Picture this…main watering hole for the agents of  a large Brokerage office…”Happy Hour!”   The agents are having a drink and sharing their weekly  war stories.  Let’s listen in:

“So Freddie, didn’t I hear you nailed a ‘hogger’ this week?”  “Yeah baby, you heard right…I’m at the house, a $475,000 listing, putting up a rider on the sign that says ‘Great N’Hood,’ and a couple drives up and wants to see it.  Ms. Homeowner was just leaving to get groceries and told me to go ahead and show it, so I did.  They liked it and said to write up an offer.  I showed the offer to the sellers and they went with it.  So…I didn’t have to split the commission with another agent…got the whole 6%, $28,500 for myself…hogged that one!”

See, in a normal situation, the listing agent lists the house at 6% and when a different agent brings a buyer, the selling agent gets 2.7% ($12,825) and the listing agent gets 3.3% ($15,675). The listing agent is the one that covers the marketing expense of the house.  Only makes sense the listing agent should get more…to offset expenses , right? 

 The listing agent probably took pictures (no cost?), made brochures ($15. ?), provided copies of the disclosure document ($5.?), had a yard sign installed ($40.?), spent a couple hours working with the home sellers, before the listing was secured, showed the home a few times (4 more hours?), took calls from other agents who showed the home (two more total hours?), wrote the offer (another hour and a half?), and will attend the closing (another 2 hours?).  So, a total of 11.5 hours.  But I usually find an agent will spend about 20 hours per deal.  So lets say the agent worked 20 man hours and had total expenses of $60.  Landing the hogger means he made $28,500 - $60 = $28,440 divided by 20 man hours = $1,422 per hour.  Yeah baby, hog it up!

Most buyers don’t understand this whole process.  They’ll sometimes be working with their agent but attend an open house or call to see one from the info on a sign and the listing agent shows them the house, writes the deal and gets a “hogger” on it.  The agent the buyers has been working with, sometimes for months, gets absolutely nothing and the agent that wrote the deal…spent maybe, a couple hours with the buyers, gets the big reward.  Bad deal, this?

Agents are supposed to not only ask a potential buyer if they have an agent, they’re suipposed to defer to the other agent, if there is one.  Then, if there is no other agent, the listing agent is required to disclose to the potential buyers, on an “Agency” document, how the process works…and…have the buyers sign it.  But do they?  The Hoggers are in waiting…c’mon uninformed buyers…line up!

When you start working with an agent, if you’re happy with them, have them set up all showings and situations for you.  That’s the only way they can get paid.  Don’t hand over the pay to some agent you don’t even know, who hasn’t done a thing for you.  And, if you do look at a home while in the search process, if the showing agent does not ask you if you are represented by another agent, let your agent know about it…the showing agent is either derelict in their procedure or unethical or plain stupid?  Would you want to reward someone like that?

One more thing (I’ll bet many readers are wondering about this), If a listing agent was happy with the normal way home sales pay out…and…an unrepresented buyer comes along…and…the offer is less than the sellers want…why wouldn’t the listing agent offer up all or part of the 2.7% he wouldn’t have to pay out to another agent, to help his sellers?  We do here…we do even more…check us out?

Beware…the “Hogger” may come your way?

Next: How to get the best deal when qualifying for a mortgage!

Ed

You’re probably not old enough to have known a better time to be investing in Real Estate.? For Home Sellers, they’ve probably never seen a worse time to be for sale?   It’s not only a “buyer’s market,” its as hot as it can get for Investors!  You make money in Real Estate on the buy! Buy now, don’t wait, let’s look at why.

The bank bail-out deal did not work according to plan.  The banks got to borrow at 1/4% and lend out at 4.75%+.  Who wouldn’t jump on that arrangement!  Trouble is…few loans are being made, except to highly qualified buyers.  Not only are the Banks messing up the housing market, the PMI insurers are fighting with the Banks, refusing to pay according to their original agreements.   In some cases, the PMI Insurers don’t have the reserves they need to pay up. Case in point, a sad story…

I’m helping a young couple try to short-sell their home.  Both have been laid off, she has cancer and couldn’t return to work even if she wanted to.  They have a young son, have moved in to less than desirable quarters but it’s all they can afford,  they are both under 30 years old, they owe $270k on their mortgage and they’re 5 months behind on their payments.

