular state.

Since caveat emptor places the responsibility on a buyer to thoroughly examine a parcel of real estate before they close the sale; it also places additional responsibilities on real estate agents representing a buyer. In large a “buyer’s agent” must accept their fiduciary responsibility to assist the buyer in searching out every potential problem that may exist or could occur after a purchase has been finalized.

Charles R. Sowell, General Counsel for the Alabama Real Estate Commission, wrote the following article in the fall of 1993.

Caveat emptor is a latin phrase which means “let the buyer beware.” This phrase is the basis of the controlling legal doctrine in the sale of used houses with material defect. It was most prominently set out by the Alabama Supreme Court in the landmark case styled Cashion v. Ahmadi, 345 So.2d 268 (Alabama 1977) and was further addressed in a case styled Ray v. Montgomery, 399 So.2d 230 (Alabama 1980). Several cases have appeared since 1980 dealing with the principle of caveat emptor. These cases taken together with Cashion and Ray set out the law in this area, and it can be a bit difficult to follow. I am going to try to simplify the cases and explain what they generally mean to sellers, agents, and buyers.

First, it is important to remember that the court in a 1971 case abolished caveat emptor in the sale of new homes, but the court has on several occasions reaffirmed that caveat emptor is the law in used home sales. Caveat Emptor does not apply to the sale of new homes.

In the Cashion case the buyer of a used home sued the seller and the listing agent after the buyer discovered that the basement leaked. The buyer was not successful because the court applied caveat Emptor and said in effect that neither the seller nor the seller’s agent had an affirmative duty to disclose a material defect in the home, unless the defect was known and could adversely affect the health or safety of the buyer. Affirmative duty means voluntary disclosure without being asked. A material defect is best defined as one which would be a significant factor in a buyer’s decision to buy or not buy a particular house.

This case was followed by Ray where the buyer sued the seller after discovering that the used house purchased had termite damage so extensive that it threatened the structural integrity of the house. The house was sold “as is.” The court held in favor of the seller, citing caveat emptor. The court said the damage seemed sufficient to be “health or safety” consideration, but the buyer still had no case because the condition could have been discovered by the buyer with ordinary diligence by inspection of the house.

Most of of the lessons of caveat emptor should be obvious. When a buyer who finds after a sale that the used house purchased has a material defect, neither the seller nor the seller’s agents will be responsible unless the buyer can prove the following:

1) There was a material defect which adversely affects health or safety;

2) The seller or the seller’s agents knew of the defect before the sale;

3) The defect was such that it could not be discovered by due diligence; and

4) The house was not bought “as is.”

A buyer’s agent who knows of material defects is in a very different position. Agents of the buyer have a responsibility under the law of agency to tell the buyer everything known about a transaction. Caveat Emptor does not apply, and offers no protection to agents of the buyer.

It must be noted that the court has used language which seems to indicate that a known, latent defect involving health or safety might not be covered by caveat emptor. A latent defect is one that is hidden or not apparent on the surface and, therefore, cannot be discovered by due diligence.

The principles of caveat emptor do not allow a seller or the seller’s agents to engage in fraud, or deceit, or to make misrepresentations about the condition of the property. The law is clear that when a buyer asks a question about a specific property condition, the answers must be truthful and complete. Likewise, a seller or seller’s agents can be liable for fraud if they knowingly take action to conceal a material fact with intent to deceive or mislead the buyer. Misrepresentations and fraudulent action are very different from simply remaining silent about matters one has no duty to disclose.

Section 24-27-36(a)(3) Code of Alabama 1975, as amended, provides that a real estate licensee may have his or her license revoked for “…failing to disclose to a potential purchaser…any latent structural defect or any other defect known to the licensee…” Does this somehow conflict with all the case law on caveat emptor? The answer is no. It is the job of the courts to flesh out and apply statutes such as this one to real life situations. The courts have spoken specifically to the duties of agents in these cases. The law is what the cases say it is.

Finally, the purpose of this article is to state what the law is, and how it is applied to those having roles in used residential real estate transactions. The Commission is bound by the law in its enforcement actions. Real estate licensees who operate within the law, even if only the minimum requirements of the law, are free to rely upon caveat emptor in their business dealings. Many companies do not agree with the results of the principles of caveat Emptor, only accepting listings on homes where the owner consents to full disclosure about the condition of the house being sold. These companies are certainly free to exercise this business judgment.

You just read where Mr. Sowell brought up another issue that becomes important in a state where caveat emptor prevails. The term “AS-IS” and commonly stated “AS-IS, WHERE IS,” is also a term as equally important to a buyer. I have provided you a link to read the following “AS-IS” from Wikipedia.

