News from REO Front Lines

An Eye for an Eye only ends up making the whole world blind!

2010-03-04T16:15:00.000-08:00

I was reminded of this quotation by Mohandas Gandi after discovering by accident that a Buyer's Agent who had submitted an offer for one of our REO Listings had wasted no time to trash our business practices on her Facebook blog!! Her exact quote was " Writing an offer on REO property on sellers terms. Listing agent provided 3 pages instructions on bold print: NO LOW BALL OFFERS accepted, please do not ask for credit, inspections, disclosures, please do not call.....Frankly, I can't wait for this REO era to be over"!

Well, my natural inclination was to trash her in our blogs! But then we would have a village full of idiot realtors who are all blind! This however, caused me to go back and review the 3 FULL page instructions we do provide to help some agents who have never written an offer on REOs.

This section doesn't say anything about asking for credit, inspections, disclosures. In fact, it's illegal to advise clients against inspections. In the section of 3 page document about Highest & Best Offer, we state, "Please, No Low-Ball Offers since it's a waste of everyone's time.

So, you will be the judge if these are accurate representation of our intent to educate and facilitate the process of liquidating properties for our clients and help buyers agent become more effective. "Please, No Low-Ball Offers since it's a waste of everyone's time" is NOT the same as "NO LOW BALL OFFERS accepted". There is a huge difference here since not accepting offers is illegal and we are bound to submit ALL the offers to our sellers. But discourging low-ball offers is completely different.

This is perhaps why Realtors have a similar reputation of attorneys and politicians. Because some of us, see a piece of information and spin it to gain an advantage. It shows desperation and complete disregard for the ultimate cost which will be born by ALL realtors. The fact that she's trying to use Social Media to build her business is understandable, but to mis-quote and mis-inform her audience is simply sleazy.

So, instead of exposing her sleazy tactics, I went to her facebook page and dropped a polite and private note that perhaps she should be careful not trash the other principals in her ACTIVE transactions. I mean, what sort of idiot you have to be to risk your active transaction by trashing the other principals!?

What would you do if someone mis-used and abused your published information and you were in a transaction with her. I would like to hear from you.

I just fired myself as a Listing Agent for a short sale & I feel wonderful!

2009-12-08T09:14:00.000-08:00

Perhaps we've been spoiled by listing vacant REO properties with complete autonomy, but last week a referral came for a Short Sale opportunity and I visited the property on Saturday. Since the property was occupied by Tenants, we made an appointment with the owner to meet us there. After meeting with the tenants, I discovered that there is a lot of un-finished and sticky business between the tenants and the owner where the owner owed them money!

Compounding the problem was that the owner was presenting the tenants as possible BUYERs of this short sale. However, he wanted us to be less than candid when it came to ALL the implication of the Short Sale and the potential for Foreclosure. It become as clear as Montana sky that the owner wanted to avoid paying the bank while collecting rent from un-suspecting tenants for as long as he could.

I started to get that un-easy feeling that one gets after talking to used-car sales reps!! I needed to take a long hot shower and see if we wanted to ANY part of such a client! Luckily, the answer was a resounding NO!

I emailed him Sunday morning and thanked him for the opportunity and reminded him that any "MATERIAL" information has to be disclosed to buyer regardless of their current interest in the property and we can NOT risk our license and reputation to be part of a deceptive campaign to milk his tenants for rent. Most importantly, California now has tenant laws to protect them during foreclosure and we wanted no part of anything illegal and fraudulent.

After I fired myself as his Listing Agent, I felt fantastic!! I felt like a huge weight had been lifted off my shoulders! Granted times are tough and I could have assigned the day to day interaction to another agent in the office; something didn't feel right. So, I fired myself.

Have you fired yourself lately!? Please share what caused your early exit?

Water Boarding or Dealing with HOA managers?! Which would you prefer?!

2009-12-01T09:33:00.000-08:00

We are starting to enjoying the Water Boarding treatment we get from our HOA managers who despite cashing our check for documents, refuse to even acknowledge that they have received our order!!

Some of them don't accept online payments or credit cards which creates a lot of delays. I guess setting up an account with PayPal would be too inconvenient. In one case, this HOA manager was claiming she had NEVER received our document request, despite the fact that I had emailed it to her! I forwarded her the original email the 2nd time and she was still denying it. Then came the cashed check and she was STILL denying that she NEVER received our order for documents. Needless to say, we had to print/scan a copy of the canceled check and email her a copy before she agreed to process it!

