Asset Management & Recovery: August 2007

Hi everyone.  I just wanted to share how successful yesterdays BBQ was.   The full hog was catered in by City BBQ and Montry made a Cajun Boil with shrimp, sausage, corn and potatoes.  Melissa made sides and we had Columbus Favorite, Cheryl's Cookies for desert. 

We had over 100 past clients and future prospects in attendance starting at 3pm and going until a little before 10.  It was a great opportunity for our staff to interact with clients they may only speak with on the phone and an opportunity for our agents to socialize with new prospects.  About 30 investors attended and we expect to sign many of them up on Buyer Broker agreements this week.  Did I mention that it's a great time to buy in Columbus, OH?  A lot of attendees were children and the blow up bouncy was a big hit.

Many folks wanted to know about this years OSU tailgates, so we are going to need to figure something out.  I think I have also given away about half of our Columbus Blue Jackets tickets for the upcoming season.  That means half still left.

The motto yesterday was "Work hard yesterday, play hard today".  Everyone was encouraged to take the entire day off (no showings & no schlepping) and I think all had a great time.

We have a small firm that is very family oriented and our few agents end up more as friends than employees or contractors.  Being able to provide little things like the tickets and BBQ events has really helped us set apart from other companies.

I knew it was coming and only a matter of time, but real estate investor Don Green has finally been indicted for fraud, money laundering and tax evasion.  Going down with him are loan officers and appraisers that helped him in the alleged scam.

In a nutshell, the allegations are that these guys would find people to put up their credit to buy properties at incredibly high prices.  The "seller" would agree to contributions back to the buyer for repairs that would never be completed.  The appraisers would jack up the values and the LO's would push the paper through. Hmmm, who was supposed to do the repairs?

Last summer Mr. Green also defaulted on about 326 properties that he owned through an LLC.  Most were in terrible condition.  Over 15 banks took a serious financial hit including a good number of smaller community banks in town.  I looked at buying portfolios from the lenders at an average price of $21,000 per property.  Loans averaged $45,000 per property.  Last year the offer was rejected.  Now, the banks are still stuck with a lot of them and can't get $21,000.

That many properties going on the market all at once, many on the same blocks where other defaults were occurring, literally decimated neighborhoods. 

Attached is a link to the Columbus Dispatch article on the topic. 

http://www.dispatch.com/live/content/local_news/stories/2007/08/23/flipped.ART_ART_08-23-07_A1_PK7MLGN.html?sid=101

I recently wrote a very basic blog about a couple of things to look out for when listing property in a bankruptcy case.  It really left a lot out.  Over the next few posts, hopefully I can give a little more detail on working in this arena.

The first thing to get out on the table is that not all people in bankruptcy are bad people.  There is a saying that bad things sometimes happen to good people.  Things like medical bills, divorce and unemployment. 

It wouldn't be like me, however, if I didn't point out that there are also the people who bought and bought like idiots and don't know how to deal with money, but they are not in the majority.

There are 3 basic types of bankruptcy filings, CH7, CH11 and CH 13.

CH 7 is an all out liquidation and can be for a corporation or an individual.  In a CH 7 filing, a person called a panel trustee or a CH7 trustee is appointed to manage the liquidation of assets.  The person filing, now called the debtor, does not control the assets that they own.  Everything is under the control of the trustee.

CH 11 is a corporate reorganization where the company will come up with a plan of reorganization (the Plan) and will work to restructure debts, create a workout plan and exit bankruptcy intact.  New financing may be put in place during the period that the company is in BK called DIP financing or Debtor in Possession Financing.  Basically, this is because the debtor is still in possession of the company and its' assets.  A CH 11 trustee may be appointed, but it is not all that common.

CH13 is an individual reorganization.  Essentially a plan is drafted, payments are made on debt and things are stretched out for, I think, 5 years.  I can't remember the last time I worked on anything in a 13, so my understanding of the process is VERY rusty.

The types of engagements that will be available to professionals on AR will be appraisal, brokerage, property management and auction.  In some cases, business brokers may be engaged.  The company in a CH 11 may engage a financial advisor and/or a turnaround specialist.

If you are looking to prospect into this community, there are a variety of places to seek clients.

1. Create a list of local bankruptcy and creditors rights attorneys.  You can find their contact information through the local bar association or http://www.lawyers.com/.  
2. You may consider joining a trade association such as American Bankruptcy Association (ABI) http://www.abiworld.org/, Turnaround Management Association (TMA) http://www.turnaround.org/, or National Association of Bankruptcy Trustees (NABT) http://www.nabt.com/ or International Women In Insolvency Council (IWIRC).

