Monthly Archives: January 2018

Home Buyers and Sellers Real Estate

Every business has it’s jargon and residential real estate is no exception. Mark Nash author of 1001 Tips for Buying and Selling a Home shares commonly used terms with home buyers and sellers.

1031 exchange or Starker exchange: The delayed exchange of properties that qualifies for tax purposes as a tax-deferred exchange.

1099: The statement of income reported to the IRS for an independent contractor.

A/I: A contract that is pending with attorney and inspection contingencies.

Accompanied showings: Those showings where the listing agent must accompany an agent and his or her clients when viewing a listing.

Addendum: An addition to; a document.

Adjustable rate mortgage (ARM): A type of mortgage loan whose interest rate is tied to an economic index, which fluctuates with the market. Typical ARM periods are one, three, five, and seven years.

Agent: The licensed real estate salesperson or broker who represents buyers or sellers.

Annual percentage rate (APR): The total costs (interest rate, closing costs, fees, and so on) that are part of a borrower’s loan, expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.

Application fees: Fees that mortgage companies charge buyers at the time of written application for a loan; for example, fees for running credit reports of borrowers, property appraisal fees, and lender-specific fees.

Appointments: Those times or time periods an agent shows properties to clients.

Appraisal: A document of opinion of property value at a specific point in time.

Appraised price (AP): The price the third-party relocation company offers (under most contracts) the seller for his or her property. Generally, the average of two or more independent appraisals.

“As-is”: A contract or offer clause stating that the seller will not repair or correct any problems with the property. Also used in listings and marketing materials.

Assumable mortgage: One in which the buyer agrees to fulfill the obligations of the existing loan agreement that the seller made with the lender. When assuming a mortgage, a buyer becomes personally liable for the payment of principal and interest. The original mortgagor should receive a written release from the liability when the buyer assumes the original mortgage.

Back on market (BOM): When a property or listing is placed back on the market after being removed from the market recently.

Back-up agent: A licensed agent who works with clients when their agent is unavailable.

Balloon mortgage: A type of mortgage that is generally paid over a short period of time, but is amortized over a longer period of time. The borrower typically pays a combination of principal and interest. At the end of the loan term, the entire unpaid balance must be repaid.

Back-up offer: When an offer is accepted contingent on the fall through or voiding of an accepted first offer on a property.

Bill of sale: Transfers title to personal property in a transaction.

Board of REALTORS® (local): An association of REALTORS® in a specific geographic area.

Broker: A state licensed individual who acts as the agent for the seller or buyer.

Broker of record: The person registered with his or her state licensing authority as the managing broker of a specific real estate sales office.

Broker’s market analysis (BMA): The real estate broker’s opinion of the expected final net sale price, determined after acquisition of the property by the third-party company.

Broker’s tour: A preset time and day when real estate sales agents can view listings by multiple brokerages in the market.

Buyer: The purchaser of a property.

Buyer agency: A real estate broker retained by the buyer who has a fiduciary duty to the buyer.

Buyer agent: The agent who shows the buyer’s property, negotiates the contract or offer for the buyer, and works with the buyer to close the transaction.

Carrying costs: Cost incurred to maintain a property (taxes, interest, insurance, utilities, and so on).

Closing: The end of a transaction process where the deed is delivered, documents are signed, and funds are dispersed.

CLUE (Comprehensive Loss Underwriting Exchange): The insurance industry’s national database that assigns individuals a risk score. CLUE also has an electronic file of a properties insurance history. These files are accessible by insurance companies nationally. These files could impact the ability to sell property as they might contain information that a prospective buyer might find objectionable, and in some cases not even insurable.

Commission: The compensation paid to the listing brokerage by the seller for selling the property. A buyer may also be required to pay a commission to his or her agent.

Commission split: The percentage split of commission compen-sation between the real estate sales brokerage and the real estate sales agent or broker.

Competitive Market Analysis (CMA): The analysis used to provide market information to the seller and assist the real estate broker in securing the listing.

Condominium association: An association of all owners in a condominium.

Condominium budget: A financial forecast and report of a condominium association’s expenses and savings.

Condominium by-laws: Rules passed by the condominium association used in administration of the condominium property.

Condominium declarations: A document that legally establishes a condominium.

Condominium right of first refusal: A person or an association that has the first opportunity to purchase condominium real estate when it becomes available or the right to meet any other offer.

Condominium rules and regulation: Rules of a condominium association by which owners agree to abide.

Contingency: A provision in a contract requiring certain acts to be completed before the contract is binding.

Continue to show: When a property is under contract with contingencies, but the seller requests that the property continue to be shown to prospective buyers until contingencies are released.

Contract for deed: A sales contract in which the buyer takes possession of the property but the seller holds title until the loan is paid. Also known as an installment sale contract.

Conventional mortgage: A type of mortgage that has certain limitations placed on it to meet secondary market guidelines. Mortgage companies, banks, and savings and loans underwrite conventional mortgages.

Cooperating commission: A commission offered to the buyer’s agent brokerage for bringing a buyer to the selling brokerage’s listing.

Cooperative (Co-op): Where the shareholders of the corporation are the inhabitants of the building. Each shareholder has the right to lease a specific unit. The difference between a co-op and a condo is in a co-op, one owns shares in a corporation; in a condo one owns the unit fee simple.

