Craigslist Suit Raises Red Flags

Craigslist Suit Raises Red Flags
By Rosmond Jones Dolen Esq.
Units (publication of National Apartment Association)
April 2006 issue

Two legal documents provide conflicting advice regarding online real estate postings. The Fair Housing Act (FHA) says that it is illegal to discriminate based on race, color, religion, sex, handicap, familial status and national origin in regard to real estate sale or rental transaction. The Communications Decency Act of 1996 (CDA), however, states that providers or users of interactive computer services are not considered publishers or speakers of content/information provided by a third party.

This conflict potentially immunizes online “publishers” such as Craigslist from being persecuted for discriminatory housing practices. The CDA does allow, however, for persecution of the person who posts the ads. Often the identity of the individual is not known due to anonymous posts or encoded information, which is held by website and not readily distributed.

Often legal action is taken against the publishing organization for a few reasons. First, corporations have deeper pockets. Suing an individual for discriminatory listings would be less lucrative and more difficult. Second, suing a publisher has the effect of forcing the organization to be more proactive in the elimination and monitoring of all adds effectively creating a more widespread solution to the problem.

Further difficulties arise in the definition of “discriminatory ads” examples given in the article range from “only Muslims apply,” to “Very quiet street across from church.” The latter being, apparently, implicitly discriminatory because some residents prefer the situation over others.

Suggestions given by the article to avoid discrimination include:
Follow the requirements of the FHA
Don’t try to circumvent the law by posting discriminatory content anonymously
If in doubt, check HUD’s guidance to advertising online
Report housing discrimination

Print is Not Dead

Print is Not Dead
By Lisa Trosien
Units (publication of National Apartment Association)
April 2006 issue

There has been a major swing in opinions over the past few years. Previously owners and managers of rentals were waiving off internet marketing as a “fad” and a medium not frequented by their clientele. Now these same owners/managers are proclaiming that print is dead and all their leases come off the internet.

What is missed by many owners/managers is that print advertising often directs potentials tenants to websites for more information. The most powerful method of advertising is creating print and online advertisements that complement each other. When tracking lead generation, ask “where did you see our advertising?” rather than “where did you hear about us?” the difference between these two questions is the number of sources the individuals are encouraged to cite.

79% of renters use a variety of methods to find their apartments and typically use three to four sources. When marketing a unit it is important to be strategic and consistent with the message and diversify the marketing approaches.

Rent-to-Buy Plan Gets Residents in the Door

Rent-to-Buy Plan Gets Residents in the Door
By Larry Schaffel
Units (publication of National Apartment Association)
June 2006 issue

40% of tenants are not “very likely” to renew their leases and the top reasons are relocation and homebuying. A Chicago developer has begun using a program dubbed RentBUY to provide tenants the opportunity to contribute up to 25% of their rent to the eventual purchase of a home. As a marketing tool this has proven very effective in attracting tenants who intend to buy homes. Additionally, the developer has constructed units and homes to both rent and buy meaning they retain tenants within their company when they choose to buy.

Thursday, 10/5/2006

We had our weekly sales meeting in the morning. Some potential deals are in the works at the office, some listings and some price reductions, nothing outstanding. I was able to inform everyone about my upcoming meetings and potential listings so that was encouraging.

Todd and I reviewed property valuation using Metroscan and the MLS system finding comparable property sales in the vicinity of two properties I am looking to list this in the coming week. The best approach is to look for properties as similar as possible to yours that have sold in the previous 6 months (up to 1 year if necessary). Luckily we were able to find a few properties that had sold and a couple whose listing expired which will allow us to provide an up to date and accurate price range for the property.

We were supposed to have a meeting with a perspective seller at 3, but there was a miscommunication and we have had to reschedule for Monday. It was almost my first face to face meeting with a seller, but I guess I have to wait till Friday to accomplish that.

Tomorrow I send in my application for the St Louis Association of Realtors so I have my own access to the MLS and other informational databases.

Wednesday 10/4/2006

Today I spent the majority of my time reading articles regarding apartment ownership and management. The way in which I can make myself the most valuable to my customers is to be able to contribute to their current status whether they are interested in buying/selling their property or are simply looking to manage their property to make the most money. As I read articles I will cite the original information source and write either an abstract or a outline of the important points. The articles will be posted by their title.

Ninth Day - 10/3/2006

AM training was focused on active listening and its impact on everything form cold calls to ongoing meetings and providing the best service we can to clients/customers.

