About 4 months ago I received a referral from one of my clients to two very nice guys who needed to sell 15 single family homes in Columbus, OH. Overall the properties were nice. They had tenants and the tenants were paying the rent.
The problem was that their loans were maturing. Their payments were about to go up. The rent would not cover the new payments. On top of it, the market for their type of property is down about 30%.
Market Drop + Increased Payments = Screwed Seller
Why did the market drop so drastically? I think it is because about 50% of the buyers dried up when the 0 Down loans took a dive and lending restrictions became tighter. It used to be that anyone could get a loan. It was the "anyones" that were buying this stuff.
Right now, the buyer is the professional investor. The guys are paying cash. These are about 50% of the deals that I am closing compared to about 10% 4-6 months ago.
Unfortunately, my sellers did not want to renew their listings with me. At the expiration, they were already planning to come to the table with $100,000 in cash on their side to get out. They cancelled their appointment to re-list and it has been about 3 weeks since expiration. I have called them a couple of times and emailed. Mostly I wanted to see about getting the lockboxes and keys.
Yesterday I found out that they are filing bankruptcy. It is all due to their real estate portfolio. These are good guys who really tried hard to do the right thing.
Who's to blame? I don't know, but it's not them.
Do you have questions about distressed assets, receivership or bankruptcy sales, auctions? Email me at rfk@gryphonusa.com and I'll try to answer it in an upcoming post.
Richard F. Kruse is the President of Columbus, Ohio based Gryphon USA, Ltd. (www.gryphonusa.com). The Gryphon Organization includes Gryphon Asset Management providing receivership and consulting services in the distressed marketplace, United Country Gryphon Realty & Auction Group (www.ucohiorealty.com & www.ucohioauctions.com) providing real estate brokerage and auction services throughout Ohio and OnlineAuctionUSA.com (www.onlineauctionusa.com) providing commercial asset liquidations from the Midwest to East Coast.
United Country Gryphon Realty & Auction Career Opportunities Available. Call 614-885-0020 x 17
Rich, it's nobodys fault. In my opinion, if we were hit with some other truly catastrophic event other than a market adjustment, it would be the same end result. These guys didn't look long enough term at their investments- wanted a quicker buck- and things changed. Too bad they couldn't hold on longer... now the market will be saturated with 15 more duds.
Rich, when people leverage themselves highly, they're taking a risk. When they hit it right, they often think they're smart. Sometimes they're just lucky. Our capitalist system rewards risk, but the potential to lose everything is always there. That's why risk is rewarded so well when it works.
Our free market system is built on the hopes of guys like your former clients. I hope they can recover eventually from their losses.
Rich,
I don't believe it! The real estate was no reason to file bankruptcy! If they had no other reason then the only reason to file was so the attorney could get paid.
You know that my partner for many years was an attorney and that my favorite daughter is also, but it never falls to amaze me how often the only one that benefits from legal advice is the attorney.
Better Luck tomorrow!
Bill
A seller called me the other day about listing one of his 8 homes all very nice current market about 150-229 k homes he bought them in 05 for what they should go for now his previous agent sold all of them to him and was the list agent then as well . He was talking about going South America and not coming back