Counteroffer: The response to an offer or a bid by the seller or buyer after the original offer or bid.

Credit report: Includes all of the history for a borrower’s credit accounts, outstanding debts, and payment timelines on past or current debts.

Credit score: A score assigned to a borrower’s credit report based on information contained therein.

Curb appeal: The visual impact a property projects from the street.

Days on market: The number of days a property has been on the market.

Decree: A judgment of the court that sets out the agreements and rights of the parties.

Disclosures: Federal, state, county, and local requirements of disclosure that the seller provides and the buyer acknowledges.

Divorce: The legal separation of a husband and wife effected by a court decree that totally dissolves the marriage relationship.

DOM: Days on market.

Down payment: The amount of cash put toward a purchase by the borrower.

Drive-by: When a buyer or seller agent or broker drives by a property listing or potential listing.

Dual agent: A state-licensed individual who represents the seller and the buyer in a single transaction.

Earnest money deposit: The money given to the seller at the time the offer is made as a sign of the buyer’s good faith.

Escrow account for real estate taxes and insurance: An account into which borrowers pay monthly prorations for real estate taxes and property insurance.

Exclusions: Fixtures or personal property that are excluded from the contract or offer to purchase.

Expired (listing): A property listing that has expired per the terms of the listing agreement.

Fax rider: A document that treats facsimile transmission as the same legal effect as the original document.

Feedback: The real estate sales agent and/or his or her client’s reaction to a listing or property. Requested by the listing agent.

Fee simple: A form of property ownership where the owner has the right to use and dispose of property at will.

FHA (Federal Housing Administration) Loan Guarantee: A guarantee by the FHA that a percentage of a loan will be underwritten by a mortgage company or banker.

Fixture: Personal property that has become part of the property through permanent attachment.

Flat fee: A predetermined amount of compensation received or paid for a specific service in a real estate transaction.

For sale by owner (FSBO): A property that is for sale by the owner of the property.

Gift letter: A letter to a lender stating that a gift of cash has been made to the buyer(s) and that the person gifting the cash to the buyer is not expecting the gift to be repaid. The exact wording of the gift letter should be requested of the lender.

Good faith estimate: Under the Real Estate Settlement Procedures Act, within three days of an application submission, lenders are required to provide in writing to potential borrowers a good faith estimate of closing costs.

Gross sale price: The sale price before any concessions.

Hazard insurance: Insurance that covers losses to real estate from damages that might affect its value.

Homeowner’s insurance: Coverage that includes personal liability and theft insurance in addition to hazard insurance.

HUD/RESPA (Housing and Urban Development/Real Estate Settlement Procedures Act): A document and statement that details all of the monies paid out and received at a real estate property closing.

Hybrid adjustable rate: Offers a fixed rate the first 5 years and then adjusts annually for the next 25 years.

IDX (Internet Data Exchange): Allows real estate brokers to advertise each other’s listings posted to listing databases such as the multiple listing service.

Inclusions: Fixtures or personal property that are included in a contract or offer to purchase.

Independent contractor: A real estate sales agent who conducts real estate business through a broker. This agent does not receive salary or benefits from the broker.

Inspection rider: Rider to purchase agreement between third party relocation company and buyer of transferee’s property stating that property is being sold “as is.” All inspection reports conducted by the third party company are disclosed to the buyer and it is the buyer’s duty to do his/her own inspections and tests.

Installment land contract: A contract in which the buyer takes possession of the property while the seller retains the title to the property until the loan is paid.

Interest rate float: The borrower decides to delay locking their interest rate on their loan. They can float their rate in expectation of the rate moving down. At the end of the float period they must lock a rate.

Interest rate lock: When the borrower and lender agree to lock a rate on loan. Can have terms and conditions attached to the lock.

List date: Actual date the property was listed with the current broker.

List price: The price of a property through a listing agreement.

Listing: Brokers written agreement to represent a seller and their property. Agents refer to their inventory of agreements with sellers as listings.

Listing agent: The real estate sales agent that is representing the sellers and their property, through a listing agreement.

Listing agreement: A document that establishes the real estate agent’s agreement with the sellers to represent their property in the market.

Listing appointment: The time when a real estate sales agent meets with potential clients selling a property to secure a listing agreement.

Listing exclusion: A clause included in the listing agreement when the seller (transferee) lists his or her property with a broker.

Loan: An amount of money that is lent to a borrower who agrees to repay the amount plus interest.

Loan application: A document that buyers who are requesting a loan fill out and submit to their lender.

Loan closing costs: The costs a lender charges to close a borrower’s loan. These costs vary from lender to lender and from market to market.

Loan commitment: A written document telling the borrowers that the mortgage company has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time. The loan commitment may also contain conditions upon which the loan commitment is based.

Loan package: The group of mortgage documents that the borrower’s lender sends to the closing or escrow.

Loan processor: An administrative individual who is assigned to check, verify, and assemble all of the documents and the buyer’s funds and the borrower’s loan for closing.

Loan underwriter: One who underwrites a loan for another. Some lenders have investors underwrite a buyer’s loan.

Lockbox: A tool that allows secure storage of property keys on the premises for agent use. A combo uses a rotating dial to gain access with a combination; a Supra® (electronic lockbox or ELB) features a keypad.

