Asset Management & Recovery: November 2007

Good evening everyone.  I just wanted to post a flyer for our most recent auction offering.  This one will not have a live component, only sealed bid bidding.  If you or your associates have clients or know of anyone looking to buy multifamily properties with significant upside potential, please take a look.  We are willing to work with out of state brokers to make sure they are compensated too.

Here is the flyer.  For full information and to download all of the property info, please see our website at www.gryphonusa.com.

I've been reading some blogs recently harping on the REO Agents.  All I can say is this: Hey guys.  Cut these people some slack, ok?

Yeah, they get a lot of listings, but there are a ton of problems that they deal with in an attempt to make the sale easy and make sure the buyers and their agents are dealt with.

•1.       They usually don't put the lockboxes on.

•2.       They usually don't change the locks.

•3.       They usually don't have any control over if the electric, gas or water is on.

•4.       There are other people in and out of the property who may walk off with the key and realize it 5 miles down the road.  Ooops.  They don't care.

•5.       Sometimes clients have agents list the property with an expectation that the property is being cleaned out that day.  Sometimes that doesn't happen and you see it dirty.  It happens.

There are 100 different things that can go wrong and do go wrong that the average agent can't or won't deal with.  There are too many properties for the asset managers to deal with the way they should.  There are too few experienced agents to manage the volume on the market.  The asset managers are not going to hire someone who doesn't have the right background, so experienced agents get large volume.

REO agents that carry 100 listings are also probably carrying $50,000 in expense advances not including asset marketing budgets and employee overhead.  Units are not selling as fast and income is going down despite increased listing inventory.  They have good properties once in a while and more than likely are dealing with junk most of the day.  Fleas, drug addicts, code enforcement and police reports are well used words.

Next time you want to bash the REO agent, please stop yourself and think that they are busting their hump doing a job that most people think they want, but can't do.  They are overworked and understaffed.  People that they don't control create situations that you think are unreasonable and then blame on them.  What is the saying?  You won't know until you have walked a mile in my shoes?  Something like that.

Mark my words, pretty soon REO Realtor will be on the Dirty Jobs TV show.

So, the next time you are outside the house and can't find the lockbox think creatively.  Don't get mad at them.  The box was probably stolen and they just lost another $30.  Take it upon yourself to figure out a solution other than giving nasty feedback.  Maybe you could take out a pocketknife and jimmy the window just like they had to do to get in the first time. 

Why do they get the listings?  Maybe because instead of complaining about why life isn't perfect, these people work on solutions.

Here endeth the rant.

This is a follow up to my recent post  Would You Refuse to Write an Offer? Can You?.

If you read my blog, you will know that I am not too proud to write a low ball offer and, sometimes, encourage it.  If you are going to go that route, you may get some other suggestions from my post Tips for Making Low Offers. 

If you are going to do this, you must be prepared for the possibility that there might be no response what so ever or that you may by involved in learning The Art of the NO Counter. 

There are probably other things I have written about just saying no or letting offers expire as a negotiating tool, but I got sick of reading my old posts looking for it.  15 pages was enough of my ramblings for me.

So on to today.  Over the weekend, I drafted an offer for $550,000 on about $1,118,000 in list price properties.  After sending the offer to the buyer for signature, he changes the document and sends it back at $450,000.  Long story.

After transmittal of the offer, I receive an email from the seller telling me that I would get a call from him today to discuss.  Today I get an email stating the following:

"We are not going to respond to this." 

I send an email to the buyer giving him the news and an apology to the seller for wasting his time.  Side note:  I had already been instructed by the seller not to forward these types of offers, however the buyer insisted and I am a sissy.

The response from the seller is not to worry about it and to "Tell him (buyer) this type of an offer is a waste of your time (mine) and that of the trustee."

At least the seller and I are on the same page !!!!

At about the same time, I get an email from the buyer all upset that the seller didn't counter stating "that's what he (seller) is there for."

I guess there are a lot of things that ain't happening today.  I'm not getting taller and the seller isn't countering.  Oh well.

Point of the day is that you can lowball if you want, but don't get angry when the seller blows you off.

Yep.  I'm gonna stir the pot and hope that everyone gets to fire a shot into the bowl.

I recently took over 2 new files containing over 35 properties.  All are rentals. 

The lenders had all of the properties appraised recently.  Let's call it within the last 60 days.  Yes.  That's 2 months ago.

These properties are located in 3 different counties and 5 different towns.  There were a total of 6 different appraisers.

