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

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

There is a major flaw in our business model, in that each real estate agent is an independent entrepreneur, but even after 25 years, there is no value built that can be sold. Entrepreneurs retire when they sell their businesses. Without shareholder value, a business isn’t really a business – it’s a job.

Then there’s the treadmill effect. Two things happen at every closing; you get a commission check and you lose a customer for 10 years. You have to get right back on the treadmill.

The good news is that you won an award for a fantastic performance in 2011. The bad news is that it’s 2012 now! Get back on that treadmill.

I know hundreds of real estate agents who have created enormous wealth over their careers, but most of it went to their clients. We don’t get wealthy in this business if we just generate commissions for selling real estate.

In other words, if you are a 20 year veteran in this business, you have sold a financial product that has performed exceptionally well and made people rich. The questions is, have you acquired enough yourself?

Buying one cash-flowing single family home at market price in the next year is a life changing event. You just have to wait 15 years to realize the benefit. (An extra $200,000 in cash is a life changer for most people, and that’s what you would likely end up with for each investment property you buy.)

You need to do this. It is a crime to be in this business and allow artificially depressed values, artificially depressed mortgage rates and skyrocketing rental rates pass you by. Stop making everyone else rich and build shareholder value in your business by acquiring assets along the way.

OwnAmerica has just crossed over our 1,000 member threshold. We’ve cracked the code on building a profitable and rewarding investor clientele quickly with simple adaptations like the Investor Open House. But more importantly, we can give you the confidence to build a portfolio for yourself.

Our certification course and toolset is just $149 for the first two months. If you like the tools, maintain your subscription for just $39/month. Or cancel and take your education with you. Watch this 7 minute demo of our stuff. You will be impressed. Then click here to sign up. We’re looking forward helping you retire wealthy someday

Originally posted on my Active Rain blog “Have you ever been to a retirement party for a Realtor?” – 7/1/2012

Inventory shortages are a recurring theme, which of course means upward pressure on prices. Not a turnaround yet but a critical benchmark, because these things can cascade and create momentum. People experience or hear about a bidding war, and a sense of scarcity sets in. Any competition among buyers is a good thing.

We know some of this is artificial, and that there is pent-up supply. The shadow inventory is still building. Washington is pushing the banks around again, this time saying they must not evict foreclosed borrowers until after Election Day. We’ve confirmed this with two sources. This has been going on in some form since the bailout in 2008. The result is a log jam that will eventually break loose with 3-5 million REOs and short sales. People close to this say it will lean heavily toward short sales. Lenders are being increasingly cooperative with short sales, and even soliciting underwater borrowers.

In many places there is a shortage of rental homes for all these families. People who make a calculated decision to get out from under a pile of negative equity are not necessarily looking to make major changes in their lives. They want to live in the same school district, and not in an apartment. They have kids and dogs. They are fantastic tenants because most of them have jobs, were able to pay their mortgage, and will have no trouble paying their rent. Their credit is often blemished solely by the short sale.

[Our area of focus is the residential investor market, and we are getting lots of traction equipping the industry to compete for it. We've all woken up to the fact that 20-30% of all home sales, every year, are investor purchases, and yet very few have developed that specialization. It's a major trend, and the flip-side of the short sale coin. Check us out here]

There is also a market driven facet of pent-up demand that we are hearing about; sellers who don’t want to sell in a buyer’s market. Time will tell how long it will take for them to loosen up, but when a seller sees the price rising on the house they want to buy, they get anxious. People won’t sit in neutral forever.

The last common theme all around the country is that everyone is busy, and hard work is paying off more than in previous years. Love that.

Please tell us about your market. What changes in attitude and behavior are you seeing from buyers and sellers? Do the micro-trends above reflect your area? What can you add to the brain trust?

thanks for reading

-greg

Originally posted on my Active Rain blog “I’m hearing interesting things from all over the country…weigh in.” – 6/23/2012

Too-good-to-be-true is a marketing gimmick as old as the snake oil salesman. Unfortunately, these unrealistic expectations have been set for millions of consumers who are intrigued by real estate, and as a result, they are chasing a very unlikely dream.

If an investor walked up their financial advisor and said “Google is trading at $578/share? Get me some for $400!”, the advisor would laugh his client out of the room. And yet that is precisely what investors do to us. “Find me a $100,000 house for $70,000!”

Those same investors have a 401k or IRA sitting in low yield accounts for decades. Their expectation for that investment is to put money aside and hope it grows gradually. They don’t ask their financial advisor to find them deals. They ask for sound investments that should perform over the long run.

Based on that set of reasonable, mature expectations, you represent the best investment on the planet – single family homes as rental property. So how do we combat the wrong advice being given by the gurus? It’s very simple. Start right now to set the record straight. Communicate the right advice: buy a market priced property that can generate a positive cash flow, and hold it…forever.

People used to buy the Ab-Roller for the impossible dream of a six pack with no work. Now they buy P90X, the most successful exercise program of all time, which tells you right up front that if you want to get in great shape, you are going to work really, really hard. Maybe people are finally tired of being lied to. They want to know how things really work and they implicitly trust the professionals who tell it like it really is.