Managing broker: A person licensed by the state as a broker who is also the broker of record for a real estate sales office. This person manages the daily operations of a real estate sales office.

Marketing period: The period of time in which the transferee may market his or her property (typically 45, 60, or 90 days), as directed by the third-party company’s contract with the employer.

Mortgage banker: One who lends the bank’s funds to borrowers and brings lenders and borrowers together.

Mortgage broker: A business that or an individual who unites lenders and borrowers and processes mortgage applications.

Mortgage loan servicing company: A company that collects monthly mortgage payments from borrowers.

Multiple listing service (MLS): A service that compiles available properties for sale by member brokers.

Multiple offers: More than one buyers broker present an offer on one property where the offers are negotiated at the same time.

National Association of REALTORS® (NAR): A national association comprised of real estate sales agents.

Net sales price: Gross sales price less concessions to the buyers.

Off market: A property listing that has been removed from the sale inventory in a market. A property can be temporarily or permanently off market.

Offer to purchase: When a buyer proposes certain terms and presents these terms to the seller.

Office tour/caravan: A walking or driving tour by a real estate sales office of listings represented by agents in the office. Usually held on a set day and time.

Parcel identification number (PIN): A taxing authority’s tracking number for a property.

Pending: A real estate contract that has been accepted on a property but the transaction has not closed.

Personal assistant: A real estate sales agent administrative assistant.

Planned unit development (PUD): Mixed-use development that sets aside areas for residential use, commercial use, and public areas such as schools, parks, and so on.

Preapproval: A higher level of buyer/borrower prequalification required by a mortgage lender. Some preapprovals have conditions the borrower must meet.

Prepaid interest: Funds paid by the borrower at closing based on the number of days left in the month of closing.

Prepayment penalty: A fine imposed on the borrower by the lender when the loan is paid off before it comes due.

Prequalification: The mortgage company tells a buyer in advance of the formal mortgage application, how much money the borrower can afford to borrow. Some prequalifications have conditions that the borrower must meet.

Preview appointment: When a buyer’s agent views a property alone to see if it meets his or her buyer’s needs.

Pricing: When the potential seller’s agent goes to the potential listing property to view it for marketing and pricing purposes.

Principal: The amount of money a buyer borrows.

Principal, interest, taxes, and insurance (PITI): The four parts that make up a borrower’s monthly mortgage payment. Private mortgage insurance (PMI): A special insurance paid by a borrower in monthly installments, typically of loans of more than 80 percent of the value of the property.

Professional designation: Additional nonlicensed real estate education completed by a real estate professional.

Professional regulation: A state licensing authority that oversees and disciplines licensees.

Promissory note: A promise-to-pay document used with a contract or an offer to purchase.

R & I: Estimated and actual repair and improvement costs.

Real estate agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller. The real estate agent who does not have a broker’s license must work for a licensed broker.

Real estate contract: A binding agreement between buyer and seller. It consists of an offer and an acceptance as well as consideration (i.e., money).

REALTOR®: A registered trademark of the National Association of REALTORS® that can be used only by its members.

Release deed: A written document stating that a seller or buyer has satisfied his or her obligation on a debt. This document is usually recorded.

Relist: Property that was listed with another broker but relisted with a current broker.

Rider: A separate document that is attached to a document in some way. This is done so that an entire document does not need to be rewritten.

Salaried agent: A real estate sales agent or broker who receives all or part of his or her compensation in real estate sales in the form of a salary.

Sale price: The price paid for a listing or property.

Seller (owner): The owner of a property who has signed a listing agreement or a potential listing agreement.

Showing: When a listing is shown to prospective buyers or the buyer’s agent (preview).

Special assessment: A special and additional charge to a unit in a condominium or cooperative. Also a special real estate tax for improvements that benefit a property.

State Association of REALTORS®: An association of REALTORS® in a specific state.

Supra®: An electronic lockbox (ELB) that holds keys to a property. The user must have a Supra keypad to use the lockbox.

Temporarily off market (TOM): A listed property that is taken off the market due to illness, travel, needed repairs, and so on.

Temporary housing: Housing a transferee occupies until permanent housing is selected or becomes available.

Transaction: The real estate process from offer to closing or escrow.

Transaction management fee (TMF): A fee charged by listing brokers to the seller as part of the listing agreement.

Transaction sides: The two sides of a transaction, sellers and buyers. The term used to record the number of transactions in which a real estate sales agent or broker was involved during a specific period.

24-hour notice: Allowed by law, tenants must be informed of showing 24 hours before you arrive.

Under contract: A property that has an accepted real estate contract between seller and buyer.

VA (Veterans Administration) Loan Guarantee: A guarantee on a mortgage amount backed by the Department of Veterans Affairs.

Virtual tour: An Internet web/cd-rom-based video presentation of a property.

VOW’s (Virtual Office web sites): An Internet based real estate brokerage business model that works with real estate consumers in same way as a brick and mortar real estate brokerage.

W-2: The Internal Revenue form issued by employer to employee to reflect compensation and deductions to compensation.

W-9: The Internal Revenue form requesting taxpayer identification number and certification.

Walk-through: A showing before closing or escrow that permits the buyers one final tour of the property they are purchasing.

Will: A document by which a person disposes of his or her property after death.

