Asset Management & Recovery: October 2007

I have gotten a lot of emails lately from AR members even though I have not been posting much.  Maybe I am burned out a little.  Who knows?

The emails have been questions "how to" and "where to go".  I am glad to help if I can.

I don't know what advice I can give to the general question of "how can I get started in REO" other than to think about Nike.  Just Do It.

Look on the internet and start registering on websites to become a vendor.  The main ones as far as I am concerned are http://www.reonetwork.com/  and http://www.reotrans.com/.  Be willing to do BPO work.  If you ask me, things like Titanium Solutions are a waste of time.  That's just me.  There are others with a different opinion.    

Truth is though that everyone is chasing the same banana.  The ever elusive national loan servicer !!!  If it were me, and it is me isn't it? 

Reminds me of a line in Full Metal Jacket....."Is that you John Wayne, is this me..."

......I'd chase the guy that nobody is chasing, the commercial loan workout guy at your local bank.  They are a member of the community and you can drive to see them.  To these people, I am a professional.  They see what I do in the community.  They know the people I know and have respect for people that have respect for my work.  They know my attorney, my accountant, my banker and my friends.  They see me at hockey games with my family and walking down the street.  I run into them at the mall.  With these prospects, I probably have instant credibility. They see my signs and "have heard of" me before.  I am not a number.  My list of A prospects is 460, but only about 10 are national servicers.  Over 90% of my effort is spent on these relationships and less than 10% spent on chasing the national guys. 

I would also suggest that you find a mentor and work with them.  Maybe find a team to work with.  The reason for this is that one can not possibly learn everything there is to know overnight.  AR is a good place to read and learn too.

Whatever you decide to do, team, no team, self taught or seminars, you need to hunker down and get in the game.

Are you going to screw up a little?  Yep.  It happens.  Is that error going to teach you something?  Yep.

I've been doing this for over 10 years and still make a mistake now and then.  It happens.  You recover and move on.

Here are a few of the things I have learned.  They sound simple, but took me a little while to figure out.

•·        Use combo lockboxes, not electronic.  Buy them online from http://www.bargainlocks.com/ cheaper than from http://www.nuset.com/.  They are $10+/- vs. $80 +/- for electronic.  Also, sometimes other non-realtor vendors will need access.  They don't have lockbox keypads.

•·        Use http://www.showings.com/ to set showings and keep track of who is going in and out.  This costs about $10 for the life of the listing.  This means that for $20 +/- you get the lockbox on, tracking of showings and easier access vs. $80 on an electronic.  On your fist listing you have a net increase in revenue of $60.

•·        Use basic coroplast signs instead of the fancy ones you use for retail type listings.  These cost about $3-$4 each vs. $20 each when you buy 100.  Also consider your frame costs at about $17 each.  The best price I found was through Jim at http://www.decals-oem.com/.  If you do a lot of inner city properties, frames get stolen for the metal value, believe it or not.

•·        Think about what your time is worth too.  If your material costs into the house is $13 you may not even care about abandoning the material after the sale, especially if you have something more profitable to do.

•·        Buy comfortable shoes that are water resistant and have thicker soles.  You don't want to step on glass or a nail.  I like the hiking shoes from Timberland.  They will go with work clothes as well as khaki pants.  Great prices on these can usually be found at Target or DSW.

•·        Get good vendors.  This, like client building, is something you will find over time.  Price is important, but so is service.  Remember how your clients work with you because of trust?  Utilizing a vendor only due to price will cost more.  How so?  It takes a few minutes to hire a trusted vendor vs. the efforts related to finding the best price and then hoping that the guy does good work.  You may also need to spend time checking on the work and supervising the vendor.  This takes time and costs you money.  Also, a vendor that knows you are loyal will give you a deal on price and put you ahead of others.

•·        Spend time building lists of buyers even if you don't work the buyer side.  In REO there is a lot of "investor" property.  Knowing who buys what and where helps you and your client.

Ok.  I'm done for now.

R

I read an article today that made me actually wonder what the H - E x 2 hockey sticks is going on in our industry?  Below are some excerpts of an a New York Times article by VIKAS BAJAJ and EDMUND L. ANDREWS.

