Dean Graziosi | Dean Graziosi Real Estate | Dean Graziosi Investment

The NAR has a long history, stretching over 100 years. It’s members have grown from just 120 in 1908, to tens of thousand. Below you will learn a little bit of their history and most importantly, their code of ethics. You’ll learn exactly what they are without the hassle of the nonsense in between.

A Brief NAR History

The NAR was founded on May 12, 1908, but not originally as the National Association of Realtors. The organization was created as the National Association of Real Estate Exchanges, at a YMCA in Chicago, Illinois. The original group was made of only 120 members, 19 boards and a single State Association. The NAR, originally known as the AREE, described its objective as to, “unite the real estate men of America for the purpose of effectively exerting a combined influence upon matters affecting real estate investment.”  One can see, almost immediately, why the image over haul was done.

By 1913 an official code of ethics was put into place. The theme of their code of ethics was termed the Golden Rule. When 1916 rolled around, the AREE realized their organization was in desperate need of a modern face lift. The first thing any company does to change its image is to change their name. The name they chose, unfortunately, didn’t get better. The name was changed to the National Association of Real Estate Boards, or the NAREB, not a catchy tune. It wasn’t until 1972, that the NAREB got the sense to shorten their name and mainstream the product by changing their name to its well known form, the National Association of Realtors.

The NAR Code of Ethics in Short

There are 17 articles under the realtors code of conduct. They are available to view in their full text at, http://www.realtor.org/realtororg.nsf/files/R_COE-Pledge-of-Performance.pdf/$FILE/R_COE-Pledge-of-Performance.pdf.

1. Be honest and protect their clients interests

2. Do not exaggerate

3. Cooperate with other real estate pro’s for their client

4. Always make clear their true position or interests

5. Do not give professional assistance where it is already being provided

6. Disclose any and all financial gains that will be received

7. Receive compensation from only party, except when they receive full consent from the client

8. Keep trusted funds of clients and customers in separate escrow accounts

9. All contract details must be in writing with multiple copies

10. Do not discriminate for any reason

11. Be knowledgeable in the real estate field they practice

12. Be truthful in advertising

13. Don’t engage in unauthorized practice of law

14. Willing participate in ethics investigations

15. Make only truthful and objective comments

16. Respect other realtors and their relationships with their clients

17. Arbitrate financial disagreements with other realtors and with their clients.

If this list of ethics is any standard for the NAR in reality, it seems you can count on them to help you with almost any realty interest you have. If you want REO’S, help with a foreclosure, or just buying your first home, the NAR representatives are a safe avenue to travel.

Let’s take a look at two ways of ramping up a rental property investment portfolio.  First, there’s Sam, a really happy real estate investor who was so happy with his first single family rental home investment that he decided to leverage his skills and money and grow his business with more single family home purchases.  Sam has purchased five more homes in nice neighborhoods around town, and all are providing a positive cash flow, as well as the other benefits of rental property ownership, like tax advantages.

We’ll also take a look at Jane, who began in the same way, with a couple of rental single family homes.  However, Jane decided to sell those and roll her investment funds into a six unit apartment project.  She’s renting out six units, the same as Sam is doing.  They’re all cash flowing well, just like Sam’s homes.  However, Jane’s return on investment for all six units is several percentage points higher than Sam’s.  Why?  Economy of scale is the primary reason.  Economy of scale is when an investor saves on costs due to the size of the project or number of units in one location.  Here are some savings points:

·         Initial Cost – While Sam is paying for individual structures built in different locations, Jane is paying for a single roof, and apartment units with common walls.  There is also some savings on land cost, as Jane’s six units are sitting on roughly the same size lot as two of Sam’s homes’ lots.  The cost/square foot for Jane’s apartment construction is about 25% lower than Sam’s.

·         Repairs & Maintenance – Jane gets some discounting by maintaining one property’s landscaping, a single exterior, and by keeping interior finishes common in colors and styles for all six units.  Sam is maintaining six very different homes in different areas.  Jane has negotiated repair service discounts as a multi-unit property as well.

·         Management & Accounting – Sam has six homes across town to keep an eye on and manage.  Six spread out properties to drive by at least once a month, and six different addresses to pay taxes on.  Jane has a single location, can watch it closely without driving around, and has a single address for taxes and other accounting purposes.

There are other ways in which concentration of rental properties in one location saves the real estate investor on costs of operation.  The key is to understand the concept of economies of scale and decide if the next logical growth plan for your real estate investment business is a multi-family property.

