Asset Management & Recovery: January 2007

Both Karen Villa  (Sale of Auto Nets Charity Over $1 Million Dollars) and Bill Ryan (REMAX Leaders Have Winning Bid for CNN Hummer for Fisher House Foundation ) have recently posted about the Founder of RE/MAX buying the CNN Hummer for $1,000,000 with another $250,000 thrown in on top. This is a great thing for the Fisher House and the people helped and serviced there.  I think we can all agree on that.

What I want to point out is that the money was raised and the vehicle sold utilizing the auction method of marketing and sale.  This is a classic example of auctions bringing the highest possible price for an asset and truly setting market value for a particular item.

Everyone was happy from the donors, to the buyer, to the beneficiary, to the back up bidder.  A true win, win, win.

A recent press release from the NAA is showing an increase in residential real estate sales by auction of 12.6% over 2005.  Much of this is due to auctioneers and general brokerage professionals working together to bring about the sale of real property.  I have inserted the release below with the permission of the NAA.

In the event you are looking for an auctioneer anywhere in the North America, please let me know.  I would love to be able to steer you in the right direction.  You can also find local auctioneers at the NAA website at www.auctioneers.org. 
  

FOR IMMEDIATE RELEASE - National Auctioneers Association Press Release

OVERLAND PARK, Kan. - The National Auctioneers Association (NAA) reports extensive growth for the auction industry in 2006 with a 7.1 percent increase over 2005 in gross revenue, translating into $257.2 billion in total revenue generated.

The most significant growth was seen in residential real estate, which grew by 12.5 percent in 2006, generating $17.2 billion. Last year, residential real estate auctions generated $14.2 billion. Residential real estate auctions are the fastest growing sector of the industry and are increasingly being accepted as mainstream with the general public.

Charity auctions also saw a significant growth for 2006 generating $16.1 billion, which is a 6.6 percent increase over 2005.

"These statistics show the auction industry has seen a progressive increase in the number of auctions and dollars generated in 2006 over previous years. Buyers and sellers are increasingly seeing the advantages the auction method brings to the sale and we are excited to be a part of this shift in public perception," said NAA President William Sheridan, CAI, AARE, GPPA.

Other sectors of the auction industry that experienced significant growth in 2006 are: art and antiques grew 9 percent over 2005 and automobiles saw a 6.5 percent increase, generating $87.2 billion.

Funded by the National Auctioneers Foundation, the findings were gathered by the global market research firm MORPACE International. The study is commissioned by the NAA to document the growth of the live auction industry.

National Auctioneers Association

Sales are like surfing, investing is like hockey and property management is just like Warren Zevon songs.

If you listen to Lawyers, Guns and Money, you might think "this is just like an eviction".

1 - I went home with a waitress, the way I always do.  How was I to know she was with the Russian's too? This is the way it all starts.  They do something dumb.

2 - I was gambling in Havana and I took a little risk. Send Lawyers, Guns and Money, Dad, please get me out of this.  This means that the tenant might not have all of the rent money, again because they probably did something dumb with the money, and it is someone else's responsibility to help them out.

3 - I am an innocent bystander and somehow I got stuck, between a rock and a hard place.  Down on my luck.  Translation - It is not my fault that I got fired for (insert stupid thing that was their fault here).

4 - Now I am hiding in Honduras. A desperate man.  Send Lawyers, Guns and Money, Dad. The S**T has hit the fan.  This means that the tenant is locked in their home and won't open the door, unless it is to go out and buy more beer.  Nobody is hearing their call for charity and it is getting serious.

The plea for help is then repeated again and again.  If this was real life, verse 3 will be repeated numerous times between the 3 Day Notice and the Eviction Hearing and more than likely at the hearing.

Think about this after a few beers of your own if you don't get it now.

Contract terms.  Interesting???

In December of 2005 I had a buyer in contract with a requirement for closing of December 24, 2005.  He had a deposit of $118,500 on the table.  All contingencies had been removed.

The date came and the date went.  No big deal, said the buyer.  We can close tomorrow.  Tomorrow turned into T+1, then T+2.

The contract called for a written notice of default and then 3 business days to cure.  I did my part, buyer did not do his.

We had a back up contract, subject to ultimate default, from buyer #2.

It was a slow market.  It didn't matter.

Buyer did not close and lost $118,500.00.

Buyer # 2 closed at the same price as Buyer #1.  Seller got contract price ++ $118,500.

Here is the point - - The little documents called "Purchase Agreements" need to be treated as DOCUMENTS WITH CONSEQUENSES. 

It is very important that timelines be followed.  You could burn $118,500.  Maybe more.

I received a call from a friend today who is interested in investing in rehab properties.  He knows that I have done it successfully and asked about my secret. 

It is really not a big secret at all.  Not going to charge $5.  Don't worry!

