One of the items covered in real estate prelicense courses is the Sherman Antitrust Act. 

While mention of the Sherman Antitrust Act might (or more probably does not) bring memories of Rockefeller and Carnegie and others who developed monoplies and trusts in order to eliminate competetion, this and other antitrust laws today are used to fight anti-competitive activites wherever they may arise, including in your local real estate marketplace. Most licensees understand that these laws prohibit brokers from talking about commissions charged clients with brokers in other firms, and prhibit licensees from suggesting to prospective clients that there is a standard commission or that those brokers who charge less than the standard commission cannot offer adequate service. 

This does not stop all brokers or their affiliates from attempting to deter other brokers from discounting their fees, by threatening to concentrate their efforts or steer buyers toward transactions for which higher commissions are available. The term “steering”, in this context, refers to action taken by a broker or agent to avoid cooperating with a particular competitor; for example, when a broker purposely fails to show his client a home listed by a discount broker even though the home matches the buyer’s stated preferences. Because listing brokers depend on cooperation from rivals, brokers may deter discounting by steering buyers away from discounters’ listings and reducing the probability that homes listed by discounting brokers will sell.

Legal? Moral? Ethical? Fattening?The Federal Trade Commission (FTC) and Department of Justice (DOJ) have responded to allegations of steering in two distinct ways, depending on whether the steering was unilateral or involved an agreement among brokers.

They have taken antitrust actions against collective activity of brokers to reduce the availability of information about properties listed by discounters.

The FTC has sued to prevent MLSs from discriminating as to the listings that are made available on the Internet.

 The DOJ has sued to prevent the National Association of Realtors from establishing rules against VOWs that limit the ability of a broker’s client to see via the Internet all the listing information formerly screened by the broker. They will continue to monitor the cooperative conduct of private associations of real estate brokers and bring enforcement actions where appropriate. They have not pursued enforcement action where steering behavior appeared to be merely the result of a single firm’s or licensee’s unilateral decision not to cooperate with a particular competitor. Therefore, despite antitrust restrictions, a licensee is free to be as cooperative or uncooperative as he wishes. However, if he does choose to be uncooperative, he will have to deal with issues relating to his fiduciary duty to a client, any duty imposed upon him by state statute or regulation to a non-client, contractual obligations arising from an employment or agency agreement, the Realtor Code of Ethics, if he is a member, and his conscience.          

As you begin your ProSchools’ real estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee) leading to a career in real estate, keep in mind that your goal is to get into real estate and MAKE IT.  The course and the test are minor road blocks. You can easily complete the course and pass the test if you aim beyond those achievements. 

To help get focused on the career, you might venture to:

http://homebuying.about.com/od/realestatecareers/

Here you will find some good information about interviewing brokers, as well as other useful information, including sales tips.  If you click on Real Estate News at that site you will find some of the major real estate news sources.  

One of my favorites is RealtyTimes.com.  For the agent-to-be this site has a wealth of information to help get started.  At the site, under “Search Realty Times” type in “new agents” and you will find a number of articles addressed to you.  If you move your mouse to ”About Realty Times” and click on ”Our Columnists”, you can see the columnists who write articles for the site.  Explore each of the columnists to  see which have articles that are of most interest to you.  Blanche Evans and Patti Brotherton should be especially worthwhile for the starting agent. 

At http://realtytimes.com/rtnews/nlpages/20000412_realtor2.htm you can find out what a real estate agent does all day.

As a new agent-to-be, you might find the following article of considerable interest:

http://www.mortgagenewsdaily.com/11112004_Choosing_A_Real_Estate_Agent.asp

This article is addressed to potential buyers and sellers, advising when they should want the experienced agent and when they should want you - the new agent.  The points presented can be invaluable in making your presentations when you are getting started.  http://www.mortgagenewsdaily.com/ is also a very good web site for current real estate news.

http://www.inman.com/default.aspx is a great source for news relating to the real estate market as well as the industry.  But unless you subscribe, you will have access only to the current day’s news. 

Once you obtain your license and join the National Association of Realtors, go to their website and click on “REALTOR magazine”, find “Selling” and go through the excellent courses on personal marketing, property marketing, etc.  In particular, note the heading “For rookies”.  Go through the program.  Look through their related articles, and through the field guides.  You need only one usable idea from any of these sources to become successful, and save time, money and energy.    

Below are excerpts from ”Remarks by Governor Susan Schmidt Bies At the National Credit Union Administration 2007 Risk Mitigation Summit January 11, 2007″. They help put into perspective some of the problems leading to the defaults that in turn have led to current credit crunch. 