Remember all of the songs and derogatory press about the “suburbs,” or “burbs” in the 80s?  The suburban lifestyle was depicted as one of blandness, and generally a really boring existence.  Huge tracts of same-looking homes in rectangular blocks created the “tract living” environment.  People went off to work in the city in carpools and came home to their cookie cutter homes every night to do it all again tomorrow.

However, “times they are a-changing,” as Bob Dylan sang.  In today’s real estate markets, prices in the suburban areas have dropped along with everywhere else, but many times a lot more.  With home prices in these areas down, some communities have developed plans to revive their “burbs,” and the 72 million+ baby boomer generation is playing prominently in some of these plans.

Rockville, a suburb of Washinton D.C. was one of those areas maligned in songs for its boring blandness.  But today’s Rockville is quite different, and is reviving the “downtown” Rockville area’s shops and businesses.  The core of the town and the plan is shops, restaurants and apartments, all steps away from a subway station.  This creates a vibrant street life that’s fun and attracts and supports business.  Also, the nearby subway station provides the convenient and fast transportation to the larger city supporting major services and employment.

Baby boomers are buying and renting in Rockville now.  They like the sense of community created by the town square.  Neighbors and friends are meeting to enjoy the square, have a cup of coffee or shop in the boutiques along the way.   It’s no longer the “sprawl” growth of the past, now called “smart growth.”  Developing a mix of housing and businesses in and near existing cities creates a mini-community.

What does this mean for real estate investors?  Simply, if a real estate investor can get in on the front end of one of these new smart growth initiatives, there is opportunity to profit.  Whether it’s rehabbing older subdivision homes for resale, or holding them for rental, these areas are successfully rebirthing the old tired subdivision concept.

The Florida real estate market has been one of the hardest hit markets during the recession.  It will take years for values to get back to their 2007 values.  Since late 2008, Florida’s real estate activity can only be described as dismal.

Residential and commercial construction, once the heart of many Florida counties, is at a standstill and showing no signs of recovery.  Unemployment on Florida is among the highest in the country. 

After Hurricane Katrina, much of the construction in Florida involved the use of Chinese drywall.  The drywall has left thousands of homeowners and construction firms involved in litigation. 

In Florida in the first quarter of 2010, 39 percent of all homes sold were distressed or foreclosed properties.  Florida was one of ten states where distressed housing accounted for more than 33 percent of all sales.  In Nevada, a stunning 63.5 percent of all sales were distressed homes.

In Florida, 35,410 homes sold in the first quarter.  15.2 percent of all foreclosure sales in the country were located in sunny Florida.  Foreclosure sales rose by 9 percent in year-over-year comparisons, but were down 3 percent form the fourth quarter 2009.

Just three years ago, Florida real estate was in high demand.  Buyers flocked to the beach and to the sun for primary and secondary housing. Houses were selling at prices that will not be seen again for years.

However, investors are on the scene and in the Florida market.  Bank owned real estate sold at a 37.8 percent discount in the first quarter 2010.  The average selling price of pre-foreclosure and foreclosure homes in Florida was just $121,394 in the first quarter.  Nationwide the average selling price for foreclosure homes was $171,971.

Many REO’s and short sales in Florida are second homes.  Sellers want out.  The banks want out and investors are reaping big harvests.  Florida investors are approaching banks for quantity discounts.  In the Sunshine State, wheeling and dealing is taking place.

Investors are finding a strong seasonal rental market for short sale acquisitions and REO’s. It’s not too late to become a Florida investor.  

Negotiating a real estate transaction is an art form.  In days gone by, real estate agents were prone to be more involved in the negotiations.  Changes in the industry have pretty much removed agents from the negotiations.   

Typically the purchaser makes an offer.  The seller’s agent presents the offer to the seller and the negotiations begin.  Price, date of occupancy, remedial conditions and non-real estate items included in the sale are negotiable items.  Contingencies that need to be addressed are the structural inspection, the mortgage contingency and any other contingency specific to the transaction.

Most contracts today contain a contingency relative to the review of the contract by the attorney for the seller.  Negotiations can occur during this period.

Negotiating a real estate transaction is not complicated, but it is important that every detail be resolved so that the transaction can commence without surprises. 

Today, the real estate market is a buyers market.  Qualified purchasers have many properties from which they can choose.  Purchasers and their agents are aware of their strength in negotiations.

