Archives for September 2018

If the real estate industry is serious about holding practitioners to a higher standard, customer service must be more important than sales numbers.
It’s critical to hold industry professionals to higher standards. That idea brought together the brightest real estate minds to discuss the changes the industry is undergoing at a Palm Springs, Calif., conference in March. They distilled the group’s insights into a dozen actionable takeaways, dubbed the “Parker Principles.” The principles, which include finding more available housing and giving back through service, are both broad and specific. But the third principle is particularly compelling: “Create a transparent chain of industry accountability to benefit the consumer.” But that transition won’t happen until agents focus more on client satisfaction than sales numbers.
Agents become a powerful force when they understand that their choices directly shape their futures. You need a player mentality, as opposed to a victim mentality. Victims believe everything is beyond their control (interest rates are too high, inventory is too low, the seller isn’t compliant). You can’t deliver for your clients until you accept the fact that you don’t create the market—you respond to it. Being a player means recognizing that your job is to help people buy and sell homes, regardless of outside forces.
More importantly, prioritizing service means holding yourself accountable. That means following through on your promises, answering questions in a timely fashion, knowing your contracts, keeping everyone on track—in essence, treating this “job” as your business. But with accountability comes transparency. For some agents, that’s a hard pill to swallow. After all, transparency requires a certain amount of vulnerability. It means letting clients know you don’t have all the answers, staying within the boundaries of your expertise, and laying out the best options for clients, even if those options don’t benefit you directly.
To create client relationships that are grounded in trust, clarity, and service, here are four tips:

• Let accountability flow both ways. In this low-inventory environment, where bidding wars are commonplace, buyers who don’t have an accountable agent are in for a frustrating experience. Sellers, too, may end up accepting a higher offer that never closes without a transparent agent’s guidance. Agents must know the process and keep everyone focused on the end goal. But buyers and sellers are also responsible for making the final decisions throughout the process and voicing questions and concerns to their agents. Bringing it full circle, agents are then held accountable for being transparent on those issues.
• Supplement data with your own knowledge. Third-party real estate sites have armed clients with unprecedented amounts of information. This isn’t necessarily a bad thing: Educated clients have a better idea of what they want (and can afford) and are easier to work with. The downside is that agents are sometimes seen as interchangeable commodities rather than trusted resources. That said, the average person will sell their home every five to seven years and move almost 12 times in their lifetime. Some agents close that many deals in one month. You have so much industry knowledge. Focus on the relationship, not the commission, to create the environment for you to become the go-to resource. By listening carefully and actively, asking questions, providing clarification, and paying attention to body language, you can develop trust.
• Use a time-tested buyer process. Transparency starts with asking the right questions, but agents don’t need to interrogate their clients. Do a quick survey about your clients’ wants, needs, and general priorities, which will save time, make the transaction run smoother, and enable you to deliver more value. Knowing your clients’ expectations creates better understanding and trust, which helps the overall transaction.
• Arm yourself with teammates. Real estate shouldn’t be a solitary endeavor. In fact, collaboration is a key ingredient for better service. Rather than constantly trying to compete with colleagues, focus on working with them to find solutions to client problems. It doesn’t matter who gets the credit; it matters whether the transaction closes. Escrow agents, qualified lenders, and reliable inspectors all improve transparency, but a good real estate team is necessary as well. Team members can help with open houses, step in when you’re challenged for time, brainstorm potential solutions to problems, and hold you accountable to the goals you set. Sometimes, it takes a village to close a transaction.

The Parker Principles laid a path for the real estate industry to transition from sales to service; it’s up to agents to rise to the challenge. Clients ultimately want an agent who can get the job done so they can move in and move on with their lives. As they evaluate you, they’ll wonder whether they can trust you to accomplish that goal. When mistakes happen, clients aren’t interested in who’s at fault—they just want the issue resolved. So be proactive to prevent problems before they arise. If in doubt, ask questions, and always look for opportunities to collaborate rather than compete.
By: Jeff Thompson (NAR)
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Retail real estate has an underappreciated problem: Year after year, incorrect or incomplete tenant expense reconciliations cost landlords an enormous amount of money.