As is is a legal term used to disclaim some implied warranties for an item being sold. Certain types of implied warranties must be specifically disclaimed, such as the implied warranty of title. “As is” denotes that the seller is selling, and the buyer is buying an item in whatever condition it presently exists, and that the buyer is accepting the item “with all faults”, whether or not immediately apparent. This is the classic “buyer beware” situation, where the careful buyer should take the time to examine the item before accepting it, or obtain expert advice.

On the other hand, the phrase “as is” does not disclaim express warranties, such as those created by the seller’s description of an item. In other words, the item may be sold “as is,” but if the item does not conform to the seller’s description, the buyer has a right to reject it.

For example, a seller of a used automobile sells his car to a buyer, and puts into the contract of sale the statement: “The buyer accepts the automobile AS IS, WITH ALL FAULTS.” Two minutes after the buyer drives off with it, the engine seizes, and the car stalls. Unless the buyer can show that there was some fraud involved, or the seller breached an express warranty, the buyer is not entitled to a refund.[citation needed] This would be a specific example where fraud in the inducement could outweigh anything in the contract, express or implied: it simply doesn’t matter what disclaimer or limitations may be found in the contract, if the contract is void (or voidable) for any reason.

Disgruntled buyers of real estate, and their respective improvements, may be faced with other complicated property law issues if a deed is conveyed as a result of a contract with an “as is” clause. In real estate, these are the larger potential problems than issues with the structure itself, which can be drawn out with an inspector. Searching public records is often difficult, and often done lazily by the seller; this means that the buyer may be burdened with liens on the home, and face various fees related to things such as public utilities.

In many jurisdictions disclaimer of various implied warranties is void. For instance, laws on consumer protection, and unfair contract terms may limit the ability of a manufacturer or seller to limit or exclude liability for various types of damage. See, for instance, the Unfair Terms in Consumer Contracts Regulations 1999 and Sale of Goods Act 1979

I don’t mean for either of these terms to scare off a potential buyer form purchasing real estate in Alabama, however, you need to be aware of these terms and their affects. Buyers can safeguard against potential problems by securing representation from a real estate brokerage firm. Buyer’s agents are bound by the law to protect the financial interests for their clients.  Every licensed real estate agent in Alabama is required, by law, to disclose the various agency relationships they offer as soon as they meet you. It is to your best interest that you select one of the relationships that provides representation for you best interest.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

RISK CAN BE COSTLY

The practice of real estate is a very legalistic business and we take our jobs far too lightly. I think one of the reasons is because we haven’t had a transaction that ended up in litigation. In all my Risk Management CE classes, I use this illustration; “When you driving down the road and you’re speeding, then you look in your rear view mirror and see a blue light flashing, it’s too late to be concerned about how fast you were going.” The damage is done. You knew the speed limit, and you knew if you were caught speeding, you would suffer the consequences. The same thing is true in real estate.

As licensed real estate agents we are supposed to know the law. When we are licensed we set ourselves apart as professionals in the real estate industry. That license signifies to the consumer that you have been educated, passed extreme examinations, properly trained, and that you are qualified to assist anyone when buying or selling real estate. The consumer should but seldom does, interview an agent before employing them to find out if they have sufficient expertise to represent their best interest.

When a real estate agent looks in the mirror, they should see an invisible phrase branded on their forehead that says, “Manage my Risk today.” Sometimes Realtors® get so caught up doing their daily performances they lose track of the risks they are taking. They don’t recognize their need for continuing education until they experience legal issues but then it’s too late to manage the risks on that transaction. They just have to guard against it on the next transaction.

Managing risk is all about taking precautionary measures before a problem occurs, to make sure that the problem never comes up. If we know the laws, rules, regulations, and company policies, and live by our Code of Ethics, preventing a potential problem is fairly simple. I use the medical profession as an example in my classes. A doctor graduates from medical school and is licensed to practice medicine by the state. At that point they have sufficient education that provides a medical background, but they are just now ready to start learning how to become a good doctor. They learn from their successes of good decisions, and they learn from their mistakes. They constantly read case studies of various diseases, symptoms, cures, drugs and etc. The longer they are in the business, the more continuing education they need so they can learn the latest techniques and medicines available that are productive in curing ailments.

I don’t put a lot of confidence in every home inspection I see because that home inspection is performed by someone I may not know; that is I don’t know their background, their past performances or the knowledge they possess. However, I almost mandate that a potential buyer have a home inspection done. Home warranties are the same way. I strongly encourage every seller to purchase a home warranty; not for covering repair cost, but to transfer the liability from the owner to the company providing the home warranty. These two inspections will greatly reduce my client’s risks as well as reduce my broker’s risks.