Top 9 Reasons That The Real Estate Bubble Is Bursting

If you own real estate or are thinking of buying real estate then you better pay attention, because this could be the most important message you receive this year regarding real estate and your financial future.

The last five years have seen explosive growth in the real estate market and as a result many people believe that real estate is the safest investment you can make. Well, that is no longer true. Rapidly increasing real estate prices have caused the real estate market to be at price levels never before seen in history when adjusted for inflation! The growing number of people concerned about the real estate bubble means there are less available real estate buyers. Fewer buyers mean that prices are coming down.

On May 4, 2006, Federal Reserve Board Governor Susan Blies stated that “Housing has really sort of peaked”. This follows on the heels of the new Fed Chairman Ben Bernanke saying that he was concerned that the “softening” of the real estate market would hurt the economy. And former Fed Chairman Alan Greenspan previously described the real estate market as frothy. All of these top financial experts agree that there is already a viable downturn in the market, so clearly there is a need to know the reasons behind this change.

3 of the top 9 reasons that the real estate bubble will burst include:

1. Interest rates are rising – foreclosures are up 72%!

2. First time homebuyers are priced out of the market – the real estate market is a pyramid and the base is crumbling

3. The psychology of the market has changed so that now people are afraid of the bubble bursting – the mania over real estate is over!

The first reason that the real estate bubble is bursting is rising interest rates. Under Alan Greenspan, interest rates were at historic lows from June 2003 to June 2004. These low interest rates allowed people to buy homes that were more expensive then what they could normally afford but at the same monthly cost, essentially creating “free money”. However, the time of low interest rates has ended as interest rates have been rising and will continue to rise further. Interest rates must rise to combat inflation, partly due to high gasoline and food costs. Higher interest rates make owning a home more expensive, thus driving existing home values down.

Higher interest rates are also affecting people who bought adjustable mortgages (ARMs). Adjustable mortgages have very low interest rates and low monthly payments for the first two to three years but afterwards the low interest rate disappears and the monthly mortgage payment jumps dramatically. As a result of adjustable mortgage rate resets, home foreclosures for the 1st quarter of 2006 are up 72% over the 1st quarter of 2005.

The foreclosure situation will only worsen as interest rates continue to rise and more adjustable mortgage payments are adjusted to a higher interest rate and higher mortgage payment. Moody’s stated that 25% of all outstanding mortgages are coming up for interest rate resets during 2006 and 2007. That is $2 trillion of U.S. mortgage debt! When the payments increase, it will be quite a hit to the pocketbook. A study done by one of the country’s largest title insurers concluded that 1.4 million households will face a payment jump of 50% or more once the introductory payment period is over.

The second reason that the real estate bubble is bursting is that new homebuyers are no longer able to buy homes due to high prices and higher interest rates. The real estate market is basically a pyramid scheme and as long as the number of buyers is growing everything is fine. As homes are bought by first time home buyers at the bottom of the pyramid, the new money for that $100,000.00 home goes all the way up the pyramid to the seller and buyer of a $1,000,000.00 home as people sell one home and buy a more expensive home. This double-edged sword of high real estate prices and higher interest rates has priced many new buyers out of the market, and now we are starting to feel the effects on the overall real estate market. Sales are slowing and inventories of homes available for sale are rising quickly. The latest report on the housing market showed new home sales fell 10.5% for February 2006. This is the largest one-month drop in nine years.

The third reason that the real estate bubble is bursting is that the psychology of the real estate market has changed. For the last five years the real estate market has risen dramatically and if you bought real estate you more than likely made money. This positive return for so many investors fueled the market higher as more people saw this and decided to also invest in real estate before they ‘missed out’.

The psychology of any bubble market, whether we are talking about the stock market or the real estate market is known as ‘herd mentality’, where everyone follows the herd. This herd mentality is at the heart of any bubble and it has happened numerous times in the past including during the US stock market bubble of the late 1990’s, the Japanese real estate bubble of the 1980’s, and even as far back as the US railroad bubble of the 1870’s. The herd mentality had completely taken over the real estate market until recently.

The bubble continues to rise as long as there is a “greater fool” to buy at a higher price. As there are less and less “greater fools” available or willing to buy homes, the mania disappears. When the hysteria passes, the excessive inventory that was built during the boom time causes prices to plummet. This is true for all three of the historical bubbles mentioned above and many other historical examples. Also of importance to note is that when all three of these historical bubbles burst the US was thrown into recession.

With the changing in mindset related to the real estate market, investors and speculators are getting scared that they will be left holding real estate that will lose money. As a result, not only are they buying less real estate, but they are simultaneously selling their investment properties as well. This is producing huge numbers of homes available for sale on the market at the same time that record new home construction floods the market. These two increasing supply forces, the increasing supply of existing homes for sale coupled with the increasing supply of new homes for sale will further exacerbate the problem and drive all real estate values down.

A recent survey showed that 7 out of 10 people think the real estate bubble will burst before April 2007. This change in the market psychology from ‘must own real estate at any cost’ to a healthy concern that real estate is overpriced is causing the end of the real estate market boom.

The aftershock of the bubble bursting will be enormous and it will affect the global economy tremendously. Billionaire investor George Soros has said that in 2007 the US will be in recession and I agree with him. I think we will be in a recession because as the real estate bubble bursts, jobs will be lost, Americans will no longer be able to cash out money from their homes, and the entire economy will slow down dramatically thus leading to recession.