The challenges is that we anticipate a lot of REOs from this development, so there is no option to go ballistic here. And if we escalate to her management, the next condo listing will be jeopardized since she will find a way to get even.

No offense to our guest at GitMo, but if this is NOT Water Boarding, what is? I know some friends of the former White House were not classifying Water Boarding as Tourture, but this clearly goes well beyond the realm of professional conduct.

However, I am happy to report that after being Water Boarded for 3 times last months, my team is no longer calling it Water Boarding, they affectionately refer to it a "Freedom Tickling" by the HOA!! This experience had made us much more appreciative of SFR listings and thought me a lesson not to EVER invest in a Condo!

What do you guys experience? Any one Water Boarding you these days!?

Wow! Buying REOs is no Day in the Park, is it?!

2009-11-12T00:15:00.000-08:00

I recently learned a valuable lesson when dealing with a buyer on one our own REO listings. I learned the hard way that unless you can win the trust of your buyer, the transaction will not close. Here's some details:

One of my agents brought an offer for one of our office REO listings. We managed to get this offer countered; but because of multiple offers on the property, the Asset Manager wanted this buyer to agree to cover ANY difference between the Purchase Price and the appraised value since they suspected the property would not appraise as high as some of the offers.

When we fully explained the implication of this condition to our buyer, he decided to reduce his offer price by $25,000 against our recommendation. His new offer price would be very near an existing cash offer that was submitted to the Asset Manager. The agent called me for help and I spent more than hour over the phone discussing how critical it is for us to avoid a 2nd visit by the Asset Manager to this purchase transaction and that he will likely lose the property to the cash buyer if he reduced his offer price.

Well, he didn't believe us. He was not buying our explanations either. So, like any good negotiator would do, I asked him to send me an email with the exact items he was expecting his buyer agent to perform. After receving the email, the agent asked me to send a note to the Asset Manager.

This reduction caused the Asset Manager to counter the cash offer which and we lost the opportunity to earn a sell side commission! To add insult to injury this buyer was claiming that we mis-understood his request that he really didn't want to offer $25,000 LESS that he just wanted to TRY it!! Good thing we had his email to clearly show him that we didn't come up with the $25k reduction out of thin air and it was his specific instructions that caused him to lose the house.

Lesson learned was that we need to spend much more time with our buyers to earn their trust. We need to spend more time explaining to them how our Asset Managers are working these purchases. These buyers have been disappointed with the previous attempts at purchasing REO properties and they distrust any new information they receive! These buyers are in a difficult position to judge fact from fiction and they tend to mis-judge their negotiation position even when they are given 1st hand intelligence of the competitive landscape.

We will be more prepared next time.

Is the recession over, or is there something else at play here!?

2009-07-23T23:25:00.000-07:00

Just in case you were wondering how hot the real estate market is in San Jose, we just received a Cash offer for $320,000 on a Bank-Owned (REO) property we just listed 3 hours ago for $275,500!! I know Goldman Sachs made tons of money, but is the recession over!? Why would someone write a cash offer for a property in Alum Rock area of San Jose and offer more than what the bank is asking!? The only conclusion I can draw is that it's PRICE!!

There has been plenty of theoretical justification for buyer's use of "psychological Reference Point" in Merchandising Research. And it points to this Reference Price as a internal standard against an "Observed Price" in marketing to consumers. Bottom line is that Retailers use the SALEs gimmicks to move out inventory where the consumers spend a lot more money without regard to "Quality" when the merchandise is priced well below our internal standard!

Have you ever taken home a shirt from the Clearance Rack, knowing full well that you will never wear it because it has a SALE sign on it!? Have you ever paid too much for something only because it was on Sale!? And believe me, pricing properties lower than everyone expectations really works! It generates tons of interest. And precisely because people are seeing prices well below their "reference point", we believe they over spend!

Could it be that my bankers are taking a page from Retailers and are marketing properties the same way Retailers conduct Sales!? We are seeing quite an interesting trend where our valuations are cut when we price REO properties for sale! One industry observer was stating that the FED has asked the banks to keep the property prices low, to avoid the creation of another Real Estate bubble!! We think it's having an opposite affect.