Erroneous common area maintenance and other reconciliations (generally referred to by the catchall term “CAM recs”) can account for hundreds of thousands of dollars in losses over time for landlords. This is especially true of those with large portfolios comprised of dozens of shopping centers and hundreds of tenants. Even for just a single tenant, incorrect calculations or lease interpretations can add up to a five-figure annual loss for the landlord. The longer the mistake goes unrecognized, the greater the damage. Reconciliation complexity also grows exponentially with property size, making inaccuracies more likely. Such mistakes can complicate and delay property transactions and even spur conflicts that sour landlord-tenant relationships.
Important as CAM recs are, however, landlords often fail to complete them on time.
Chalk it up to the labor-intensive, time-consuming nature of the process. Generally speaking, it amounts to a herculean effort for already-busy property managers and accountants. Timing wise, CAM recs are usually conducted right in the middle of spring tax season. As a result, real estate companies’ internal teams work incredibly long hours as they dive into the weeds on expense calculations, caps and modifications in addition to their daily responsibilities. This presumes the team is actually able to engage on CAM recs. All too often, companies run years behind on the process precisely because their internal teams already have too much to do.
There’s a double-whammy here: Let’s say a company is three years behind on its CAM recs. When it does eventually find time to straighten things out, it is likely to frustrate its retailers by asking them to pay back huge sums.

If too much time is allowed to pass, what are essentially statutes of limitations on CAM rec recoveries can be triggered, resulting in thousands of dollars in irrevocable losses for the landlord. When the mistake runs in the opposite direction — i.e., the landlord has been taking too large a share of expenses for a particular tenant — the solution is to give out rent credits, which is hardly optimal for owners seeking to stay on budget.
Falling behind can complicate things in other ways as well. Let’s say the landlord grants a tenant a “one time” exemption from paying a certain annual expense. An under-the-gun property manager might fail to properly record that temporary break. As a result, the tenant could avoid the payment for several years running. In addition to the costs associated with that particular tenant, the error could also compound losses linked to other retailers: At many shopping centers, leases stipulate that the share of expenses paid by inline tenants will be based in part on what the larger tenants paid. When that number has been wrong for years on end, the cascading effects can be a costly nightmare to sort out.
Of course, an increased likelihood of precisely the types of errors described above is a predictable consequence of a rushed or intermittent CAM recs process. That means tenants are more likely to be confused about their true share of expenses, which can lead to unpleasant and expensive haggling and can hurt the retail-landlord relationship.
Lack of standardization also can make it harder for property managers and accountants to review calculations for correctness. Whenever they start the CAM recs process, they have to be on guard for unexpected quirks and inconsistencies. They go to each other with questions like, “Now that Jane has left the company, do you remember how she handled this issue the last time we did CAM recs?”
At a time when owners are racing to buy and sell properties in a white-hot market characterized by thin margins, the effects of faulty or unclear CAM recs on transactions can be substantial as well. When landlords negotiate expenses with tenants, they often “document” these agreements informally (by, for example, typing out the details in a file saved to a hard drive). The intent is to draw up a proper lease amendment later, but in practice this step often falls by the wayside. When it comes time to sell the property, the resulting ambiguities can create a mess that delays the deal.
All too often, companies acquire properties with the intent of reconciling CAM and other expenses in March along with the rest of the portfolio. But when evaluating acquisitions, it is much wiser to immediately identify all underbillings and overbillings related to tenants’ share of expenses. This ramps up the efficiency of transactions, saves money and mitigates risk. All too often, however, buyers are too busy to get ahead of the curve on the process.
Retail landlords across the industry need to allocate more time and resources to maximizing the efficiency of their CAM recs. To improve things, start planning now rather than waiting until seasonal crunch time. The effort should include a detailed review to uncover any errors among all tenants, as well as any unaccounted-for slippage in your cost recoveries. The team should prepare a summary report with standardized billing formats to verify that expenses were coded or bucketed appropriately; a property summary should show the recovery rate, tenant by tenant.
Throughout the effort, the goal should be to thoroughly document all reconciliation-related changes. Automated, consistent tenant notices are a crucial finishing touch. Having these ready-to-send letters in advance can be a big time-saver for property managers and tenants alike.
Consider outsourcing these tasks to an experienced third party. Such firms, including the one I helm, bring their own expertise to the table; they routinely see the types of mistakes other companies make and continuously improve their own tools, systems and software. Experts can help buyers uncover reconciliation issues immediately upon acquisition or even during due diligence. By leveraging these capabilities, landlords can avoid pouring precious internal resources into non-core activities — and gain an edge at a time of intense competition and rapid change.
By: Mike Harris (Forbes)
Click here to view source article.

