Read by More Than 30,000 Agents

2) How Secure is Your Equity Line of Credit?

It's the moment that real estate agents dread. You've been showing properties to your client, you've found one that you think will work for your them, and then completely unexpectedly you hear them say:

"I have a friend who has a real estate license and I want him to cooperate and receive some of your commission."

And just when you thought you were getting closer to earning some good money with the client, you've now got a brand new situation on your hands you have to deal with.

This is where both new agents and mediocre agents often just roll over and cave-in to the client, offering a portion of their commission to the client's friend who has the license. But seasoned professionals on the other hand definitely know this is no time to stand for this kind of treatment from anyone.

This problem oftentimes stems from the inaccurate assumption by many people, that possessing a valid real estate license is the most important component for getting paid commissions. But while it's necessary to have a real estate license to legally receive commissions, having the license itself is really meaningless unless one does the work to create the opportunities to get paid the commissions.

With this in mind I'm completely appalled at the number of people I hear of who complete all the work and pass the exam necessary to get their real estate licenses, and then never do much of anything else to find and close transactions.

Continuing along this line of thought, during the Spring of 2005 I was reading an article in the Los Angeles Times discussing this subject, and the President of one of the realty boards in the L.A. area was quoted as saying that "approximately 75% of our members close between zero and one transaction every year."

Now this was in the first half of 2005, in a market that was completely on fire in Southern California! I'm just dumbfounded to hear these statistics quoted during the absolute best of times. And these weren't just licensed real estate agents, these were agents who took the additional step of actually joining a realty board! Which means they were most likely affiliated with a real estate office, and had their license registered under the Broker's License in that office.

I wonder what the statistics would be then for all real estate licensees, including those who never even affiliated their license with a real estate brokerage office?

It just shows you how difficult it is for most people to consider the possibility of ever prospecting and facing rejection, even if it offers great success as long as you're willing to do it. But then of course the general public keeps telling us that we don't really do much to earn our commissions as real estate agents, and that we're extremely overpaid. 

I'd like to hear the opinion of these exact same people once again after prospecting just one week on their own in real estate for about 10-12 hours.

With this in mind, when a client tells you they have a friend who they'd like to have cooperate in your real estate commission, they don't understand the nature of our business. The toughest part of our business is finding the right property where the two parties involved can agree upon closing a transaction. Yes, there are other difficulties that must be overcome along the way all the way through the closing, but nothing that you'd want to start sacrificing your commission to anyone over. Especially when you know the other person has no experience in the business, they'll most likely do nothing at all in the transaction, or even worse they'll make your life more difficult because of their incompetence.

So you have a situation with your client where their friend has a license, most likely an agent's license, and most likely one not affiliated with any Broker's License right now. (And it probably never was affiliated with a Broker's License at any time since they've had it, either.)

So in effect, you're probably dealing with a licensed agent who has no legal right to receive a commission in the state you work in, because their license isn't registered under anyone's Broker's License right now.

What you really must do is zero in on the situation and perform what's called a "reframe," something that politicians often become brilliant at doing. And in this situation what you'll be doing is actually changing the way your client feels about what they're asking you to do.

Here's a phrase you may want to utilize in creating this reframe:

"John, as you and I both know, it's the locating of the ideal property for you that determines whether or not I'll earn and get paid a commission here. The rest is all follow-up, and I'd never hire somebody after the fact, give them a piece of my commission, and have them do the follow-up for me. That's not real estate brokerage, John, that's charity."

"If you feel sorry for your friend because he has a real estate license and he's never had a successful real estate career, I understand. But because bringing him into this situation now would be an act of charity, you're going to need to pay him out of your pocket, not mine."

What this will ideally do is get your client to recognize he's asking you for an unreasonable favor for his friend, and at a huge expense to you. And he'll also recognize that if he's not willing to pay the friend out of his own pocket, he shouldn't be asking you to do it either. Quite frankly this person is his friend, not your friend.

This firm, business-like stand will often be all you'll need to have your client get rid of the notion of having his friend cooperate in the commission with you.

Click here for downloadable E-books and live audio interviews with top-producing real estate agents. These interviews are with industry experts who show you exactly what they do to continually make hundreds of thousands to millions of dollars a year.

2) How Secure is Your Equity Line of Credit?

Real estate values have been appreciating through the roof these past several years, particularly in areas like California, in the Northeastern states, and in Florida. And along with this appreciation have come plenty of big second trust deed equity lines of credit, too.

If you've been following the news lately, you may have learned that 2005 was the first year in history that American people spent more than they earned during year. And the bulk of this extra money came from people tapping into the equity in their homes through lines of credit, and spending this money in the marketplace.

When times are good people normally don't think anything will ever change, but I went through two major real estate recessions during my career as a broker, so I tend to think that things will come and go in cycles.

With this in mind, I remember what happened in the Southern California real estate market in the early 1990s. After record appreciation during the second half of the 1980s, the market then transitioned into a recession in the early '90s. People had built-up some great equity in their homes during the previous years, and many of them had substantial credit lines available against their homes, all secured by second trust deeds.

And then a notice similar to the following one came one day in the mail:

Dear Valued Customer:

Due to changing market conditions we've readjusted your equity line of credit from $200,000.00 to $75,000.00. We appreciate your business and look forward to many more years of having you as a loyal customer.

Sincerely,

Your Loyal Lending Company

So in a heartbeat people like Bob and Betty who thought they could rest assured that they had a $200,000.00  line of credit were stunned to find out that they now had only a $75,000.00 credit line available. And since they had already utilized $65,000.00 of the original $200,000.00 credit line, they now only had $10,000.00 of their new credit line left, instead of the $135,000.00 they thought they had left.

I'm mentioning this to you because of the changing tide of what's being reported across the country in real estate. Foreclosure rates are up in a number of areas, and the lending industry is under fire for having made money so easily available to people who are stretched to the limit financially. So it might not take much for the lenders (or their regulators) to decide it's time to reduce the risk in some of the loans, and cut people's credit lines.

And if there's ever any solid evidence that property values have reversed and are heading downward in your area, you can almost count on lenders reducing people's credit lines in the area. It's just a matter of how quickly they'll act to make it happen.

So plan accordingly and know this is possible. And if you know anyone with an equity line of credit they think will always be available to them, you may want to mention this to them.

In closing, one of the lenders in my area mentioned last week that his business has gone from 50% of his loans being for home purchases, to 90% of them now being for refinancing of existing loans, with the majority of the homeowners taking out some equity in the process.

With this in mind, there's no way the lending industry will tolerate this forever.

Click here if you'd like more information on my one-on-one coaching program to take your real estate productivity to the next level. One-on-one coaching is available for both real estate agents and company management.

Click Here for More Testimonials

Subscribers to my E-newsletter receive FREE online training. My training course is designed to take you to the next level in your real estate sales career regardless of where you are currently at in your career right now. If you're not currently a subscriber to my FREE E-newsletter and you'd like to subscribe and receive my FREE 7-Day Online Real Estate Training Course, click here.

If you arrange for me to lead a seminar or training for your real estate company you qualify for FREE coaching! Call me or email me for more information.

Please forward this E-zine to anyone you know who is interested in becoming a better, more productive real estate agent.

To subscribe to Jim Gillespie's 
Advanced Real Estate Supersales E-zine

 Click Here

To unsubscribe and bring tears to my eyes follow the directions below.