What do you think!?

Help Wanted: Pre-Qual vs Pre-Approval!? Our struggle to communicate.

2009-06-18T20:05:00.000-07:00

I am desperately looking for suggestion to better communicate our Asset Manager’s requirements for a true Pre-Approval vs the canned Pre-Quals we are still getting! Despite the fact that we state in the Private section if the MLS listing that the Pre-Approval should include a “Loan Number, Rate, Term, ....etc”, we are still getting the same Pre-Qual letter from the loan officer in their office!

Is it the similarity in the names!? Is it because most realtors don’t know what to ask for from their loan officers!? Is it the culture gap between the lending side and the real estate side of the house!? What is it?!

The problem becomes a tactical nightmare when we are getting more than 10 offers per listing and we have to unite the original Purchase contract with the 2^nd attempt at getting the pre-approval right! We are convinced that the buyers are put in a difficult position if their agent neglects the financing side of the transaction.

Have you figured out how to communicate this requirement!? Please help if you have!

Please, please help ………………………………!

Don't sell your REO twice!! Pre-Marketing is the answer!

2009-06-18T08:56:00.000-07:00

Our Monterey County listing in South Salinas was posted on MLS yesterday (see attached) and it's already generated 4 offers. Part of the reason is that we aggressively marketed the property even while we were waiting for the Listing Agreement and price. We hosted an Open House and posted the property on Craig's List while we were waiting for the Listing Agreement and price!

Our own website which is syndicated to Yahoo, Google, Vast, HotPod, Trulia and Homescape also generated a lot of info requests for the property.
The results are more qualified, pre-screened buyers with less probability of cancellations! We got more than 12 buyers who had called and got on the waiting list for us to notify them and their agents when the price becomes available

After all who has time to sell the same property twice!? Do you!? Share your ideas on what works has worked for you as well.

Is this TERMITE guy your realtor!? I hope not!

2009-06-07T16:15:00.001-07:00

Our recent REO listing in San Jose generated more than 27 offers and we had to stop accepting offers in 3 days when the Asset Manager wanted to focus on top 4 offers. That was when one agent called and insisted that he will be making a strong CASH offer. His offer came from an email address that had "TERMITE" in the domain name, but I was not going to hold it against him.

Since his offer was selected by the Asset Manager and it was a cash offer over the asking price; I contacted him by email that I needed him to update his client's proof of funds which were 3 months out of date!

He called back that he can NOT get a hold of his clients! This is me pausing on the phone now, which I was hoping would negate the possibilty of me telling him, "why is that my problem now"!! Well, it turns out there was more to the TERMITE domain name than meets the eye. Guess what the Asset Manager's reaction was when I told him that our TERMITE guy who is working as a realtor part time and can't get a hold of his client!? You guessed it, his clients didn't get the offer.

Moral of the story is that make certain that the package your realtors are sending to REO Listing agents is complete and comes across as professional and leaves a strong 1st impression. Specially when there are 27 offers and we have plenty to choose from.

Would you let this part time realtor write an offer for you on your REOs? I welcome your comments!!

Bad Manners or what?! Don't let this guy write REO offers for you!

2009-06-07T16:03:00.001-07:00

Our recent REO listing in San Jose generated more than 27 offers and we had to stop accepting offers in 3 days when the Asset Manager wanted to focus on top 4 offers. That was when one agent called and insisted that he will be making a strong offer. I informed him that there are 27 offers with ALL of their pricing above the asking. What he told me next is the inspiration for this blog.

He asked me: "will you sign and Non-Disclosure Agreement that you will not share my offer with anyone else"!? At first, I wasn't sure what he was asking, so he repeated that he will require an NDA before he sends me an offer! I replied that I have 27 offers and I don't think I will have time to publish his offer to anyone! He then said, "I will take you word on it and won't send you an NDA"! The next day his office called and wanted to see if they can deliver the offer manually since their fax and scanners were NOT working!! A day after we had stopped taking offers they emailed us a document which was a scanned copy of an MS Word document which was NOT readable!!

Bottom line is that it takes alot more that filling out Real Estate forms for an agent to successfully represent a client when they are writing offers.

