This past Saturday I watched the Florida Gators play Mississippi State. It was painful to watch, all the way to the very end where we had a few seconds left and a field goal would have tied the game and given us a chance at redemption. Kicker Chas Henry steps up and… MISSES!!! Game over. Gators Lose. Cameras focus in on the defeated face of Henry and you can see in his grimace that he knows he just lost the game.

You see, he’s actually not a field goal kicker at all! He’s a punter (and a really good one at that!) who’s filling in for the regular kicker who’s out with a back injury!

Besides… could he single-handedly have lost the game? NO WAY! He missed the chance to pull it out, but the whole team together lost the game.

Or did he?

And what does this have to do with a short sale?

Sometimes we as Realtors feel like that replacement kicker being brought in at the last minute to try to save the day. When you’re brought into the game just a little too late and a client is hoping that you’ll be able to pull some miracle out of a hat, is it YOUR fault if the property goes to foreclosure? (well, maybe, but that’s another story! J) Did YOU stop paying your mortgage a year ago and wait until the very end to get help?

When an agent that understands short sales is brought into the “game” early enough, and a good “coaching strategy” of pricing, marketing, file submission and follow up is used, the closing rate of short sales is actually quite high.

If an agent doesn’t understand this strategy and prices the property too low or too high, doesn’t market the home aggressively to get a reasonable offer early in the process, submits a shoddy financial package and doesn’t follow up with the lender regularly and escalate when needed… then it doesn’t matter how early they’re brought into the game… they’re most likely going to lose anyway.

However if the property already has had a hearing and an auction date has been set, no matter HOW great you are at your job… that last second field goal attempt is going to miss most of the time.

Don’t take it personally. Don’t dwell on the failure. Focus on the families that DID come to you early enough that you WERE able to help. Focus on next week and the new family you’ll meet that needs you. You’re not a last minute kicker… you’re an important part of their team that needs to be in on the coaching decisions BEFORE the game even starts!

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Anyone that’s been in the field at all over the last year has seen it: a home that is in a $120,000 neighborhood is all of a sudden listed as a short sale for $75,000. I just saw that very situation first hand in a neighborhood that I own a rental property, in fact it’s the first home I ever bought and Tim & I lived there for 3 years before turning it into a rental, so over the years I’ve tracked the values in there VERY closely, it’s kind of my temperature gauge for the real estate market.

After I got over my initial anger over how someone could POSSIBLY list a property that much below market value in MY neighborhood, I started thinking rationally about why this might not be a good practice. Here’s a few ideas that I came up with and I’d love to hear any others you might have.

Bank turns the short sale offer down. Come on… banks aren’t stupid (oops, sarcasm!). If a house is solidly worth 120 and the BPO comes in at 120, they’re going to turn down 75! Yeah, you’re going to get offers, pretty quick and probably multiples, but if it’s never going to get approved you’re wasting YOUR time, your BUYERS time (and their agents’), and you’re not only wasting your seller’s time but maybe also costing him his house. You’ve gotten his hopes up that his credit will be saved and his home will be sold, but alas, it was not meant to be because his agent didn’t understand the short sale process.

Another thing is often the bank will ask you for listing history such as:
How long has it been on the market?
How many offers have you gotten?
What price(s) has it been at and for how long?

If I had listed that same property at $129,000 then lowered to 125 then 120 then 115 then 110 and then we get an offer at that point for 104, I can very reasonably show the lender that we TRIED to get more but this is the best offer we were able to get. If I list it at $75,000 and get an offer the next day for $74,000 then the bank is going to wonder if we COULD have gotten more for the property if we had marketed better, priced better, marketed longer, etc.

On the other hand… maybe some how, some way, the bank DOES accept the ridiculous low offer. How does that play out? Well, I’m glad you asked!

The lower the property sells for, the larger the 1099 “phantom income” or deficiency judgment will be. That’s right, to calculate out the 1099 Cancellation of Debt amount OR a deficiency judgment, they take the amount you owe the bank minus the amount it sells for and the difference is how much you technically still owe them. So the lower the selling price, the larger the amounts they still owe. This also applies to the lender asking for personal notes or cash brought to closing. (do you think the “lowball lister” explained this to their seller?)

