October 2007

Before it is over, I may need to retitle this post, but it’s too early. So, on to the latest email I received (from Illinois, no less) in what is shaping up to be Ask the Brokers Week at the San Diego Home Blog.

I have a question and hope that you can be honest with me about it. With the market the way it is today, would it truly make a difference if I go with a big real estate company verses a real estate marketing consultant, who reassures me that we will get (my property) sold before I get into any further trouble and lose it all? I just need some truth because I just wasted 3 months with a friend of mine who honestly didn’t show me anything that she claimed was being done except working from her computer.

Steve and I have worked for Little, Big and Biggest when it comes to brokerages. I will give you the most honest answer I can given that we are currently affiliated with the Biggest category.

All things being equal, the brokerage your agent aligns himself with is terribly important. Larger companies can provide resources that smaller firms simply can not. These include legal and administrative support, technology-related opportunities and tools, and credibility and presence in the agent community. I will brace myself for the onslaught of agent rebuttals to this statement, but the average agent (and, therefore, the consumer), in my opinion will be far better served by the large, established brokerage. And, the sad fact is that most agents are average at best.

All things are not equal, however. Big and small companies alike will have mediocre agents under their banner and they will have stellar agents associated with their brand. Ultimately, the individual agent will dictate the level of service and success that the client receives. A brand name alone does not qualify an agent to represent you. As the consumer, it is incumbent to evaluate the differences. Look at the individual agent’s marketing and services program, look at their track record, evaluate their successes and speak to their past clients.

As for your particular situation, I obviously don’t have all of the facts. Properties fail to sell for a variety of reasons: Market factors; location; property condition; and, most importantly, price, to name a few. Beyond this, the agent can indeed be an influencing factor. Proper pricing advice and aggressive, professional exposure are critical in a successful sale. The best agents today will find themselves “working from their computer” a lot, that much is for sure, but as one who leans a little further toward the side of technology than most, I still spend as many hours a day communicating with my clients on the phone and face-to-face than I do from behind a computer screen.

It is all too easy (and common, I’m afraid) for the agent to bear the brunt of blame when things are not going well. Too often, this is not justified, yet often some of the blame is warranted. A successful partnership, and don’t forget that your relationship with your agent is just that, is dependent on effective communication and on trust. The most important advice I can offer is this - If you are unhappy with your representation for any reason, you should find an agent that you can respect and trust. You have so many choices. Settling for a “friend” because you feel obligated may not be in your best interest, unless of course that friend is the best agent for the job.

Big company or small, your agent is an independent contractor who brings with them a particular level of experience, knowledge, professionalism, and success, not to mention a particular tool box of marketing and service tools to help you sell your home. Big companies may tend to offer their agents a wider array of spoon-fed opportunities to serve their clients and a more impressive brand recognition, but these are not ultimately proprietary things. Your agent, large company or small, can and should demonstrate a commitment to their business by being always knowledgeable in the market, in contracts and disclosure law, and in the changing technological opportunities for marketing your home. They can and should show a commitment to you and the business of representing you using the best resources available. Ultimately, it will be the qualities of the individual agent which are most important to you personally and to your transaction.

I received this question today:

I was told I had loan approval. The broker then opened escrow. Escrow should have closed 8/27/07. As of this date, I have no funding and escrow has not close. Am I entitled to receive my deposit and appraisal back?

I am afraid I have more questions than answers, and I hope you will help me out through your comments (under an alias, if you wish).

1. “I was told I have loan approval. The broker then opened escrow…”

Loan approval is always subject to conditions, so my first question is, were there conditions that you were unable to meet? Was your “approval” a prequalification or a preapproval, or did you indeed get subsequent underwriting approval subject to final funding conditions? Regarding prequalification and preapproval, there is a difference. A prequalification typically consists of a short conversation with the lender or mortgage broker. “What do you make? What do you owe?” Based on unconfirmed representations, the lender or mortgage broker will make a determination that you are, in theory, qualified to make the purchase. On the other hand, a preapproval typically involves actual completion of a loan application, verification of assets, and a credit check. While not a final commitment to make the loan, it is clearly more thorough.

2. “Escrow should have closed 8/27/07. As of this date, I have no funding and escrow still has not closed.”

I can’t imagine why escrow is two months late in closing, but I clearly lack the information that you have. You say you have no funding. Funding occurs after full loan approval and after loan documents have been executed. Have you signed loan documents? What reasons are you being given for the extraordinary delay?

3. “Am I entitle to receive my deposit and appraisal back?”

Most lenders require the appraisal to be paid out of pocket by the buyer. You would have to take this issue up with the lender, but I highly doubt they would refund the appraisal cost. This is a cost of doing business paid to a third party for services rendered.

Regarding your deposit, this goes back to whether or not any of your contingencies of purchase are active. If you have waived all contingencies, particularly your loan contingency, then your deposit is at risk, since failure to close at this point would be a breach of contract. If, on the other hand, you have not removed these contingencies, you might be entitled to have your deposit returned upon cancellation.

Again, if you are willing to shed a little more light on your situation, that would be helpful. If there are any lender-types out there (Brian Brady?), I would appreciate your input.

It sounds like a mess all around, and the real travesty (I sense) is that no one is properly explaining the process or the reasons for the delay to you. I wish you the best of luck!

The County Recorder’s Office will remain closed through the remainder of the week. We were also just advised that San Diego Gas and Electric has a two-week delay for shutting off the gas for termite fumigations; they are presumably a little busy with other things right now. Between these issues and the challenge of finding homeowner’s insurance, those in escrow should plan for and expect a delayed closing.

