By Joel Persinger
The one trait which causes more trouble in a real estate transaction than any other human trait is that of impatience. Over the years I have seen many clients, both buyers and sellers, shoot themselves in the feet simply because they could not be patient. Some unforeseen little thing causes escrow to be late in closing and the next thing you know the buyer or the seller gets his knickers in a knot and the entire transaction, on which everyone has worked tirelessly for weeks or even months, starts to fall apart.
Pitching a fit over little things is a common practice among real estate buyers and sellers. In fact, this type of childish behavior is one of the greatest contributors to the failure of real estate professionals to communicate properly with their clients. Most of us don’t like being yelled at. If we know that a client is prone to throwing fits, we naturally tend to avoid sharing bad or even potentially bad news with that client. Of course, this only postpones the inevitable. The news eventually must be shared and the resulting explosion of attitude on the part of the client often has the effect of killing an otherwise healthy transaction.
To make matters worse, some real estate agents are just as guilty of losing their patience. In the almost twenty years since I began my practice of real estate I have seen more real estate “professionals” throw the equivalent of kicking and screaming fits then my wife has seen among children in her almost twenty years as an elementary school teacher. Some agents have actually adopted, “I’m going to scream and yell and throw an obnoxious fit” as their main style of negotiating. This approach is both unprofessional and unproductive.
In today’s market, which is flooded with foreclosure and pre-foreclosure properties, impatience can be even more deadly to a real estate deal than ever before. Because a great many of the properties currently being sold require the approval of the lender involved, buyers are being forced to deal with large institutional bureaucracies rather than with individual sellers. Negotiating with the loss mitigation department of a national or international banking firm can be somewhat like trying to get a quick, favorable and accurate response from your least favorite branch of the government. Such negotiations require herculean efforts, flexibility, a multitude or repeated attempts and yes, plenty of patience.
When a client understands the ups and downs of the process and can exercise patience the transaction goes much more smoothly and the chances of successfully closing escrow are greatly increased. This is in no small part due to the fact that the Realtor is then able to focus on getting the job done rather than acting as arbiter, counselor, psychologist and whipping post while trying at the same time to negotiate a favorable outcome. So remember, patience is not only a virtue it is also the best tool you can employ to increase your chances of success in a real estate transaction. When challenges arise, as they most certainly will, take a deep breath, count to ten, think about what I’ve written here and be patient.
Monday, June 23, 2008
Monday, May 26, 2008
The Reality of Buying Bank Owned Properties
By Joel Persinger
When I started in the real estate business, I worked with a guy who was often quoted as saying, “People are funny” before continuing on to describe what particular act of “people” had prompted him to express dismay at their actions once again. Almost twenty years later, I have come to realize that he was right all along. About some things, “people are funny.”
Take buying foreclosed upon properties for example. With the market having changed significantly, foreclosures have now become REOs (Real Estate Owned). For reasons which I do not have space to explain here, banks sell REOs directly through real estate agents rather than through the more traditional real estate auction. Most people call them, “Bank owned properties.”
What causes me to lament that, “People are funny” is the unbelievable fact that buyers expect these properties to be both cheep and in top notch shape. Such expectations are unreasonable and, frankly, unrealistic. When homeowners can no longer make their payments and find themselves facing foreclosure, it is quite common for them to stay in the home as long as possible without making a payment. Along the way, they often strip the house of anything valuable. Even if they are generous enough not to trash the place, they certainly do not maintain it. Thus, at a minimum the home has been lived in for six months to a year without any maintenance or care before the lender manages to foreclose. By the time the bank actually gets the property, it is generally in serious need of attention.
We all seem to understand that homeowners don’t want to throw good money after bad by taking care of a house that the bank is going to foreclose upon, but we forget that the banks have lost money on these homes as well and are not particularly keen to dump more money into them. Consequently, banks often put these properties on the market just as they are. Some are just dirty. Others will require considerable work to get them into a livable condition. Either way, the vast majority will NOT look like model homes when you see them.
So, what’s a buyer to do when he wants a deal? As my son would say, “Get real.” Remember that you get what you pay for. If you buy a house cheep, you will probably have to put some work and money into the property. Therefore, it is of vital importance that you have someone knowledgeable about home repair and rehabilitation to help you. You also must have the money set aside with which to get the job done. If you are fortunate enough to find a bank owned property in great shape, don’t expect to get a deal. Everyone else is going to want that one too. You will probably have to pay more if you want to have a prayer of buying it.
When I started in the real estate business, I worked with a guy who was often quoted as saying, “People are funny” before continuing on to describe what particular act of “people” had prompted him to express dismay at their actions once again. Almost twenty years later, I have come to realize that he was right all along. About some things, “people are funny.”
Take buying foreclosed upon properties for example. With the market having changed significantly, foreclosures have now become REOs (Real Estate Owned). For reasons which I do not have space to explain here, banks sell REOs directly through real estate agents rather than through the more traditional real estate auction. Most people call them, “Bank owned properties.”
