Monday, August 25, 2008

Short Sales, Are you sure?

There is a stanza from an old country ballad that goes like this:

" My Uncle Mort, he's sawed off and short,
He stands about 5 foot 2.
But he thinks he's giant,
When he gets him a pint,
Of that good Old Mountain Dew."

What I know about Short Sales is about as elusive as that euphoria that comes to Uncle Mort when he pops the cork on that jug of Mountain Dew. There are a lot of people who are chasing foreclosures and short sales in our current market. I suppose it is the nature of all of us to look for a good buy. After all our marching cry is ' Buy low and sell high.' not the other way around.

I remember 5-6 years ago when I actually showed my first foreclosed property. I was aghast. It was on the west side of town and looked decent from the outside, yet the inside was a fixer upper nightmare. The walls had been smashed in. Lighting fixtures had been removed. The drop in stove was gone and the wires formerly connecting it were still exposed. No danger involved because the electricity had been cut off many weeks earlier.

Very recently, I read an article concerning financial institutions, holding mortgages on homes heading to foreclosure, paying the motgagees a significant bonus NOT to trash the property. Now the implication here is that in normal cases the mortgagees do just that. Is it out of frustration, necessity or just down right orneriness? I suppose there is some market somewhere for drop-in ranges and light fixtures that will garner money for purchasing that Mountain Dew. I generally prefer the Diet variety, when I am into Dew slamming.

I listed a property some time back that ended up being financially impaired. That is a nice way of saying that the owner had not made a payment for a few months. It is really not according to Hoyle that a Seller should withhold that information. Yet here I was in the midst. The property had a first and second mortgage on it. I recieved an offer on the property that was not capable of paying off both mortgages. In other words one of the mortgage holders was going to have to accept a short sale.

After checking with the primary mortgage holder I was advised that they were not accepting one dime less than what was owed to them. Thier opinion was that the second lender had no business making a loan to their client. This was in the day of getting 20-30 offers for 110% loan to value loans in your mail box. I called the Wiley B. Coyote Company, the secondary lender. They must have known they were in a losing position because the person I ultimately reached agreed to bring our sale before some committee appointed to that task. I had numerous man hours invested in trying to get to the decision makers on this sale. Amidst my efforts the Wiley B. Coyote company sold the paper on this loan to the Alfred E. Neumann company and I had to start over. I finally got it done, however, and successfully closed the deal. I even got paid a little commission. Amounted to .35 per hour for my effort. On top of all that a few months later this client called me and told me the IRS was after her for taxes on the amount the mortgage company had let her slide on.

For my money, short sales, are a disappointing pursuit. More power to the agents in our community who seem to make their living in this arena. You are usually not going to save all that much money at the end of the process. You then have to ask yourself if you have invested in a property that is going to make you proud and will hold its head in the resale market.

The market in general has shifted in the favor of the Buyer. Dealing straight up with a Seller with your Realtor negotiating for you will yield many good buys. Why waste your time trying to chase a little better deal through a bank. They are rarely accessible when you call them, they never return your call and in due time there are a lot of banks that may not even be able to meet their own financial obligations. I am just not convinced that chasing short sales is worth the time and effort.

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Uncle Oswald sings it:

Monday, August 18, 2008

Only the Lonely

When I am fortunate enough to list a client's home we always end up discussing the relative merits of Open Houses. Now, please understand that I have sat in more than one open house venue, fogging the windows with my breath, watching and waiting for attendees.

I generally tell my folks that there is a little sub-culture of people who go to open houses as a recreational activity. They get up on Sunday morning and get their cup of coffee, tea or hot chocolate and pull out the real estate section of the newspaper and start deciding how they will spend their Sunday afternoon. They run in little packs and attend open houses with no more intention of buying a house than they have of floating to the Bahamas on a Kon Tiki style raft.

When I was a green and newly-licensed agent I was encouraged to hold open houses, by my Broker. Why? Because it was a great way to connect with potential Buyers. I never was successful in that effort. The approach went: "Are you working with an agent?" " Are you aware that it costs you nothing to work with one? The Seller pays our commission." The answer would mostly be, something to the effect, that they already had an agent and were just trying to help her out by looking on their own.

I recently recieved a blanket e-mail from a prominent Tallahassee firm that was soliciting agents from other firms to sit at their open houses. Any Buyer who you write a contract for, you keep the commission. Any Buyer you convince to work with you, you have sole rights to. I can see in my mind's eye the load up on that program at the listing appointment. " Mr. and Mrs. Home Owner, our firm holds open houses weekly. We outwork our competition. We will sell your house." Then they farm out this useless expenditure of time in holding the open house.

I have NEVER written a contract on a home sale from an open house. The effort to hold these things is a bygone tactic that may have worked at one time but is useless here in the 21st century. Why? Because anyone with any cyber-savy at all can look at all the houses they want to in any city in America from the comfort of their home., Mostly anyone licensed to practice real estate has a website. On my website you can get a direct IDX feed from the MLS of any city in Florida. Why would you need to galump around town looking at houses burning your $4.00 per gallon gasoline when you can do it on your laptop?