Would you let this guy write an offer!? I welcome your comments!!

Time to use Public funds on Startups, Not Bail-Outs!

2009-02-22T11:51:00.000-08:00

Dear Senator,

As a startup owner, I am writing to express our extreme distaste about the FREE handout of money to failing business such as AIG, GM and Chrysler while companies like ours are starving for capital. If we were offered such convenient access to capital, we would be hiring staff to grow our business and the economy!

We are currently working with banks with liquidation of their non-performing mortgages and foreclosed properties. We need capital to open 3 offices in Orange County, Sacramento and Modesto. However, the tight restrictions on credit are preventing us from obtaining financing. As a member of the Santa Clara County's Affordable Housing, we can use the financing to purchase these foreclosed properties for use by our non-profit housing institutions who offer much needed affordable housing solutions in Silicon Valley.

It's time to focus precious public dollars on startups and not bailouts !! There is no reason why US can NOT have a thriving Auto Industry with ONE healthy, re-organized auto maker vs 3 crippled one's on life support! We urge you to decline ANY further request for additional funding from the BIG 3 since they were the guys who fought the innovation and fuel economy standards. As tax-payers we are appalled that you are risking our kids future; so Auto Executive and Wall Street t THUGS can give themselves bounces!

The findings of the Congressional Oversight Committee chaired by Elizabeth Warren, offers damming evidence of how irresponsible Congress was in allocating our tax dollars. Without attaching ANY condition to the TARP money given to big corporate tycoon; you have put our kids and grand kids future into monumental risk. Unlike US Congress, UK government has attached very strong conditions to their bail-out funds. UK banks and companies who received bail-out funds, will be audited after a year to make certain that the funds were used to fund small companies as opposed to TRAP dollars who are being used to purchase corporate jets!

We will remember your conduct and your vote when it comes time to elections if Congress continue to waste tax payer dollars un-checked. We are looking forward to seeing much tougher stance from Congress on ANY future spending of public's money.

*********************************************

What do you think!? If you agree, please write to your representatives as well.

Tricks to get AWESOME pricing on REOs! Post Contract Price Reductions!!

2009-02-15T10:02:00.000-08:00

We have been noticing an interesting strategy which some buyers are using is to contract our REO property at huge discounts to the list price once they have it under contract!! These buyers are ordering inspections which in 95% of cases reveals more repair requirements. These buyer then request additional dollars towards these repairs and we are seeing complete compliance from our Asset Manager since they don't want to lose the buyer!! This results in huge deals.

Here's an an example that we saw work this past month!

1) Write an offer at $310,000 for a property listed for $359,900.
2) Get it coutner and contract at $325,000.
3) Order inspection and come up with $30,000 of repairs (not that hard to do with REO properties).
4) Amend offer price to $295,000 or request credit for repairs.
5) Close.

That more than $64,900 discount to the list price and goes a long way to cover debt service. With rents on the rise, this is a good strategy to acquire rental properties using REOs.

Do you think you can use such a stragey? Let us konw what you think!?

How to write the highest offer on an REO and lose!?

2008-08-20T11:03:00.001-07:00

Are you writing offers on REO properties for your buyers!? Are you facing Multiple Offer situations!? Are you losing these deals?! Please read on.....

We listed an REO property in San Jose on August 1, 2008 which had some serious potential and thanks to our Gorilla Marketing with Craigs List we were able to generate a lot of interest. In 2 days we had 3 strong offers came from Realtors and I wrote one for one of my buyers as well.

Ironically the offer which captured the Asset Managers attention was not the one that had the highest price even though she countered BOTH of them. What became apparent to me was that most of us who have been writing offers for years; ASSUME that the person reviewing our offer is ALSO a California Realtor (or in the same State as you are) and knows exactly the significance of each CHECKED-BOX and CONTINGENCY that we are creating on the offers. Compounding the problem was the highest offer had conditions which did not lend themselves to the on-line portal that most of us use to enter these offers. In other words, I had to write a lot of explanations to communicate the nuances of this offer to the Asset Manager.

For instance the realtor with the higest offer was asking for 50% of Section 1 work which is typical in MOST offers we used to write in the OLD-WORD and not the New Realty! This creates un-certainty for the Asset Manager and they don't want to bother with the offer even though it's the highest price. Same goes for a precentage carry back on City and County Transfer taxes which when you think about is insane! The Asset Manager reviewing this offer is in Baltimore and the property is in San Jose!! How does he/she is expected to place a dollar value on this condition!?

