|Note to Self:|
"After 25 years, you should KNOW better!"
That's how long I've been a Real Estate Broker...
Helping Buyers and Sellers and Investors navigate the mine fields of several crazy market swings. In 1986, as a newbie, they gave me a manual "mortgage calculator wheel" to help figure monthly payments... and the mortgage interest rates on the wheel STARTED at 10%. Why? Because there were no available rates under that. When I came back from Berlin, Germany with the Army in 1980, to work at the Pentagon, I bought a house with a rate of 16.75%. So don't complain if you feel abused today with a 4.5% rate.
So, with all this experience and wisdom, I should have discipline and smart business sense, right? I should look them in the eye and tell them they have little chance to be successful in certain types of transactions, right? Well, I do... most of the time. Here's the deal - I have a strong desire to help people get what they want, as far as their Real Estate Goals are concerned. And I feel pretty good, knowing that's the heart and soul of how I approach things. If a guy tells me he wants to buy a house, I'm going to work it for him, like a dog on a bone.
But lately, I've been experiencing a lot of push-back from specific areas of the market... and I don't like my lack of self discipline, in how I've responded. Two quotes come to mind:
- "Knowing that the task was absolutely impossible, I doubled my efforts anyway." (Unknown)
- "A man's got to know his limitations." (Dirty Harry/Clint Eastwood)
"I can get a great deal, right?"
Here's the cheese to go with my whine. Buyers call me and say something like, "Frank, I found this house at 3113 Chatham Road online, and it's 2,400 square feet, with 4 Bedrooms, for only $119,500!" "Can you show it to me?" And I immediately start to think, "Oh, Oh..." because I KNOW it's an REO (Real Estate Owned - Bank Foreclosure) Of course my buyer wants to see it, however, it's been on the market for only 3 days and it's listed at a "teaser price" - crafted to create competitive bids. They race to get a "lender qualification letter" to show they can get a mortgage. They want to offer less than the asking price, have an inspection contingency, make it subject to their bank's appraisal, and offer a $1,000 max escrow deposit.
So, what's the problem? As soon as our offer goes in and 5 days have passed, we are told by the listing company that we need a "Multiple Offer Disclosure Form" and that "Highest and Best" offers are now due "by Noon tomorrow." There are 12 total offers and ours is the only one that's not "cash with no contingencies." These investors can usually close in 15-30 days and also are not timid about going over the asking price. They realize the value presented and they know we are at the bottom now. BOOM! SPLASH! (That's the sound of being blown out of the water)...
In Flagler County, Florida today, there are 685 homes For Sale, from $35,000 to $4,200,000. Only 17% are distressed (short sales/foreclosures) and only 5% are REO/Bank Owned. Sounds pretty OK? Sure, BUT in the "Under $150,000," market it's different... Way different! There's only 175 of those homes and 63% are distressed... with a whopping 35% being REO/Bank Owned! And that is exactly the market segment that draws all the "investors with cash" looking for rental properties. And they are driving "Mom and Pop with a mortgage" out of the segment.
I'm not saying that's bad, because it's not. Actually, it is helping to clear out the market bottom, which is essential to real recovery. But my "lesson learned" is this: Keep my "non-investor" buyers with mortgages in the "normal" market and away from REO enticements. Short sales are OK now (and I'm shocked to hear myself say that). BUT, stay away from REO's!!! Fool me once, shame on you. Fool me twice, shame on me!