Our industry is only now beginning to add true value to real estate investors. This is our opportunity to be the P90X of the investing world. You can’t get rich quick, but you can absolutely get rich!

Here is a tool that can help. The Case Study Calculator is the coolest real estate evaluation tool on the web, and we make it available for free. Click here to see a brief video that demonstrates how it works. Try it, play with it and share it with your friends. Make assumptions and watch the outcomes change. The more you do, the more you will see that great investments are hiding all around you, right in plain sight.

To learn a ton about real estate investing, and how to build a great investor clientele, please join us at www.OwnAmerica.com and register for a free webinar demonstration.

Originally posted on the Active Rain blog “The End of “Too-Good-To-Be-True” Marketing” – 6/19/2012

The reason is simple – they know how to analyze Wall Street, and haven’t a clue how to analyze Main Street. It’s all a matter of perspective and experience. They have too little of both.

Consider the following chart, courtesy of data downloaded from Zillow.com. This is a 15 year depiction of home prices in the US, not adjusted for seasonality, inflation, or anything else. No economists have overcomplicated these numbers to demonstrate how smart they are. This is raw data spread out over the appropriate time frame, and it makes it very clear what is causing home prices to rise.

The sections shaded in blue represent the Spring Market, something every real estate professional understands. There is more demand in the Spring, and most economists know that more demand means upward pressure on prices. The conclusion that a month-to-month increase in home prices in April is evidence of a bounce in the housing market is akin to reading a sharp decrease in temperature in November as the coming of the next ice age. Wrong. It’s seasonality – 15 years in a row.

This is very important, because if you look at the non-shaded areas, you know what to expect in the second half of the year – a decline in home prices. And you can also expect CNBC and Reuters to run headlines like “Home Prices Unexpectedly Decline – Housing Headed for a Triple-Dip!”

What history teaches me is that we are finding a bottom in home prices, and they will not materially increase until there is an overall economic boom. There is also likely to be a decline in home prices due to the release of the log jam of foreclosures that have been piling up. Nonetheless, we are headed for stabilization over the next few years. Nothing more but nothing less.

One more thing; take a look at the trend line on the chart above. Draw a line from the low point in 1996 to where we are today. The free market has erased the bubble. Most of the bad behavior that gave us the housing crisis has been corrected. Learn this for yourself and you will sleep better at night, and be able to defend yourself against the wizards of wrong in the media, Wall Street and academia.

He was not a young soldier, like you might assume. He had some grey around the temples just like me. We chatted for a bit and I learned that he was headed back to Afghanistan, for the third time, to train a new batch of young men and women. It was going to be at least 6 months before he saw his wife and kids again. He wasn’t certain, so neither were they. He also wasn’t complaining.

I suddenly stopped feeling sorry for myself that I had to endure another week on the road, with my return trip booked and a date-certain for my homecoming.

This space is usually dedicated to promoting my company and mission. This time I wanted to say thanks to the guys and gals like that gentleman I sat next to, back in December, between Jacksonville and Atlanta. I’m home tonight to tuck Diana and Patrick in. He’s still in Afghanistan.

I hope he knows how much we appreciate what he is doing for us.

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 a regional hospital going bankrupt. When some folks are confronted with dissatisfied customers (members, citizens, patients, etc.), or they have run out of money, someone will always suggest they “run it like a business!” I have come to the conclusion that they don’t know what a business runs like, and so that inference scares them. I want to explain, because there are times in my life when the best-run thing in my life is my business.

Well-run businesses are keenly aware of who butters their bread, and when those VIPs are unhappy, the people responsible respond like they just sat on a hot stove. As annoying as a complaining customer can be, the thought of them telling two friends is so unnerving that lemons must be made into lemonade. You just can’t send someone out into the world ticked off at your business. It’s acutely painful. It takes a little sliver out of your soul. Think DVM vs. The Apple Store.

Well-run businesses can picture it all coming apart. They focus on success but don’t deny the possibility of failure. They never say never, when it comes to failure. Great businesses look for the Achilles Heel in their operation. They ask “Is there anything…ANYTHING that could take us out?” It’s the polar opposite of believing you are a permanent fixture in the world. Entities that are not run like businesses sometimes ignore signs of decline for so long that it is too late when they realize they are in catastrophic trouble. They wake up well beyond the point of no return. Think US Postal Service VS UPS. Vulnerability leads to responsiveness.

A well-run business exists to generate more revenue than it spends. This sounds simple enough, but look upstream to government, and downstream to individual households, and you see a lot of people with a not-for-profit attitude. Consider how Governor Jerry Brown of California responded this week to the news that his state increased its debt by $7 billion in the last 5 months. He wants to raise taxes to cover it. Now consider a Pizza place on Main Street. The economy stinks, people are eating out less. His revenues are down 30% and he is losing money. Would increasing the price of a pizza pie from $10 to $15 be a good idea? Ludicrous! Ridiculous! People would simply take their business somewhere else, like Arizona.

My conclusion is that a well-run business should be innovative, smart and well organized, but it must be grateful, humble, disciplined and patient. When I have been able to bring those last four qualities to my personal life, it runs like a well-oiled machine.

Originally posted at My New Outside Blog: Run Your Life Like a Business
March 16th, 2012