When I was growing up (ages 4-22), I played hockey and later coached some very successful little guy hockey teams.  While playing I was on 4 Illinois State Champion teams.  One when I was about 10 and another 3 in high school.  Back in the days of playing, all of my coaches had the same theory; one I share.  Winning was about working the numbers.  Offense was all about shooting and scoring.  The higher the shot on goal stats were, the higher the chance of scoring and, by extension, the higher percentage of WINS.

There were high percentage shots and low percentage shots.  A shot, no matter the difficulty and angle, was still a shot.  No shot, no chance of a score.  It is all numbers.

Investing in real estate is the same thing.  No offer, no chance to buy.

If you get in front of the net, shoot.  If you look at a property, offer.  Some offers have a high percentage and some have a low percentage.  Every so often the goalie will have his legs apart or will have fallen down.  When this happens even a low percentage shot can create a goal.  Quite often, you are not going to see the opening before you take the shot but circumstances that you do not control will create additional opportunity.

I tell investors to view it and offer on it.  As an investor, you do not care about the neighborhood.  You do not care about the color.  You do not care about he neighbors.

Almost every variable can be factored into a spreadsheet.  DOM, crime rate, carry cost.  It really does not matter.  It is all numbers.  Some things make a property and neighborhood more valuable and some make it less.  The same type of property in different areas has a different worth.

If an investor buyer has spent the time to research a property out and take a look, they should make an offer.  They should offer on every property they view, provided they have the experience with the potential situation.  Caveat being that inexperienced rehabbers should not get in over their heads.

You are going to run into a lot of properties where the seller would never take the offer.  You are going to take a lot of low percentage shots.  Sometimes, the goalie will fall down.  Sometimes he will just throw in the towel.  Sometimes he is just holding a place and not playing the game.

You do not know until you fire a shot.  Sometimes, when you least expect it, you put the biscuit in the basket.

I am a believer that the auction method, when used property, is a very effective tool in selling property.

We can debate day in and day out the benefits of an auction for the seller.  They include shorter times and non-contingent contracts.  That is not the point of this post, however.

The point of this post is that auctions can make the AGENTS more money faster too.

While the percentages differ a little around the US, most auctioneers will tell you that BUYERS AGENTS typically do not show up at auctions.  When they do, their clients typically do not buy the property.

In most real estate transactions that involve an auctioneer, there is compensation available for buyers agents.

Do you know what happens if there is no buyers agent?  Usually, that money is split between the listing agent and the auctioneer.

It can also be given back to the seller or any number of things and is a negotiable item.

Considering that NO BUYERS AGENTS is involved in over 80% of my transactions, that leaves a lot of money on the table.

Quite often the contract can say that in the event there is a buyers agent involved, the listing agent/auctioneer agrees to provide a co-op of XXXX.  By default and unless modified through negotiation, that means that the compensation is retained by the listing agent/auctioneer if there is not buyers agent.

So remember, if you are negotiating a deal to assist your client through an auction, there is a large chance that the buyer agents co-op allowance will not be collected by anyone.  how you use that information is up to you.

There have been some thought provoking questions posted today and over the last few weeks about what you should be asking your prospective listing agent in the interview.  The following are my answers. 

* What is your guarantee?  I guarantee to provide a written marketing plan, follow that plan and provide regular updates as to the status of the transaction.  You will be provided with multiple ways to make contact in the event you have questions or concerns along the way and will receive prompt response.

* Do you personally answer all phone calls on the property?  Property information is on hand at or office and available online.  In the event a buyer or agent needs additional information I will provide those answers personally.

* Can we cancel the listing if we're not happy?  In the event you are displeased with the services you are receiving we would appreciate notification.  Should not be able to rectify the issue to your satisfaction, you may cancel the listing.

* Do you have a personal assistant?  I have a full staff including licensed assistants, an appraiser and CPA.  We also keep an attorney on retainer that would be pleased to provide additional assistance.

* If you don't call me back within 24 hours will you take $50 off the escrow?  If you are displeased with the services you receive, we will be pleased to cancel the listing.

* May I see your personal Internet web site?  I encourage you to review the corporate site I have designed for my company.  Additionally, all of my marketing materials are available electronically and can be emailed to any location.

* What systems do you have in place that will keep you in constant contact with me during the listing and the transaction?  You will have an office as well as cell phone number to reach me via phone and an email address that I can access by computer and Blackberry.  Additionally we will provide regular reports on a schedule that you require.

* Are you fully automated with your own personal computer, FAX machine, copier, pager, voice mail, etc.?  Yes.

* What is your average market time vs. other agents' average market time?  I sell traditionally as well as at auction so my time to closing is a little faster than you would expect at about 50 days.  I do not keep track of other agents.