Just to double check the values from the appraisers I don't know, I engaged some folks I do know to provide BPO's on the same assets.  Since I have read the appraisals, I did not conduct any of the BPO's myself.   

So far, the BPO Values are coming in between 39% and 73% of the appraised value.

Why is this?  What is it about appraisal standards that continuously value property higher than it can ever be sold for?    Is that the problem or is it that the agents and brokers doing the BPO's are wrong?  Are they always too low and are the appraisers always right?

Hmmm....

This whole thing just kills me.  39%?  That's 61% difference of opinion between 2 professionals.

Honestly, I don't believe appraisals anymore.  I don't believe the ones in these files, don't believe the one on my office space and don't believe the one done on my home.  I can't sell my house for the appraised value or anywhere near it.  Same thing at the office. 

Good for me that the bank still believes in appraisals !!  Gotta love that home equity line of credit !!!!!

Hopefully one of these days there will be a better way.  Maybe someone will change the appraisal standards and "highest and best" will become "most likely".

She doesn't know it yet, but lack of response just got someone fired.  They just lost 6 listings that I guarantee will be sold.  I admit, they were not high dollar.  Thing is though that agents are running in circles with sellers that can't afford to sell.  Here is a slam dunk and I can't get an agent to acknowledge an email.

I found the agent online and spent 20 minutes talking with them to confirm their background.  I told them that I would be following up with them at the end of the week with the addresses and wanted to conduct the preliminary asset inspection with them this coming Monday.

Thursday I sent an email with some info.  Friday I sent another with the balance of the info and attempting to confirm the Monday appointment.

I have heard nothing but crickets.

So here is what I need folks.  This is not rocket science:

• Licensed agent with some drive
• Must be based in Mansfield, Ohio and member of local MLS
• Must be accessible.  That means answer cell phone and respond to emails.
• Must be able to price properties.  An understanding of conducting BPO's a Plus.
• Must be willing to market properties on FREE Websites.  I'll even tell you which ones.
• Must be willing to schedule contractors from your contacts for emergency work.
• Must be willing to post eviction notices.  I'll prep them and send via email.
• Must be willing to put a For Sale sign with their name on it in front of 6 properties.
• Must be willing to use combo lockboxes.

Not sure yet, but drive and responsiveness might just trump experience.  Frankly, I am considering walking into the largest brokerage in the town and telling the broker to give me the new guy.

Friends, if you know an agent with the qualifications above who has a brain and can spell, I want to talk with them ASAP.

Good morning folks.  When I am not ranting and blowing off steam with silly posts, I try to make a point that will be helpful to someone.

Today it is a quick reminder about what the dates outlined in the contract really mean.  A lot of people in my world have forgotten that the timelines in a contract mean something.

Did you know that if you fail to inspect and reject a property within the timeline for inspection, you may have ultimately accepted the property and waived your contingency?

Did you know that if you fail to transmit your Lender Letter in time, you may be in default and the seller may be able to cancel the contract?

Here is the big one. 

Did you know that if you FAIL TO CLOSE on time you may be in DEFAULT on the contract?  Did you know that the Seller MAY not extend the contract?  Did you know that you may LOOSE your deposit?  Did you know that you may loose your deposit AND possibly be liable for a shortfall if the property is sold for less to someone else?

I can only speak about the contracts I am involved with, but almost all of my files have decisions being made based on timeline.  The deposits required are based on risk and a calculation of cost to cover expenses in the event of a default.  I can't tell you how often we decide to accept price or terms because the property will close at a certain time.  This could be at the end of a quarter.  It could be because of a change in weather.

Do you know one of the reasons that REO sellers want the closing to be at their title company?  It is so there will NEVER be a late closing due to an error with that vendor.

Do you know why some lender sellers are requiring buyers to be approved by their preferred mortgage company?  It is so there can't be any games played concerning not being able to get the buyer financed.

True Story - 2 years ago we defaulted a buyer and kept $112,500.  We were in contract with the backup buyer the same day and closed within 10 days.  Seller made more money.

True Story - This summer a deal failed to close on time because the loan officer was "too busy" and couldn't "get around to it in time".  We defaulted the buyer and sold to someone else.  Buyer sued LO.

True Story - Buyer told me yesterday that they have not been able to get financing covered yet on their non-contingent cash offer.  They are not going to close on time.  We have a timeline issue for the seller.  There will be no extension.  We need to go to Plan B ASAP.  The default letter has already been written and is sitting on my desk.  The ads for the auction are already drafted and are ready to send out.  Guess who is holding the deposit?  Guess what else?  It's not small.

