John Occhi, ePRO, Hemet-San Jacinto CA Real Estate, 951-443-6259

How To Find Investor Buyers for Bank Owned Listings

As an listing agent of Bank Owned Homes (REO) my job is multi-faceted from securing a property, cleaning it up for resale, generating reports to help price the property and the ultimately listing the home in the MLS and selling the property with a successful close of escrow.

As a listing agent, I rely on many traditional marketing methods to help sell the homes, as quickly as possible for the most amount of money for my seller client and the least hassle for my staff and I (as well as my client).

Ideally, I want to ‘double end' as many transactions as possible - therefore earning 60% more income. You see, on the listing side, I typically earn a 2% commission after providing my asset managers with a 1% referral fee. On the selling side, I earn the full 3%. So, you can see why double ending makes sense to my bank account.

By traditional methods, I am referring to sign calls with a call capture toll-free number, internet advertising, agent-to-agent networking as well as door knocking the neighborhood. and the like.

DOOR KNOCKING

Yes, I'll pause here - I still do this whenever possible. It is a great way for me to introduce myself as the listing agent and asking the neighbors to keep an eye on the home for me -letting them know the number on the sign notifies me immediately on my cell phone, if they ever need me. I'll drop off a property flyer, a magnet, a pen, or whatever other branded trinket I may have at the time.

The best part of door knocking is no one else does it anymore. I get to ask the neighbors face-to-face if they know anyone who may want to move into the neighborhood, as there is a great value right down the street. I have had neighbors buy the home as an investment. I've had neighbors buy the home to move their kids into it. Others have referred a sibling or even a parent to the neighborhood gem. Door Knocking works.

SURF THE MLS

This is perhaps one of the most effective methods I have ever used. It's a little outside the box and would actually be considered reverse engineering. You know what that is right? Someone has a product that you want to be able to figure out how to make it for less, so you tear it apart and figure out what everything does so you can recreate your own version.

This happens with import products coming to us from China, India and other corners of the globe. It happens in the food business, all the time. A new recipe comes out and then next thing you know everyone has their own version. Well it happens in
Real Estate Too!

What I like to do, when I get a new listing is I'll troll the MLS Sold data looking at the recent SOLD listings for cash deals that match the profile of my listings; i.e. neighborhood, age, size, etc.

Once I identify my ‘short list' I'll take a drive by the property and more often than not I'll either find a crew doing their rehab work or a ‘For Rent' or ‘For Sale' sign in the yard. In the case of a crew, I'll stop and strike up a conversation. Maybe it's the owner and maybe it's not...but the crew definitely knows how to reach the owner. Get that information and leave my business card.

In the case of a sign, I just call the number and strike up a conversation, letting them know there is more on the way and find out what their interest level is.

If I am not successful in making direct contact, I still gather the buyers name from the tax records and put them on a mailing list to announce new listings when they become available.

FOR RENT SIGNS

No only do I call on the signs of the recently sold properties, but while familiarizing myself with the neighborhood activity for my latest listing, I'll gather the information on all of the For Rent signs in the neighborhood.

This will allow me to achieve a couple of goals.

1) I can develop a very localized rent roll for the neighborhood that I can provide to my investor clients to help them justify the purchase of a property; and

2) As I mentioned above, I can strike up conversations and figure out if the owner may be looking for additional real estate investment property in the Hemet - San Jacinto, CA neighborhood...or anywhere else for that matter (I love Referrals).

These methods may be outside the box. None are expensive. Implement them, and you will develop a buyers list for your investment properties...or any others that come on the MLS.

Black Friday - The Best Deal of the Day is REAL ESTATE!

Sure, it sounds self-serving since I sell real estate for a living...I'll give you that...but here me out.

On Black Friday morning, the day after Thanksgiving,...did you get up at Oh Dark Thirty to stand in line in front of Best Buy or some other big box haven of super deals with limited quantities. Were you lured into getting out of a perfectly warm and comfortable bed to brave the cold (in most parts of the country - I think it hit 90 here today - but that's another story) and the crowds for one of those 3 lousy laptop computers for $199...or were you drawn in to Office Depot for one of their $59 digital movie cameras with 4 guaranteed in each store?

I'll bet if you didn't subject yourself to one of these great bargains or any of the other hundreds...even thousands competing offers, looking to separate you and your money in the biggest day of bait and switch in the entire year then you know plenty of hard working folks who did go...Am I right?

