March Foreclosure Newsletter
March 24th, 2008
Construction Costs
March 24th, 2008
I spent the weekend walking through some pretty distressed properties, with a client that wanted to build an apartment building on the site. One place was so bad, we were walking arm linked on the second floor encase one of use fell through. I was getting hammered by my client by him wanting numbers of what it would take to build a building. Which of course we wanted those numbers in that moment. I am not a GC, I know a bunch of them, but I am not one. But knowing my clients mind set, I prepared by have a CG show up so there could be a rough idea of what it will take. This in turn got me a phone call this morning from that client thanking me for thinking ahead, and a compliment tell me in ten years of his transactions he has never that an agent give him that kind of anticipated response. Calling a GC is free, having them come out to walk a potential job free, gratitude form your client Priceless.
Discount Services
March 21st, 2008
Yesterday I posted a blog on Activerain.com about how I have my clients get bids on services from vendors.The reason I do this, is to keep my friends in the industry sharp on their job performance and to save my clients money with competitive rates. I got the comments in return referring to how I might be setting my clients up for discount service. Which has me a little preachy now. My preachiness is over the personal belief that I represent my clients first, it is my job to guide them; service them, and protect them from taking more aspirin then me. So, if I am doing my Job right, my clients should be receiving the best value for their dollars, not me taking my clients to the bank so my “friends” can have all their dollars. Granted paying for good value is just that but not having all those people you know that provide great service compete for a job, how is that not servicing your client with the best customer service? If I am to have my business grow, how are broke clients going to purchase more real estate?
Humor at Auction
March 21st, 2008
So I took some clients to auction today, of which we stood in the cold as usual due to a law created in the eighteen hundreds. Which for the first 30- 40 minutes we listened to the trust company read off a huge number of home that the auction was postponed by the lien holders. That basically left the 40 people standing there with about with 4-5 homes to bid on that would yield a viable profit. Every person standing there have the same numbers on the maximum bid to yield a profit. But just so happens there was this group there that was bidding way over the maximum bid marks. And I was dying laughing watching these business investor scream obscenities, because of the stupidity of these people. My clients were a little shocked to see the happenings but it was truly comical. People remember to watch your bottom line, and not to let you ego take you over with a “I WIN ” attitude , because you loose when your ego runs your numbers.
Bank Negotiation in Short Sale’s
March 19th, 2008
I have been receiving emails from a number of people asking me the best way to get the bank to accept a short sale offer. The simple answer is, do not super low ball the lender. Low balling creates conflict and it ends communication avenues. Banks have been making money long before all of us were twinkles in our parents eye’s, so thinking you are doing them a favor is a mistake. It is a numbers game, they know just as you do, that you will need to purchase the property with at least 20-25% equity to turn a 7-10% net profit. So, be real with your offer, be real with your clients about creating a real offer. Or as usual you will find yourself and your clients at the end of the line. With such low ball offers you will not create a good relationship with the lender on any future offers. And if that does not work, go to Costco, buy a 15 dollar carrot cake and deliver it to the banks L&M department. Food also creates a positive relationship, that will open communication easier.
Foreclosure Prospecting
March 19th, 2008
When prospecting any foreclosure investor that knows their salt one of their first questions that will come is “Do you door knock?”. If your answer is no, you lost yourself an investor. If your answer is yes, YOU BETTER PROVE IT. Cause when push come to shove, and you haven’t produced, they will know you lied, and then statistically speaking your former clients will tell 12 people how you lied to them. So, before you speak check every fear at the door, for when your hand reaches that solid core be prepared for what comes. The person on the other side of that door is scared, in denial, angry, addicted to some drug (usually a alcoholic, statistically speaking in Washington), has a savior medical issue (mental impairment or physical), and has some story to go along with all of it. And unless you can muster the empathy and will to patiently LISTEN, you are in the wrong area of work.
Next knowing you have the courage to deal with what is on the other side. You need prospects. How do you get prospects? There are many resources. I prefer realtytrac.com they manage the most extensive foreclosure research site I have see online. You have to pay of course, but if there is money to be made, it is usually not free to get there. Don’t be afraid, you need at the data you can collect to limit your possibility of failure. But at the same time don’t be afraid to mess up, because human dynamic predicts you learn the most from failure. So enjoy the lesson, and don’t do it again.
After you have formed your prospecting list and knocked on many doors after most likely weeks of labor. You obtain an interested party, do not ruin it trying to take them for the bottom dollars. You will put your self back at the end line with all of the other people knocking on their door. So remember WIN/WIN. You get what you need and they get what they need. Be honest if they ask you about your profit, show there is nothing to hide. With that honesty, you will create a business that has many return clients.
Short Sale Tips
March 18th, 2008
When writing a deal for a short sale there are a couple of things to remember.
