John Connolly's Real Estate Career History and Motivation

Whether you are in the real estate "business" or not, real estate is weaved into every single person's life. Every person with a roof over their head, rented or owned, is impacted by what happens in the Real Estate market. The Real Estate market is tied closely to both the local and national economy and job market. And yet no public school that I have ever heard of spends any time providing an educational foundation to young adults that prepares them to enter into their first Real Estate transaction or respond appropriately to changes in the Real Estate market.

My real estate story began in early 1998. After graduating from UVA, I relocated to Salt Lake City to be in a place where I could indulge my passion for both skiing and mountain biking. Shortly after moving to Utah, I met my wife (also a Utah transplant who moved here for similar outdoor pursuits) and we got married, and began shopping for a house -- our first home -- so that we could settle in and begin our family (we now have 3 beautiful children!)

We were first time homebuyers, excited, eager, and apparently -- easy targets. Since we were both new to Salt Lake City, we didn't know many people and so didn't have the advantage of knowing someone who could refer us to "a good agent". And we knew NOTHING of the process of how to interview/hire an agent or of the complexity of the process of purchasing real estate. I had a Bachelor of Science degree. My wife had an Associate of Science Degree in Biochemistry Technology - neither of us were unintelligent, and we were 28 and 32 respectively, so we weren't entirely devoid of life experience either -- we just neither of us had ever transacted real estate before, so we were green.

At that time the real estate market in Salt Lake City was a reasonably balanced and growing market, and agents were plentiful. It wasn't long before we met a woman who identified herself as an agent and offered her "services". She offered to show us some homes - but only if we first signed a Buyers Agency Agreement. We had no idea what a Buyers Agency Agreement committed us to, and upon asking her to explain, she did simply said "I'm not allowed to show you any houses unless you sign this - it's State Law" (not true, by the way). We were a little hesitant, and prodded her for more explanation since we weren't stupid (just naive!) and we did understand that by signing the Agency agreement, we wouldn't be allowed work with any other Agent.

We asked her repeatedly "What does an agent actually DO to earn the commission on a home purchase?" Her response was a vague "Well you have to have an agent to buy a house. You can't buy a house in Utah without an agent" (also not true - you can, it just is good sense to buy with representation). She continued to evade further requests for even a brief outline of what services she would be providing. This, of course should have been a big red flag for us, but, we were naive, and excited! We had already identified several homes ourselves (using online tools) that met our criteria and we were concerned that we would miss out on the opportunity to view and make offers since this agent kept telling us that "time was of the essence". So our excitement to get going in the process of buying a home overshadowed what SHOULD have been a warning sign to us -- that the agent we were about to employ was either unable, or unwilling, to explain to us a) an agent's role in the process of purchasing real estate and b) the value that she personally would bring to us in her hired capacity to be our agent.

We went ahead and signed a Buyers Agency Agreement with this agent. She informed us that it was legally binding for the term of the agreement, and that we could not back out of the 6 month contract without a lawyer (which was also not true) - and she took us to view the 3 homes that we had identified. The third home was EXACTLY what we were after! We were practically shaking with excitement. The agent advised us to make an offer immediately, on the spot, and for MORE than the asking price with NO contingencies "to ensure that our offer would be accepted". She advised us to make this offer even though we didn't have any financing arrangements made...in fact we didn't have a clue how to begin to get home financing (we had signed the Buyers Agency agreement with her only a few hours before, and she had provided ZERO guidance to us regarding the process and hadn't asked us ANY pre-qualifying questions nor interviewed us in any way to determine what our needs and experience was). Upon learning that we weren't preapproved for financing yet, she made a call to "a mortgage broker that [she] works with a lot" who "has a reputation for being able to finance anyone", and we shortly (the next day) had an appointment to go see him.

And this is where things pretty much became a whirlwind of activity. The Mortgage Broker (the ONLY one that our Agent had recommended) was very "reassuring" -- he said there would be NO problem getting us financed (even though we were self-employed and did not have W2s to verify our income). He said he would make all the arrangements, and the only requirement he had was that we HAD to close on our home at a Title company of his choosing. We had no reason to question that requirement (since we were not receiving any guidance from our agent) and so were oblivious to what was happening to us. We were being defrauded. The Mortgage Broker had an "inside man" working at the "required" Title Company who enabled him to perpetrate a double contract deal (totally illegal). On top of that, he also made all the appraisal arrangements - with what we later learned was a crooked appraiser - to which we naively paid more than triple the standard appraisal fee. In retrospect it was obvious that he charged the much higher rate to compensate for over-inflating the value so that the double contract would work. Ironically, our real estate agent was quick to call us (this was the ONLY time she was quick to call us!) when the appraised value came back so much higher than our purchase price, to let us know what a "great deal we were getting on our home -- over $30,000 in built in equity!" When the fraud was eventually uncovered and investigated, the appraisal review said that the appraised amount from two years earlier was "laughable, and any prudent real estate professional should have seen this a mile away".

