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2. Watch Out When You Invest in Real Estate

1. Take Your Real Estate Prospecting to the People!

Let's face it. Anything you can do to brighten-up your real estate prospecting sessions can be great for both your prospecting results and for your attitude in general as a real estate agent. So I want to propose a simple idea you can do once in awhile that can be fun, informative for your prospects, and move you to a new level of accomplishment in the real estate prospecting arena.

Consider hosting events in your territory 1-4 times a year or so where you have experts talk to the people in the community about important issues that they will definitely want to know about. If there are any proposed changes in your area that your local government officials are considering, this would be the perfect topic to have an appropriate government official speak about at one of these events. Are any zoning changes being proposed that could be very controversial in your territory? Are there any new construction projects being talked about that some people are in favor of but others are opposed to? How about new regulations for street widening, parking, maximum building size per square foot of land, or a newly proposed freeway or highway in the area? All of these are topics that get people's attention that they will definitely want to know more about.

What you can then do here is contact the most appropriate government official who can best speak on the proposed ordinance and invite this person to speak at an event hosted by you. You could perhaps host the event at a local lodge, a recreation hall, or maybe a building owner in the area will offer you the free use of their facility as this is a matter of public concern that everyone wants to know about.

As an alternative, you could also consider hosting events with speakers like CPAs, estate planning attorneys, and real estate tax experts. People who would attend an event where the most recent real estate tax laws and strategies will be discussed could very likely be people who will be looking to buy or sell real estate in your area in the near future.

When hosting events like these on a regular basis, you have the opportunity to rise above the other real estate agents who are your competitors in your geographical territory. Your prospects will see you as providing them value on an ongoing basis instead of just knocking on their doors and calling them like all the other agents are doing. And of course when you host events like these, you can have a big banner at the front of the room with your name, company, and phone number on it as the person responsible for hosting the event and putting it all together. On top of this, because it's your event, you get to stand up and say whatever you want to in front of the prospects also. This is a great opportunity for publicity, enhancing your image, and also mentioning a few words to them about the current real estate market which may land you some new business before everybody goes home.

Keep in mind that when you focus on doing things for your prospects that provide value to both them and the community, you rise to a whole new level as a real estate agent in their minds. Many of the other agents may just be focused on getting their prospects' business when they're ready to buy and sell. You, on the other hand, through providing your prospects value on an ongoing basis, now have a great chance of becoming the first agent they'll want to work with when it's time to get moving on their next real estate transaction.

2. Watch Out When You Invest in Real Estate

Regulations have changed in our industry so much in the past 15-20 years. The obligations for us as agents to disclose everything that we know about or should know about to all parties involved in a real estate transaction have become so unbelievably all-important. Along with this, the agency disclosures on who we represent in each of our transactions must be very clearly spelled out to our buyers and sellers.

As real estate agents, we are held to a much higher degree of disclosure than most other industries are. We are held to be experts at what we do, having fiduciary relationships with the people we represent, and as such we must not do anything that would cause us to gain an economic advantage for ourselves while simultaneously causing detriment to our clients.

When it comes to us investing in real estate this also creates some touchy arenas for us to deal with. As we are often considered to be experts at what we do we can also be held to have taken economic advantage of sellers if we purchase properties from them at what is later considered to be below market prices. This can be true even if we did not utilize our real estate license in the transaction and did not collect a real estate commission from the seller. In other situations, if we are purchasing properties as investments and are utilizing our real estate licenses to collect commissions in the process, we could truly be sealing our own fate.

Real estate laws in the USA vary on a state-by-state basis, but there is a common underlying theme that applies to many of the individual state laws. Because of this, if you utilize your real estate license to collect a commission on a transaction in which you are the buyer, you are most probably held to an obligation of full disclosure of anything that could affect the seller's desire to sell the property to you. So, if you are purchasing a property that is not listed on the market and you are buying it at a below market price, you can easily be held to have breached your obligation to the seller to disclose all material facts involved in the transaction. In summary, you don't want to put yourself in this position.

I'd like to tell you a story that may illustrate this in far greater detail for you:

There's a truly outstanding real estate agent that I know by the name of Michael who sells real estate in California. Several years ago Michael purchased an investment property for $650,000.00, and it's possible that the property may have actually been worth $700,000.00 at the time he purchased it. Over the next 2-3 years this property appreciated in a very hot real estate market and Michael then sold the property to another investor for $850,000.00. That's when Michael's troubles began...

The original owner that Michael had purchased the property from had heard about the recent sale and was angered by the profit that Michael was making only 2-3 years after the original sale was completed. He decided to sue Michael claiming that while Michael utilized his real estate license and collected a commission on the original transaction, Michael had also breached his obligation of full disclosure as a real estate agent in the transaction and had taken advantage of him. He claimed that Michael had purchased the property unfairly from him at a below market price.

Michael was in a tough situation. He realized that the cost of going the distance in court through litigation would be about $50,000.00 in legal fees, a lot of mental and emotional aggravation, and the possibility of losing his real estate license. So to make matters really simple and begin moving on with his life, Michael decided to give the previous owner of the property exactly what he was looking for...100% of the profit Michael was expecting to receive on the sale of the property after deducting the original $650,000.00 purchase price from the proceeds.

Now keep in mind that the original owner of the property had taken the $650,000.00 that he received from Michael 2-3 years earlier and reinvested it in another property at that time. And that property had also appreciated incredibly over the same 2-3 year period. So the original seller was definitely coming out way ahead of the game here on both properties.

Which leads me to my point in telling you this story:

Talk to a qualified real estate attorney in your state and get very clear on what your obligations are both as an agent representing your clients, and as a licensed real estate agent who wants to invest in real estate. A little homework in advance on your part with an attorney who is truly an expert in this arena can go a long way towards helping you to avoid any situations like the one that Michael experienced.

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