Folks - These things happen.  Contracts are real .  Blown timelines have consequences.  They get expensive. 

I was thinking about increased costs this morning and was planning to write about it, but was beaten to the punch by Sean Allen & Pilar Lorenzo and their cost cutting ideas blog.  Here are some of mine.

Gas costs are a big part of the expense structure in any home or office and I see many families, including mine, wanting top quality meals at home.

In an effort to save on both, here are a couple of additional ideas you can put into use.

1. Use Fireplaces - Everyone has at least one friend with an old tree in the yard.  If you are in the property management business you may even come across them yourself.  This past summer I cut down a dozen trees in my yards and in those I managed.  There is a whole winter of wood stacked in the yard now.  We crank up the furnace in the morning when we get up for about an hour, but a fire in the fireplace all evening keeps the house warm through the night.
2. Fuel Perks - There are different programs, but in Columbus Ohio the best places I have found are Giant Eagle with Costco in second place.  Giant Eagle is giving 20 cents off of gas at their gas stations for every $50 you spend in the store.  This is up from 10 cents from a couple of months ago.   Costco is about 5 cents a gallon cheaper than all of the other stations in town.  TRICK - Giant Eagle will let you buy up to 30 gallons per fill up on the discount, but you can only fill 1 car.  They will let you fill as many gas cans as you want though.
3. Shopping Days - Again at Giant Eagle, meat goes on Managers Special on Wednesday and Thursday.  Many times it will be 50-60% off.  I have a veal recipe from my personal cookbook that is wonderful and will post it later.
4. Home Garden - I know that this might not be very helpful now, but a little garden in the yard will produce more tomatoes and green peppers than you can handle.  I think we spent about $6 on plants this year and grew enough to have fresh tomatoes in a salad or other dish every day.
5. Moonshine - I'm just kidding.

I woke up this morning and did what I usually do, check email, check the RAIN, check my web stats, email a couple of folks and watch some CNN.  I'm boring in the morning.  Later I get to dodge bullets.  That's fun.  Ok, back to the show......

Yesterday I received a couple of documents appointing me into court cases outside of my companies MLS area.  No big deal.  That has happened before and I will usually consider refering the filed operations portion out and just do the trustee work myself.  Maybe I will join that local board and do the work myself.  It depends.

I remembered TLW's blog from a couple of days ago about Raingle not Google and instead of using Google to try and find some people to interview, I searched ActiveRain. Today, I was the consumer and was looking at the site through a different pair of eyes.

I didn't find what I was looking for, but did see something interesting.

First, there were very few agents in the area I was looking.  There were no agents with an REO or distressed asset background.  Foreclosure.com and realtytrac here I come.

Second, the agents that were there didn't have a picture or logo posted and had very little information about themselves.  One still had the "instruction" text from A/R posted under their bio.  One agent did have a little info, but as a consumer I was a little turned off by the agents "specialty"

"I specialize in all areas of buying and selling"   WHAT ?

Boys and girls, I have been doing this a long time and can think of a dozen areas of this business where I know enough to get me into a lot of trouble.  Probably not going to call this person for an interview.  My first impression is that they don't have any specialty and are probably running in 75 directions.  Not what I want or need.

I want to wrap this all up and make a point, but I don't really know how.  I guess I would say that, from the consumers point of view, the agent profile is every bit as important as blogging and getting good Google rankings.  They need to see the real you in your profile.

I specialize in everything.

I give great service.

I want to be your agent for life.....

.....are not really getting me, the consumer, to pick up the phone.

One thing that I am definitely doing this weekend is reviewing MY profile.

Recently a couple of my bank clients have been attempting to sell their default loan portfolios to groups of investors.  Many of these portfolios are in the 3-8 million range.  The assets are mostly vacant, mostly former rental properties either single family, double or four-plex.  Most loans were originated 12-24 months ago. A majority were 90+ late with only about 20% or so less than 90.  All are located in Columbus Ohio or Dayton.

Sellers were hoping for offers close to 60% of loan balance.  What they received were offers going from 18% to 27%.  Maybe the offering wasn't promoted aggressively?

I don't know why I am surprised, but I am.  The offers were not accepted although I think the parties are still negotiating.  With that big of a spread I'm not sure where that will go.

Wonder what these properties are going to eventually be worth when I get them as REO?

Soon to be listed on www.gryphonreo.com, another 50 ++ properties.  Come n git em !!!