If that property DOES close at $75,000, you’ve just set a new Market Value for the neighborhood. Typically short sales sell for fairly close to market value, so if you do get one through, the market takes notice. When you list yours for 75 then other sellers in the neighborhood feel pressure to lower their prices too. This results in the continued decline of market values.

I think that deep down in their hearts, EVERY real estate professional wants our values to stabilize and stop this awful downward spiral (hey, did you ever notice that a downward spiral is EXACTLY like a toilet flushing?) When an agent lists a property low like this, that stabilization seems less and less likely.

Your commission is lower. Yes, that’s a complete sentence and a complete thought. Don’t get me wrong… I NEVER make decisions based on the commission amount, but in this case, a higher price is not only better for YOUR pocket, but is also better for the Seller and their lender. If you are acting as a single agent for the seller, lowball listing prices are probably not in the seller’s best interest.

Although the buyer’s might love you! Oh wait, probably not. Not once their agent explains to them that you listed it low to try to “drum up interest” and get multiple offers and you expect them to come in over asking price. Buyers don’t like that line any more:

If you really want the house you’ll have to bid $20,000 over the asking price…

Uhhhh… that’s what got our market in the pickle that it’s in! Slight difference now though… we’re not telling them to go in over MARKET value like in the boom, only above ASK price (but still at or below market). We know that, but the general public is VERY gun-shy about this right now…

These are just a few I came up with in my head… what can you think of that I missed?

UPDATE/ADDITION:
I’ve actually heard from an attorney that we may be violating license law and/or ethics by pricing the property too low. When the client gets their 1099 at the end of the year and finds out they owe $20,000 to the IRS… they might be coming back to you to find out why you didn’t tell them about that part.

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Picture this FICTIONAL situation… You’ve been arrested (gasp!) for the unconscionable crime of being a Realtor. The prosecutor is putting together their case against you… will it all be heresay or will there be any cold, hard evidence?

This is one case where you WANT there to be a ton of evidence! Stuff like:
Uh-Oh!

-Satisfied clients that have given you a written, or even stronger, VIDEO testimonials!
-A mac-daddy website with tons of traffic and comments from your adoring “victims”
-An awesome presence on ActiveRain and other industry sites
-Certifications that show you were TRAINED as a real-estate ninja assassin
-Facebook pages, Twitter followers and Linkd-inners that rave about you
-Signs, riders, business cards, direct mail pieces and more… PROVING that you are guilty of the crimes you have been charged with!

I hope you realize by now that the “crimes” are tongue-in-cheek! 🙂

What I’m trying to get accross in this fictional situation is very simple…

DOES ANYONE KNOW YOU’RE IN THE REAL ESTATE BUSINESS?

You can be the best Realtor in the world with all the best training and experience, but if nobody knows you exist, you’re probably broke! A mediocre agent who is AMAZING at marketing will be retired years before you.

What can you do?

Become the absolute best marketer of real estate services that you possibly can! Get educated, read books, take classes, and absorb what you can. Then go IMPLEMENT some of what you learned.

The agents in my office are starting a 9-week SEO/Internet Marketing class tonight. (SEO means search engine optimization). Every Monday from 7-9 we’re sitting down in the conference room to watch a series of training webinars to make us even better at letting people know what we do and how we can help them… what’s YOUR plan to get more clients? 80% of all buyers start on the internet, so that’s where we decided we want to spend a little more time and learn more about.

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That’s what one of the newer agents here in the office said to me the other day. He’s set himself a goal of 5 new listings this month and asked me for some ideas on how to get them. Sometimes the strangest things get me going on a tangent, and I’ve really been thinking about this a lot… not only because as his broker I feel it’s MY job to help him be successful, but also because I love seeing people succeed and I really want to be a part of helping him reach his goals!