In conclusion, the three reasons the real estate bubble is bursting are higher interest rates; first-time buyers being priced out of the market; and the psychology about the real estate market is changing. The recently published eBook “How To Prosper In The Changing Real Estate Market. Protect Yourself From The Bubble Now!” discusses these items in more detail.

Louis Hill, MBA received his Masters In Business Administration from the Chapman School at Florida International University, specializing in Finance. He was one of the top graduates in his class and was one of the few graduates inducted into the Beta Gamma Business Honor Society.

Mr. Hill received his undergraduate degree from the University of Florida with a double major in Finance and Risk Management.

For the past several years he has been working in a South Florida commercial real estate lender that specializes in financing real estate developers. Mr. Hill has seen firsthand the challenges and pitfalls that real estate developers are experiencing, and how the real estate market has been deteriorating rapidly. He is also a professional consultant to professional real estate developers and investors.

Mistakes Rookie Real Estate Agents Make

Every time I talk to someone about my business and career, it always comes up that “they’ve thought about getting into real estate” or know someone who has. With so many people thinking about getting into real estate, and getting into real estate – why aren’t there more successful Realtors in the world? Well, there’s only so much business to go around, so there can only be so many Real Estate Agents in the world. I feel, however, that the inherent nature of the business, and how different it is from traditional careers, makes it difficult for the average person to successfully make the transition into the Real Estate Business. As a Broker, I see many new agents make their way into my office – for an interview, and sometimes to begin their careers. New Real Estate Agents bring a lot of great qualities to the table – lots of energy and ambition – but they also make a lot of common mistakes. Here are the 7 top mistakes rookie Real Estate Agents Make.

1) No Business Plan or Business Strategy

So many new agents put all their emphasis on which Real Estate Brokerage they will join when their shiny new license comes in the mail. Why? Because most new Real Estate Agents have never been in business for themselves – they’ve only worked as employees. They, mistakenly, believe that getting into the Real Estate business is “getting a new job.” What they’re missing is that they’re about to go into business for themselves. If you’ve ever opened the doors to ANY business, you know that one of the key ingredients is your business plan. Your business plan helps you define where you’re going, how you’re getting there, and what it’s going to take for you to make your real estate business a success. Here are the essentials of any good business plan:

A) Goals – What do you want? Make them clear, concise, measurable, and achievable.

B) Services You Provide – you don’t want to be the “jack of all trades & master of none” – choose residential or commercial, buyers/sellers/renters, and what area(s) you want to specialize in. New residential real estate agents tend to have the most success with buyers/renters and then move on to listing homes after they’ve completed a few transactions.

C) Market – who are you marketing yourself to?

D) Budget – consider yourself “new real estate agent, inc.” and write down EVERY expense that you have – gas, groceries, cell phone, etc… Then write down the new expenses you’re taking on – board dues, increased gas, increased cell usage, marketing (very important), etc…

E) Funding – how are you going to pay for your budget w/ no income for the first (at least) 60 days? With the goals you’ve set for yourself, when will you break even?

F) Marketing Plan – how are you going to get the word out about your services? The MOST effective way to market yourself is to your own sphere of influence (people you know). Make sure you do so effectively and systematically.

2) Not Using the Best Possible Closing Team

They say the greatest businesspeople surround themselves with people that are smarter than themselves. It takes a pretty big team to close a transaction – Buyer’s Agent, Listing Agent, Lender, Insurance Agent, Title Officer, Inspector, Appraiser, and sometimes more! As a Real Estate Agent, you are in the position to refer your client to whoever you choose, and you should make sure that anyone you refer in will be an asset to the transaction, not someone who will bring you more headache. And the closing team you refer in, or “put your name to,” are there to make you shine! When they perform well, you get to take part of the credit because you referred them into the transaction.

The deadliest duo out there is the New Real Estate Agent & New Mortgage Broker. They get together and decide that, through their combined marketing efforts, they can take over the world! They’re both focusing on the right part of their business – marketing – but they’re doing each other no favors by choosing to give each other business. If you refer in a bad insurance agent, it might cause a minor hiccup in the transaction – you make a simple phone call and a new agent can bind the property in less than an hour. However, because it typically takes at least two weeks to close a loan, if you use an inexperienced lender, the result can be disastrous! You may find yourself in a position of “begging for a contract extension,” or worse, being denied a contract extension.

A good closing team will typically know more than their role in the transaction. Due to this, you can turn to them with questions, and they will step in (quietly) when they see a potential mistake – because they want to help you, and in return receive more of your business. Using good, experienced players for your closing team will help you infinitely in conducting business worthy of MORE business…and best of all, it’s free!

3) Not Arming Themselves with the Necessary Tools

Getting started as a Real Estate Agent is expensive. In Texas, the license alone is an investment that will cost between $700 and $900 (not taking into account the amount of time you’ll invest.) However, you’ll run into even more expenses when you go to arm yourself with the necessary tools of the trade. And don’t fool yourself – they are necessary – because your competitors are definitely using every tool to help THEM.