* What professional designations do you have?  I have two designations as an appraiser, have graduate auction academy credentials and am working towards a CCIM designation. I have held real estate licenses in two states, auctioneer licenses in seven and have conducted transactions in over 20, plus abroad.   In addition I have been qualified as an expert on real estate and asset marketing in both State and Federal Courts and regularly act as an officer of the Court in asset sale transactions.

* I want to give my home the advantage of the latest marketing strategies. How much time & money do you invest each month in professional training?  Over the past 11 years I have spent tens of thousands dollars streamlining my asset marketing processes.  Recently, most of my educational time has been spent as an instructor.

* Can you give me a list of your clients who have closed escrow and can I call them?  I would be pleased to provide references on past transactions.

* Why are you personally motivated to sell my property?  This particular question has had many answers over the years.  When I started, I had all sorts of reasons that I could quote.  Later, I decided that the clients I was going to work with, and would want to work with me, deserved nothing but straight answers.  -- Selling property is a business transaction and is ultimately about money and net return for both of us.

* Why should I list with you rather than any other agent who is calling?  If we have gotten past the last answer then you agree that this is a business deal and will see that our interests are aligned.  We are partners in a financial transaction.  With me, you are going to get the truth and not a sales pitch.  If that is the type of relationship you are looking for, I believe you have found it.

Out of all of the Listing Presentation blogs, I have not seen anyone that is talking about Brag Books.

Brag Book - A photo array of sold, managed and auctioned properties, copies of past ads, copies of press releases about the agent and/or company, copies of newspaper or magazine articles about the agent and/or company.

This is something that my clients like to look at and is something that I bring along to listing and general purpose meetings.  Since I am going after prospects that are directing their clients to me (attorneys, bankers, etc.) I do a lot of general purpose meetings.  These may or may not turn into work immediately, but are a step in the relationship building process.  For example, I am working a project right now with 30 structures.  I did the first GP meeting with the contact almost 3 years before he brought me a deal.

Anyway, the Brag Book is something that I bring and use constantly.  Is this just too Old School?  Am I missing something?

Yes, this is another boring post from me. 

I really can't wait to go away on vacation at the end of next week.  You would think that after Christmas and New Years, that I would have had enough time off.  I really didn't get any.  Parents in town, shopping for the gifts, cooking dinner (s), deals exploding.  That was not a vacation.

Melissa and I have found that the only real way to get a good vacation is to take a cruise.  The cell phone does not work on the cruise (most times) and logging on to the email is about $72.00 per minute.  That keeps me to about 10 minutes a day of working.

If you really want to get away, consider the cruise.  You will be forced to relax.  7 days is all I can take before I go nuts though.  1 day to calm down, 4-5 of relaxation and then 1 day to get all fired up hoping to get into cell phone range and check in on my life.  That 4-5 days is wonderful.

We like Holland America, but are trying Carnival this time.

Anyway.....

For those of you looking for some marketing or clerical help, now might be the time to contact the local highschool.  In our area, there are advanced business classes that require students to have jobs.  Some classes don't care if you are a burger flipper or copy person and some require that you are involved in some type of business fuction, like marketing.

It just so happens that the local high school here has a class that is required to be involved in marketing of some nature.  Good for me that I am looking for someone to take the position of VP of Direct Mail Labels & Postage.

This sounded like a great opportunity to find inexpensive help as well as provide a learning atmosphere for a student.

Just in case you know of someone looking or want to copy my text for your own outreach to the local schools, I have copied in the criteria I sent to the school.

Thank you for taking the time to speak with me this afternoon. I am looking for an intern or part time employee to assist me with clerical / office activities with an emphasis on global marketing efforts for my company. This would be a 10hr./wk position with students working 2 +/- hrs. per day or splitting the time M - W - F. Some of the work may be unsupervised.

Primary Function - Assisting with outreach to clients and prospective clients utilizing direct mail and internet based applications. Thoughts on expansion and upgrade of current methods would be welcomed.

Secondary Function - Potential to assist with design and implementation of asset (real estate and business equipment) liquidation marketing plans. This includes print media, online media, press release and media relations.

Other - As an aide to the company owners, an opportunity will exist to learn about contracts, lending practices of commercial lenders, commercial loan defaults, court ordered recovery actions, real estate brokerage, auctions and asset valuations.

The person interested in this position would need to be detail oriented and understanding of, and adherent to, deadlines. They must be able and willing to take direction and, within parameters, make decisions and move ahead based upon reasonable judgment. Much of the primary function will be similar from day to day, however when new and complex projects arise there will be opportunity to work in an extremely fast paced and challenging environment.

As this is both an employment opportunity and a learning opportunity, part of the application process will be for the candidate to negotiate their own compensation.

I have attached a PDF bio and company brochure for applicants to review.

Thank you again for providing this information to your students.