I made one call today because that is all I needed to setup a meeting on Friday with a woman who is looking to sell two properties and buy a new investment building closer to her home. She works for a local mortgage firm and many of her clients are looking to buy or sell investment properties as well. Talk about a great contact to have made. We spoke on the phone for 10 minutes and I am very much looking forward to meeting her in person.

Being in the information industry one of the best ways to improve myself and the value of my services is to become more educated and active in real estate, property management and the local market. I will begin posting articles relating to these topics on the blog. The posts will be abstracts of articles and will cite the original source so readers may obtain the original if they so desire.

Eighth Day - 10/2/2006

I’ve begun setting up my cold calls in sets of 10. During the calling process I keep track of how many people I speak with and their responses. I spoke with one woman during my morning calling session who is interested in selling a different property than the property where I picked up the for rent number. Over lunch I drove by and the property is nice looking from the outside and is 100% occupied. I will call her back and see if I can get a listing on the building.

We listened to the 2^nd half of the Steve Shiffmann CD, my notes of which will be posted in a separate posting.

Timing is everything. I spoke with a man in my afternoon round of calls who, upon being asked if he wants to sell his building simply responded “yes.” He is out of town until Saturday afternoon but we will be in touch Monday morning and set up a meeting at his building so I can get a listing.

Seventh Day - 9/29/2006

FINALLY, (I guess it has only been a week) I made some cold calls. I called 10 for rent numbers I picked up the other day. The numbers have been entered into a new database I created that includes name, address, phone number and property descriptions of each person called. Before any new number is called it will be cross-referenced against this database to ensure either they haven’t been called previously or to adjust my introduction based on previous calls.

There were a couple people interested in buying additional properties but no one eager to sell. After reviewing my calls I found myself being too “soft” on the calls and not strongly pursuing my script and a meeting. Next time I will continue to push for meetings.

Todd and I listened to the first half of a cold calling CD from Steve Shiffmann. I will include a copy of the notes I took in a separate entry after we have finished the course.

I left the office at 12:30 and drove around my farm area for 4 hours picking up nearly 100 phone numbers of multifamily properties for rent. This will be the beginning of my database.

Sixth Day - 9/28/2006

We had our weekly sales meeting this morning where discussed new properties listed in the office and market trends. After leaving the meeting I was prepared to make my first cold calls, but after doing a little more role playing with Todd, I got cold feet and retreated to my computer to script some responses.

I did learn an interesting method of property valuation. When calculating a return/cap rate for a property many investors account only for utilities and maintenance expenses. In actuality, many additional expenses are associated with rental units including marketing, credit checks etc. the average figure according to research firms is between $2500 and $3500 per year per unit not including financing payments. The range of these figures is associated with the age of the building, style of construction, turnover of tenants and location implications of the building. These figures represent “hands free ownership” where you pay a third party for all activities.

These figures are significant because if a building is owned free and clear, i.e. you pay 100% cash for the property, rents must be approximately $300/month per unit to break even. Once mortgages and financing is included the break even amount increases. I also learned the term “buying a job” because if you buy a property with the intention of performing maintenance and management tasks yourself, you are essentially buying a job. What people fail to include in their property valuation figures is compensation for time they spend working on the property.

Fifth Day - 9/27/2006

Apparently due to Brokers renewing their licenses and new rules regarding license issuance, there is a huge backlog at the MREC. Apparently I can expect to receive my Broker license no earlier than mid October.

Todd and I went to look at a FSBO property on North Kingshighway this morning. The owners are looking to exchange into a strip center from the 20+ unit apartment building. The property is advertised as partly improved and we looked at one of the “improved” units. It appears that a lot of the repairs have been cosmetic with a few broken windows.

Todd had apparently looked at the property previously and had some very interesting comments about the status of the building, its operations and the location.

We returned to the office and practiced a few more calls and planned additional responses to “nos.”

I spent the afternoon walking around a couple streets in my farm area collecting for rent addresses and phone numbers. For Rent signs are a great way to generate leads for a number of reasons. First, the numbers are readily available and it shows if the building is managed by a PM or by the owner etc. Second, one or more units are empty and the property is cashflowing less than the maximum amount which might create a negative cash flow situation, aka motivated seller. Third, there is at least one unit vacant meaning if a meeting is set up, you can see a unit without interrupting a tenant and have a quiet/private onsite location to discuss a listing.

