What is the FC Factor in Real Estate? It is the knowledge, people receive from two major motivational factors. Those are either FEAR or CONFIDENCE. Most Real Estate sales people work on one of two those factors.
Confidence is what great sales agents learn to hone. How do Real Estate Agents build confidence with a Buyer looking for a home, lot, investment, or business? It is far more difficult to master the Confidence Factor, because each has its own learning process.
Homes are the most common and easiest to work with. It all begins with proper training. Not all training is equal. Some Brokers pride themselves on the level of training the provide to Sales Agents. Others provided either the minimum, or nothing beyond state requirements to obtain a license. And of course there is always shades of gray between. There are too many aspects of proper training to cover here. The main aspect of this article is to familiarize readers with signs of the two basic factors.
Another major step in the Confidence Factor is working with a group of great Inspectors. Those are people who show us what to watch out for. Good Inspectors are also great at explaining maintenance issues. A good Real Estate Agent will accompany Buyers during the inspection and learn from the experience so they can help pass that knowledge along to future Buyers.
In most cases, Real Estate Agents are not licensed home Inspectors, and are not allowed to provide a complete assessment of a property. But we are allowed to point out obvious defects. In many cases, defects may not be obvious, but fall into a questionable category. Issues like foundations, electrical, plumbing, and roofing are some examples. A Real Estate Agent may see cracks in basement walls, but is neither qualified, or licensed to provide a valid assessment of the issue. But a good Real Estate Agent will point out the possible problem and explain how a license professional can properly assess the situation. The same is true for electrical, plumbing, and roofing issues. If a roof looks bad, let a licensed expert made a recommendation. If electrical wiring doesn’t look right, most Real Estate Agents don’t know electrical codes, but may be able to point out wiring that appears to be added after the house was built. A good Real Estate Agent will point out issues for a licensed Inspector to look at.
By law, licensed Real Estate Agents are required to disclose major defects in writing to both parties. The trick is, those defects have to be known and verified. Real Estate Agents have to know how to balance that law with another law telling us to be fair to both parties. That means Buyers and Sellers.
As an example. A roof may look bad to a Real Estate Agent standing on the side walk 50 feet away. But that roof may have an issue the Real Estate Agent is not trained to properly assess. The defect may be a fungus, dirt, or debris collecting on the roof. It would be inadvisable for any Real Estate Agent to offer an opinion that would drastically effect the value of that home in the eyes of potential Buyers. That would not be fair to the seller.
State licensed Inspectors are trained to inspect roofs, as well as other areas of homes. A good Inspector will determine the type of roofing, expected age, and remaining life period. A good Inspector will also look at other areas on the roof to determine quality of the materials used and installation. Inspectors will also be able to determine if the roofing materials faced recall notices, or other issues. Those are details Real Estate Agents are not trained to observe, nor share opinions on.
Having sold my own properties, I’ve seen a number of Real Estate Agents in action. Some, a few, but not many, walk through the door attacking the property. They point out every flaw trying to impress Buyers with their knowledge. They are trying to win Buyer’s confidence by convincing them, they will find every issue in an effort to obtain the lowest price. Is that being fair to the seller? Agents like that are trying to feed on the fear factor, getting Buyers to think, they will never find another Agent who is willing to do battle for them.
There is a process Real Estate Agents must follow to disclose major defects. They must be disclosed in writing. In most cases, this involves a series of steps from third party licensed professionals involved in the transaction. An Inspector most likely will be one of them. Because Real Estate Agents are not trained or licensed in many of those areas of expertise, Buyers have to rely on other licensed experts. Once the proper inspections are completed, that can trigger a chain of events every good Real Estate Agent should be able to explain. It can be a little different from case to case, and the procedure may be a little different from Real Estate Agent to Agent.
Major defects to watch out for relate to safety in and around the home. In most cases here is Wisconsin, safety issues must be addressed and fixed before the properly can be sold. This is especially true in transactions involving a loan. In some cases involving cash purchases, the Buyer may choose to correct the issues themselves. But defects should always be disclosed in writing to protect the interest of all parties involved.
Major Fear Factors
It took me years to figure this racket out and how it works. I lost count on the number of sales I’ve lost to this type of, what I consider, Real Estate scam.