So I get a ridiculous offer…$167k and the buyer wants $10k back for closing costs.  (I really don’t think the bank will get more than $185k for this house.) The bank does an appraisal and turns down the offer.  Not surprising?  Next, I get an offer for $190k and this buyer only wants $6k for closing costs.  The bank will look at it.  Weeks go by and no answer.  I have to work through a couple different Reps at this bank, to get the proposed deal looked at.  Meanwhile, the buyer wants an answer soon - they don’t want to miss out on the second choice.  We get an answer; the bank will go with the deal but the PMI Insurer wants the young couple to sign a $25k promissory note.  I’ve already sent the bank tax records, closed bank account records, a hardship letter, monthly budget and “comps.”  This young couple couldn’t sign a note for $25 bucks, let alone $25k?  The bank won’t allow me to negotiate with the Insurer.  When I informed the prospective buyer’s agent, she came back to us with a $200k offer and I informed the bank.  They said they would take another look.

Several days later, the agent withdrew the offer and I informed the bank that the deal was dead.  Several days  after that, the bank notified me they would accept the offer - they hadn’t even read my e-mail to them from days earlier.  Who’s in charge at this bank?

We now work with an attorney and a staff totally dedicated to doing short-sales.  This strengthens our marketing efforts and reduces the time necessary to get these done.

This whole mess adds value for the Realty Investor. The stumbling and bumbling of these banks has put a huge number of homes in front of Investors that have good financing sources.  If you can close fast and have savvy lenders, you’re in the drivers seat!  What we’re finding though, is that too many Investors are sitting on the fence, hoping for even more price reductions, before they snap the trigger.  More and more realty tracking firms are projecting a slide in prices for up to another 18 months.  There’s more to consider though…an increase in rates is inevitable and those rate increases may eat up the dollars saved on the buy, within a few years.  The time to buy is right now, especially since the banks, Fannie and Freddie are going to make it harder for buyers to get financing.  Look at these guys…struggling with depleted reserves.  Last week, a WSJ article pointed out that these reserves were supposed to be at 2% but were only at less than .6%

Fan/Fred put the ‘touch’ on the FED to the tune of $111 billion so far.  FHA requires lenders to have cash reserves of $250,000.  But now they’re considering to raise this reserve amount to $2.5 million.  You can guess how many Lenders will no longer be offering their services for FHA deals if this goes through.  They’re in trouble folks - and the loan game is going to tighten up like nothing we’ve seen.  The time to buy…if you can…is now!  Rates will go up, they always have.  When this will start is hard to say but when it does, it will be swift and severe!  Don’t get trapped, buy now while there’s plenty of choices and some money still available!

Now, where to go for the deals? We always look at the areas that offer the best potential for rental and resale.  If you’re not working with a proactive, ambitious Realtor that’s taking their time to do previews for you and pulling ‘comps’ to find the very best deals for you, give us a call…we can find you what you want in less than 30 days.  And…December is one of the best months for an Investor to be busy in the market.

But wait, there’s more!  Sound familiar? There really is more though, here’s how we work with you:

We get together to set up a strategy to find you what you want.  We nail down the best areas to search in.  We set you up with a search program that gets all new listings to you, the same day all Realtors get them…you’ll be at the front of the line so you don’t miss anything.

If you’re too busy to see the homes you have the greatest interest in, we’ll preview these for you and give you a report on them.  That will save you time  - we’ll only set up showings for the homes at the top of your list.  Make sense?

Once we find what you want and close on it, you’ll get 25% of the commission paid by the sellers.  This is to compensate you for your work in the search process.

There are over 1,525 homes for sale at prices less than $150k right now, in just 4 counties! Many of these were purchased and renovated or updated within the last few years.  This means you may have only minor items to repair or just cosmetic work to do in order to rent them out or re-sell them.
Time is money…don’t get caught in a rate increase and lose out on some of the hottest deals ever!  We just put a deal together for an Investor at 5.25%.  If that same deal ($150k) was 7%, it would require an additional $170/month.  Get in while you can ‘cash flow!’

Ed

Well, aren’t you lucky…the FED’s bailout is going to help home owners and sellers in trouble.  Really?  And when will this happen, when?

The driving factor for home sales from 2003 - 2006 was the “0″ down bit, accompanied by the ability for buyers to roll their closing costs back on top of the offer = no money out of pocket to buy = very risky loans.