Buyers with pre-approval letters from a lender are hard to find and thus are in a strong position.  But, sellers with nice homes in desirable neighborhoods always have strength in that they reside where others would like to live.

Real estate negotiations are rarely about who has the upper hand.  They are usually about the perceived value of the real estate.  If the buyer wants to build a case for a lower selling price, he will need to support his claim with comparable properties.

The seller may be willing to provide certain incentives to get the purchaser to a higher price level.  At the same time, the buyer may be willing to make concessions to lower the price.  Finding the balance has saved many transactions. 

The key to successfully negotiating the contract is to first make clear what items both parties like.  After those issues are clear and resolved, create a list of the items that need to be agreed upon.  By identifying those items the parties resolve issues one at a time.  Unless one party is unwilling to negotiate, the transaction can usually be saved. 

The process can be nerve wracking and time consuming.  However, reasonable parties usually come together because one person wants to sell and the other wants to purchase.  If that basic principle does not exist, there is no way the deal will come together.  

If investors are purchasing a foreclosure property, repairing the property and putting it back on the market as soon as the repairs are complete, the investor should already know the asking price.  In keeping with the investment strategy that there is no romance in real estate, the investor must be very familiar with values in the neighborhood as well as with foreclosure sales and short sales.

In addition to applying the square foot replacement cost to the property, the investor will have performed a CMA before purchasing the property.  During the period the property is being renovated, the investor must stay in touch with the marketplace, including those short sales and foreclosures.  These sales definitely impact the value of homes around them.

In the investor’s buy-fix-flip strategy, every real estate agent and every buyer will most likely know what the investor originally paid for the property. That information may come into play.  However, in areas where the investor has acquired a distinctive home in a desirable neighborhood and made smart improvements, profits are being registered.

This may account for why investors are entering the higher priced areas and bidding on REO’s and short sales with jumbo mortgages.  The investor must be willing to tie up credit, pay for improvements and run the risk of being unable to sell quickly.  If the property does not flip, the investor can rent but a good deal of credit will still be attached to the property.

Buy-fix-flip on jumbo mortgage housing is risky.  But, investors in certain metropolitan areas are turning big profits.  In some cases, the investors have been able to ask very reasonable prices and generate multiple offers.  When a fair price for a unique property comes on the market, good things happen.

This practice has become popular in Oakland.  “We’re seeing multiple offers; we’re seeing above asking prices.  People are buying foreclosures, fixing them up and selling them and getting offers,” says David Kerr of ZipRealty in Oakland.

If the investor has the ability to perform the renovations themselves, six figure profits are within reach.  There is profit to be made on jumbo failures but be prepared to handle the risk.   

Every now and then an investor comes up with a novel idea.  The Mack Companies are a real estate investment company located in Chicago and specializing in the city’s south and west sides.  The company has come up with a nice package, which they call home-redevelopment.

The home-redevelopment concept is designed for the small to medium investor who has a small appetite for risk.  The company has put together an interesting formula with controlled exposure and a steady yield with long-term potential.

The new product is called RECAP, which stands for Real Estate Cash-flow and Appreciation Program.  The Mack Companies promote the product as the simplest way to be in the real estate investment business with minimal risk.

Rather than purchase short sales or go through the foreclosure process, investors purchase one or more of Mack’s tenanted, professionally managed completely redeveloped homes at discounted prices.  All properties in this offering are located in secure, stable areas of the city.

The homes are in “pristine” condition, are guaranteed to be structurally sound, including all the structural systems, and have all appliances that appeal to tenants.  All tenants in the RECAP homes have been qualified by the company.

As the real estate market improves, investors can anticipate long-term growth.  Meanwhile, investors have a steady stream of income.  The Mack Company says investors receive one check for each property each month.  From the proceeds the investor must pay property taxes, the mortgage, management fees and insurance fees.  Typically the investor nets between $200 and $300 per month.

Mack says most tenants stay in the properties for five years. Obviously there are questions to be asked, but it is refreshing to see developers start to untangle the effects of the recession.  

With the pressure that buyers and sellers are under in today’s real estate market, the Department of Housing and Urban Development (HUD) has opened offices with home counseling services.  Many real estate companies and agents also provide comprehensive home counseling services.

Home counseling services cover a wide berth of topics ranging from home purchasing to preventing foreclosure.  Most brokerage houses provide these services free of charge and all HUD services are provided at no cost.

When you are purchasing, the counselor can help evaluate your credit, assist in correcting any errors on the credit report and explain the purchasing procedure from beginning to end. One of the most important parts of purchasing is understanding the amount of money the purchaser will need to cover the down payment and all closing costs. 