So for starters, I am reaching out to YOU to share some of your tips, ideas & strategies for me to share with him. Reply back to this email and next week I’ll share with all of you some of the top tips that I received. In the mean time, here’s some of what I thought of:

First: Look back through your leads from the last few months. Everyone you’ve talked to. Contact them all again and see what they decided to do and it they would like to meet again. (check MLS first to see if they listed with someone else). If they WERE thinking about listing and didn’t, maybe they just need more information or a little nudging to get them off the fence. I would explain that with interest rates so low, it is a good time to sell as there are lots of buyers in the market. As long as their home is in good condition and priced right they should be able to sell in a reasonable timeframe.

Second: Put together an info packet on you, your company, and your marketing services. Send or drop it off to any FSBO’s that you see. Studies have shown that most FSBO’s list with an agent after a very short time of trying it on their own.

Third: Share on your Facebook, Twitter, whatever you’ve got friends & followers. Ask for their help in reaching your goal. People love to help their friends when they can, but only if you ask. In a separate post, you can also mention the different ways you can help a seller, such as short sale, staging, etc. In marketing, there’s a station we call WIIFM? (What’s in it for Me?). Don’t make everything about YOU, make it about how you can help THEM!

Fourth: If you are a short sale specialist, tell the other agents in your office that you’ll share any of their listings that they want to have you work on the tedious details. This is a win-win because if they are too busy or inexperienced to handle the short sale and might have just passed on the listing, you now have brought a solution to them.

Fifth: Pick up any floor-time that you can! I don’t know about your office, but we’ve had a bunch of walk-ins lately. Yesterday we had a walk in and within 60 minutes she had shown us the property and signed the listing agreement (it’s right up the street). Yes, it happens!

Sixth: Get to some networking groups, pronto! They’re all over the place, and many are free. The more people you can share your message with the more will be sending you referrals!

Seventh: Ask some of the busier agents in your office if there are any leads that they haven’t had time to follow up on and offer to work them if you can share the listing. Dead leads don’t benefit anybody, they’d probably rather have 1/2 of a listing than zero because they waited too long to contact the lead.

There’s just a few that I thought of off the top of my head. What ideas would YOU share with an agent that wants to get 5 listings in the next 20 days? By the way… if you take a minute to do this exercise, you’ll be surprised at the ideas you’ll get for YOURSELF to jumpstart YOUR biz!

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You already know that I don’t watch the news… but there’s been some amazing stories that seem to keep finding their way on to my radar screen… just wanted to take a minute to share some of them with you!

After the first ever DECLINE since the 50’s in Florida’s population in 2008-2009, we’re showing an increase again!!! (Except in MY county… 🙁 That means more people will need to buy or rent houses! To see the full story, Click Here.

American’s Economic Confidence is Up… we’re still low, but it went up a few ticks when analysts expected a decline… Incresed consumer confidence = people spend money = people buy houses! Read the full story HERE

Florida’s economic confidence is up 1 point but has stayed fairly stable. Here’s the Story!

Pending Homesales rose 5.2% in July! For the story, Click Here

These are all stories and facts that you might want to share with your clients… please understand I am NOT saying our troubles are over… but at least you can show a little bright side of the market to your clients!

Enjoy!
Andy

I had the wonderful pleasure of hearing Wendy Kurtz speak at a meeting I was at this week. Wendy consults with some of the top speakers and authors in the country on building their brand and selling more books. Since I’ve been tossing around the idea of writing a book, I figured I’d hear what she had to say… and boy am I glad I did! (find out more at www.WendyKurtz.com)

One of the things she shared right at the end was her “DREAM Principle” which is an easy to follow 5-step process for business success… and even though she was talking about authors, my mind kept applying them to my real estate business, so I figured I’d share them with you today.

DREAM is an acronym which stands for:

Define your business. Develop your core business because it’s the foundation of your success. What can you help your clients with. If you try to be everything to everyone you’ll end up with nothing.

Recognize your strengths – establish a competitive advantage based on your unique skill (why should they pick you instead of agent B?)

Evaluate your opportunities – don’t take every gig you get offered, make sure it lines up with your goals (this is a lesson I’ve RE-learned lately… if you don’t get a great feeling from a potential client… don’t work with them! We have choices and don’t have to work with everyone that walks through the door!)