ABI  will have 4 regional conferences and one national convention annually.  TMA has local chapters that meet 6-9 times a year, usually have a golf outing and then they have 2 pretty big conferences a year.  NABT has one conference a year.  I think it is coming up this weekend in Chicago.  IWIRK will have local events.

I will get more down on paper possibly tomorrow about how to become employed as a professional in court.  For now, let me offer this. 

Breaking into this arena is a long road.  It takes focus and constant reminder to the prospect that you are there for them.  You need to get involved in local events and join local insolvency groups like IWIRC.  It's not just for women, at least here.  You might find out information on your local Bar Association Bankruptcy Committee and see if you can speak to them about real estate trends.  You can also call the United States Trustees office to obtain a list of local panel trustees.

Just a few thoughts.  I've done them all and had good response.  As a matter of fact, it's time to call Myron about speaking on the current market trends and how the lending markets are effecting sales.

Can you find someone an agent almost anywhere in the country? 

I was just reading a blog asking if someone should specialize in buyers or in sellers.  I am not sure I gave the best advice, but I gave what advice I could give. 

You Must Be a Specialist to Survive.  Stick only to what you know.

If you think about it, that is not as crazy as it sounds if you are also a full time referrer. 

Let's think about that for a minute and take me for an example.  I might not be the best example, especially for kids, but I am all I have to work with here.

I specialize in real estate auctions and working with distressed assets.  Sometimes the two go hand in hand and sometimes not.  Outside of these two verticals, I do not venture.  I refer. 

There is a ton of money to be made in just keeping your Contacts up to date.

This month I have referred sellers to 3 AR members who are out of my area. 

Cha-Ching !!

I have forwarded countless buyers to agents in my brokerage.

Cha-Ching !!

I referred one buyer to an agent outside my brokerage who specializes in a neighborhood 40 miles away from me.

Cha-Ching !!

Could I have personally done these deals?  Possibly.

Would it have taken a lot of added time?  Probably.

Are the agents receiving the referral a lot better than me due to their specialties?  Absolutely.

First and foremost, I think that people need to specialize.  If you do, the referrals will come your way too.  Next, I would encourage agents to keep up on their networking.  Know who to go to and how to get things done.

I'll give you another tip.  If you can become the all knowing one in real estate, the Yellow Book of sorts, people will call you just to be referred to people you know.

Can anyone say Angie's List??

Cha-Ching !!!

We all know that the market isn't doing so well.  A lot of Realtors are trying to get into the REO market and, like it or not, many are involved in Short Sales.  According to a friend who is a CH7 Trustee, bankruptcies are increasing and cases that have assets to sell is increasing.

For the past 12 years I have specialized in distressed sales.  Much of this work has been in the United States Bankruptcy Court.  There are different types of bankruptcy or "bk" as many call it.  There is CH7, CH11, CH12, CH13.  All of them pertain to different situations. 

In bankruptcy there are a lot of different players.  One of those players is the CH7 Panel Trustee.

If you are being hired to sell property in a CH7 case, it is the CH7 Trustee who will probably be hiring you.

There are a couple of things to know.  First of all, if you do not get formally approved under a court order to sell the property, your contract is not worth much.  If your client goes into bankruptcy and you want to keep the listing there is more paperwork to do.  For instance, the Trustee is now the client, not the home owner.  Additionally, any offer that is acceptable to the Trustee must also be presented to the court for approval.  Approval can take 20 days, so offers that close in a week are not going to work.  Broker fees are also not set in stone.  It is possible that fees may be knocked down even if you have a contract.  It is also possible that you will not get paid at closing.  You may need to apply to the court to receive your payment as retained professionals, per the bankruptcy code, must submit applications for fee.

The way to minimize the risk on all of this is to make sure you read through not just the contracts, but also the Motions and Applications to make sure that the details are spelled out.  When the trustee seeks approval of the sale, make sure that the court docs allow you to receive your compensation at the closing table. 

This could be a novel and I need to go, so good luck and happy prospecting in the bankruptcy arena.  Be careful and learn the rules.  You'll be fine.

Last year OSU Football tailgates reached an all new high (some might say low).  We had the party bus complete with the "center support post", DJ, food, beer, corn hole games.  We had it all.  Parties were held at the legendary Riverwatch Tower on Lane Ave.  RWT is private property, so you can walk around with cocktails in your hand.  This is a no-no everywhere else tailgates are held, so the space is a premium.

