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Short Sale 2.0

A major shift is taking place in the way the massive log jam of distressed properties is being dealt with. Over the last couple of years, defaulting homeowners have become a protected class. I say this without intent to sound heartless, but I still believe in the basic tenet that you can’t keep stuff you didn’t pay for. Houses included.

Partly because we have a government today that seems to distrust successful businesses, and partly because the banks brought it on themselves, the government has been abusing the mortgage lending industry for years. Law suit after lawsuit, a public relations smear campaign and iron fisted regulations have been unleashed on our mortgage lenders. As a result, it is common for defaulting borrowers to squat in homes for years without paying their mortgage or taxes. The result is skyrocketing costs for banks who attempt to foreclose. It really is out of control.

The result of this is Short Sale 2.0 – the next phase. In Short Sale 1.0, lenders were schizophrenic. They would take months to make decisions on short sale offers, and be totally inconsistent. One day they would approve a case, the next they would decline an identical case. They could not figure out what they wanted to do, but now they finally have. They are soliciting high risk borrowers to do short sales. We should anticipate that the REO inventory will dry up and the short sale inventory will flow.

There are two noteworthy differences between an REO and short sale that I have not seen get much attention, so I want to do that here. First, the house is going to be in good condition. Borrowers need to be on their best behavior to have their negative equity forgiven by the bank. They are not going to trash the place.

Second, every short sale adds one home to the inventory, and one tenant into the marketplace. These tenants are gold. People who struggled to make a $4,000/month mortgage payment can make a $2,500/month rent payment with ease. Their objective is to create the least disruption to their family as possible, which means renting a house in the same school district.

Do you have enough single family houses for rent to give your short sale sellers a soft place to land? Most likely you don’t, but the solution is built in. If you have two short sales in the same town, you need to find an investor to buy them both, and create rental options for those two sellers. These folks desperately need us to get in front of this.

The habit we need to get into is merchandising each listing in two ways – as a home and as an investment property. I promise you, good investors will respond to any marketing you put out there, since no one does any marketing targeted to them. The message is simple. We have a steady flow of listing AND quality tenants to need to rent houses. All we need now is some smart investors who want to capitalize in this opportunity.

This approach will maximize your revenue potential, and provide a service to your community. Just imagine for a moment what it would be like to lose your house and not be able to find a place to move nearby. Your kids have to change schools. You may need to put your dog up for adoption because you are stuck renting an apartment. All because you bought too much house at the wrong time.

Let’s solve this problem. It’s a housing crisis and we are the housing industry, if not us, then who?

Originally posted on my Active Rain blog “Short Sale 2.0″ -8/5/2012

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Good, Better and Best

Switching from PC to Mac: a rite of passage. Not just a decision, but an experience.

As I navigate this gauntlet, a pattern has jumped out at me. Here were two outstanding machines – a Toshiba Satellite and a MacBook Pro – and I am stuck using them both right now. I know I need to make my move, but I hesitate. A new client from Carolina One Real Estate in Charleston told me I would never get out of limbo until I just “make the jump”. He says I must not hesitate, lest I cause myself unnecessary pain. He says I need to rip off the band aid.

The most compelling point he made, though, was in his encouragement to “make the jump”. Where had I heard that phrase before? Yes! It’s what Han Solo said to Chubaka when they were about to blast off to light speed. “Hold on! I want to make the jump”, he said.

Making the jump from better to best is not a decision, it truly is an adventure. Dangerous? Maybe. Worth it? Definitely.

I’ve been through this already, making the jumps from Blackberry to Droid to iPhone, and it was an adventure. With a smart phone. you are forced to make a clean break, which is a blessing because it gets the pain over quickly. There were things I had to give up, like a keyboard or a free navigation system, but the best is best for a reason. In the case of Apple, I don’t think the key benefit is reliability or features or sex appeal. It’s feel. The MacBook Pro and iPhone feel better than their counterparts. They seem heavier, even though I know they are lighter. PCs and Droids are great, but each button and hinge and finish on the Apple equivalent is better, and the sum of all those superior parts makes them best. Is that the key to best? The sum of superior parts? It couldn’t be that simple, could it?

It’s the same thing with cars. I love all cars. One of my favorite things about being on the road a lot is I get to rent all kinds of cars. I had a blast with a mini-van in Maryland this week, for example. Being a car guy, I’ve had a bunch of different cars in my life, and I wish it weren’t true, but American and Japanese cars are PCs and Droids. German cars are the Apple of their space. They feel completely different, like every individual component of the car, from the door handle to the steering wheel, is heavier in a good way. If you’ve driven all three, you know what I mean. I love them all, but Germans make the best because of their engineering, and the quality of each individual part, which translates to feel.

I would imagine musical instruments have this same quality differentiator. You can play a great guitar, and then you play a Les Paul and you know you have the best in your hand.

So, how does this relate to our business? I’m not sure, but if we take the mystery out of why the best feels like the best, it might just come down to the sum of a bunch of better parts. Glass and metal on an iPhone instead of plastic and plastic on a Droid.

Is it possible to accomplish the equivalent in real estate? Become tangibly better in little ways and achieve the status of best in the process?

It’s at least worth a try. Our clients have given us feedback that the things we teach in our OwnAmerica Investment Certification course are core to real estate. We teach a dimension of product knowledge that does make you smarter about the underlying asset you sell. Sure, we help our clients make more money by closing more transactions with new clients. And sure, we provide the only toolset in the business that actually makes it easy, but I am after something more. I want our clients’ clients to come away from the experience with a sense that they have just experienced the best. Something feels different. Like an added dimension to professionalism. Houses as homes. Houses as rental properties. All good. Houses as little pieces of America. That feels right.

Click here to learn more.

Originally posted on my Active Rain Blog “Good, Better and Best” – 7/22/2012

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Seriously. I’m in the business 20 years and I have never even heard of one. I am a fun guy, so that can only mean one thing – no one ever retires from real estate. Is it because we love it so much, or that we can’t? There is a major flaw in our business [...]

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My Airplane Conversation with a Soldier

I’ve been doing too much traveling in the last couple of years. With two little kids at home, it’s not my favorite part of the job. I even whine about it sometimes. Then I met a man who reminded me how lucky I am. He was not a young soldier, like you might assume. He [...]

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Run Your Life Like a Business

Have you ever heard someone say, in defense of doing things according to the status quo, “This is not a business, we can’t run it like one!” I have, from the general manager of a local golf club I used to belong to; from elected officials in local government; from my local school board; from [...]

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