To this day, we don't know if our real estate agent was actually in cahoots with the Mortgage Broker, or if she was just SO incompetent and/or uncaring that she didn't see the blatantly obvious signs of fraud. One of the jobs an agent is supposed to provide is to "review docs at closing for discrepancies and inconsistencies" -- uhm -- that didn't happen for us!! 2 years later, a different and very kind and patient mortgage officer with whom we went to refinance our original balloon loan, broke the news to us that at the closing of our home purchase we had been defrauded. There were actually 3 different sets of closing documents (all with differing purchase prices), and we had paid a whopping 7 points (approximately $13,000) to our Mortgage Broker for the high interest balloon loan he had given us (the going rate was 1 point (approx $1500)); several key docs (needed to make the fraud work) had FORGED versions of our signatures on them; and the appraisal that the agent used to convince us that we were getting such a fantastic deal on our house? It was completely fabricated and unsubstantiated. We had paid significantly over market value for our home AND been taken to the cleaners on closing costs! We were severely upside down in our home when we should not have been. Our real estate agent had completely failed in her fiduciary duty to look out for our best interests!

Not content to sit back and be victims, my wife and I went to work educating ourselves on how and WHY the real estate system was structured in a way that this sort of victimization could so easily happen. After much preparation for presenting our case, we sued the Mortgage Broker (in absentia) and won a settlement (which we've never been able to collect). At the time we discovered the fraud (at the 2 year refinance mark), the Mortgage Broker who orchestrated the fraud was already in hiding as he was being pursued by the FBI for numerous counts of even higher dollar fraud that he'd extracted from a large, highly respected nation-wide lender. The Title Company that he had required we close at was already out of business by the time the fraud was discovered (which was a real disappointment since the Title Company was the ONLY entity that was actually required by the State to be liable for "errors" of this type at the time the fraud was perpetrated). And so since there was no hope of collecting a cent from either of those two players in the scheme, as much as it pained us on principle, we ended up having to settle out of court with the Agent and Appraiser in order to cover our out of pocket court costs. The out of court settlement left both the Agent and Appraiser free to remain licensed in their respective real estate capacities and both are currently still practicing in Salt Lake City, Utah.

Now isn't that scary???

This is the underbelly of Real Estate. The part that many agents and other Real Estate service providers for years have preferred to sweep under the rug and pretend doesn't exist. Up until the recent "mortgage melt-down" no one was talking about fraud, and real estate professionals instead only presented the warm and fuzzy and profitable side of real estate! Real Estate in many ways is a "self-regulated" industry. In Utah, the licensing requirements minimal, and the Utah Division of Real Estate relies on people and industry professionals "reporting violators". The bottom line, in my opinion is that the policing of real estate professionals is adequate. Inevitably, an industry that is easy to get into, and that doesn't have much in the way of accountability attracts both incompetent practitioners, and shady practitioners.

You can read more about protecting yourself from predatory lending and loan fraud at the U.S. Department of Housing and Urban Development website...but the bottom line is:
CAVEAT EMPTOR ("Buyer Beware" for those of you unfamiliar with Latin!)

Of course, not ALL agents are bad! There are GOOD and GREAT Agents out there to choose from. I obviously think that I am one of them! And there is much opportunity for home buyers/sellers in the real estate market, even in the current market -- there is always the "use asset" benefit of having a home to call your own! But there are also a significant number of "bad eggs" masquerading as service professionals who are literally out to do as little as possible for the most amount of money. PLEASE exercise your capitalistic right to INTERVIEW BEFORE SIGNING WITH AN AGENT and to BREAK YOUR BUYER or SELLER AGREEMENT if the agent is not fulfilling their fiduciary or functionary duty! Interviewing to select an agent is an incredibly important step in your real estate process! Trust your gut, and make sure the agent answers your interview questions with confidence and sufficiently detailed explanations. Make sure the agency agreement defines the service expectation and that it offers a service guarantee that allows you to exit the agency agreement without penalty if the agent does not meet the defined criteria. If the agent doesn't offer these two things, then they are either incompetent, or unprofessional, or they deliver such poor service that they have to rely on the terms of the agency agreement to "keep" their clients from leaving them!

I went into Real Estate to make a difference. To serve people's real estate needs WELL and with PRINCIPLE. To help turn the tide and ensure that Joe Q. Public had an honest, hard-working option for representation and GUIDANCE. I chose Stonebrook Real Estate as my brokerage because they are a local, independent company with a Principal Broker (Bob Spicer) who is committed to both integrity and service - a perfect fit for my convictions. A Real Estate Agent does NOT make your decisions for you - and you should never take their advice without understanding it. As an expert in their field, doing their fiduciary duty for their clients, your agent should be telling you ALL that there is, both good AND bad, and not lead you down the garden path to believe that everything is easy and simple and rosey. There will be bumps along the road to home ownership. You need to be made aware of them so that you can be prepared to weather them - your decisions should be based on solid and realistic information.

I am motivated by personal experience to protect the interests of my clients - it is the reason I chose to enter this profession. I truly believe that because of my personal experience and conviction, I serve my clients far better than an agent who got their license because their mother-in-law thought it would be a good idea!

I would love to be your Real Estate Consultant. Contact me today to learn first hand how good a real estate transaction can be.

Sincerely,

John L. Connolly