Nearly half a billion dollars in fresh money is headed to New Mexico state coffers after a record-breaking oil and gas lease sale this week by the U.S. Bureau of Land Management’s Carlsbad Field Office.

The two-day, online auction generated $972.8 million in bonus bids for 142 parcels in Eddy, Lea and Chaves counties, breaking all records for BLM lease sales across the nation, according to the agency.

The amount generated is nearly three times the $358 million the BLM earned from all sales nationwide last year, and more than two times the agency’s record year for lease-sale income in 2008, when it earned $408.6 million.

New Mexico will reap about $467 million from the Wednesday and Thursday sale, because 48 percent of the revenue from such lease auctions goes to the state where the oil and gas activity occurs. The rest goes to the U.S. Treasury.

The auction results drew praise from U.S. Interior Secretary Ryan Zinke, who said in a news release that the state’s robust oil and gas development has turned New Mexico into a “centerpiece” for the country’s “all-of-the-above energy future.”

“The people of New Mexico will see about half a billion dollars of this right back into their roads, schools and public services,” Zinke said in a prepared statement.

The lease-sale money will significantly increase the state budget for the current fiscal year.

In August, the Legislative Finance Committee and executive economists projected a $900 million revenue surplus for fiscal year 2019, which began July 1. However, that projection was based on an estimate of just $200 million from the BLM’s latest auction. The $467 million it actually earned would now push that surplus to nearly $1.17 billion.

Apart from the lease sale’s record for total income, the auction also produced the highest bid ever for a single parcel and the highest per-acre bid ever received by the BLM in all its lease sales nationwide.

That bid generated $101.5 million for a 1,240-acre parcel in Eddy County, representing $81,855 per acre. That’s up from BLM’s previous record of $76.7 million for a single parcel set during an auction in New Mexico in 2016. And it’s double the BLM’s previous $40,000 per-acre record bid, set during a 2017 New Mexico auction.

The record-breaking auction reflects an unprecedented boom in oil and gas production in the Permian Basin in West Texas and southeastern New Mexico, particularly in the Delaware Basin, an oval-shaped shale rock formation that protrudes from southwestern Texas northward into Eddy and Lea counties. Modern drilling technologies have turned that zone into one of the most productive oil and gas fields in the world, which is sharply driving up prices for land parcels there.

New Mexico oil production reached an all-time high of 171 million barrels in 2017, and output this year is on track to climb even higher. Production reached 87.5 million barrels as of May, up from 66.8 million barrels in the same period last year, according to the state Oil Conservation Division.

“New Mexico is at the forefront of the oil and gas industry,” Ryan Flynn, executive director of the New Mexico Oil and Gas Association, told the Journal. “We’ll see more records being broken going forward.”

Unlike the boom-and-bust cycles of the past, the industry expects production to continue climbing for at least a decade, Flynn said.

“This is different than anything we’ve experienced before,” he said. “We’re not only seeing record-setting production, but sustained growth that we expect to continue over the next five to 10 years.”

Before this week’s auction, environmental groups said the BLM was planning to include about two dozen parcels within 10 miles of Carlsbad Caverns National Park. But in late July, the BLM eliminated those parcels from the September auction.

By: Kevin Robinson-Avila (ABQ Journal)
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The Terra Firma land real estate magazine is the official publication of the REALTORS® Land Institute, “The Voice of Land.” Published bi-annually in the Summer and Winter, this publication features relevant content on the hottest real estate and land industry topics. It is designed to bring the information that real estate professionals need to succeed and grow their business. With authors ranging from verified industry experts to Accredited Land Consultants and top industry service providers, readers will have access to credible, pertinent and plentiful information to help them transform their business.
Click here to view the 2018 Summer issue.
By: RLI
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