Assess your feedback. And remember that feedback does NOT EQUAL criticism… it’s a business building tool. If a client has complained about something… don’t get defensive immediately… slow down and look and see if there is some truth in what they’re saying and see if you need to remodel your office policies & practices to ensure it doesn’t happen again.

Manage your reputation/brand – it strengthens your brand and unlocks your full business potential (her example was an author who researched an organization thoroughly before agreeing to take them on as a sponsor)

I hope this hits you like it did me… I’ve been so busy working IN my business that I’ve not taken the time I should to work ON it… time to refocus!

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Today Fannie Mae launched a new consumer education website on foreclosure options.

The way I found out about it was when I received a call from the Orlando CBS affiliate, Channel 6 News asking if they could interview me about the new site… www.KnowYourOptions.com
So while he was asking me questions about the ramifications of a foreclosure on your life (credit, jugdments, etc.) I pulled the site up quickly to take a peek! It’s actually a pretty good site!

A lot of the information they are sharing is similar to the info I put on MY info site, www.BeforeYouShortSale.com which is for Orlando Short Sale Homeowners info.

They cover the options for when you want to keep your home, including something they call “Deed-for-Lease” which is where you deed your home to the lender (called a deed-in-lieu of foreclosure or dil) and then they will rent it back to you for a specific period of time for current market rent value. The other options when you want to stay in your home are: refinance, repayment plan, forebearance, and modification and on the site they explain what each of these are and the benefits. But remember… if you want to stay in the home you will need to be able to qualify for the payment, so if you are without income you will most likely not qualify to keep your home.

They also cover the options for when you can’t or don’t want to keep your home. These include Deed-in-Lieu and Short Sale and cover the what’s, how’s, and benefits of these options for your family.

Within an hour of my “phone interview”, the reporter from Channel 6 was here in my office with his camera guy to do an interview and find out more about what options a homeowner has in Orlando if they are facing a challenge with their mortgage or facing short sale or pre-foreclosure. The spot will run tonight on Channel 6 between 6-7pm and I’m figuring will be re-run on their website www.clickorlando.com

If you are a homeowner facing trouble with your mortgage, check out the site: www.KnowYourOptions.com it has some really good information that might make your decision easier. And if you are in Seminole County or the Orlando area… give me a call!

If you are an agent, check out the site and consider using it as a tool to share with your clients. It will answer most of their questions and the info is coming from a 3rd party credible site.

See you next week!

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Here we are… halfway through the year. Time to take a look back at the last 6 months and see where you’ve been and what your results were. Set aside at least a half hour to complete this…

1. Look at your closed transactions so far this year: How many? Average transaction size? Average gross commission? How many buyers vs. sellers vs. both? How many short sales vs. REO’s vs. “regular”? This will give you an idea of what “niche” you’ve been working whether you realize it or not!

2. Look at your marketing: How often did you send out a mail piece? What were the results? Did you send a newsletter? Where did most of your closed transactions come from? Did you Blog? If you see a trend for where your business is coming from, step it up! Do More! It obviously worked!

3. Look at your personal self: How many hours did you work? Did you eat right? Did you excercise? Did you take a vacation (even a weekend?)? Did you partake in your favorite hobbies? It’s important to balance work and home!

I just did this exercise myself and it was kind of shocking! So far year to date I already have 1 more closing than ALL of last year!!! Yayyy!!! Except the Gross Commission Income is almost exactly HALF of last years! Booo!!! So I can honestly say I’m working twice as hard for half the pay!

Why is that? Because my average transaction size is so much smaller. Those $20,000 condos really take your average down! (but take the same amount of work!)

Based on this information, I’m going to tweak my marketing for the next 6 months. And that’s what we’re going to talk about next week… what to do with this info and make positive profitable changes for the rest of the year!

See you next week!

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There has always been a lot of incompetence in the mortgage business, but when the money was flowing it really didn’t matter because if you had a heartbeat you could get financed, so inexperienced mortgage brokers could still be successful. But now that money has tightened up, you can’t risk your deals on a mortgage broker or an approval that is bogus.