A) MLS Access is probably the most expensive necessity you’re going to run into. Joining your local (and state & national, by default) Board of Realtors will allow you to pay for MLS access, and in Austin, Texas, will run around $1000. However, don’t skimp in this area. Getting MLS access is one of the most important things you can do. It’s what differentiates us from your average salesman – we don’t sell homes, we present any of the homes that we have available. With MLS Access, you will have 99% of the homes for sale in your area available to present to your clients.

B) Mobile Phone w/ a Beefy Plan – These days, everyone has a cell phone. But not everyone has a plan that will facilitate the level of use that Real Estate Agents need. Plan on getting at least 2000 minutes per month. You want, and need, to be available to your clients 24/7 – not just nights and weekends.

The Real Estate Market In Panama

Most likely, you have heard of the recent real estate BOOM currently occurring in Panama. Perhaps, there are several internet sites you have read or visited searching for further information on the topic. Or maybe you are one of those persons that have taken the decision already of buying an apartment or a beach house, but you don’t know where to start or wish to start your own real estate project in Panama, yet still need more information. Well, I have prepared this article in a practical and simple way in order to guide you in our real estate market. You will find this paper helpful, whether it’ll be for the direct buying of a property or to start your own real estate project in Panama or simply to have a more complete notion of this rising real estate BOOM.

What is happening in the Panamanian Real Estate market?

What is going on in Panama is without any sort of precedent. The market is growing rapidly and such real estate development has never been experienced before in our country. Monthly, we are visited for hundreds of foreigners interested in buying real estates in Panama, in the City, the coasts and the mountains. The constant rising of the value per square meter is almost in a monthly rate. For example: in January, 2006 it was possible to find apartments in Panama City for around US$ 1,000.00 per square meter, which is nearly impossible nowadays (US$ 1,200 – US$1,400 and rising). This has generated the value per square meter to triplicate in the city and even to quadruplicate in the rest of the country. The main real estate broker associations have foreseen that the general value of the land in Panama could rise up to 30% to 40% in the next three years, due to this price increasing flow.

Extreme luxury towers of over 100 stories, residential houses of over a million dollars, yachts and marine clubs, huge luxury hotels, golf camps designed by well-known international specialists, as well as top of the line malls, are currently under construction or in process of delivering in the next couple of years; renovating the face of the city into an international and cosmopolitan metropolis. Promoters, private investors and international real estate companies, from United States, South America and even Europe, have started the construction of real estate projects of great impact. Also, a great number of international real estate broker companies are currently setting up businesses in our country per month. Specifically we could say that seven of the highest towers under construction in Latin America are being built in Panama City, within the areas known as “Avenida Balboa” (this area is projected as the skyscraper in front of the sea in the city). We could mention, among others: Aqualina, Aquamare, Vitri, Ocean Two and One, Los Faros de Panama and Ice Tower, ready to be delivered for the year 2009; besides the hundreds of apartment towers bring developed around the city. Great beach lot projects, island resorts, as much as in the Caribbean Sea (Bocas del Toro) as in the Pacific Ocean (Pearl Islands); as well as delightful retirement mountains (Boquete, Altos del Maria) are part of the avalanche of real estate projects that seems just to be starting.

Which are the real factors that caused this real estate boost?

We all know that after the hostilities occurred in Panama in 1989, the Panamanian real estate market remained hesitant and the small amount of inversions in this sector were led in its majority into commercial projects. Eleven years had to run by after this event (year 2000) for the leaders in the tourist sector of the Panamanian government (led by the well-known Panamanian singer Ruben Blades) to take action initiating a serious campaign for the enhancement of the country’s image. Panama was shown as “the path less traveled”, stressing not only in the advantages of being and international banking services and offshore center, but also in the social, tourist, ecological and geographic elements that until then were unknown to the rest of the world. This successful campaign was promoted worldwide in the main international television chains, in Europe as well as in the United States. Added to this, something that has to be acknowledged, for the year 2003 Panama comes back to the international field with the announcement that a young Panamanian lady (Justin Pasek) won the Miss Universe contest, situation that allowed by extension the range of advantages of our country as a tourist and commercial destiny. Between the years 2003 and 2005, little by little the number of visitors increased as a consequence of these two important catalysts.

Meanwhile, small groups of professionals (lawyers, brokers, and independent professionals) were offering seminars about the Panama’s advantages or organized small real estate tours to foreigners. Several articles published in international retirement magazines (generation known as “Baby Boomers”) and second residences abroad, started to acknowledged Panama as one of the best countries in the world to live at high standard levels, but with low costs; all of this caused due to excellent projects addressed to this market, as “El Valle Escondido” in Boquete – Chiriqui or “Altos del Maria” in Panama. One of the main triggering factors of this real estate boost in Panama occurred last April 24th, 2006, when Donald Trump announced in New York City the construction in “Punta Pacifica” area in Panama City of a 65-story tower branded as “Trump Ocean Club International Hotel”, with a cost of 220 million dollars. Further more, on October of the same year, the national acceptance for the enlargement of the Panama Canal was given, initiating construction works in the year 2009. Starting from this point, there is no doubt that Panama would become the centre and role model of real estate investments in the area, situation that has been increasing exponentially.

Which are then Panama’s advantages as a real estate destiny?

Well, let’s get into the subject. Let’s study those advantages that Panama offers and that will allow you, effectively, to take the decision to buy a property in our country, as many foreigners have done. From the real estate point of view, we could mention:

-*- Panama offers the best banking center in the region, with the use of the American dollar as legal currency and with top of the line banks (HSBC, CITIBANK, BBVA, etc.) which will facilitate the process of obtaining mortgages for foreigners, offering a fast international bank transaction process for deposits and reservation of properties.