I suspect that the challenge might be that the buyers are insisting on these conditions (because they bought their house 10 years ago with the same contingencies) and the realtor has no choice but the put them on the offer! However, we need to coach and educate our buyers that this will put their offer in an inferior situation. You are the one leading and owning the conversation with the listing agent not the buyer and you are the one who will be blamed not them!

The solution would be to get a strong estimate on the Section 1 repairs or any other carry back costs and then communicate that as a specific dollar mount which corresponds to what your client is requesting. That way, the Asset Manager knows a head of the time the risk they are taking with your offer.

I hope this help and would love to hear more if you have other examples.

David Mortaz, David@HomestretchCapital.com

www.HomestretchCapital.com

Who Knew Foreclsoures could result in TOYs-For-Kids!!

2008-07-24T13:35:00.000-07:00

In a recent preview of one of our REOs, I came across some Toys that were left behind! It made me sad cause I have a 9 year old too and know how attached kids can get to their toys. So, I contacted the Asset Managers and got permission to remove the Toys to be donated to GoodWill.

They gladly agreed becuase in this case everyone is a winner. We avoid sending the toys to Landfills and some kids potentially could get toys they otherwise could NOT afford. And the lender could use this to get some positive PR. I am sure Al Gore would be proud, but charity begins at home and I am happy we were able to get something positive out of a difficult situation.

But what if everyone of us who offers REO Services did similar things?! What if before the TRASH-OUT services is ordered, we all made an extra phone call to get the Toys and other useable material OUT of the house to a charity. What if we recommended "Green" or "Recycled Products" in REO repairs that we come across daily? What if we cared about the impact we are having on this Earth?

What if!? After all, my 9 year old and the kids who lost their toys still have this Earth in common and I would like to leave it in much better shape that we found it.

Would appreciate any feedback and comments.

Does your REO Agent pass the SMELL Test?!

2008-06-02T11:48:00.001-07:00

I recently was amazed at the shabby way our offer was handled by a well-branded Silicon Valley Real Estate company that I started thinking about why banks trust their precious REO listings to these incompetent agents!!? This agent claimed he had NOT seen my offer that I personally dropped at his office after meeting with him few minutes earlier the same day!! We met him at his office to drop off the offer which we did after discussing it with him. It sat in his in-box for 4 days and he was claiming he had not seen it!!

So, I am thinking there should be a "SMELL TEST" to distinguish an ordinary agent from the one's who will perform exceptionally. Specially since this guy has 30 active REO listing and 30 closes per month!! Hence, my attempt to identify Top 10 questions that REO Asset Mangers could pose to REO Agents before assigning their next REO. Drum roll, please....

1) What's the Marketing Plan for moving this REO!? Most REO Agents just post on MLS and forget about it. I was listing our REO condo in the CraigsList in Dubai and we were able to close in record 45 days!! This market calls for Gorilla Marketing since there is too much supply.

2) How many current REOs are you servicing? This agent claims 30 active REO listings, 25 in escrow and 30 closes per month! How does he prioritize them!?

3) How many people are working full time dedicated to REO listing and sales in your office!?

4) How many Open House you have held for your existing REO listings in the past month? Ask them to provide MLS output for the posted Open House scheduled.

5) Are you staging your vacant properties?! If not, why not!? I am amazed to find the condition of some of the REO listings and it's no wonder that City and County Organizations are now involved with these neighborhood plights.

6) Do you have a maintenance and property management team that's routinely managing these REO listings?

7) Do you have a billing system for submitting invoices to Asset Managers? Less time an agent spends on paperwork, more time they will have to market the REO listing?
8) Do you have lead capture system and are you communicating the REO listing to these leads? How often and how do you measure the success of these communications?

9) Can you provide References from the Asset Managers that were working with our on your previous REOs!? We can provide Asset Managers, their Assistants, Title reps......etc who enjoy working with us on REOs.

10) What motivates you?! Look for answers above and beyond MONEY cause this is a Channel business which requires a tag-team approach to get deals closed.

As the famous saying goes, "ask and you may receive"!