1.You are representing the money, so don’t let the bank push you around. You hold the ability to help the bank satisfy there mortgaged debt load. Right now in this market financial institution have hurt themselves over the amount of debt they have assumed to the real assets they have. It is not your job to take care of their investment mistakes. So, when they start talking about reducing your commission, start talking about walking and them getting nothing.
2.You need a good title and escrow company. Don’t just use the people you have been working with for years. Go take a couple of short sale classes sponsored by different title companies to figure out who has the strongest staff for dealing with this type of sale. I did, now it as brought less stress to me and my clients.
3.Don’t try to super low ball the lender. Because not only does the primary lender need to get paid, in most cases the secondary lender needs some gravy to help cover their losses. So remember to negotiate with the secondary lender to make sure they don’t kill the deal because unless they sign off too, to clear the title the DEAL IS DEAD. In the cases I have dealt with, we have negotiated to just a few thousand dollar pay-off for the secondary lender.
REO FUN!
March 16th, 2008
I spent Friday combing through the ROE properties in all the zip codes that start with 981**, 980**, and 982**. Let me tell you, I had a great discovery. There were a total of 15 available, out of the 1200 or so foreclosures in the month of February in those zip codes. There are only 15 homes that didn’t get bought at auction and went back to the lenders possession to be sold by the lender. Out of those 15 a number of them were around Boeing Field, so it is understandable why they were not bought at auction. The properties that were not bombarded with aircraft engines every few minutes either didn’t exist on the MLS or had been sold in the matter of days. Then there is One left, and by Monday it will have an offer.
Daily I get emails from prospective buyers telling of there desire to purchase a foreclosure or REO property. The individual’s idea from media influence is that, there are a flood of these on the market. NOT TRUE! But it is easy to see how one would have this idea with the mass amount of doom and gloom that is portrayed. Yes,
The Reality of Foreclosure Investment
March 13th, 2008
1. The concept of purchasing real estate for a sum that could be the tenth of the value of the home is, UNREAL!
The Reality is that homes in Washington that are being sold at auction are being sold at close to market value. Why? 75% of all homes that are in foreclosure where bought after 2003, of that 75% of foreclosed home 85% of them where refinanced in 2005. After these home where refinanced people pulled there equity out and did not pay off other debt, they spent themselves into more debt. So now in the beginning of 2008 these homes are going to auction with little to no equity in them. Which makes purchasing at auction fruitless. The reason for this fruitlessness is not only have you just paid off the primary lender at about 20% of the real estate actual market value. You now have to pay the back taxes, and you will need at least 10% market value of the home to repair its distressed state. Now you are Possibly sitting on 10% equity if you are lucky. In this market there is no way for you to sell the home at market value, which means you will need to sit on the property until the market recovers. Which is 2 to 3 years away.
2. Purchasing a home at auction for the minimum bid is, UNREAL!
The Reality is at auction there is about 60-70 people there on any given Friday. 60% of those people are representatives of companies that have millions and millions of dollars of purchasing power. You will also see everyone of the people with a bundle of papers they are flipping through, these papers are title reports. Which says they have done their homework on every property that is being bid on that day. So when a property that will yield the profit they are looking for, they have a RED LINE mark, which is the maximum bid possible for profiting on that purchase.
3 . You can get financing to purchase that property at auction, this is UNREAL!
You must have CASH at auction. when that auctioneer says sold you hand that person a cashiers check for that amount. You asking yourself, “How do I get a cashiers check in that amount in that moment?” You don’t. You have to bring multiple cashier checks in many denomination, so you can giver them as close to that price as possible, and you will be over paying. How do I get that money back? Right. In 4 to 6 weeks you receive a check back from the Trustee company for the difference. There are Hard Money Lenders, but barrowing money from the mafia never goes well.
4. Well I can just take over the home owners mortgage and do a “Quick Claim Deed”, UNREAL!
The Reality is you are leaving yourself open for being sued by the previous owner for fraud, and with the States Attorney General is prosecuting these cases and the previous home owners are not loosing. Why Fraud? Because the home owner is under extreme duress.
What is a good way to invest in foreclosure?
1. Work out a Win/Win deal with the home owner. If you don’t know what a Win/Win deal is. It is where everyone walks away from the negotiation table unhappy. And if there is now way for the home owner to win, because of the situation they have put themselves in. Be honest about that. That way respect is created, and at least they are able to relieve themselves of the burden.
2. Do not buy a house just because it is in foreclosure, make sure the equity is there.
3. Broaden your scope of equity investment. More time then not I have gotten great deals, just because the home owner needs out of the home. These people are not in foreclosure or in bad financial situations, they are inpatient. Use that. Close the deal quick, so they feel relieved and less stress. You will be surprised how many people hate waiting and would rather not have stress then money.
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