The counselor can provide everything the buyer needs to know about the mortgage industry.  Mortgage products change constantly and as the mortgage is such an integral part of homeownership, it only makes sense to get advice from a professional.

The best time to learn about the “offer for purchase and sale of real estate” is before you are ready to make your first offer.  That way when you find the property you want, you will be ready to act.  The counselor can explain all the parts of the purchase offer as well as explain the home purchasing process.  Purchasers will need to select an agent, find a property, make an offer, negotiate the contract, arrange for a mortgage and close the title.

Generally, the counselor can introduce the prospective purchaser to several lenders.  Purchasers should always obtain a pre-approval letter from the lender before submitting an offer.  The presence of the pre-approval will make the offer look more appealing and increase the purchaser’s chance to get the offer approved.

Private or public housing counselors can also help troubled homeowners.  Today, troubled owners have many options and opportunities to prevent foreclosure.  The housing counselor will be aware of all the federal and private workout programs.  Whatever course of action is on your horizon, consult with a housing counselor before you begin. 

Consumer confidence is one of the key indicators that investors always track.  For the past two years, consumer confidence has risen to surprising highs and fallen to desperate lows.  Every time there is a shift there is a reason why.

That’s the scary part.  Consumers are human.  They react to headlines, media and world events that really have very little affect on the overall marketplace.  Savvy investors not only watch consumer confidence but they analyze it.  In fact, the consumer confidence index published by the Department of Commerce affects every market from equities to currencies to commodities to real estate.  If you fancy yourself a real estate investor stay on top of this important index.  You will make many smart moves by staying on top of consumer confidence.

In July, the Certified Financial Planning Board of Standards released a survey through June 30^th, 2010.  The study revealed that consumers are worried about equity markets and currency markets.  The survey, which included more than 1,000 residences from all areas of the country and from all economic levels, indicated that 83 percent of those polled believed their finances would improve over the next six months.

These consumers believe that many sectors of the economy, including residential and commercial real estate, will also improve in the next twelve months.  Progress will be slow and delayed, but progress will be made.

Certain aspects of the June real estate market activity are surprising.  In Southern California’s six biggest counties, real estate sales increased by 7.2 percent in June compared to May.  In fact, activity in these counties was the highest since June 2006.

California trails Arizona and Florida in short sales and foreclosure activity.  Facts are facts.  More money was invested in Southern California last month than in the pat two years.  Additionally, more mortgages were written than in the last two years.

While this is not a complete endorsement, it certainly marks a trend worth watching.  Pick your investment area and follow the consumer confidence trail to short sale success. 

What a difference a year can make! Lending service companies have reversed last year’s mortgage modification resistance in a resounding way.  According to a HOPE NOW survey, more than 159,00 mortgage modifications were completed in May 2010.

That brings the number of modifications in the first five months of 2010 to 800,536.  With new government incentives, lenders are finding it less expensive to attempt workout programs and modifications rather than foreclose.  Typically, lenders are not in the real estate ownership business.  The cost of maintenance, real estate management and real estate commissions makes owning and selling real estate an expensive proposition for banks.

HOPE NOW includes counseling organizations approved by the agency and mandated to work with troubled homeowners.  These counselors are equipped to work with homeowners in credit counseling and debt management as well as short sale tutoring and foreclosure instruction.

Faith Schwartz, a senior adviser for HOPE NOW, said, “The latest results continue to support the industry’s unprecedented efforts to assist borrowers across the country using myriad foreclosure prevention programs.  The industry has made great strides and is organized around significant efforts.  It is incumbent that the industry, government and non-profit segments continue to collaborate until the housing market has stabilized.”

The Treasury Department reports that 49 percent of homeowners who do not qualify for permanent Home Affordable Mortgage Programs (HAMP) have been placed in alternative modification plans with comparable payment reduction benefits. In addition to the 159,000 mortgage modifications processed in May, another 213,000 trial alternative workouts such as forbearance and repayment through short sales were initiated.

These figures are definitely encouraging.  However, there remains some pretty discouraging news relating to then success of modification loans.  Almost 206,000 foreclosure actions were commenced in May.  Almost 100,000 foreclosures were finalized during the month.

HOPE NOW reports that 9.50 million mortgage workouts have been offered to distressed homeowners since July of 2007.  Nearly 3.2 million of these workouts are loan modifications.