I thoroughly believe that an ounce of prevention is worth a pound of cure. Real estate education and real estate training is the best way to stay abreast of changes and to be reminded of ethical procedures when representing the public that is buying or selling real estate. Education and training is a business expense that is an allowable deduction by the state and by the IRS. Therefore it cost you nothing, but benefits you greatly. So protect yourself and your clients by managing your risks.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

MANAGE YOUR TIME--ACCOMPLISH MORE

I hope creating a business plan has been a pleasant experience for you. I can guarantee if you carefully create a business plan and then really commit to following that plan, it will be the best financial decision you have made in your entire life. I’m sure some of the large dollar volumes you need to produce in income from listings and sales to buyers were eye opening. Realizing the time required to accomplish certain activities was shocking. At first glance some people will begin thinking negatively and assume the tasks are impossible. It’s not impossible. Matter of fact, with practice, you will be capable of doing several times as much as your goal calls for. It seems to be human nature to fear the unknown. We feel uneasy traveling roads we’ve never been down before. By the time we arrive at our destination, we realize the simplicity of the journey. I don’t know where I got it but I have a saying I use all time, “DREAM BIG & BE BOLD……..great and mighty forces will come to your aid.” Embed that thought in your mind, believe it, and there is nothing you can’t accomplish.

Creating a business plan is useless unless we commit to following that plan. The most difficult task in a business plan is “Time Management.” Today I want to share some thoughts about managing time. We are creatures of habit. We began adapting habits as infants in the cradle. I don’t suppose we’ll stop habitually doing things until our death. Bad habits can be very difficult to change so let’s focus on forming good habits. It has been statistically proven that doing something 21 times in succession becomes a habit. I have experimented and found that resisting a bad habit, verbally, seemed to aid in breaking bad habits. I know from experience that when I stopped smoking, after 21 days I had kicked the habit. It was much easier from that point on. Try this test just for fun and see what results you get. Set your alarm clock for a certain time to get up that isn’t normal; let’s say 5am. Do that for 21 days in a row. On the 22 day set your alarm for 5:30am and I’ll bet you will wake up on your own accord within a few minutes of 5am.

I find it difficult to separate “Focus” from “Time Management.” One without the other seems impossible. You must be a able to maintain your focus in order to manage your time, and the most important action required in time management is the ability to stay focused on doing things that are important to your success while resisting non-productive things from hindering you. I first learned about “Time Blocking” back in the 70’s while attending a real estate seminar in Atlanta, Ga. It was about that same time I learned the term, “Prospecting.” I learned that if I wanted to become successful, I needed to block all my time from 9-12 every morning of every work day to call new prospects. At that time I didn’t understand the importance of making phone calls to people I didn’t know so I found myself sitting, drinking coffee for three hours. After some experimentation I found that “Cold Calling” was easier than “Door Knocking” and it was more productive too. At least when you got an irritable person you could hang up on them.

It’s amazing how much wisdom you gain with the passing of time. I finally learned that the more organized you are, the more things you can accomplish in a standard 8 hour work day. I was raised on a farm where our work day began at 4am and we didn’t eat supper until 8pm so learning to use an appointment book was extremely difficult. The 21 days of using an appointment didn’t become habit for me, I hate to say. I could find no one to help me. Other Realtors used their appointment book like a to-do list and that didn’t make sense. I would draw a line in my appointment from 9-12 and write prospecting in that space but then other agents would stop by with their coffee and we’d waste time talking about everything but real estate. Then I made friends with a very successful business man. Many times when I’d call him, he would answer. Finally he told me if I wanted to talk to him, to call him at home after supper time. I asked him why, and he replied, “I schedule every minute of my work day for specific tasks. That’s how I accomplish so much. That’s the reason I make as much money as I make.” After much in-depth thought, I asked for his help. It wasn’t so much about writing in the appointment book as it was in making a commitment not to let anything hinder me from keeping an appointment. Whatever you write down in the appointment book you have to accomplish. Here’s your sign! It totally changed my life so let me share some ideas that will help you manage your time.

The first order is to purchase an appointment book. Buy a large, desk model with plenty room to write. Make sure you get one with 15 minute increments. I prefer one that when open, has a 2 page view of a full week. The next step is to open it on your desk with all the junk removed. On a scratch pad make a list of everything you want to accomplish on Monday. From that list prioritize the things from most important to least important.