What causes me to lament that, “People are funny” is the unbelievable fact that buyers expect these properties to be both cheep and in top notch shape. Such expectations are unreasonable and, frankly, unrealistic. When homeowners can no longer make their payments and find themselves facing foreclosure, it is quite common for them to stay in the home as long as possible without making a payment. Along the way, they often strip the house of anything valuable. Even if they are generous enough not to trash the place, they certainly do not maintain it. Thus, at a minimum the home has been lived in for six months to a year without any maintenance or care before the lender manages to foreclose. By the time the bank actually gets the property, it is generally in serious need of attention.
We all seem to understand that homeowners don’t want to throw good money after bad by taking care of a house that the bank is going to foreclose upon, but we forget that the banks have lost money on these homes as well and are not particularly keen to dump more money into them. Consequently, banks often put these properties on the market just as they are. Some are just dirty. Others will require considerable work to get them into a livable condition. Either way, the vast majority will NOT look like model homes when you see them.
So, what’s a buyer to do when he wants a deal? As my son would say, “Get real.” Remember that you get what you pay for. If you buy a house cheep, you will probably have to put some work and money into the property. Therefore, it is of vital importance that you have someone knowledgeable about home repair and rehabilitation to help you. You also must have the money set aside with which to get the job done. If you are fortunate enough to find a bank owned property in great shape, don’t expect to get a deal. Everyone else is going to want that one too. You will probably have to pay more if you want to have a prayer of buying it.
Monday, May 12, 2008
Choosing the Right Advisers
By Joel Persinger
There is an old proverb that says, “Plans fail for lack of counsel, but with many advisers they succeed.” This little bit of wisdom, penned by King Solomon, is quite invaluable. However, problems can arise when we choose the wrong advisers or forget that Solomon wrote “many”, and instead seek advice about everything from only one person.
Not long ago I attended a meeting with some clients who were being served by one of the Realtors in my office. These folks were having some financial difficulties and needed to sell their home for less than what they owed on it. The process is called a, “Short Sale.” We are working on a great many short sales and have developed an expertise in that area. This is precisely why the clients in question had been referred to us.
During our meeting, it became apparent that these folks had done little homework regarding their situation. While we are experts in the field of real estate, we are not experts in the law or regarding taxes. So, my agent and I strongly urged these nice people to speak to an attorney regarding other possible options and an accountant to determine to what degree there would be any tax liability associated with their short sale. They agreed and promptly made appointments with both an attorney and a CPA.
Following their meeting with their attorney they called my agent to tell him of their decision to move forward with the sale. He asked if they had consulted with a tax professional. They replied that they had not, but that they had an appointment with one coming up in a day or so. A few days later my agent followed up. The clients informed him that they would indeed have some tax consequences, but that they were prepared for them. The real problem, they said, was that the CPA had told them that short sales don’t work and that the lender probably won’t accept a short sale anyway. Not surprisingly, we later learned that the CPA had never been involved in a short sale.
So, let’s look at the concept of “many advisers.” It goes back thousands of years to a time when an ancient King ruled a powerful kingdom. Just as with our President today this King, named Solomon, surrounded himself with advisers. Some advised him regarding domestic issues and others on matters of war and relationships with other nations. I’m sure you will agree that he probably didn’t ask his generals how to address the problem of traffic congestion within his cities or defer to his domestic advisers on matters of war. Neither should we ask a CPA for advice regarding the practice of real estate nor a real estate broker to counsel us regarding our taxes.
Each professional has the potential to provide valuable insight upon which you can base well informed decisions, provided they each understand their limitations and confine their advice to what they really know. When they step outside of those boundaries, you may wish to reevaluate your choice of advisers.
There is an old proverb that says, “Plans fail for lack of counsel, but with many advisers they succeed.” This little bit of wisdom, penned by King Solomon, is quite invaluable. However, problems can arise when we choose the wrong advisers or forget that Solomon wrote “many”, and instead seek advice about everything from only one person.
Not long ago I attended a meeting with some clients who were being served by one of the Realtors in my office. These folks were having some financial difficulties and needed to sell their home for less than what they owed on it. The process is called a, “Short Sale.” We are working on a great many short sales and have developed an expertise in that area. This is precisely why the clients in question had been referred to us.
During our meeting, it became apparent that these folks had done little homework regarding their situation. While we are experts in the field of real estate, we are not experts in the law or regarding taxes. So, my agent and I strongly urged these nice people to speak to an attorney regarding other possible options and an accountant to determine to what degree there would be any tax liability associated with their short sale. They agreed and promptly made appointments with both an attorney and a CPA.