I recently listed the home of a friend. He is a little older than my 62 yoa and has bought and sold several homes. I asked him about his feelings toward Open Houses. It was pretty positive. I advised them, in my opinion, they were a waste of his time. The only people who will come will be your neighbors who want to see how you decorate your home. I paid the $60 to run the ad, I provided the $100 worth of signs to lead the folks in and............................the only people who came were the neighbors.

I advise folks if they will let me slide on the open houses I will discount my commission. If you let me slide on advertising in our local paper, I will discount my commission. That advertising is expensive as well as useless. That is another post on another day.

Here is hoping that I do not have to spend a lot more of my precious time sitting, all lonely, at an open house while my seller goes out to eat and to a movie to abet the process. There are better ways for me to spend my money and time in your behalf, that will drive far better results.

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Roy Orbisong :

Wednesday, August 6, 2008

Doctor, Doctor, Give me the news!

I had an experience that bears remembering from a couple of years ago. I got a call from an acquaintance who wanted me to drop by his office. That is always bad news. I thought Amway? Some other multi-level, get rich quick scheme? Well, I went because I have this lingering fear that something is going to come along that truly is a get rich, quick scheme and I will be chasing the train after it leaves the depot.

There sitting on top of this guy's desk is a little machine that looks like a blood pressure machine that you see in the pharmacy. He started giving me the hot pitch. Seems this machine was the first of its kind and its function was to measure your level of antioxidants. I have never been a big believer in antioxidants but I stayed mute. He invited me to stick my finger in a little orifice in the machine and wait until the red light went out and then the machine spits out a cash register tape and he tears it off and looks at it. Shaking his head he tells me that I am pitifully low on antioxidants. He shows me the number. It is around 10,000.

At that point I ask him what the number means. He says it means that you are way low on your antioxidants. I tell him " No I mean, if you take my blood pressure the number is a manifestation of millimeters of mercury measured at atmospheric pressure against a specific gradient. If my blood pressure is 140/90 then it means that the pressure is 140 during systole and 90 during diastole. What does this number mean?" He stared at me for a moment, thanked me for coming by and told me he had another appointment. I found out later that he was a NuSkin distributor and he was jockeying to sell me vitamins to build up my antioxidants.

On a visit to my physician later on, who is a respected practitioner of internal medicine, I asked him what he thought about antioxidants. He told me that if it could help me take off about 40 pounds of blubber he was all in favor of it. Otherwise, he was in agreement with the folks at American Heart. It is a nostrum without the benefit of clinical trials nor proven efficacy. It was all in the minds of the people who like to sell you health supplements, containing antioxidants.

Here lately, I have been running into a little creature named Zillow. I had a face to face encounter with a client on a listing appointment. He had his laptop, I pulled out mine. We both jumped on some unsuspecting neighbor's wireless network. He said Zillow had his property valued at X. My comparables, out of the local MLS network, had him priced at Y. We argued for the better part of a half hour and struck a compromise at Z. It was exhausting. He had unflailing confidence in his Zillow. I started to ask the same question about the Zillow formulae as I did the NuSkin salesman. I let it go. It is possible to win a battle and lose the war.

I blogged a few weeks ago about the Wal-Marting of real estate commissions. My bottom line was that if you are going to retain a Realtor then get an experienced, smart one, preferably pretty good-looking, and then listen to the advice they give you. We live in the world of real estate daily. We practice in your back yard. We are the doctors of the real estate scenario.

It is easy to get enamoured with an internet entity that is so pretty and has as many little bells and whistles as Zillow. However, would you please explain to me how a software engineer sitting in Zillow headquarters in Pittman, New Jersey can create a formula, from property appraisers databases primarily, that can tell you what a home is worth that they have never walked into? It is mostly Buyers who glom onto Zillow and want to beat you off your price, because it is usually lowball.

This is another tiresome effort to remove the expert from the process. We believe their fees to be too high. They are crooks. They are lazy. They don't spend enough time with us and on our project. "That doctor was in the exam room with me for 45 seconds, looked at my labs and then had his nurse write me a handful of Rx's. His fee was $150. The Rx's cost $200. " My next door neighbor, who graduated from, junior high school, in the summer, sells health supplements that have antioxidants in them. I am going to put my life in her hands." Whoa ! That physician did 8 years of schooling past high school. Then he did another 4 or 5 in a residency program somewhere. He knows his specialized field better than anyone. Realtors do not come close to that level of professionalism, but they are trained and experienced where you are not. Retain one, listen to them and get ready to go to a closing. Remember that Realtor does not make a dime until he or she sells your house.

I have relatives and friends, in whom I place great confidence, who put a lot of stock into health supplements. For that reason I give them some degree of merit. I often consult Web-MD to provide explanations for my numerous bouts of hypochondriasis. I think that Zillow and the other online appraisal engines have some degree of credibility. Just as I would not rely solely on Web-MD to give me conclusive avenues on an illness, I would not rely solely on Zillow for setting a value on my property. The more information we garner the better off we are. In the final analysis you need to consult the expert to come to a well advised path forward. The internet is a wonderful tool for raising the performance of all of us.

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A little ditty: