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Just a quick note: AAROnline.com will be down intermittently on Saturday, February 4 and Sunday, February 5 from 10:00am to 2:00pm. We apologize for the inconvenience.

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AAR’s email issues were resolved Wednesday evening at 5:10 pm local time by our excellent tech staff.

Our domain host now attributes the issue to a problem with their DNS (dynamic name server) service. DNS is the “Internet address book” which allows traffic to flow using domain names instead of IP addresses. Thanks to all who called and alerted us of this problem.

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BY JACK COTTON, CRS, CRB

The real estate business is a relationship business. This statement is never truer than it is in the luxury end of the market. High-net-worth individuals like to be with others who are like themselves and want to deal with people they know or are known by someone they know.

Depending on who you listen to, there are those who tell you that the concept of geographic “farming” in real estate is over; it’s dead; it’s for the losers of the business.

I don’t subscribe to this extreme position, but I do believe that we need to elevate the process of finding luxury clients to be more on the level of “gardening.” Farming is a hot tractor tilling hundreds, if not thousands, of dusty, manure-laden acres.

Gardening takes place in a smaller area, it is more precise, and there is rarely a tractor involved.

Gardening is so effective because the decision to buy or sell high-end real estate often is impulsive.  A high-end owner of real estate will wake up in the morning, look out the window and wonder what the view of the mountains or water are like from another angle.  That afternoon the call goes out, the house goes on the market and the search begins for a home half a mile away.

This concept of musical houses is why it is critical for you to use gardening to be “top of mind” with high-net-worth owners of real estate in your desired market area.

Select a small, defined geographic area in where you want to dominate the market.

Gardening this geographic area based on an organized plan of action can yield results because people of means like to be around people like themselves. Gardening geographically, therefore, can yield results as high-net-worth individuals are given the opportunity to “hand pick” their neighbors. In addition, a neighbor will often purchase adjacent property for added privacy or for a family member.

How do we garden? Again it is like farming, but on a smaller, more elegant scale:

Mailings: Mailings should be consistent, planned about a year in advance and reflect the quality of the service and product that you are representing.  The services, of course, are you, and the product is the high-end real estate you represent. 

Calling: The method of calling that has returned the greatest results for me is to call first with a very brief explanation of a mailing, usually a survey, they are about to receive and ask them to keep an eye out for it.

Events: ”By invitation only” property previews are a great way to meet people in your garden. You can join forces with a high-end retailer to enhance your event.

A master gardener would never till, plant, water and feed and then expect a beautiful floral display by the weekend. You might be surprised, however, at how fast results can come from real estate gardening.

Jack Cotton, CRS, CRB, has worked continually in the real estate company he started in his college dormitory room 37 years ago. Over the years, Jack has been involved in most of the record breaking luxury residential sales on Cape Cod, either directly or as coach to the agent involved. His books, Selling Luxury Homes: 12 Secrets Luxury Home Buyers Know and 12 Secrets Luxury Home Sellers Know  hit the Amazon bestseller list at the same time in October of 2011. Connect with him on Twitter or Facebook.

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Sandy Krestan, branch manager and Certified Mortgage Planner for Benchmark Home Mortgage , shared this update on appraisal standards with AAR. A member of the Arizona Mortgage Lenders Association, Scottsdale Association of REALTORS® and Women’s Council of REALTORS®, Sandy constantly strives to stay informed of industry trends and information. You can reach Sandy directly at 602-820-5166 or by email at sandy@TheKrestanTeam.com.

Appraisals continue to be the knothole in a lot of real estate transactions. If you’ve ever had one come in low, then you know how frustrating it can be to look at the comparable sales and try to make sense of how the appraiser came up with that value. Underwriters and investors struggle to make sense of the hodgepodge of commentary and adjustments on appraisals as well.

In an attempt to provide consistency and accuracy to the appraisal process, Fannie Mae and Freddie Mac have implemented a Uniform Appraisal Dataset (UAD), and ready or not, it rolls out on all appraisals completed  on or after September 1, 2011. FHA has issued guidance that they will follow suit shortly thereafter. (You can also learn more about UAD on NAR’s Appraisal Insights blog.)

So What Does This Mean to the Rest of Us?