Fannie and Freddie got hit in a big way and now, the mortgage game has some very serious restrictions, no more “0″ down and nearly impossible to roll closing costs into the loan. (Exception being the FHA’s 6% back from the seller and the  203-k program.)

Then again, FHA (founded in 1934 to provide mortgage insurance for lenders, in case of default), is still offering insured loans with only 3% down.  In fact, in 9/07, they insured $6 billion of these…and…this year, they insured $25 billion of these that’s over 4 x the ‘07 #.   Wonder who’s watchin this store?

As I’m writing this post, I checked the MLS for the T/C “core” counties: Ramsey, Hennepin, Dakota, Anoka, Washington, for the number of homes for sale for: less than $100,000, $100,001 to $200,000,  and for the number of homes for sale built in 2003 or newer.  Absolutely mind boggling!  I’ll give you the numbers a little later in this post.

If your selling and you’re too close to the bone, to pay out 5 -6 or 7% to sell your home, call me right away, I can probably save you from 3% to 5.5%…that means you’ll save thousands of dollars…or…not have to bring money to the table to close?

I’ve recently been able to help two home sellers, pay only $495 to get their homes sold.  If we talk, remind me to tell you how this was done.

So many home owners have learned that they can’t refinance because their homes are worth less than when they bought them.  Those who had ARM’s or % only financing, have seen their payments get jacked up past what they can afford to pay.  If they can’t pay, their options are; short sale or let it go into foreclosure.

The homes that are selling now are those that have maximum exposure, show well, have a minimum of repairs necessary, are priced competitively and offer financing help.  You have to look good and get the maximum exposure you need.  We use one website that gets over 6 million visits monthly and we get your home in over 700 other websites as well.

If you’re having trouble with your mtge., you might want to check out the “Hope Now” program, promoted by Tres. Scty. Henry Paulson.  It began as an effort by housing counseling agencies and mtge. service providers, to modify loans on a voluntary basis.  Home owners in trouble are to call 888-995-hope.  The orginization charges borrowers $300 to get help.  Some banks are willing to add past due payments to the loan and structure a new payment plan to bring the home owner current.  In many cases, the new payment is higher than the old one…hmm, what’s up with that?  I may have it wrong though, so check it out at “Hope Now.”

A source for the forms used for short sales and foreclosures can be found at genworthfinancial.com.  If you’re contemplating either solution, check them out.

We’re spending a great deal of time lately on short sales.  The process is complex and if you don’t send in the total package lenders require, your request will go to the back of the line and you may not get an answer for months.  Call me for the list of what you’ll need to send and I’ll mail it to you, no obligation of course.

In general, we find that 1st. mtge holders want to get at least 90% of what you owe them.  The second mtge holders like to get 10% or more of what you owe them, but will often take as little as $1,000.  EG: a home owner owes a total of $300,000…$240k to the 1st mtge and $60k to the 2nd mtge.  The deal may be accepted for $216k to the 1st and $6k to the 2nd = $222k total.  We’ve seen even lower numbers for a case like this.  The key to success is in the ability of the listing agent to negotiate with the lenders.  I feel I offer seller’s this expertise.  So, if you’re in a jam like this, give me a call…can’t hurt to talk, right? Also, if the pundits who surround you tell you that you’ll have to pay income taxes on the difference, Google up: IRS 982 and study this information.  If you don’t understand, talk with an accountant, your pundits may have it wrong…as usual?

Oh yeah, the numbers for paragraph #5 above: # selling for $100,000 or less in these counties = 1,200

# selling for $100,001 to $200,000 = 4,385

# selling that were built in 2003 or newer = 2,031

If you’re buying, see our “Buyer’s Incentives” above…it could be worth thousands of dollars for you!  Plus, we can really deal for you.  We have all the tools for a  strategic approach; price points, amenities +/-, days on market, etc.  Call me, let me help you get the best deal and give you cash back at the closing for your help in the process.  And, if you have to sell to buy, we need to talk about that as well.  Remember, it’s worth thousands for you!

I’ve talked with a lot of prospective seller’s who have put their plans on hold, after we examined the whole truth about this market.  I’ve also helped many home seller’s in trouble avoid total financial disaster.  What you want to accomplish is the most important element, lets talk about your goals and see if we can come up with a plan that makes sense.  Doesn’t cost a dime to plan, let’s get a plan put together for you.

Give us your story,  tell us about any experience you’re having with today’s topics, or selling or buying real estate.

Ed