Last week the Illinois Senate passed a bill to substantially rewrite the Real Estate Act of 2000. The bill now goes to the governor for signature. Here are some of the highlights of the bill:

They’re changing the terminology of the industry. Currently, a Salesperson is what most people think of as a regular agent and Broker is the person that the Salesperson works for. Of course, the public thinks of everyone as a broker because, well, they broker deals. So they’re changing the terminology to match popular usage. The new terms will be Broker and Managing Broker. Probably a good idea since realtors aren’t supposed to be selling anything when they are working for a buyer (yeah, you heard me right).

They’re increasing the course work required in order to become either a broker or a managing broker. The broker requirement is going up from 45 classroom hours to 90 hours, while the managing broker requirement is going up from 120 hours to 165 hours. 15 of these hours have to be situational (not exactly sure what they have in mind here but with any luck it will include how to answer your phone, how to return phone calls, and how to use email). In addition, they are increasing the ongoing educational requirements for both licenses.

The increase in coursework is definitely a good idea because, let’s face it, there are a lot of Bozos running around as real estate agents. If nothing else this should clear the ranks out a bit, pushing some of the marginal players over the edge. You would be surprised at how much is missing from the current curriculum that we have had to figure out on our own. For example:

• How to handle a short sale
• How to find and pull up public records
• How to determine zoning
• Where to find the building codes
• How to find out what the development plans are for adjoining properties
• All the documents required for a closing
• Typical inspection issues to look out for
• How to use the MLS effectively

Of course, there’s no guarantee that they will apply the additional course hours to this practical stuff.

In addition to a host of consumer protection initiatives, another new requirement is that a broker will have to be licensed for at least 2 years before becoming a managing broker. The cynical part of me thinks that this is an attempt to restrict competition but I guess it makes sense – for the average person. However, given that the job is not exactly rocket science, I know of at least a couple of people who were able to move quickly into this role, without a lot of time in the trenches, and became more effective than most overnight.

This new law takes effect December 31, 2009 but existing licensees have until April 30, 2012 to comply with the new requirements. So, there’s still plenty of damage that can be done in the meantime.

It’s that time of year again when realtors do their annual pumpkin dropoff. Well…not all realtors – just the ones that follow the traditional real estate marketing model of ingratiating yourself with your clients. It’s an old realtor ploy popularized in the realtors’ bible: How To List & Sell Real Estate In The 21st Century. On page page 53 the author tells the story about how she learned about the success of Tommy Hopkins in Simi Valley a few weeks after she started in real estate: “For Halloween, he rents a truck and loads it up with pumpkins. Then he puts on a ghost costume and drives around his neighborhood giving away pumpkins.” She includes this strategy again under her “Full Year Farming Almanac” on page 93 under October SUPER-promotion.

Uhhhh…I refuse to go around in a ghost costume – even at Halloween. I’d rather discount my commission and give rebates to buyers.

Apparently, you would. At least that’s what a Gallup poll released in November 2008 revealed. Although it’s old news I thought it was interesting since I routinely hear people within the industry lament the “fact” that realtors have one of the lowest trust ratings of any profession – next to used car salesmen.

Well, it looks like this might be another one of those industry myths and lies – but this time it’s one that clearly does not promote the industry. Here is the actual data from the Gallup poll where they interviewed 1010 adults across the nation about their perceptions of the honesty and ethics of 21 professions.

As you can see, realtors actually landed in the middle of the pack, right behind lawyers. The ranking above is based on the % of respondents that gave professions high or very high marks. However, you can also see that if you were to rank these same professions based upon the % that gave professions low or very low marks, realtors’ ranking would actually rise a couple of notches.

Surprised? Yeah, me too.

Gary’s Note: There have recently been issues with real estate deals not appraising at their contracted price. The article below, provided by Marc Jacobs of A&N Mortgage, explains some of the reasons why.

Today I wanted to discuss the Home Valuation Code of Conduct (HVCC), which went into effect May 1^st of this year.  While it may seem like old news, there are consequences that may effect a buyer’s financing options and ultimately your profit.  The purpose of the rule is to prevent any influence mortgage professionals may exert over an appraiser.  Therefore, an uninterested party must be responsible for ordering the appraisal.

The rule doesn’t apply to all lenders equally.  These are the distinctions that need to be understood before a buyer chooses a lender.  I will discuss the procedures used by large banks, mortgage brokers, and finally mortgage bankers like my company, and why mortgage bankers provide the best possible alternative for getting fair appraisals.

Large banks, like Wells Fargo, Chase, Citi and Bank of America use Appraisal Management Companies (AMC) for their appraisals.  These are national companies, many of which are not at all familiar with the areas they are appraising.  The consequences are that properties are being appraised for under market value.  Another reason for the low appraised values is that many of these large banks have ownership in the AMC’s.  Therefore, it is likely that after writing off billions of dollars in bad loans, they are making sure that the appraisals are as conservative as possible.  Lastly, banks that use AMC’s sometimes wait two weeks for the appraisals to be done.

Mortgage Brokers are not allowed to order an appraisal at all.   The lender that is financing the broker’s loan will order their own appraisals, utilizing either the system mentioned above or one similar with all the same consequences.

Mortgage Bankers are able to use an alternative procedure, which I believe to be the best and most efficient.  While I can not personally order an appraisal, there is an impartial employee at my company who can.   The advantage is that we use local appraisers who have years and years of Chicagoland experience.  Our appraisers do not work for bank owned AMC’s.  Rather than looking for ways to lower their value, they search for ways to justify a higher value.  In addition, we can track the progress of the appraisal which makes the turn around time only 24-48 hours.   From my experience, HVCC has been much less of a burden for my realtor partners than those using large banks and mortgage brokers.

In today’s turbulent real estate climate, we certainly don’t need unnecessary obstacles making it more difficult to close deals.  As you can see, it is very important to choose the right lender.  Big is not always better.

According to the Mortgage Bankers Association FHA and VA loans comprised 36% of the mortgage applications in the month of June – which is a lot. There’s a really simple reason for this huge share of the mortgage market and it should come as no surprise to anyone. Since banks have stopped loaning 100% or more of the purchase price to buyers and people have had to come up with real down payments the government is the only game in town for low down payment mortgages. And there is a huge demand for low down payment mortgages.

Now if you are selling a single family home it’s relatively easy for the buyer to get FHA financing – assuming the house is in decent shape. However, condos are a different animal. There are a whole host of reasons that a development won’t qualify and the condo itself can only be mortgaged for $410K.

So you would think that condo listing agents would be all over the FHA program to make sure that their listings are eligible for this government giveaway. But you would be wrong. We have buyers that need FHA financing and there is no point in showing them condos that won’t qualify. There’s actually a field in the MLS where the listing agent can check the types of financing options available but it’s rarely used and even if it is used the FHA option is overlooked. So the first thing we do is call the listing agents to find out if they think the development will qualify for FHA financing. And you would be surprised how often the agents don’t know and don’t seem to care to find out. Well, let’s face it. It’s only 36% of the potential buyers.