If you determine that you need to prospect or generate lead from 9-12 each day take a highlighter and highlight 9-12 on each day and write in “Lead Generation.” If you normally go to lunch from noon to 1pm, highlight those times for the week and write in “lunch.” If you have set aside any other particular task you want to accomplish on a daily basis, highlight those times.  Now when you look at week, you have blocked times to accomplish certain task. The next step it personally commit to doing those things during the “blocked“time and don’t let anything hinder you. When someone invites you to do something tell them you need to check your appointment book. If the time is during the time you have blocked for other activities, tell them you’re sorry but you have an appointment during that time.  Other words don’t let anything or anyone control your scheduled work plan.

Next take the things you need to accomplish on specific days, the things you prioritized on scratch paper, and insert them into your schedule. Now highlight those things in a different color. Those things are new appointments. You have now set aside a specific time to accomplish that particular task. As new tasks arise, strategically fit them into your schedule as needed but make sure you don’t use time that you have allotted for other tasks.

It is important that you consider the time you have blocked as an appointment to do a certain thing. By prioritizing everything you do, and scheduling sufficient time to do that particular thing; it will get done. We all know from past experience that if we don’t set aside time to do something, it may not get done. By planning your work day and committing to follow that plan is assurance that you will accomplish the things that are most important to you. For example, you wouldn’t schedule two doctor appointments for the same time. You wouldn’t schedule a home showing to two different buyers for the same time. Surely you wouldn’t break one appointment to show property to a prospect; would you? Why not block from 1-4 pm for showing times. Control your work schedule by letting your clients know that your reserve certain times for showing property. After all, if you aren’t controlling your own time, someone else is controlling it, and the things you need to do won’t get done. Do yourself a favor and give it a try.

 Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

Like a Reunion—The Plan is coming together

If you have read the last four blogs on this topic, you are getting tired of digging for information so you could follow the instructions. I know it can be difficult but if we truly manage our business the way we should, we track all this information on a weekly basis. If we don’t keep track of all our expenses and incomes, we could easily go broke before we realize what has happened. Now that you have produced all the figures, let’s put them to use in putting together a personal income plan for the next year. If you are just getting started in real estate, you can still build a income plan by basing all production strictly on your desired income goal for the coming year. Follow the instructions below for each number without jumping ahead. Throughout this process you will use answer for one action to produce an answer for another action. Take your time and don’t advance steps until you thoroughly know how and why for each step.