THE DEAL OF THE DAY

The truth is there is no better bargain today than real estate. Doesn't matter if you are a first time home buyer, a repeat buyer or an investor. There are bargains galore out there just waiting for you to write your offer and negotiate your own terms and conditions.

Best thing you can do today with your time is find a dedicated focused REALTOR® who has not fallen into the lull of the Holiday Spirit and taken the weekend off, but find one who is hungry and eager to provide you with the best service possible and find you jus what you are looking for...the best deal of the day...and who knows, play your cards right and you can be moving by Christmas!

Better yet, if you are looking to buy a home in the Hemet - San Jacinto Valley, CA - then please look no further...just call me!

Merry Christmas to all,

By the way, an interesting bit of trivia was revealed about the Silverdome - the state of the art stadium built in 1977 at a cost of $55 Million dollars and it was recently sold to a Canadian Developer for $585,000 - wow - talk about depreciation - that only about 1% of the original purchase price and it included 20 acres of land!...But that's another story.

Today is about giving thanks for all we have - no matter how little we may think it is.  If we put it in perspective and just think for a moment how most of the world lives...we have a lot to be thankful for.  If we stop and think about our wealth and compare it to previous generations of Americans...or citizens of the world...we have so much.

Most importantly though, I give thanks for my wife Sherri, who has been my inspiration since I first met her in 1996 - when she was only given 5 years to fight the rare cancer she was diagnosed with.  Well, here it is 13 years later and I continue to give thanks.  Yes, times are tough and no her health is anything but fine...but she is my role model and I love her so...

Here is a great video sang by Johnny Cash on the old TV show, Dr Quinn Medicine Woman...this pretty much sums up how I feel right now...

I suppose, I as a local REALTOR®, am fortunate that the Hemet - San Jacinto Valley in So Cal is not overbuilt with condos, as much of Southern California is. All of our condo inventory, in the local real estate market is older - most dating back to the early 1990's and earlier.

Throughout most of the region, condos were built at a rapid pace during the recent housing boom. Not only were condos built from the ground up but there were many involved in converting apartment buildings and complexes into condos. Literally, hundreds of thousands of condos were built or converted and sold throughout this decade in Southern California. Unfortunately, as we all know, the real estate market went on vacation shattering the American Dream and left developers, investors and bankers with an out of control inventory that needed to be dumped.

As in all areas of real estate and lending the powers-to-be have been looking at ways of tightening the controls of the marketplace without strangling it. One of the hardest hit areas for lenders and government insurance programs has been in the condo market and so now it is time for lending regulations to get tougher on everyone, on order to protect the governments exposure.

WHAT GOVERNMENT AM I TALKING ABOUT?

Fair Question. When I refer to the 'government' I am specifically talking about the organizations that either buy or insure loans and one way or another are an intricate part of our government...and yet they are removed. To be honest, I'm not real sure I understand it anymore than I understand how a private organization like the Federal Reserve can control our currency. The entities I am referring to, of course are Fannie Mae, Freddie Mack, FHA and even the VA. These entities will be referred to as the 'government' throughout this article and should not be confused with anyone that you get to vote for...these guys are just there...

Fannie and Freddie are the organizations that the banks turn to in the 'secondary market'. What happens is your bank writes and funds the loan. They then bundle your loan and sell them on the secondary market to Fannie or Freddie. Today, Fannie and Freddie loans are considered to be 'Conventional Financing'. Conventional loans require the buyer to put between 10% and 25% cash into the real estate transaction. This is the why and how of the pop in the bubble, as far as Wall Street is concerned, because then Wall Street would sell these bundles all around the world.

The FHA and VA actually insure the loans. Like Fannie and Freddie, they are not involved in the loan process. The banks and lenders are free to loan any amount of money to anyone. However, if they want to free up their resources and exposure, they need to recycle the money by selling the notes on the secondary market. What the FHA and VA both do is guarantee the loans if they meet very specific guidelines that the banks have to ensure are adhered to, if they want to write FHA or VA Loans. Prior to the crash, anyone in real estate will tell you they were more trouble then they were worth. Today, however, FHA and VA loans are the bread and butter of the real estate industry.

What has made FHA loans very desirable is the low cost of entry. The home buyer is only required to put 3.5% down payment into the deal and may ask the seller to contribute up to 6% for closing costs. The FHA has had some very strict conditions that homes must adhere to, in order to qualify for the FHA insurance.