“Nontraditional Mortgage Products
Last September [2006], the federal banking agencies, including the NCUA, issued guidance on the risks associated with nontraditional mortgage lending. Supervisors are concerned that current risk-management practices may not fully address the entire set of risks inherent in nontraditional mortgages–risks that could be heightened by current market conditions. Nontraditional mortgage loans are those that allow borrowers to defer repayment of principal and, in some cases, interest. Over the past few years, there has been a large increase in nontraditional mortgage products, including interest-only (IO) loans, for which the borrower pays no loan principal for the first few years of the loan, and payment-option adjustable-rate mortgages (option ARMs), for which the borrower has flexible payment options–and which could result in negative amortization. These types of mortgages are estimated to have accounted for about one-third of all U.S. mortgage originations in 2006, compared with less than one-tenth just a few years earlier. Nontraditional mortgage products have been available for many years; however, they have historically been offered to higher-income borrowers. More recently, nontraditional mortgages have been offered to a wider spectrum of consumers, including consumers who may be less able to afford the jump in monthly payments common in these types of mortgages and may not fully recognize their embedded risks. Subprime borrowers are more likely to experience an unmanageable payment shock during the life of the loan, meaning that they may be more likely to default on the loan.

Supervisors have also observed that lenders are increasingly combining nontraditional mortgage loans with “risk layering” practices–such as by not evaluating the borrower’s ability to meet increasing monthly payments when amortization begins or when interest rates on adjustable rate mortgages rise due to indexing or at the end of a “teaser” rate period. We are also seeing more frequent use of limited or no documentation in evaluating an applicant’s income and assets. Although some lenders may have used elements of nontraditional mortgage products successfully in the past, the recent easing of traditional underwriting controls and the sale of some types of nontraditional products to subprime borrowers may generate losses on these products greater than has been observed in the past. Additionally, information from other sources seems to indicate that more borrowers are purchasing real estate with no equity down payment by using simultaneous second liens. The greater prevalence of risk-layering practices and sales of nontraditional mortgage products to nonprime borrowers have occurred in the past few years as competition for borrowers and declining profit margins has prompted lenders to loosen their credit standards to maintain loan volume in a slowing environment.

The industry trends I have just described, taken together, were what led the Federal Reserve, NCUA, and the other banking agencies to issue guidance on nontraditional mortgage products last September. The guidance emphasizes that an institution’s risk-management processes should allow it to adequately identify, measure, monitor, and control the full set of risks associated with these products. It reminds lenders of the importance of assessing a borrower’s ability to repay the loan, both now and when amortization begins and interest rates rise. Nontraditional mortgage products warrant a bank having strong risk-management standards as well as adequate capital and loan-loss reserves. Further, bankers should consider the impact of prepayment penalties for ARMs. Lenders should provide enough information so that borrowers clearly understand, before choosing a product or payment option, the terms of and risks associated with these loans, particularly the extent to which monthly payments may rise and negative amortization may increase the amount owed above the amount originally borrowed.

Subprime Mortgage Lending
The agencies’ guidance on nontraditional mortgage products did not specifically address mortgage lending to subprime borrowers–although, as noted, nontraditional mortgage products are sometimes offered to subprime borrowers. Both lenders and supervisors are aware of the benefits of subprime lending to homeowners, and both have an interest in ensuring that the market remains viable over the longer term. To ensure that viability, it is important to maintain sound underwriting standards and product terms as well as sufficient consumer protection practices. Therefore, subprime mortgage lending continues to be an area that supervisors monitor closely. While overall mortgage delinquency rates remain low by historical standards, they have been increasing in recent months, especially in the subprime sector. Performance deterioration is most notable in the more recent vintages. Many industry observers believe the poor performance of more recently originated subprime loans is due primarily to looser underwriting standards, including limited or no verification of borrower income and high loan-to-value transactions. Subprime lending has certainly created homeownership opportunities for borrowers with weaker or less certain credit histories. But because of the increased risk profile, lenders need to be especially diligent in maintaining prudent underwriting standards and in promoting manageable loan terms and sufficient consumer disclosure practices. Further, as part of an ERM process, as lenders design more complex products they need to identify ways to clearly communicate the product features and risks to their customers.Subprime mortgages typically carry higher interest rates than prime loans. It is not uncommon to find margins of 600 basis points or more on adjustable rate subprime loans after the expiration of a teaser rate. Not surprisingly, some borrowers are unable to keep up with their mortgage payments once these payments fully adjust. In some cases, if alternative financing cannot be found, borrowers may be forced to sell their home or enter foreclosure. And given prepayment penalties, home price appreciation slowing significantly and capital market investors becoming more conservative, some borrowers may be having more difficultly in refinancing to avoid foreclosure.Supervisors are discussing what can be done to ensure that these types of loans are being originated in a safe and sound manner and that consumers are being provided with clear and balanced information so that they can fully understand the terms and risks of these products. Subprime loan underwriting, when done prudently, should reflect all relevant credit factors, including the borrower’s ability to service the debt. In the current environment, risk managers should review policies governing the use of loans with limited or no documentation and simultaneous-second mortgages. Lenders that do not account for tax and insurance burdens in assessing borrower qualifications should understand the associated risks. It may even be prudent to escrow tax and insurance payments to ensure that the collateral is adequately protected from physical casualty losses as well as tax liens, or the lender should inform borrowers what should be set aside to meet the periodic insurance and tax payments on their homes if these payments are not already included in their total monthly mortgage payment.”