Following their meeting with their attorney they called my agent to tell him of their decision to move forward with the sale. He asked if they had consulted with a tax professional. They replied that they had not, but that they had an appointment with one coming up in a day or so. A few days later my agent followed up. The clients informed him that they would indeed have some tax consequences, but that they were prepared for them. The real problem, they said, was that the CPA had told them that short sales don’t work and that the lender probably won’t accept a short sale anyway. Not surprisingly, we later learned that the CPA had never been involved in a short sale.
So, let’s look at the concept of “many advisers.” It goes back thousands of years to a time when an ancient King ruled a powerful kingdom. Just as with our President today this King, named Solomon, surrounded himself with advisers. Some advised him regarding domestic issues and others on matters of war and relationships with other nations. I’m sure you will agree that he probably didn’t ask his generals how to address the problem of traffic congestion within his cities or defer to his domestic advisers on matters of war. Neither should we ask a CPA for advice regarding the practice of real estate nor a real estate broker to counsel us regarding our taxes.
Each professional has the potential to provide valuable insight upon which you can base well informed decisions, provided they each understand their limitations and confine their advice to what they really know. When they step outside of those boundaries, you may wish to reevaluate your choice of advisers.
Buying a Bank Owned Property
By Joel Persinger
Now that home prices have been down for a while, many are the folks who call my office asking about the possibility of purchasing foreclosures. It seems that some seminar gurus have been making the rounds again and people are starting to get excited about investing in real estate.
That’s all fine and good except that buying foreclosures in today’s market is a bit different from what it might have been a decade ago. Today, many, if not most foreclosed upon properties are NOT sold at auction. This is because many of the properties have more owed against them than they’re worth. As a result, the bids at auctions are often far too low to even come close to covering what is owed on the properties. Lenders safeguard themselves against such eventualities by establishing the bidding high from the start. Thus, nobody will bid above what the lenders will bid and so, the lenders often take the properties back and simply list them for sale with a real estate broker. Such a property is called a REO (Real Estate Owned) and they are listed by the hundreds with brokerages that specialize in selling REOs. They are sold in, “As is” condition, just as they would have been if sold at auction and, they are often sold at a discount.
Since these properties are available through real estate brokers, you don’t need to have a specialized approach in order to buy them. You simply call your agent and have him show you the properties just as you normally would. Then you make an offer, begin negotiations and away you go.
Still, there are some differences you should be aware of. Unlike, a homeowner who is selling his home, banks are exempt from certain disclosure requirements. In fact, some banks simply will not make some disclosures even though they are required to do so. This is why you will need to do a little investigating of your own. For example: you should always have the property inspected by a professional, qualified home inspector and you should spend some time talking with neighbors about the neighborhood and the history of the house.
Negotiating with banks and many REO brokers can be difficult. You will almost never get to speak to the bank directly. You must deal with the REO broker. Unfortunately, they’re not much better. Quite often, they won’t return phone calls, almost never answer the phone, hide behind three levels of assistants and often adopt a, “My way or the highway” style of negotiating. In most cases, you’re not going to buy a REO property for fifty cents on the dollar, but you can get a very good deal if you simply take your time and do your homework. And don’t forget, a good real estate agent can help you a ton.
Now that home prices have been down for a while, many are the folks who call my office asking about the possibility of purchasing foreclosures. It seems that some seminar gurus have been making the rounds again and people are starting to get excited about investing in real estate.
That’s all fine and good except that buying foreclosures in today’s market is a bit different from what it might have been a decade ago. Today, many, if not most foreclosed upon properties are NOT sold at auction. This is because many of the properties have more owed against them than they’re worth. As a result, the bids at auctions are often far too low to even come close to covering what is owed on the properties. Lenders safeguard themselves against such eventualities by establishing the bidding high from the start. Thus, nobody will bid above what the lenders will bid and so, the lenders often take the properties back and simply list them for sale with a real estate broker. Such a property is called a REO (Real Estate Owned) and they are listed by the hundreds with brokerages that specialize in selling REOs. They are sold in, “As is” condition, just as they would have been if sold at auction and, they are often sold at a discount.
Since these properties are available through real estate brokers, you don’t need to have a specialized approach in order to buy them. You simply call your agent and have him show you the properties just as you normally would. Then you make an offer, begin negotiations and away you go.
Still, there are some differences you should be aware of. Unlike, a homeowner who is selling his home, banks are exempt from certain disclosure requirements. In fact, some banks simply will not make some disclosures even though they are required to do so. This is why you will need to do a little investigating of your own. For example: you should always have the property inspected by a professional, qualified home inspector and you should spend some time talking with neighbors about the neighborhood and the history of the house.
Negotiating with banks and many REO brokers can be difficult. You will almost never get to speak to the bank directly. You must deal with the REO broker. Unfortunately, they’re not much better. Quite often, they won’t return phone calls, almost never answer the phone, hide behind three levels of assistants and often adopt a, “My way or the highway” style of negotiating. In most cases, you’re not going to buy a REO property for fifty cents on the dollar, but you can get a very good deal if you simply take your time and do your homework. And don’t forget, a good real estate agent can help you a ton.
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