I just also spoke with a friend who is a land manger for a major local developer. "We are dumping land at ‘nobody needs it' prices" he tells me.  I know that there are many people out there stating that the media is scaring the public, but I'm not so sure.   Here's the excerpts from Reports Suggest Broader Losses From Mortgages

• Merrill Lynch said yesterday that it would take a charge for mortgage-related securities on its books that is $3 billion more than the $5 billion it expected just two weeks ago.
• And a report from the National Association of Realtors showed that sales of existing homes in September fell twice as much as economists had expected, to their lowest level in nearly 10 years
• In a new report to be issued today, the Joint Economic Committee of Congress predicts about two million foreclosures by the end of next year on homes purchased with subprime mortgages. That estimate is far higher than the Bush administration's prediction in September of 500,000 foreclosures, which in itself would be a tidal wave compared with recent years. Congressional aides provided details of the report yesterday to The New York Times.
• The Joint Economic Committee estimates that the lost of real estate wealth just from foreclosures on subprime loans will be about $71 billion. An additional $32 billion would be lost because foreclosed homes tend to drive down the prices of other houses in the neighborhood.
• Those figures would cause a decline of $917 million in lost property tax revenue to state and local governments, which will also have to spend more on policing neighborhoods with vacant homes. The states most likely to be hard hit fall into two categories: those where prices had been rising fastest, like California and Florida, and Midwest states with weak economies, like Michigan and Ohio, where people with low or moderate incomes made heavy use of subprime loans to become homeowners and consolidate debts.
• Economists at Goldman Sachs have predicted prices will drop by 15 percent, meaning an overall decline of more than $3 trillion; other forecasters have said the decline could be 20 percent or more.
• In the next 18 months, interest rates on more than two million homes loans will reset to higher adjustable rates.
• Inventories of unsold existing homes rose last month to their highest level in almost 20 years.
• The housing bust has also led to job losses. From the start of 2003 to March 2006, housing-related businesses like mortgage companies, home builders and contractors added 1.3 million jobs, or about 23 percent of all new jobs created in that period, according to an analysis by Mark Zandi, chief economist at Moody's Economy.com.  Since then, the housing business has shed 383,000 jobs, while the rest of the economy has added nearly three million jobs.
• Late yesterday afternoon, Bank of America said it would lay off 3,000 people across the company and has replaced the head of its investment banking division.

Providing that all of this is true, and I can't see why these numbers and well respected sources would lie, things are not that great.  It is not just media hype.  The market is going to keep going south for a good while and we all had better get used to it.  I'm not planning to move anytime soon!! 

Hopefully this will be an interactive post that we can all learn from.

A little background - We have discontinued using a popular real estate magazine to promote our listings.  This has created a surplus $500 a month that can be re-deployed without a net increase to our budget.  Also, I have been tracking the responses from the local paper.  It is non existent.  The gross number of listings on Sunday, for example, is about 80% lower than last year.  With print being such old news, the decision to increase web spending online was easy.

So far, we have tentatively decided on the following:  (note - we do a lot of bank work, so we are focused more to those websites)

1. http://www.foreclosure.com/ - $9.99/wk. - (Smart.  They make more per member charging by the week)  Can post all of my listings here.
2. http://www.realtytrac.com/ - $45.99/mo. - Can post all of my listings here and can buy upgrades on a per property basis.
3. http://www.reonetwork.com/ - $100/mo.  Purchase a premium membership so our name is "at the top of the list".  This may or may not pay off.
4. http://www.realtor.com/ - $187/mo.  Just cause I am sick of not being able to post properties the way I want on the free program.  Is this really worth it??  Inquiring minds want to know!!

Total = $392.95  Remainder = $107.05

We are also using free things like http://www.postlets.com/, http://www.craigslist.com/ and http://www.realestateflyerads.com/.  Response has been pretty good.

In addition to this effort, we are working on upgrading the website on our real estate side.  Totally different budget.

So, are we looking in the right areas?  Are there better places?  Better ideas?

I don't know how many parts this will be.  It might only be 1.

Our website was designed about 4 years ago and, since then, our business has changed a little.  For example, we didn't have our own brokerage when we started.  Long Story.

We have been working on a custom design internally for a LONG time.  Everyone we hire seems to get caught up on something else??  We have gone through 2 firms who specialize in the auction business, one of our internal designers broke both wrists waterskiing and our hired gun writer hasn't been able to fit us in.

I have a basic set up of our desired homepage completed and am working, when I have time, on the back data.  I have found that custom building all of the real estate back end features is going to cost a ton of money.  Instead, I am going to continue working on my custom site for the liquidation and consulting side and move to a template solution for our real estate brokerage.  I really don't need anything complicated, just our listings, a mortgage calculator, some basic info on the company and a list of our agents.  It would be great if we could put our listings in MLS and have them import to our website and other websites without re-load.  I think many providers do this.