Of course, even these warnings did not convince many lenders to change their ways. It took the refusal of investors to continue buying the loans to bring the concept of “prudence” back to loan originating and underwriting.  

It appears that it is true that “history repeats itself”, yet “we learn from history that we do not learn from history” and that “those who do not learn from history are condemned to repeat it”. (I love those thoughts).  

Those who only considered current trends (such as increasing home prices) and made or got loans based on anticiapted future increases in value of the secured property did not learn the lessons of the 1980s when loans were being made on that basis, contributing to the demise of the S&Ls, and prompting passage of FIRREA, requiring licensing and certification of appraisers who appraise properties securing federally related loans.     

Often students are told to just put the “best” answer. To that I say, AHHHH!!!!

If the question is not an “except” question, three answers are false. One is true. There cannot be a true answer and a truer answer. You cannot “know” choice A is true and pick choice B, because it also sounds true. When you pick B, you are declaring A, C and D are all false.

If an answer cannot be false, it is true. When you are struggling between two choices, ask yourself if either one could ever be false. If it cannot be false, it’s true. For example, one choice is that “owners and renters both have estates.” Another choice is that “they both have freehold estates.”  If you choose they both have freehold estates, you are also stating that they do not both have estates.  That is an impossible combination of choices.  They cannot both have freehold estates unless both they have estates. On the other hand it is possible that they could have estates that are not both freehold

This is the second part of a discussion of how to take tests so you do not miss questions because you misread the question or answer.  Students graduating from ProSchools’ real estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee), generally pass the license exam with high scores the first time, when they are aware of some basic test-taking skills. 

Many students have trouble with choices with the word “not” in them. We tend to pay no attend to the word, “not.” What part of “no” don’t we understand?

When it comes to tests, very often we don’t understand any part of it.  When you see the word “not,” read the statement with the word in it, then read it without the word, and listen to which way sounds correct.

You can do the same in reverse.  When in doubt between two answers, stick the word “not” in each choice and see if either appears correct with it in the statement.

What makes good students go bad – that is, choose the wrong answer when they know the right answer?

This is the first part of a discussion of how to take tests so you do not miss questions because you misread the question or answer.  Students graduating from ProSchools’ real estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee), generally pass the license exam with high scores the first time, when they are aware of some basic test-taking skills. 

In the next few blogs, I’ll give some tips on how to improve your test-taking skills.  
 
Except questions.  These are the type of question most often missed simply because of a “stupid” mistake – putting the answer you know is right. Sometimes you do it because it is hard to think in the negative. (“Is choice A not true? No, it is true so it is not not true, so it is not the answer.  Is choice B…? By the time you get to choice C, you are so exhausted you tell yourself, “That’s true,” and mark it as your answer). 

To avoid this, on scratch paper, create columns A, B, C, D.  For each question that is confusing, ask it choice A true, is B true, etc.  Mark T if it is true, F if it is not. When you are done and have 3 Ts and one F, the answer to the question is the one that is F.

Finally, the end (I promise) of the discussion of how to go through ProSchools’ real estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee), pass the license exam with high scores the first time, and graduate from the school sounding like a professional real estate agent.

The best way to learn or remember the material is to say it out loud!  When you read a key fact or key point, read it out loud.  Look away and say it out loud again.  To remember facts, repeat them out loud.  It works!!! 

This is the way you remember a person’s name when you are first introduced.  It is also the reason students will often start to ask me a question and then stop in the middle.  In verbalizing the question, they suddenly see what they were missing when they read the material or quiz question silently. 

