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Odd Times for John

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Odd Times

 

Truth is, I’ve been working on a three-part series that is not complete.  But the following questions from John just went to the front of the line.

 

These are odd times I’m in right now, and I’m not quite sure how to deal with it.

As of the past week, it looks like I’m now on a 10 appointment per week schedule. I am absolutely slammed. I’m behind on pricing 6 properties that I’m supposed to be done with already. I am left with no "on the business" time so all of my projects have been on halt for a couple weeks now, which is unsustainable if I want to keep growing and improving the company.

10 appointments per week was the point that I was hoping to bring on a listing specialist.

But the problem is, we are WAY down on sales. Right now, I’m having cash flow issues, but I expect/hope those to clear up soon. But looking at the big picture, if you’re looking over the last 4 months, our total market volume (and thus the total available income) is down 35% compared to the same period last year. My GCI is nearly identical (within just a couple hundred dollars) between those two time periods. Net profit is 5K better (3K profit compared to 2K loss).

As far as supply and demand, our market is around 12 months of inventory right now when looking over the last 4 months, compared to around 8 months of inventory for the majority of last year (until October).

Right now, I only have 2 open escrows out of 22 total listings, and zero buyer escrows. I’ve been firing sellers left and right and slashing prices, but I still haven’t been able to get back to the 30% of listings in escrow number.

By the way, I picked up a pretty big new lead source… I’m now the "listing partner" for a home builder with nine communities here. Whenever someone wants to build a house on a contingency, the only way that person can do it with refundable earnest money is to list with me. Otherwise, they have to put up 5-7K non-refundable. We went official with this last Wednesday, and I’ve already booked 5 appointments from them. The best part is, I get to charge the full 6% and don’t pay them any referral fees.

Also, the TV ads have been working nearly as well as the radio ads this month.

Any wisdom or suggestions for me?

Thanks!
John

The very first thing is to congratulate you on your excellent performance!  I wish I had been this far along when I was only three years in the business.  Giant plus points are TV & radio ads working well; enough market ethics presence to land a nice builder account; and nicely increased GCI, especially when compared to the market.

Negatives: you are colliding with several different problems, all at the same time.  At 8 – 10 appointments per week you normally would bring on a listing specialist.  To clarify, I have never "brought on a lister", nor would I ever do that.  I always take my most trustworthy buyer specialist and promote them.  This person must be a team player – not "a salesman".  I would never "hire a lister", as it would be a sure-fire way to ruin what you have built.  But that 10 listing appointments a week would have to be a sustainable level, not "I did it for a couple of weeks".  You can stand on your head for a couple of weeks.

The problems:

1. Most listings currently being taken are not selling

2. Zero buyer deals in escrow

3. Overall market has changed enough that "comps" are now meaningless

4. Not enough time left over to work on organizing for the future

The solution(s):  First and most importantly, recognize you need to arrive at the level of knowing you don’t know when it comes to prices.  Most of your current listings are overpriced.  Continuing to do what you are doing and thereby getting even more listings isn’t going to solve anything.  In fact, it will only make the problem worse.  I went through this too as our inventory ballooned.  Handling this issue directly solves problems 1 and 3 and opens the door to handling number 2, as well.  It won’t directly fix number 4 but fixing number 4 isn’t your most urgent problem.  Getting price reductions (as in 2, 3, 4 or 5 on the same listing – until it actually sells) and only taking listings where it has at least a real chance of selling and has a seller who is fully onboard.

The magic formula:  If it is in MLS correctly, on lockbox and not sold it is overpriced.  Again: If it is in MLS correctly, on lockbox and not sold it is overpriced.  There are NO exceptions to this statement.  As in none.  Your statement, "I’ve been firing sellers left and right and slashing prices, but I still haven’t been able to get back to the 30% of listings in escrow number"  is an excellent start in the right direction.  But it is only the start.  Otherwise, your profitability is about to nosedive.  No buyer deals and 2 listings in escrow screams out, "I’VE GOT A QUALITY CONTROL ISSUE".  Price.  Just that one thing will "fix" this.  No other action will.  If you are too short on time – to cope – start screening the sellers much more carefully on the phone so you only physically go to see the truly ready, willing and able. 

Get your open escrow board filling up then – once you have "motion" back in your listing inventory then put your main attention on getting more listings.  Naturally, I fully expect (based on your past performance) that you will revert this scene so rapidly it will even surprise you.

Russell has been an Associate Broker with John Hall & Associates since 1978 and ranks in the top 1% of all agents in the U.S. Most recently The Wall Street Journal recognized the Top 200 Agents in America, awarding Russell # 25 for number of units sold. Russell has been featured in many books such as, "The Billion Dollar Agent" by Steve Kantor and "The Millionaire Real Estate Agent" by Gary Keller and has often been a featured speaker for national conventions and routinely speaks at various state and local association conventions. Visit him also at nohasslelisting.com and number1homeagent.com.

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7 Comments

7 Comments

  1. Barry Cunningham

    February 19, 2009 at 10:32 am

    OMG..somebody call the media…

    Russell Shaw says: ” If it is in MLS correctly, on lockbox and not sold it is overpriced”….

    And after nearly a year he and I finally agree on something!!!

    Such a simple concept so far out of the grasp of reality of so many agents. We deal with this so much on short sales it isn’t funny…If it ain’t selling then it ain’t worth the price you have it at..that simple.

    Now I can take the rest of the day off. Russell Shaw and I finally agree on something.

    One question though Russ…am I still a turd?

  2. Paula

    February 19, 2009 at 6:32 pm

    Oh Barry – You make me laugh! Take the day off! Russell is right on the money. Well priced homes are selling! Other than that – they are overpriced for the condition they are in. Sellers have to fix one of the problems – condition or price.

    I too have the same problem with short sales – had a seller outright decline an offer – He has fantasies the lender will let him buy it at the reduced price.

    I take automatic reductions every two weeks until we get action, then I know the price is right!

  3. fred

    February 19, 2009 at 11:09 pm

    Although it sounds great, in this economy and recession I don’t think “The magic formula” is reality.

    I list a lot of homes, and I hear tons of stories from sellers that previously were listed with a traditional broker. Many tell of how the agent constantly pushed for price reductions.

    Sounds like they are right.

  4. Paula

    February 22, 2009 at 9:23 am

    Fred – Listing versus SOLD is the key. If someone has too many listings not selling, the price is not right, due to either
    condition or location.

    Most non distressed property owners want to start high; in that case, you must reduce the price or fix the conditions. You can not get top dollar if the home is not in “top dollar” condition.

    Short Sales are a different beast. I take automatic reduction on short sales, so I can show the bank at what price we actually had interest.

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Coaching

Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!

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magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Coaching

Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:

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short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Coaching

Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.

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Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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