1. List your desired income for the next year. That’s easy; huh?   _________
2. Write down the percentage of you income for last year that came from your listings.  If you had no listing income, your percentage from listings should be 50% but could be more or less. _____
3. List the dollar amount of income from last year listings. For example if 50% of you income came from listings, and your total income was $100,000, your dollar amount would be $50,000. _____
4. Write down the current average listing price of properties you list. For example let’s say houses in your area are currently being listed for $150,000; an average. ________
5. Now write down what those listings are actually sold for. We know that homes seldom sell for full price. When property is listed at current market value, most homes will sell for 90-95% of the listed price. If listings are overpriced they may sell for 75-80% of listed price. Let’s say you listed a home for $150,000 and it sold for 85% of the listed price, the amount you write down would be $127,500. ________
6. This one will vary from person to person and from one geographical area to another. In most areas the commission split between brokerage firms is 50-50 which is what we will assume in this plan. Even though commissions charged by a firm to represent a buyer or seller varies between brokerages, we will use 6% commission rate. Each brokerage establishes the percentage of income produced, they will pay to the agent for closing a transaction. This percentage ranges from 50-95% but let’s use a common percentage of 70%. To arrive at the percentage you will write down take that 70% and multiply by .03 (one side of a 6% commission) which should give you.021. You will use this percentage later. ________
7. Next write down the results you get by multiplying the dollar amount you listed for number 5 with the percentage in number 6. __________
8. Now we will determine the number of closed listings we need for next year by taking the dollar amount we used in number three and dividing it by the dollar amount we arrived in number 7. __________
9. Next let’s figure how many total listings we need during the year to meet our desired goal. To arrive at this number, take the number of listings in number 8 and multiply it by 75% because not all listing will sell; for whatever reason. The nearer the current market price a property is listed, the chances of it selling increases giving a higher percentage. Your answer to this step should be a two digit number; on an average. _________
10. List the number of listing presentations you will have to make to get one listing. National statistics show about 33% but that depends on your personal communication skills. Let’s use the 33% which will give us 3 presentations will equal 1 listing. ________
11. Here we will determine how many presentations you will need to make during the entire year. Multiply your answer from number 9 by your answer on number 10. _________
12. There are 52 weeks in a year but you will probably take a vacation or two so write down the number of weeks you plan to work next year. Allow for the unexpected. Normally your answer would be 48-50 weeks. __________
13. Next we want to write down the number of listing presentations we need to make by dividing your answer on number 11 by your answer on number 12. Don’t round off. Your answer might like something like 1.38 but will vary based on how you answered previous questions.________
14. Here we will determine how many new contacts we need to make each week in order to make the necessary presentations. This varies between agent’s skills but a good number would be to make 20 contacts to get 2-3 presentations. Multiply number 13 by 20=__________.
15. Find the number of new contacts you need daily by dividing your answer to number 14 by 5 days. ___________ Surely you plan to work 5 days a week.
16. You may think this one is ridiculous but it is very important. Determine how many minutes you need to spend each day contacting new prospects. Multiply your answer to number 15 by 10 minutes. The time you spend in conversations will decrease with practice. ___________
17. Multiply your answer to number 16 by 60 (minutes in an hour) to determine how many hours you need to spend each day prospecting. ___________ Personally I believe in the 80/20 rules which means you should spend 80% of you day in lead generation.
18. Now we need to determine the annual dollar volume of listings needed to meet your goal. Divide your answer on number 4 by your answer on number 9. $_______________ Note: your answer should be in Millions.
19. You never want to have less than 20 listings at all time (if you want to be real successful) but about 3% will sell and need to be replaced by new listings, or they’ll expire or be taken off the market so let’s use a 3% turnover rate. To determine the dollar value of listing inventory you need to maintain at all times, divide you answer on number 18 by .03%.___________ This will also be a large dollar amount.
20. Now let’s determine the total number of listings you need to maintain at all times. Divide your answer on number 19 by your answer on number 4. Your answer will probably be much less than the 20 I stated in number 19. __________
21. Now that we have determined the work needed for listings, we now need to determine the dollar volume of sales (from buyers) that we need to produce annually. Using the same income volume of $100,000 (as stated in number 3 above) and considering 50% your income will come from listings and 50% will come sales to buyers, this answer should be the same as your answer to number 3, or subtract number 3 from number 1 to get your answer. ___________
22. To determine your average income from sales, multiply your answer for number 5 by your answer on number 6. $____________
23. To determine your annual number of sales (buyers) needed divide your answer on number 21 by your answer for number 22.
24. To determine the total number of new listings you need each month, divide your answer to number 9 by 12 (months in a year). ______________
25. To determine the total number of sales (from buyers) you need each month, divide your answer to number 8 by 12. ____________
26. To determine the dollar volume of income you need to produce each month, in order to meet your goal, divide your answer to number one by 12.

 This seems like a very long process but it is important for you to know exactly what you need to accomplish every hour of every day. When daily accomplishments are missed they are gone forever unless you move required actions to the next day and then there aren’t enough hours in a day to accomplish necessary activities that are important to reaching your goal.

Next week we will finalize the business plan by discussing “Time Management.” Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

TRACKING INCOME

If you have followed the last three articles, you will have completed the personal evaluation process. Next we will analyze the number of days we worked last year as well as the number of hours we worked each day. We will also determine the number of listing we took during the year, and how many of those listings actually sold. We’ll also determine how many buyers we work with and how many actual sales we closed during the year. This is very important for you to determine so you can establish the number of transactions you need to close to equal your previous year performance. As previously stated, we need to know our current level of production in order to know how many transactions we need to close during the next year in order to increase our level of production and reach our desired goals.

If you were not in real estate last year don’t worry about it. We will cover your information next week but go ahead and write down the topics we discuss so you’ll know what you need to track for next year. Everyone else, take a piece of paper and let’s complete the following steps.

1. Write your gross income (before expenses) for the past twelve months. This will be very important next week when we begin building your action plan.
2. Break down your annual income into four quarters. Enter the income in each quarter just like it was produced. Don’t simply divide the annual income by four. We need to be able to tell your most productive time of the year.
3. This one requires total honesty from you. Write down the average number of hours you worked each week during the last 12 months. If you haven’t work consistently, take a guess but don’t exaggerate. FYI, successful real estate agents work 40-50 hours per week.
4. Next take your annual income and divide by the total number of weeks worked in the last 12 months and then divide by the number of hours you worked each week. The results will be the average income you earned per hour of work time. This is what your time is worth.
5. List the average sales price per closed transaction. If you closed 36 transactions last year, add all total actual sold prices and divide by 36 for an average sales price.
6. Write down the actual number of listing you took during the last 12 months.
7. Write down the number of listings you had to expire during the last 12 months.
8. Write down the actual number of active listings you currently have.
9. Write down the number of listings you currently have that are pending; under contract but have not closed.
10. Write down the average number of listings you take per month during the year.
11. Write down the average number of hours you spend each week in lead generation.
12. Write down the most productive sources of lead generating for new listings. For example it could be farming a particular area, mailing out fliers, advertising in real estate books or a number of other methods. List three things that work best for you.
13. Write down the total number of transactions you closed during the last 12 months; include listings and buyer sales.
14. Write down your average net commission earned per transaction during the last 12 months.
15. Here comes the part you had rather forget. Write down the number of transactions (listings and sales) that fell apart and never closed during the last 12 months.