THE WINDS OF CHANGE

The new FHA guidelines for Condos were suppose to go into effect on 11/2/09 but have received a delay for implementation until December 7th, 2010. The current rules can be found on the FHA Website. The new rules can be found in a lengthy PDF Letter published by HUD. Here is an excerpt:

IV. General Requirements

Environmental reviews will not be required for condominium projects approved using the DELRAP option. If the appraiser identifies an environmental condition or the lender is aware of an existing environmental condition through remarks provided on the Builder's Certification, form HUD-92541, the appraisal or other known documentation, the lender must avoid or mitigate the following conditions before completing its review process:

1. The project is located in a Special Flood Hazard Area designated on a Federal Emergency Management Agency flood map.

2. Potential noise issues, where the property is located within 1000 feet of a highway, freeway, or heavily traveled road, within 3000 feet of a railroad, or within one mile of an airport or five miles of a military airfield.

3. The property has an unobstructed view, or is located within 2000 feet, of any facility handling or storing explosive or fire-prone materials.

4. The property is located within 3000 feet of a dump or landfill, or of a site on an EPA Superfund (NPL) list or equivalent state list...

5. The property has any hazards or adverse conditions listed in Section 1.f. of the Builder's Certification, including, but not limited to, high ground water levels, unstable soils, or earth fill.

6. The project is located in a wetland designated on National Wetlands Inventory maps or designated by State or local authorities.

7. The project is on the National Register of Historic Places or is within a historic district listed on the Register.

8. The appraiser or DE lender is aware of any other condition that could adversely affect the health or safety of the residents of the project.

WHAT DOES THIS ALL MEAN?

These new guidelines have an impact on everyone involved. In the long run, once the units are all occupied and in accordance with the FHA guidelines, I imagine that these communities will be a nicer place to live. In the meantime anyone looking to buy or sell a condo has a serious uphill battle in front of them, with some serious hoops of fire to jump through.

BUYERS

Cash buyers will be in a great position to take advantage of the market, especially if you are looking for a place to live. Even those with 20% to 25% down and can qualify for Conventional Financing will be fine. However, fuyers looking to use FHA financing should probably look eleswhere. Most condos are built where they ar as a matter of convenience - close to major roads and retail areas that will often include a gas station most condo projects will be excluded on this basis.

Buyers with low down payments will find themselves excluded from a very traditional first time home purchase.

OWNERS/SELLERS

Perhaps this is the group that will be hit the hardest. Given the fact that every homeowner in Southern California has lost equity, condo owners have not been exempt from this national crises. However, where there is hope for those who bought regular stick built homes that the market will eventually turn and equity will once again be a positive word of hope.

However owners of Condos will be facing a much smaller pool of eligible buyers. Again, just the location factor alone of most condo complexes may permanently exclude them from future government financing programs.

CONDO HOA ASSOCIATIONS

If at all possible, the Boards of the local HOA will be bending over backwards to meet the requirements, if it is possible, to establish a relationship with the FHA. If the association cannot meet the stiff guidelines then their owners may not be able to sell and then look to walk-a-way in a strategic default resulting in a foreclosure and reduced revenue for the HOA which could very well spell trouble for the HOA.

IS THERE AN UPSIDE?

In the short term, the only one to benefit is the FHA with less exposure in the condo real estate market. As mentioned earlier, condos have traditionally been the place many first time home buyers begin their road of home ownership. Condo development and absorption rates will definitely decrease.

The high-end condo complexes found near the waterfront or in downtown communities may be hit the hardest, due to their locations which the FHA now finds to be undesirable. Large suburban complexes will struggle as well, with higher vacancy rates and less HOA dues collected month after month.

The upside has to belong to the banks with the REO Inventories and the Property Managers with rentals to keep rented. Buyers who would otherwise be in the condo market with an FHA loan will now find themselves buying entry level homes or stay in their rental units. Perhaps, once the market stabilizes the FHA will look to relax some of their tougher standards.

HOW LONG CAN CONDO OWNERS WAIT?

Eventually there may be enough political pressure to 'bail out' the condo industry. but until then, first time buyers will be squeezed out of condo purchases due to a lack of financing...sellers will be forced to either stay in their units, despite the growth of a family or other need to move-up or they will just walk-a-way as many homeowners are doing today with a strategic default...HOA boards will continue to scrambel to provide basic services on a dwindeling budget and the banks will be looking at an excess inventory of REO Condos that they are going to have to manage.

So, how bad will it have to get before their is enough pressure to change the new status-quo? Not sure, my crystal ball has been acting up on me...