Fourth Day - 9/26/2006

On Tuesday mornings Bob provides training. All new agents are required to attend and it is optional to more experienced agents. Today’s topics covered the impact of the current housing market on rental properties, negotiations and escrow account management.

After the meeting I met with Todd and we role played some cold calls. His responses were much more positive than what I can expect to receive during actual calls, but the emphasis was on dialogue and responses.

I was amazed at how different it is to listen to Todd make calls compared to our simulated calls. The key to a successful call is having a purpose and direction to the phone call whether it be a meeting, a listing, information etc.

Third Day - 9/25/2006

I drove around the three zip codes on Friday and have decided to focus on the 63109 zip code. The area encompasses over 1000 multi-unit properties, the majority of which are 4 family (720) but that also includes numerous larger properties. This area will allow me to become experienced listing and selling some 4 family units while also allowing scalability to large units as my experience increases. The area includes all or parts of 5 neighborhoods and has local business associations, housing corporations and local groups, all of which will provide an excellent opportunity to network and get to know the area.

Todd and I identified properties both for sale and for rent in Sunday’s paper and called for more information. It was interesting to listen to his pace of conversation and line of questioning that ultimately leads him to a meeting, listing, information or whatever he determined was the purpose of the call.

I need to create or find a database program that allows me to list and group contacts. Todd suggests listing the contacts by phone number so that before I call, I search for the number and find out if I have contacted them previously if they have had previous property listings etc. Phone number is ideal because in the paper the name is not always included and can be hard to obtain.

Another tool that will be extremely valuable when I cold call will be a tracking system. The calling process has been described by many as a slot machine. Every time you “pull the lever” you have a change to “win.” When you pull the lever and don’t “win” and you know that for every 10 calls you make you will get 5 appointments, then every “non-win” is simply one call closer to the “win”

Second Day - 9/22/2006

I picked up a map of St. Louis on my way into work today. I need to begin identifying a Farm Area. A Farm Area is a geographic area of specialization where an individual knows the market intimately, market drivers, neighborhoods, streets, rents, investors, etc.

I began using Metroscan in conjunction with Google Maps and Zillow to identify promising areas. I’ve narrowed it down to three zip codes in St Louis City.

First Day - 9/21/2006

I arrived at 9 am for a weekly update meeting with the real estate group. The meeting was casual and informative with information primarily provided by Bob, the managing broker regarding the residential and commercial real estate industries locally and nationally. While foreclosures and listings have increased dramatically over the previous year the market is favorable for multi-family properties and investment properties.

After an initial overview of the MLS system I met with the trainer/mentor, Todd, and we spoke about the training process and research/information tools. MetroScan is a program which uses city and county Assessors’ information to provide a searchable database of properties. MetroScan used in conjunction with the MLS database and other informational sources is a primary provider of leads and research.

One of the major delays in getting started is going to be getting my license assigned to Bob. At the moment I have a temporary work permit which has been approved by the MREC. Within a few days I should have received the individual broker license. Once I have the license it can be returned to the MREC and a Broker-Salesperson license can be placed with Bob.

What I learned today:

1. Brokers are information providers
2. Property owners have four actions they can take
1. Sell
2. Buy
3. Hold
4. Exchange
3. Lead generation practices

Tomorrow I have four tasks to complete:

1. Define farm area
2. Identify existing “players” in the farm area
3. Begin compiling contact information database
4. Meet other agents in the office

I’m extremely excited about working with the professional at Realty Exchange and am confident that the combination of their guidance and my hard work and persistence I can be as successful as anyone in the industry.

Meetings

I spent three weeks talking with principals and managing brokers of many firms in St Louis getting to know the industry/market and looking for employment opportunities. Each person I spoke with addressed the difficulty of getting started in the industry especially from a financial and motivation stand point for the first 3-6 months. Commercial real estate is driven in large part by knowing an area’s prices, rents and investors very well and being able to network with owners. Developing this network is a long and difficult task.

Ultimately I joined Realty Exchange, a firm with department focusing exclusively on various areas of the market. Appartment Exchange is the property management branch, Coldwell Bank Premier is the Residential branch, Realty Exchange is the multi-family and investment branch and Realty Exchange Commercial Group focuses on retail, office, industrial and land brokerage.

I selected the multi-family and investment branch to begin because it is what initially drew me to commercial real estate, is the most relevant to my interest and has a faster learning curve than other segments.