Update - This just received from an insurance agent with Homeservices of America:

I have just gotten word from one of my carriers that I can ISSUE/BIND insurance for properties that ARE NOT located in an actual BURN area!  This will open the possibility of getting some escrows closed.

Good news!

With many of our fires not yet contained and firefighters all over Southern California still putting their lives on the line to save lives and homes, we have yet another firestorm coming over the horizon. This one is a Santa Ana of insurance companies pulling out of Southern California. With thousands of people displaced from their homes at the same time many others are struggling in the current environment to buy or sell homes, we now get this bulletin from Travelers Insurance -

Travelers has ”Suspended Binding Authority for Coverage on Dwellings and Personal Property”for all of San Diego County, most of the Mountain Communities of San Bernardino County, portions of Orange County and LA County.

In fact, we are hearing from many sources that an insurance moratorium is in place by all companies for all of San Diego. We saw this in 2003 immediately following the Cedar Fire. At that time, individual zip codes were red-tagged; now, entire counties are affected.

Travelers - These are the guys with the “umbrella” logo, suggesting, I must assume, protection. According to their website:

Our success is built upon our ability to provide innovative insurance and risk protection products and services in-synch with our customers’ needs.

Guess what, Travelers? Your customers still have needs.

After the 2003 fires, things settled down within a few weeks, but it took at least one scathing expose by the San Diego Union Tribune and some political intervention. It will be interesting to see how Governor Schwarzenegger and Insurance Commissioner Poizner respond to our current situation.

I don’t pretend to be an expert on the insurance. Of course I know that these companies are there to make a profit and many do that part very well. After all, shareholders are expecting it. They, like me and most others, have bills to pay. But being my Pollyanna self, I cannot fathom people or companies who bail on others when the chips are down. I would like to think that they see their customers as more than lucrative actuarial tables. Silly me.

If you have a home in escrow now, insurability will be at least a near-term concern. We have one such home, scheduled to close in the next two weeks, which may experience delays. Many people throughout the region will be similarly impacted. To me, this defies logic. I can understand the need for an insurance provider whose corporate offices are located a thousand miles away and who is unfamiliar with our community to confirm the status of a given property. However, I find it unconscionable for this same company to decide that now, faced with claims from people who have paid (and paid and paid) for this very protection, they will take their ball and go home. They are in the business of making money, certainly, but their “product” is protection. Where did that umbrella go? There was no moratorium in effect when their was no foreseen, widespread threat. They happily collected their premium checks when blue skies were overhead. And, one could argue, our county is a much lesser “risk” today than it was yesterday.

We will be keeping an eye on the insurance situation over the next few days and weeks as we did during the Cedar Fire and will try to identify those insurance companies who stand up to the call. We hope that some will, and I just hope that the local and national media will expose the companies who, for the time being at least, don’t have the courage to live up to their slogans.

The skies are a little bluer, at least they are over my home this morning. When I woke up, I was startled by the noise outside. Then I realized it was the sounds of traffic. Strange that I hadn’t noticed the relative eerie silence over the past forty-eight hours, but it had been there. Today, at least some people are returning to their work and their lives. Thousands of others are not, their lives having been redefined through an act of God so unforgiving that it shakes one’s faith.

This is where it gets hard. I have joked to friends and family and have made light of my personal circumstances here in San Diego, but not because there is anything amusing or funny going on. That is just what I do and how I cope. Others will deal with their grief and their fears in their own ways. For Steve and I, we must begin the process of healing. What afflicts us is survivor’s guilt.

What do you say to a friend, a colleague, a client or even a complete stranger who has lost everything? When do you go back to your daily routine, and how do you resolve in your own mind that performing a mundane yet necessary routine task or obligation is somehow not a show of disrespect for those who do not have the luxury?

Since Monday morning, I have been following the fires in San Diego County and in the San Bernardino Mountains with nearly equal determination. I consider both my communities. We are not rich, but we are blessed to have homes in both places, and I am now convinced beyond doubt that the residents of these communities are among the finest anywhere. In San Diego, a local reporter watched his home burn to the ground while he reported it to the live cameras. In Lake Arrowhead, I read of a firefighter battling to save a structure while speculating on the emergency frequency I was following what the fate of his own home might be a few blocks away. At Qualcomm Stadium, one of our more visible evacuation centers, at least one report speculated that the volunteers outnumbered the evacuees. Volunteers were being turned away. What they really needed was money.

Gratitude. Our firefighters, law enforcement and other emergency personnel have worked tirelessly to protect our communities and at great personal risk. Our elected officials have responded from the outset with equal conviction and commitment. They are all tired, and they are all hungry. Yet, they have performed and continue to perform their jobs in the most brilliant ways imaginable. They have saved lives, and the numbers speak for themselves. I called my own evacuation an overreaction, yet this “overreaction” was precisely what was needed. There are not enough words to properly thank them.

Pride. These communities continue to rally to lend support to the victims. They give of their time, of their money, and of their homes. The outpouring of compassion has been enormous. It reminds us that people are good.

This morning, I hear a songbird outside, several, now that I stop to listen. It will be awhile before I feel like singing again, and I feel guilty even dwelling on such things. God bless everyone who was touched by this tragedy.

For those of you who wish to run Dean Spanos and the San Diego Chargers out of town and sell off the Qualcomm Stadium site to a developer to generate revenue for the City, I have the following question:

Where do you think we should put the 10,000 people (or more) who are displaced by the next wildfire or earthquake, or whatever natural disaster? 

The current crisis could not demonstrate more clearly that this facility (or its replacement) does not just serve as an entertainment venue. Right now it’s not generating one damn penny of revenue for our City, but I would venture that it’s a safe guess to say that most if not all of the 10,000 or so people who were there yesterday, are there today and/or tomorrow consider it priceless.