I have used parts of various business plans to formulate the plan I have been using. They are all similar but derive at the same results, just from different angles. When I help someone personally build a business plan I ask a few more questions than those we looked at today. It depends on the results a person wants to accomplish. Using various parts of this business plan has proven successful for sales people in non-real estate related businesses.

Next week we will focus on building a personal income plan. It will be very detailed and maybe a little confusing but it will tell you exactly what you need to do to accomplish your personal goal.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

How's Your Business Plan Progressing

Today we will continue building our business plan by honestly evaluating our past work habits, personalities, and job performance during the last year so we can realize the things we need to improve upon in the coming year. For those reading this article that reside outside Alabama, please keep in mind that Alabama law differs from surrounding states because Alabama is a “Caveat Emptor” state which places responsibilities on the purchaser to research all aspects of a property before purchasing.  This article is written specific to Alabama even though most parts of the business plan will apply to anyone, regardless where you live and work.

When working with buyers or sellers in Alabama, it is mandated by Alabama License Law, and regulated by the Alabama Real Estate Commission , that upon initial contact with a prospective buyer or seller, the agent must disclose and explain the various possible agency relationships available through their agency. This is referred to as RECAD which is an acronym for Real Estate Consumers Agency and Disclosure Act. The law states this disclosure is to take place upon initial contact, as soon as reasonably possible, and before any confidential information is exchanged. When asked, most agents say they disclose this information, but when talking to consumers they say they have never had anyone RECAD them before. With this in mind, grade yourself on your performance of disclosing the various agency options upon initial contact; not when a listing or offer takes place.

Successful agents are working with many buyers and sellers at the same time. They also have many other duties to perform on a daily basis dealing with getting transactions closed. At the same time they must remain focused on generating new future business. Many agents will work with a “things to do” list for the next day and at the end of the day realize they didn’t accomplish everything on their list. The reason for this is generally because they didn’t work from a schedule. They didn’t block certain times to do specific things; therefore, some very important things didn’t get done. Grade yourself on how well you perform in scheduling your work by time blocking for specific activities.

The real estate profession is a very legalistic business. Since we own our own business, we must have the answers at the time we need them. Education provides this knowledge but some think they don’t have time to take educational course to improve their skills. Some agents never take more educational course than those required for license renewal. Grade yourself on your mindset for obtaining education necessary to the success of your business.

When asking agents entering into my coaching program what their goals are, I get answers like, “To become debt free,” or “To make $100,000 a year.” In reality this is what they would like but it isn’t their goal. A goal is specific including where you are currently, where you want to go, and what you need to do to reach the desired goal. Goals are generally long and short term; what do you want to accomplish during the next year and at what level you want to be five years from now. Annual goals trickle down to monthly, weekly, and daily goals by simple division. It is virtually impossible to reach major goals without having a business plan or road map of what you must to do to accomplish the goal. Grade yourself on your proficiency of setting goals, and following a predetermined plan for daily work activities.

Some agents have difficulty closing a listing opportunity or getting a prospective buyer to write an offer for a property. I think this is probably due to the agent having the cart before the horse; so to speak. They are seeing the opportunity to have another listing rather than providing specialized skills to aid the consumer in selling their property. Some agents experience difficulty in getting a buyer to make an offer because the agent is focused on getting a commission rather than what is financially best for the buyer. Agents are required to have the client’s interest above their own interest. An agent’s top priority is to accomplish what they are hired to do; list and sell real estate. If we remain focused on the consumer’s best financial interest, the money will follow.  Grade yourself on your ability to put your clients/customers best financial interest above your own.

There are many other areas’s we could evaluate ourselves in but let’s look at our overall performance for the past year. New agents can forego this section and move to the next step which we will cover next week. Agents that were in business last year, grade yourself on your overall performance for the past year. Don’t grade yourself based on the amount of money you made, but on the performances in the areas we discussed in the last two articles. Be totally honest with yourself because no one will see your answers. This is to help you only.