This is the third part of a discussion of how to go through ProSchools’ real estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee), pass the license exam with high scores the first time, and graduate from the school sounding like a professional real estate agent.

Another favorite line of questioning by students is:  “If I have memorized all of the answers to the quizzes, will I pass?”  “If I am getting 90% on all of my quizzes, will I pass?”  

For many of these students, the method of study is to, “Just memorize all of the questions in the course.”  

Unfortunately, you probably could not memorize questions where you do not understand why an answer is correct.  Even if you could, it would not matter.  Students who memorize questions will claim the license exam had material they had not seen in the course.  Those who study the course material report the opposite – the questions were worded differently, but did ask about material covered in the course.

>(Oregon real estate prelicense is an exception.  In Oregon, most of the license exam questions have been made available to students, so if a person could memorize all the answers, they should pass.  But the Oregon Real Estate Agency made their questions available because their exam bank has over 2,000 questions, and if a student do not learn the information, he would not be able to remember the answers.)  

Our quizzes should help to point out areas you do need to master.  But, in most states and for most exams, the school does not know what questions are being asked, and if we did know we could not tell.  Therefore, you can be assured that the questions provided in school will not cover every exam item.  Even when a question does cover an exam item, it will probably be worded differently than the question you will see on the license exam. 

To prepare for the license exam, study and review the course material, and use the quizzes to challenge yourself to think about the material.  Focus on explanations, instead of just the correct answer.  Try to explain to yourself why the correct answer is correct.  Also, stop to think about why an answer you thought was correct is in fact false.  

This is the second part of a discussion of how to go through ProSchools’ real estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee), pass the license exam with high scores the first time, and graduate from the school sounding like a professional real estate agent. 

When students want tips on the best way to go through a course and prepare for an exam, they often word the question something like: “Do we really have to know all this?”, “Is this on the exam?”, “What can I skip?”, “How many questions will be on this.. on this.. on this?”

Below is one method of study provided to us by students who wound up having to take their license exam more than one time – do not try this at home!

“Skip the course material, or just glance at it, because it is impossible to learn it all, and if an item will be on the license exam, the school will provide it in a quiz question.”

My response would be…skip nothing. It is true you will not be able to master it all, and you should not go crazy trying. Some of the material you may need to have as background to understand what you need to know when you enter your career. Also, it does help to have material you need to know for the exam mixed with background material so your mind is able to relax from time to time.

In this and following posts, I will give you some of my ideas on how to go through Proschools’ Real Estate Prelicense course (we offer courses in Oregon, Washington, Hawaii , Colorado & Tennessee), pass the license exam with high scores the first time, and graduate from real estate school sounding like a professional real estate agent.

The first reaction of many students who begin their course of study is the excitement of the thought of a new career. The second reaction, after reading a page of material is, “I cannot learn all of this.” And that is probably true.

So how can you progress through the course, while remaining sane and tolerable to those around you? 

Lower your expectations.  After only one page you expect to need to know everything you have read.  After 100, 300, or 500 pages, you don’t.  You will be surprised that there is so much you did not know.  Hopefully, this is true, since we are trying to present information that is new and not waste you time with material you already knew.

Expect to go over material two or three times.  The first time, you may remember half of what you read and understand half of that.  Do not stop to memorize every new word or idea. Go from the beginning of a section to the end.  Words, terms and ideas get clarified as they are used repeatedly.  If the section is confusing, do not try to remember specifics until you understand general idea being presented. 

For example, do not try to memorize which items might be real property or personal property.  First try to understand the difference between real and personal property. If you do, you will know whether an item would be real or personal.

The most difficult areas (other than those that look like they have math) are those with a number of similar items to sort out. For example, the section on estates is difficult because there are at least 11 of them, and some of them have a number of different names. Each is easy by itself, but after 11, it’s a jumble. If you first get the concept that all estates fall into one of two categories – freehold (owning) or non-freehold (leasing) – with five being freehold and four being non-freehold, the task of learning them gets easier.

If there are exercises, brainteasers, or other forms of interactivity, stop to do them. They are there to give you a chance to take a breather as well as to reinforce certain ideas. When you have finished a section, take the quiz or complete the exercise that follows. This will help to reinforce information in the section.  Review the explanations provided. Then move on to the next section.  Later go back to the section and review and retake any quiz that pertains to it. 

When you have finished the course(s), go back again and review key words and concepts and retake quizzes.