-*- Panamanian immigration law has one of the best retirement programs in the world, which will allow you to become a “resident” in less than two months. This program offers several incentives as the possibility to import goods and personal values into your new properties free of import duties, as well as motor vehicles also free of import duties.

-*- An outstanding service, utilities and infrastructure system for properties, such as: high speed Internet (there are five of the main Internet interconnection Networks crossing through Panama), Cable and Satellite TV, public potable water, wide range of telephony offer, fixed and cellular.

-*- The opportunity to buy extreme luxury apartments with ample spaces to a price amazingly low compare with apartments of the same quality in USA and Europe.

-*- The opportunity to acquire properties exempt to the 0% of property taxes for a period of 5, 10, 15 and even 20 years (depending on the date of construction’s commencement).

-*- A vast variety of companies and bilingual professionals involved in the real estate market.

-*- If you are a businessman, Panamanian law has fiscal benefits to constructors and promoters that start real estate projects in the country.

Additionally, there are other advantages to take into consideration that even when you are not directly involved in the real estate business, they can become helpful at the moment of taking the decision of buying a property:

-*- Panama has been acknowledge for companies as Pinkerton Intelligence Agency as a high standard security country in contrast with the current situation in neighboring countries.

-*- You can hire house keeping services for a low cost (around US$ 150.00 per month)

-*- Up-to-date high standard technology available.
-*- The opportunity to acquire products from all over the world in the Colon Free Zone, due to the noticeable position of the Panama Canal and the transit of over 14,000 ships per year.

-*- The conditions of Panamanian taxation law allow the tax payer not to pay taxes on bank interests or even income taxes when the service and/or business are performed abroad.

-*- An exceptional geographic position to perform international commercial transactions, with fast access to the Pacific Ocean as well as to the Atlantic.

-*- Panama has a low-risk profile in regards to natural disasters, such as earthquakes and hurricanes.

These are some of the many advantages that Panama can offer if you decide to acquire a property in our country, whether it is to invest or simply to relocate and enjoy life.

Which are the most attractive places to buy properties?

To better answer this question, we have to divide our answer in four groups: Panama City, the mountains, the Pacific shore and the Atlantic shore.

Panama City

The main seaside view luxury condos are found in Panama City, distributed as follows: Balboa Avenue, Punta Pacifica and Costa del Este. The region known as “Avenida Balboa” has become the icon of real estate development in Panama. The reason for this is due to the current construction of luxury residential apartment towers with an outstanding architecture with a height of over 100 stories, to be concluded in the year 2009. Balboa Avenue offers quick access to the whole city, the banking area, as well as to the main avenues, given that it is the coast boulevard. One hundred meters away from this area you will find restaurants, bars, hotels and several facilities. European promoters, American and South Americans have foreseen the real estate potential in this area, equivalent to condos phenomenon occurred in Miami during the eighties. “Punta Pacifica” area was developed over the old City airport (for the reason that it was next to the pacific coast and inside the city). This region was designed specially to provide an answer to the upcoming real estate demand. The area offers beautiful projects and high standard apartment towers. You will also find in “Punta Pacifica” malls (Multiplaza Pacific), Hospitals (John Hopkins Hospital), corporate buildings and access to highways (Corredor Sur) which will grant you fast access to the international airport in 15 minutes. Is also in this sector where the Trump Organization and K Group will raise their promoted real estate project. Another of the desired areas for foreigners is Costa del Este.

The “other city” as is referred to was also conceived and designed for the development of apartment buildings and closed residential communities. It is the perfect place for a foreigner to completely relocate in Panama. This region has it all schools, malls, wide avenues; this sector offers several real estates with a gorgeous view to the sea or to the city, located five minutes away from the city and only ten from the international airport. It also important to stress out that this luxury tower’s development is not circumscribed to these few areas. There are also urban projects in the region of Punta Paitilla, Coco del Mar and San Francisco (all of them in front of the sea), as well as beautiful developed residential areas in the surroundings of the Panama Canal, such as Albrook, Clayton and Quarry Heights.

The Mountains

Gorgeous mountain projects with cool, fresh weather from 18Cº to 20Cº (64ºF to 68ºF) have been developed in the provinces of Panama, Cocle and Chiriqui. In the province of Panama, the most representative mountain project is found in the region of Sora, 75 minutes away from the City and known as “Altos del Maria”. This project consists of a well-organized foreigner’s community with utilities and spectacular landscapes. Another region of urban development can be found in what is known as “Tierras Altas” (High Lands) located in the province of Chiriqui (Volcan, Boquete and Cerro Punta). Among these places, Boquete has become one of the most relevant real estate centres in the whole country, given that it counts with a wide supply of real estate projects, residential houses in the mountains with amazing landscapes. Boquete has been recognized by specialist in the subject as one of the best places for retirement in the world, fact that has generated in this region the highest concentration of retired foreigners in the country. Finally, in the province of Cocle, you will find the region known as “El Valle”. Located in an extinguished volcano, El Valle offers the perfect weather, rivers, waterfalls and tourist attractions. El Valle is at present taking measures to become one of the most wanted regions in the field of mountain real estate properties, owing to its facilities and infrastructure, as well as to its proximity to Panama City (1hr. 45 mins.)