Next week in “Creating a Business Plan (part four) we will analyze our last business year work history as it relates to listings sold, buyer transactions closed, hours worked and etc. Remember, we need to know where we have been, and what we are currently doing, before we can know what we need to do to improve our future performance.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

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For more detailed information about individual courses, refer to a specific type course icon listed below; which will provide additional information, prices, etc. Simply click on the link below:

• 60- Hour Alabama Sales Prelicense
• 30- Hour Alabama Sales Post License
• 6- Hour Alabama Reciprocal  Sales Prelicense
• 60-Hour Alabama Broker Prelicense
• 6-Hour Reciprocal Alabama Broker Prelicense
• Alabama Real Estate CE Courses
• Mortgage Exam Prep
• The Book Store

Alabama Real Estate Institute CE Class Schedule for 2012

To register for one of these classes click on this link CE Class Registration Form or for more
information contact James Anderson, (251) 979-2530.                                                                                                     

Honestly Evaluation Youself

If you didn’t read Creating A Business Plan (Part One), please do so before reading this blog so you’ll better understand how to build your business plan. As I told you last week, if you follow these instructions, you will be able to complete your own personal business plan. Since you must know where you are currently before you can create a plan for where you want to be in a specified time in the future, there are a few areas you need to evaluate your current performance. I suggest you take some paper and write down numbers 1, 2, 3, 4, and 5 or you might want to use 1-10. In each of the areas we discuss, grade yourself 1 or 2 if you’re very poor, and 5 or 10 if you’re extremely proficient in that particular area. Most of us will need some or maybe much improvement so you’ll grade yourself somewhere in the middle.

First let’s look at how you contribute to team spirit with other agents in your office. We all have different personalities. Some people are very laid-back and quiet while others are very out-going and loud. Some are leaders and some are followers. Some are very likeable while others seem to portray less desirable or even hatred characteristics. Some people are very easy to talk to and some leave the impression they don’t care if you ever speak to them. Just as important, there are those that will share their knowledge with anyone that asks, while some people won’t give you the time of day. None of us invented the way to become multi-millionaires. We are following productive techniques that we learned from someone else. Grade yourself on the quality of team player you see yourself.

There are basically only two types of attitudes that I know of.  One is a negative attitude and the other is a positive attitude. Look at any office with three or more people working there and you’ll probably see examples of both. Only an individual can change their attitude! People might be able to do things that depresses us, or causes us to have negative thoughts but it’s up to us to control our own attitude. In almost every situation, behind negativity lies opportunity. We must seek out those opportunities and act upon them by possessing a positive attitude. If there were 10 agents working in one office, one would have more business than they can handle while several others can only find things to grumble about. It seems that we are taught from birth to be negative. The weather man will predict 30% chances for rain rather than predict 70% chances that it won’t. When was the last time you watched the evening news and it was filled with positive things happening around the area in which we live? No, it’s filled with killings, robberies, and negative information. Grade yourself on the type attitude you have.

Personally promoting your business is one of the most productive and most proficient marketing tools we have. Something as simple as wearing a name badge that cost less than $10 can yield thousands in commissions. There are people everywhere we go. When was the last time you went to the grocery store, or any public business that you didn’t see other people. Did you take the time to introduce yourself to them, and find out if they were interested in buying or selling real estate? I have a statement that tell all agents in every class I teach; “If you don’t have a name badge on, you’re not in business.” It cost you nothing to wear one, but it tells everyone that you are proud of you company and you are proud to be in real estate. I personally sold two properties within a four months period that came from people seeing my name badge and expressed an interest in buying a new house. Grade yourself on your personal performance for promoting your business; not by mail or the internet, but personally.

Listing properties for sale is the backbone of the real estate business. Listings bring in prospective buyers. Listings get your name out to the public. Listings, when sold, produce income. The way one markets a property produces multiple incomes through referrals. So many agents collect the commission they earned and never contact that seller again. Listing a property for sale provides the perfect opportunity to establish a fruitful relationship with the seller and all their friends and neighbors that will produce referral incomes for many years in the future. Of course you have to ask for referrals before anyone will give them to you. Notice I said, “give;” yes referrals are a gift. Yet after the sale closes we concentrate on finding new business and let all the former opportunities vanish. Grade yourself on how well you take advantage of referral opportunities.

Most real estate agencies have a monthly sales meeting to inform their agents about the level of production in listings and sales for the past month. They inform the agents about new laws, rules and regulations that affect the business in general. Granted some sales meetings are boring but there is always a tidbit of information that is helpful and useful to increasing our productivity. As a general rule, 35-50% of the agents will attend while the rest think they are too busy, or they don’t need the information that will be shared. For whatever reason they don’t attend. Their absence affects the unity and team spirit of the entire agency. I can accept missing one a year but not attending the other 11 is negligence your part.  Grade yourself on your attendance habit.