This deal was kind of funny. When the buyer’s agent submitted the offer, they included a very weak pre-qualification letter. When I called the loan officer who’s name and number was at the bottom to ask for some clarification, they had disappeared! POOF! Gone. (Imagine that!)

I told the buyer’s agent and she said “Oh My!” So today I get a different preapproval letter from a different company and broker. This is what prompted our lesson for today. So first, go take a look at the letter HERE. (it is in .pdf format and you can print it or just look on the screen. I have blacked out the client’s and company name and cut off their logo header and their signature at the bottom. Nothing else has been changed)

Got it? Ok, here we go:

Right in the first paragraph is says: 1) he has been pre-approved then 2) this loan pre-qualification and 3) This is not a loan approval. So which is it? Is he approved or not? Then it goes on to say that “Loan approval is subject to completion of a mortgage application… WHAT!?!?! I read that to say he hasn’t even made loan application yet! I’m sure that’s not the case, but I’ve got to give this letter to the lender I’m trying to negotiate the short sale with…and that’s how THEY’RE going to interpret it!

Let me suggest what you SHOULD be seeing in a pre-approval letter. I look for things like:

“Mr. Smith has made loan application with our company and we have received a preliminary approval from automated underwriting. This approval is subject to verifications and full underwriter approval and is subject to change” or something loosely resembling that. It will also usually list things like: satisfactory appraisal, title, seller contribution of X%, etc.

Here’s the real scoop: A good loan officer can take a full 1003 loan application (pronounced “ten-oh-three”) in 5-10 minutes. It then takes all of about 5-10 minutes OR LESS to run it through automated underwriting system. So from first contact, a good loan officer can have a REAL approval letter to you in 10-20 minutes. There. Now you know the truth. This includes FHA and VA loans.

The other thing that I didn’t like in this letter was the 4th bullet point: “LTV 97% financing and buyer will need 3% in down payment assistance from seller”. Two things jump out at me.

1. As of 1/1/09, FHA loans are now 3.5% down, so the LTV would be 96.5%, UNLESS the case number was assigned prior to 12/31/08, which if it was already assigned, I would probably have received an APPROVAL not a pre-qual.

2. There has been no such thing as “down payment assistance from the seller” since October first of last year when programs such as Nehemiah and Ameridream were squashed by FHA guideline changes. Did they really mean to say 3% closing cost assistance? Don’t know, but again, I have to provide this letter to my negotiator, so it must be very clear that the buyers are qualified or my short sale will get de-railed.

These things SCREAM inexperience to me. I wrote a few months ago about the importance of having an experienced FHA lender doing your deals, and this is just further proof. A broker with 10 years experience costs your borrower about the same as someone with 10 hours experience, so please be careful who you’re referring your buyers to.

Hope you enjoyed today’s lesson!

Andy

P.S. I answered Tim’s mortgage line yesterday while he was out at an appointment and it was one of the agents that gets this newsletter every week calling to see if anyone would even answer the phone! It seems she had given out 3 mortgage broker names to clients over the weekend and 2 of them were out of business! Can you imagine if they went out of business mid-stream in one of your deals? Wow! So the answer is YES, Tim is still in business and (usually) answers his phone!

UPDATE:

There are several reasons why as a BUYER’s agent you want a strong pre-approval:

you know that you are dealing with a qualified buyer (not wasting time)
you know that you are showing them homes in the right price range
you will structure your deals properly for the financing approved for (ex: get an FHA/VA addendum, ask for closing costs or other contributions, etc.)
you’re not taking an absolute stranger into a vacant home and risking your life (car dealers ask for a drivers license before you can test drive a car but most agents will meet a stranger at a vacant house based on a 2 minute phone call! amazing!)
your offer will be taken more seriously
you’ll be able to put offers in quicker and even nights and weekends without having to get a mortgage person on the phone

As a LISTING agent, you won’t be pulling your seller’s house off the market for someone that can’t really buy it!

Happy Selling!
Andy