Anywho...

I have contacted Homes.com, Z57 and Point2Agent.  We'll see what they all offer.

Wish me luck.

R

For me, the niche is working with lenders and attorneys.  To let them know about our services, we email, use direct mail, send press releases and buy ads among other things.

One of the greatest ways to promote yourself and your business though is to have someone else proclaim you as the expert in your chosen profession.  Sticking to a niche and becoming the local expert is paying off.  Over the past 3 weeks, I have been quoted very heavily in the local business paper, Business First.  Last week, I was contacted to fill in as a guest speaker to the Columbus Ohio Bar Association, Bankruptcy Committee

Thursday, October 11, 2007, Todd Helpbringer of Helpbringer Mortgage and I spoke to over 50 bankruptcy and insolvency attorneys about the current "State of the Real Estate Market" in Ohio.

Speaking points included:

•·        Changes to the market from October 2006 to October 2007

•·        Some causes of the foreclosure boom

•·        Neighborhoods and price points hardest hit

•·        Lending changes

•·        Government Initiatives

•·        New real estate marketing techniques

•·        What to expect today from a Purchase Offer

The audience was made up of a cross section of attorneys representing clients with financial problems, creditors' attorneys and bankruptcy trustees.  All, some way, are utilizing the services of Realtors and Auctioneers on a daily basis.

To everyone out there plugging along, keep plugging.  Form a plan and stick to the plan.

Good luck.

R

Guys, I work both sides of the fence here.  The asset manager side where I hire agents for BPO's / listings and the agent side where my firm conducts the BPO's and takes listings.

When on the agent side, I really want to make the BPO factory happy.  Our staff will address requests for review of numbers, but in no circumstances will we adjust to make the Factory look good.

There are many reasons that a BPO is being conducted.  It might be pre-foreclosure, to confirm value on a property about to go in contract or because the lender is selling loans.  If selling, they want the BPO to be as high as they can get it and if buying, they want to the BPO to be as low as possible.  Fun game, huh?

Look at this from the asset managers side for a minute.  What I would ask everyone is to ALWAYS look at this from the asset managers perspective. 

I need the truth.  I can handle the truth. 

I also answer to other people.  I am talking to the client based on YOUR report.  If the report is bad then I have bad info, list at a bad price and I look like a fool.

How long are you going to stay in the good graces of the asset manager if you make them look bad?

This whole thing is equal to the retail agents "buying the listing".  It is no good for anyone.

My suggestion is to be honest with your client and build trust.  In the long run, the file manager asking you to push values is going to bury himself and bring you along with him.

The last thing you want is for a client to see your pushed value and tell you "Ok. Go get it for me."  You have now created your own demise.  You are the listing agent on an Overpriced Turkey and you did it to yourself. 

If you are from Mars or something you might not yet know it, but it is a buyers market in Columbus, Ohio.  Unfortunately it is a buyers market where fewer buyers have much money for closing costs, etc.  Due to this, we are seeing a lot of very low offers that include 3 or 4% in closing cost help.

If you are a buyer that wants to take advantage of today's market and want closing cost help please consider strengthening your offer in other areas.

Consider these points:

•1.      Make the deposit a little higher if you can.

•2.      Offer to let the listing agent hold it (good will)

•3.      Keep inspection times and request to remedy times as short as possible

•4.      It is suggested that you have your attorney look at contracts, but please have this completed in a few days, not a few weeks.

•5.      Have your loan approval completed, subject to appraisal, and try to make this period short too.

Please remember that a seller may consider taking a lower offer, but this is a give and take proposition.  If you get the lower price, what are you giving in return?  My suggestion is to help the seller rip off the band aid by making the deal move quickly.

Buyers agents, please read through the remarks and talk to your clients about those remarks before submitting offers.  If in doubt, please call the listing agent.  For example, if the remarks say "Bank Owned and Selling As-Is", it might be a waste of time to negotiate the request to remedy timeline.  Also, the remark that all offers are to include proof of funds letter wasn't put there just so we could fill the space.  The seller really wants one.  Not only does the seller want the letter, he would prefer it is not more than 30 days old and coming from a reputable (known) lender.

Recap - It is not bad to offer an amount lower than asking but if you do, 45 days for inspections, 15 days for attorney review, and a pre-qual letter from JimBob's Loans written on a Denny's placemat in December of 2006 is not going to help you get the home.

On the other hand, maybe I'm the one that doesn't get it.......