Participating in a company caravan of newly listed homes for sale is a perfect opportunity to improve your knowledge for establishing market values. More times than not, when participating in company caravans, an agent will see a property that triggers their mind about a prospective buyer. That wouldn’t have happened had they not gone on the caravan. If your company doesn’t have caravans following the monthly sales meeting, it is a good way for you to improve your leadership qualities by starting a caravan yourself.  Caravans are beneficial to sellers, buyers, agents, and they loudly for the quality of sincerity of the agency. Grade yourself on this educational technique.

Next week, in part three, we will grade ourselves on our initial conversation with prospective buyers and sellers. Until then, I wish you a very successful and productive week.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.

BUSINESS PLAN A PART OF YOUR TEAM

Success is all about realistic expectations, regardless of the industry in which you work. For some reason people enter real estate sales without giving careful thought to their income expectations. I think it is because they see real estate as being a lucrative profession. They see names on “For Sale” signs all over town and equate those signs with success. Then they rationalize if they got a position with the same agency, they too would be able to do the same thing. Many people work around very successful sales people that can never seem to get their career moving in a profitable direction. I place most of the blame on the qualifying broker for the agency because they haven’t provided proper training.

Real estate sales are a business. Agents are independent contractors, working for themself under the umbrella of an agency. Like starting any new business, the first step is to set realistic expectations which are done by completing a business plan. How can you know what you need to do until you know what you want to accomplish? You can’t! If you decided to go into the lawn care business, you would first have to determine how much profit you can make off each lawn, and how many lawns you need to cut each day to produce the income you need to meet your financial needs. This makes sense, doesn’t it? This process is part of creating a business plan.

For real estate agents in my “Productivity Coaching Program,” regardless of how long they have been in business, we begin by creating a complete business plan. We have to know where they are currently before we can help them get to the level of production they want to reach. This also makes sense, doesn’t it? Time will not permit me to go into detail about my 13 page business plan but I want to share the basics for creating a business plan.

Setting realistic expectations begin with determining a financial goal. That is how much you want to earn in your first year. We will also determine where you want to be in 3, 5, and 10 years from now. It is a proven fact, if you continue doing what you’re doing right now, you’ll keep earning what you are earning now, and this is not progress. So let’s get the first year right because it sets the stage for reaching your long term goals. Before moving forward let’s look at other general goals you need to set. Money is a necessity for survival but it’s not the reason for living. Be totally honest and objective with yourself when creating the following goals. Determine what is best for you and your family in each goal.

Career goals include the amount of income you want to produce in your first year in business. You need to determine how much you wish to be making in 3, 5, and 10 years from now. Other career goals might be to own your own agency within five years. It might be to become the top producing agent in town in three years. It might be to own 10 income producing properties in 10 years. Career goals are specific realistic expectations you want to accomplish in a specific amount of time.

Personal Growth & Development Goals are personal accomplishments. You might wish to become a better husband or father. You might desire becoming a leader in the community.  List things that make you, generally, a better person, or will help you develop into a better person. Make sure you list a specific time frame in which to accomplish these goals.

Health & Fitness Goals is an area that few people give thought to until they reach their golden years. Our health is so important to accomplishing other goals. It might be your goal to lose so much weight within six months. A good fitness goal could include working out at a gym three days a week. List anything that will improve your general health.

Family Goals could include vacation time, trips, a cruise, or simply specific time allotted for family activities that will strengthen the relationship of all family members. Another family goal might be to begin attending family reunions or researching your family tree.

Additional Goals are for specific things that are of most importance to you; things you want to accomplish that aren’t listed in another goal. I include my religious goals in this area.

Self Improvement Goals are specific things I need to do that will aid me in accomplishing all my other goals. An example might be taking educational courses to improve selling skills, or writing skills that would help me communicate better through e-mails, or blogging. It might be as simple as wanting to get my broker’s license or taking a course to help in time management.

Each goal should be realistic, attainable and should include a specific time in which to accomplish that particular goal. Each goal should have short term (one year or less) and long term (3-5 year) goals. Goals are not just a “wish list.” They are things you wish to accomplish in a specified time. The business plan you develop will block time for accomplishing each of these goals.

Since developing a business plan is so important to the success of all real estate agents, and it is so detailed, I have decided to write about it in segments. If you follow this blog over the next few weeks, you will be able to develop your own personal business plan by following the instructions in each blog. So, take a piece of paper and complete the above steps including all the goals. Next week we move to the next step.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.