Broker License Application

The application was provided by AMP with the results of the exams. To receive a salesperson’s license, the license must be held by a Designated Broker and said Broker must sign the application and provide the business location for the MREC to send the license. I applied for an Individual Broker License since I did not have a broker to associate with and had to complete the application immediately. The website where I took my education requirements provided Certifications of my having completed the courses. Since I was applying for a Broker License I had to supply a Consent to Examine and Audit my escrow account.

The application says it takes 3-4 weeks to receive a response so by late September I hope to have a response. And barring an unexpected discovery during their background search I will be a licensed Independent Broker.

Escrow Account

All licensed brokers in Missouri are required to have an escrow account. The account must be registered with the MREC and the MREC must be allowed to review and audit the account at any time.

I contacted my local bank, Bank of America (BOA), and asked my service rep if they offered escrow services and how long it would take to set up an account. The rep said he would investigate as he wasn’t familiar with escrow accounts and get back to me. I’ve found its very helpful to find people like this service rep who are reliable and will help perform research into certain topics. He called be back 30 minutes later and said they would set up an account but would take no part in its management. I met with him that afternoon and 15 minutes later the account was established.

According to Missouri License Law, the account cannot be interest bearing unless all parties who have an interest in the escrow funds (buyer, seller) agree that the account be interest bearing and agree who receives the interest accrued. I kept it simple and asked for a non-interest bearing account, which I’m sure BOA won’t mind providing.

License Success

I have passed both the Salesperson and Broker License exams in Missouri with scores in the mid 90%s. I wasn’t particularly comfortable entering either exam. If I had not needed to complete the courses within such a tight timeframe, I would have taken an additional few days to study the content for each exam. However since one only needs 75% to pass the exams, it worked out just as well.

The exams are pretty interesting. The facility is run by Applied Measurement Professionals (AMP). The facility consists of 25-30 computer terminals. Before you walk in they load the test you are about to take. After a brief introduction to the testing platform and commands you complete a practice exam of 10 questions.

The candidate completes the exam at their own pace (with a maximum time limit in place) and can mark questions they are uncertain about and return later. Upon completing the exam, one fills out a review of the facilities and test proctor. By the time you leave the examination room the results are printed and delivered to you.

Salesperson and Broker Content

As mentioned in previous posts, I obtained both the Salesperson and Broker Licenses simultaneously through an online real estate school. While I was expecting the content to be similar, I also presumed the Broker content would be more detailed and in depth. I was therefore very surprised when the content for both were identical. The slides used to convey the information were not just similar; they were the exact same slides I had read just weeks earlier for the Salesperson course.

While this came as a surprise, it certainly reinforced the material I had learned and allowed me to understand it more thoroughly. The test itself was more difficult in some aspects, especially the math portions, but very manageable.

Real Estate License

The requirements to obtain Salesperson and Broker Licenses are controlled by State Governments and enforced by the State’s real estate governing body. In Missouri, real estate practice is overseen by the Missouri Real Estate Commission (MREC). On August 28^th, 2006 an amendment to existing rules and regulations took effect increasing requirements for obtaining a Broker License.

Prior to August 28^th, to be eligible for a Broker License an individual needed to either;

a) have been actively involved in the Real Estate business under a licensed Broker

for 12 of the previous 18 months, or

b) have taken a 48 hour Broker License course.

With both choices, the individual would have to take and pass the Broker exam and apply for a Broker License with the MREC. After August 28^th, individuals need to be actively involved in the real estate business under a licensed Broker for 2 years to be eligible to take the licensing exam and must still apply through the MREC.

The information regarding this bit of legislation was an important factor in my decision to obtain both Salesperson and Broker Licenses simultaneously. I learned of the change when I was in Wyoming through a friend’s father with whom I had met and expressed my interest in the commercial real estate industry in St Louis.

Beginnings of Real Estate

I’ve known for a long time that I was interested in real estate and viewed my recent move to St Louis as the perfect opportunity to transition into the industry. A license is required to participate legally in the profession, Salesperson’s License at minimum and a Broker’s License is required to act independently. I also knew that I wanted to get a Broker License if possible to allow myself the greatest immediate and future flexibility within the profession. I researched distance education programs as I was still in Wyoming at the time, and decided upon www.realestateexpress.com.

The courses were structured into State and National portions and further subdivided into categories specific to the test and content. There were usually eight to twelve units per category which contained 10-15 slides each. The slides were similar to power point slides densely packed with information and split their form between bullet points and paragraph narration. A few situational examples were provided to make the content more tangible. Supplemental materials were also provided; the Missouri License Law in its entirety, practice tests and an online textbook