I’ve worked with dozens of Buyers for months, then one day, find out they purchased a property from another Agent. In some cases it turned out to be an Agent holding an open house. The Buyers walk in, like the house, and the Agent turns up the fear factors on high. Buyers are often told the house has an offer the Seller is considering, or someone is about to submit an offer. The Agent at the open house offers to help the Buyers I’ve been working with by getting them the best deal or out bidding another party. That Agent just happens to have a contract ready for the Buyer to sign. Notice the fear factor?
Another issue I’ve seen repeated is where a Buyer gets a phone call out of the blue from an Agent who happens to know how much the Buyer is qualified for, and what type of house they are looking for. Those Agents follow their script to make the Buyer sign a contract and purchase a home out of fear. In many cases I’ve received phone calls months down the road asking me what to do. The Buyers either didn’t get the property inspected or used the inspector suggested by the Agent and the property has a number of major defects.
In both cases, those Agents chose to ignore ethics codes. In the later example, Agents choose to purchase information stolen from computer hard drives. Both cases rely on the fear factor to force people into making rash decisions.
There are certain procedures Investors need to follow to be successful. I am not going through all those steps, but I will list a few factors Agents may use to force a quick decision. The major factor they dwell on is using information spread through the Internet. Most investment sites are in business to make money for themselves, not you the customer. I’ve seen dozens of people ripped off form Internet investment sites. I’ve posted what I’ve been able to piece together for what I believe is a script sold on the internet. That script is designed to drain potential investors of funds.
How Online Real Estate Scams Work.
There is a process to follow and each Real Estate Agent has their own procedure. I have a set procedure and like to follow a particular order. First find out what if the Buyer watched any online videos. Many Buyers watch a half hour video and think they know it all. This makes working with them difficult. They are filled with false expectations and some of the online methods are either impossible or illegal.
The next step is to find out the Buyer’s experience level. I like to send new investors information on landlord training if they are starting out, or buying their first duplex. I use this to gauge enthusiasm. Of course I check to find out if they are a cash buyer or if financing is in place.
Buyers have to be familiar with the area they plan to invest in. We go over prices in a few areas. Then assess price and condition. When a Buyer makes a decision, I send them a market report with active and sold prices over the past 6 months within a half mile of the property they are interested in. We also look at the number of foreclosed properties in the area to help estimate future prices or problems.
Looking at market data in the immediate area is the most important step. But some agents use the confidence factor to lock up another sale. In this situation, a Real Estate Agent will use information they know is prominent on Real Estate investment websites. They encourage the Buyer to purchase the property by saying something like, “all you need to do is paint, put in new carpeting, and resell this property for $100,000.” Some Real Estate Agents work on hopes and dreams build up on the Internet.
Some Real Estate Agents use the confidence factor to talk Sellers into listing their homes for sale. It is a simple process I’ve seen used, and although it may be technically legal, I do not consider it ethical. If you look on the standard Listing Contract in Wisconsin, you’ll see the contract is between the Seller and Broker. Not the Real Estate Agent, but the Broker. Some Real Estate Agents are instructed by their Brokers to use that loop hole to their advantage. What do they do?
Some Real Estate Agents use office sales figures to impress Sellers. Since the contract is between the Seller and Broker, the individual Real Estate Agent uses office sales figures to impress the Seller by presenting office listing and selling figures as their own. But the office nor Broker have anything to do with most of the tasks involved in listing a house. The individual Real Estate Agent fills in the contract, gets it signed, takes measurements, pictures, collects data, and writes up the ad for the property. The individual Real Estate Agent also handles any offers to purchase and negotiations. The Broker has very little to do with the property listed for sale, and hopefully sold, other than collecting the sales commission and filing paperwork.
So you can see, most Real Estate Agents will work with a combination of fear and confidence factors. How they use those factors is important. Do good agents use that fear factor? Can the fear factor be used in a good way? Only when it is used within the restraints of the law. Real Estate Agents are also required to disclose what is called adverse defects. What is an adverse defect? It usually concerns conditions around the property. That can include legislation, certain improvements, and other factors that could drastically effect the value of the property. The Real Estate Agent has to know about those conditions to reveal the source, most often news, or updates on local issues. A few examples may be plans for a new expressway, zoning changes, and other factors involving major improvements in the general area. That is not a fear factor, but providing vital information.