The Pacific Shore

The supply of lots in front of the sea starts in the pacific coast line of the Province of Panama, and it goes all the way until the mid-country provinces. Most Panamanian high-class families have their beach houses on this sector; due to its proximity to the City (45 minutes). This coast line offers residential areas such as Came, Coronado, Punta Barco, San Carlos, Gorgona, among others. Within these beach residential areas we have to remark the region known as “Coronado”, region which counts with one of the best professional Golf camps in Latin America, pools, beach clubs, equestrian clubs, several restaurants and great supply of houses and apartment buildings in front of the sea. Additionally, further on in the pacific coast line, we can find the region of Playa Blanca. Since the development of the macro hotel project known as “Royal Decameron” in the area, the infrastructure and general surroundings have grow significantly. In Playa Blanca, you will be able to find casinos, swimming pools, restaurants, bars and discotheques, beach clubs and a great variety of real estate projects just right next to the beach. Finally, we should also mention the recent development experienced in the seaside areas the provinces of Los Santos (Pedasi) and Veraguas, such as Playa Arenal, Punta Mala and Playa Venao, among others; which have become the new destiny for many foreigners (mostly Europeans) that are searching for great extensions of lands in front of the sea.

The Caribbean Shore

In this area, we can find a similar supply of real estate properties to the one found in the pacific coastline of the mid-country provinces. There are several properties in front of the sea, as well as vast extensions of hectares next to the beach. This region is located two hours away from Panama City and it offers the option to buy in the well-known Colon Free Zone. On the west side of the country, you will find in the Caribbean coastline, the spectacular region of Bocas del Toro, where properties next of the sea or in the middle of an island are simply astounding. A great variety of international real estate companies have started projects in the crystal clear waters of Bocas del Toro. Bocas is one of the most known tourist destinies in Panama, located only 1hr and 45 minutes away by plane. It offers an amazing night life, restaurant, hotels and tours around the different islands of the area. Bocas del Toro coastline has become the most wanted real estate choice for retired or pensioned foreigners in the Caribbean. Among the best areas of Bocas del Toro you can find Isla Colon, Boca del Drago, Red Frog Beach and Playa Larga. The residential project known as Red Frog is of renowned reputation in the international spheres, given that it offers an incredible exclusively designed development for foreigners in one of the most beautiful islands in Bocas del Toro, Bastimento’s Island. The project has marine clubs, restaurants, houses and a dazzling infrastructure.

Islands

The most notorious group of islands is found in Bocas del Toro, given that, as we already mentioned it offers a wide variety of real estate projects in the Caribbean, scenario of several TV series broadcasted around the world. The most important islands of the archipelago are: Isla Colon, Isla Bastimentos, Isla Solarte, Isla Cristobal, Isla Popa and Isla Zapatilla. Likewise, we can found several small independent islands for private projects. Bocas’ islands counts with an astonishing ecosystem for scuba diving, marine activities and bird watching. Another group of islands that is raising popularity is the real estate market found in the archipelago of Mosquito’s Gulf, in front of the pacific coastline of the province of Chiriqui. This Gulf has been granted by the Panamanian government the title of Ecological Reserve, as a consequence of the great diversity of marine fauna found in the area. Most of the islands have registered real estate titles, which allow its prompt buying. The surroundings of these islands are famous for being one of the best places in the world for Black Marlin fishing. The Pearl Islands are located within the Gulf of Panama, three hours away from the city in the open sea, offering a group of more than 35 beautiful islands with spectacular landscapes, surrounded by coral reefs and vast vegetation. The beauty of this area attracted the production team of the popular reality show “Survivor”, who has filmed several times in this region. Finally, you will find the island of “Coiba” in the Pacific Ocean, formerly a prison already abolished and currently a National Park. The main island and its small islands such as Isla Iguana have become in top destinies for scuba diving and water sports.

What should I and should not do when buying a property in Panama?

As a final tip, we will recommend you some practical advises in case you decide to buy a property in Panama:

Recommendation # 1 : You can visit the projects on your own, but it is advisable to be assisted by a professional who could properly introduce you to the promoters, avoiding the pointless increase on the price.

Recommendation # 2 : If you are not fluent in Spanish, you should ask the promoter to get you the contract both, in Spanish and in your native language, for all legal transactions to be performed.

Recommendation # 3 : Once you reserve your property, immediately ask for a receipt and the signature of the Promissory Purchase-Sale agreement.

Recommendation # 4 : Once you have signed this agreement, double-check the deadlines for the subsequent down payments of your property. If you miss one of these, you are exposed to lose the money already paid to the promoter.

Recommendation # 5: Try to take a quick decision on acquiring the property; given that once you reserve it, the price is then frozen. Due to the current demand in the market, prices on apartments rise at a monthly rate.

Recommendation # 6: Once you reserve your property, look for the professional advice of lawyers or real estate brokers, in order to verify all documentation and contracts are due to the procedure of registration.

Recommendation # 7: Think about the possibility of acquiring your property through a Panamanian corporation. They are of fast incorporation, considerably cheap and easy to manage. Using a corporation to acquire a property in Panama will ease a future transfer of it, if that’s the case.