After last season ended, the discussions began on how to go bigger and go better.  Almost everyone that I know would love to go back to being 18 again "knowing then what they know now." 

This years OSU Tailgate at Riverwatch Plan was borne by men thinking of how they would have thrown parties if they could afford in College what they can afford now.

The menu was planned, we spent the winter buying our new tailgate gear.  One guy bought a stainless steel party trailer with 2 keggerators.  It was all set.

Just 2 days ago, the "package" came out with the rules for this year and the order forms for the spaces.

Ouch!  That will leave a mark.  We were hit with the P word.  Riverwatch turned the place over to a PROMOTER. 

Last year the rules were pretty basic.  No Firearms.  No Drugs.  Not everyone listened to the wacky tobaccy rule, especially those girls who somehow ended up testing the "center support post" for structural integrity.

This year the rules are a little expanded.  In addition to the normal gun and drug limitations, they include:

•·        NO food or beverages may be brought onto the property.

•·        ALL food and beverages MUST be purchased from approved, on-site, vendors.

•·        No Vehicles.  I guess the bus is out.

•·        Tent Spaces - $900 per game for the entire season and $1250 per game if you don't buy the whole season.

•·        40 people can attend at the tent price.  Add 20 more for an extra $200.  No more than 60 people allowed.

•·        No large sound systems.  I guess the DJ is out and stage bands are in ???

•·        Bratwursts - $5 each.  I guess no pig roasts.

•·        Beverage prices were not disclosed in the package.  I supposed I know what that means.

After some quick calculations based on last years consumption of food and beverages and estimates on what these guys would reasonably charge us for a beer, the tailgate at Riverwatch Tower would cost us in excess of $25,000 spread over the home games.  I suppose it might be a little less since we could only have a maximum of 60 friends attend.

OK.  On to Plan B.

One of my clients has asked me to market 96 properties for sale in part or in whole.  Most properties are inner city Columbus, OH and have a total debt balance in excess of $7,000,000 and can probably be purchased for much less.

I have another portfolio coming up through a bankruptcy case for about 55 properties mostly located in suburban Columbus, Ohio with an estimated value of another $7,000,000.

A third will be coming up in a receivership case of approximately 25 properties, mostly rented, in the Dayton, Ohio area.  The estimated value has not yet been calculated. 

Please call me at 877-5-GRYPHON if you are a direct buyer of distressed property or financial instruments.  Confidentiality and Non-Circumvent documents will be required.  These opportunities are for principal buyers.  No broker calls at this point please.

Please come visit with us at one of the two open house events for this wonderfully renovated executive home in Olde Town East.  Property is being offered for sale by motivated real estate professional who is downsizing to a smaller home.  Co-listed by Richard Kruse and Michael Casey.

Here in Columbus a new law has been enacted so anyone dropping off scrap metal must have ID checked, etc.  The new regulations stem, in large part, from all of the break ins where thieves strip copper pipe from vacant homes and sell it to fund their crack habit.

No matter what you did, they got in.  Lock it, board it, put a dog in it.  They still got in and stole your pipes.

The cost to fix this problem ranged from a few hundred to a few thousand.  Most people replaced the pipe with PVC.

In the last week, I have had 3 outdoor A/C systems stolen.  What are they doing, stripping them for parts?  Is the new scrap yard the nearest HVAC contractor?

Newsflash !!  This is more expensive than the pipe.  According to the HVAC contractor I have been using for years, the new A/C systems are not compatible with the old (more than 3 years) furnaces.  Yes, there are repair parts available, but installing whole units isn't going to work right.

So out of the frying pan and into the fire.  Cost of new AC + Furnace = $2500 +/-.

Great.  Landlords and owners be advised this is starting to be a problem.

Anyone know where I can get a PVC AC system????

Good morning all.  As many of you know, much of my business is outside of the role of the traditional real estate agent.  In fact, much of my work is as a State Court Receiver. 

In the past 3 months I have been approached to undertake transactions in Dayton, Cleveland and Newark even though I am in Columbus.  They may come through.  They may not.

Many of my projects involve residential real estate and some involve commercial.  The properties are usually in fairly bad shape.  Sometimes they have tenants and sometimes not. 

If you have experience working with REO, federal bankruptcy and state court receivership please forward your resume and/or bio to me for our files.

rfk@gryphonusa.com or fax to 614-573-6344.