Long Beach, Ca. Every since the middle of last year, I have had countless brokers calling me trying to either off REO bulk packages or attempting to buy them. I would like to know if anyone of us 70000+ members have had any closings in regard to this market trend. I don't know about the rest of the Country but in my office, out of the last 15 sales, half have been either short sales or REO properties!!
See attached letter from a personal friend, I would like any comments or observations, thanks, ktm
Hi Kirk:
Good Morning! Okay, we are finally ready to go with the REO's/notes and are working directly through a contact who has lead us to a trader with Bear Stearns for note product. It is a tremendous connection. I am currently awaiting the step by step process they want us to follow and completion of a note ordering form today.
Also I had a separate call yesterday with a firm that has been closing REO deals. They are a large, well-known loan servicing provider who is supporting several banks in offloading their product. What I learned from the principal owner of this firm is our buyers must be ready to pull the trigger at a moment's notice on REO packages, which means we need to have our buyer's educated and well prepared. The REO process is truly a "bid" process and is extremely competitive so "newbie" buyers/investors to the game will have great difficulties in securing packages if they don't know "how" the deals work and are structured so that is where we come in.
I have a follow up conference call with this gentlemen today at 1:00 p.m. and he actually has an Orange County office and other offices with 82 employees on staff nationwide to support their banks and the loan servicing. He and his firm can actually assist large buyer's with an exit strategy post purchase if they do not have a solid exit strategy in place. This is also a tremendous contact and source.
Here are the primary elements we need to "prep" our associates and buyers with if we are to be successful in securing REO's/notes as follows:
The buyer/signatory MUST be identified upfront on the initial note order form or letter of intent. The seller's must know "who" they are potentially doing business with from the start because of the U.S. Patriot Act so if we can not get past this key buyer ID disclosure issue with involved broker's/consultant's, etc., we can not move forward. Buyer ID is crucial and the first step as the seller will check their "watch" lists for certain organizations, names and parties that they are prohibited from doing business with under law. Secondary to that critical item is the new "internal" watch lists the banks have in place due to the unbelievable level of fraud occurring in the arena so the involved parties requesting product for purchase MUST be disclosed.
Basically, this means we must have full disclosure. And we must also have a cohesive team of honest, knowledgable and professional experts who can work together in harmony for the desired end result for the client's benefit. We must all be willing to play fair for everyone to win and get paid. I believe we can do that together as long as the relationship with the end buyer is strong and we are all willing to be educated on what needs to occur to be successful. This is no different than any other real estate transaction only larger and more complex. It is simple; name the players!
Realistic buyers is a must. We need to ensure we are working with buyers who clearly understand the current market and price points. Much of the frustration occurs when large buyers with deep pockets puff out their chest and demand to get to the front of the line to dictate what the seller will give them and at what price point. They want high-end everything for little or nothing. Yes, we are in a correcting real estate market but buyer's must be realistic. This type of attitude and behavior will not fly with the banks and selling sources. These types of buyers/investors will never secure product and will likely get themselves blacklisted. This is one of the "hot" topics with bankers and private sellers right now. They are sick and tired of arrogant buyers and their uneducated broker's and consultant's. As professionals we need to be able to control this issue with our buyers and professionally facilitate these transactions. That's what we get paid to do right?
Exit strategy is crucial. Buyer's MUST have a reasonable and solid exit strategy post purchase. The selling banks and private selling sources are not high on "flips" because of downline liability tied to the U.S. Patriot Act i.e. know your customer's customer comes into play. Buyer's must be prepared with a solid business plan and exit strategy period. If there are two equally qualified buyer's competing for a "bid" on a REO portfolio and one has a solid exit strategy/business plan and the other doesn't guess who is going to secure the pool? It is our responsibility as professionals to ensure our buyers understand this key issue and make sure the seller's know they can perform and handle the product once they secure inventory.
Financial performance - last but not least is necessary. The buyer's MUST have their finances in order and be able to prove it. Cash is king and cash buyer's trump buyer's that use credit. However, solid credit options with credible financial institutions i.e. warehouse lines of credit, etc., with well know banks are also strong financing options. Hard money loans from shakey lending sources for newbie buyer's will not impress the sellers and will likely lessen the buyer's chance of securing a REO or note pool.
We all must remember at the end of the day the Seller decides "who" they will do business with period. They are selling/trading their assets and they can "choose" not to do business with certain buyers, brokers and consultants. Unfortunately, the buyer's and involved parties are not in the driver's seat on this one as there are more buyer's than seller's right now. So let's all be clear on that...the seller's are in control.
Whew! That was a lot to cover but Kirk please be certain your contacts and buyers understand these basic rules of engagement so we can move forward rapidly to have a solid and prosperous future together! As I will be a major and key facilitator in these transactions (as a former 20+ year banker) we need to ensure we can all be transparent and work together again, for ALL to win!
I will be in touch with you as soon as I can so get your buyer's ready to go! I will send you the note ordering form and instructions for the REO's, which will likely be a standardized Letter of Intent (LOI) as soon as I can. Off to meetings now. Sam Perez and I will keep you posted. Make it a great day!
Thanks so much,
Kirk Timothy Mulhearn
Broker/Owner
3728 Atlantic Ave.
Long Beach, CA. 90807
Telephone: 562-989-4091 Ext. 110
Facsimile: 562-424-4580
"Excellence is not an individual act but a learned habit." Aristotle
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Recently we wrote an article, How will higher loan limits acutally change California's real estae market?, that discussed what the effects would be if this bill passed. The question remains, "How will it affect the rest of America?"
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Just start interviewing small business owners. Grant you that an extra $700-$1000 would be great to have in cash back from the government, but is this amount really going to effect the way America's true economic state. Let's admit to the fact that the average household is spending between $200-$400 a month on gasoline alone in Long Beach, California. Now add the fact that groceries are running a typical family between $500-$1000 a month. This tax rebate would definately help but seems to resemble more of a band aid rather then a cure to our current economical malaise...
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As far as the NFL is concerned, I also feel that since we Southern Californians lost the Rams and Raiders that there has been a gaping hole of emptiness for the lover of our traditional National Blood Sport and all. Of course, there is no money form the City Coffers available to shore up a team, but I do believe that Long Beach woud be a fantastic venue for any professional sports team.
Long Beach lot could turn into great beachfront lot for NFL, USC
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