The MLS is the most common source appraisers use for their information gathering on comparable sales, and currently, it MAY OR MAY NOT provide all of the data they will be required to report. Therefore, they will have to call you to get it if you’re the listing agent. This will slow things down a bit, and your quick response, if you’re the listing agent, will be very important to getting appraisals completed on a timely basis.

Here are some of the significant data changes:

Days On the Market: Days on market (DOM) is now defined as the total number of continuous days. DOM is required for the subject and the comparables.  So even if it is taken off the market for a short while and then relisted, the appraiser will have to count all of the days it has been listed.

Offering Price: The original offering price and history of all price changes must be reported.

Sale Type: Sale type must now be reported and the allowable choices are:

1. REO sale
2. Short sale
3. Court ordered sale
4. Estate sale
5. Relocation sale
6. Non-arms length sale
7. Arms length sale

The appraiser will have to start at 1 and choose the most applicable choice in order from 1-7.

Financial Assistance: All financial assistance must be reported. Financial assistance is now defined as: “Financial assistance or concessions paid by any party on behalf of the borrower include both monetary and non-monetary items, including below-market-rate mortgage financing, gifts of personal property, payment of property taxes and/or HOA dues for a period of time, etc.”

Site Area: Sites and parcels with less than one acre must be reported in square footage. Sites over one acre are reported in acres.

Property View: A view rating and view factor must be assigned to all sites. The allowed rating choices are: Neutral, Beneficial or Adverse. There are 12 established view factors which include water view, golf course view, industrial view, power lines, etc.

Property Style: Appraisers must use appropriate architectural design type indicators such as “Ranch,” “Colonial,” “Rambler,” “Farmhouse,” etc. Descriptions such as one story, one-and-one-half story and two stories are no longer acceptable.

Condition of the Subject Property: An overall condition rating must be assigned from the predefined condition categories provided.  The appraiser must also report any “material work” done to the kitchen and bathrooms in the last 15 years. The work must be categorized as “not updated,” “updated” or “renovated.” Specific definitions are provided for each of these terms. The time frames of all “material work” done must be provided in the following intervals: less than one year, one to five years, six to ten years, eleven to fifteen years or time frame unknown.

The standardized “Not Updated,” “Updated” and “Remodeled” definitions as well as the condition ratings will be used to describe the condition of the property.

Sale Date of Comps: The appraiser must now report the contract date as well as the closing date of all comps.

Quality of Construction: This is one of the most significant changes being made! The appraiser must report a quality of construction rating of the subject and all comps from a list of six predefined quality levels.

Basement and Finished Rooms Below Grade: The total square footage of below-grade improvements (unfinished basement) must be reported. The finished square footage below grade must be reported. Percentages are not acceptable. The access to the basement must be reported as either “Walk out,” “Walk up” or “Interior only.” The number and type of finished basement rooms must be reported. The allowable room types are “Recreation Room,” “Bedroom,” “Bathroom” or “Other.”

AMC Reporting: The appraiser is now required to report the name of the Appraisal Management Company involved in the assignment.

On a Final Note

Despite all of these changes, nothing takes the place of the underwriter’s review in the process. It is ultimately the underwriter who is held responsible for insuring that the appraisal is acceptable and supports the value. There is a process that takes place once the appraisal is in that tests the appraiser’s result against an automated valuation model for quality-control purposes. If this process detects that there are other, potentially closer or more recent comps, it will red flag the appraisal data, and the underwriter may have to further investigate value through the use of a review appraisal or by getting additional information from the current appraiser. So it’s never over these days until we have a firm commitment from the underwriter.

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Have you seen the wealth of information NAR has on their website regarding legal and ethics information? Check it out: http://www.realtor.org/rmolaw_and_ethics/lawandethics

This topic was featured in the April 4th Daily Updates from REALTOR® Magazine written by columnist Bruce Aydt, ABR®, CRB, who is senior vice president and general counsel of Prudential Alliance, REALTORS®, in St. Louis and a former chair of NAR’s Professional Standards Committee.

Question: I am a part owner of a property that I am listing. Must I include a statement that discloses my ownership interest in the property in the MLS and print ads or on the For Sale sign?

How would you answer this?

Here is the link to the answer that was published.

HAVE A DILEMMA? Send your ethics questions to ethics@realtors.org.