Monday, August 24, 2009

Websites are "Bug Zappers" For The Unmotivated

To be "distressed" means different things to different investors. I only want "distressed" Sellers that have new homes they can't afford anymore; that don't need work; that are easy to sell; that aren't over-leveraged; and all beckon me to live in them!

Meanwhile, I don't think there is any secret other than being chronic, persistent and repetitive in letting a targeted niche of prospects know what you have to offer. Otherwise, "one-off", or short term advertising puts the "pain" in campaigns.

I'll go further and say that ugly mail always works better for me than pretty mail. The less I explain on the piece, the more compelling the mail is. I never mention anything negative, and only pique the Seller's curiosity in solving ONE problem they are most likely having.

That said, I believe in direct mail. I profile a zip code for all homes that have been owned for a certain period of time, had "x" amount of equity at the time of transfer, have fixed rate mortgages, no recorded 2nds, are 3/3/2's or 3's, over 1,100 sqft and under 3,500 sqft and built within the last four years.

These are going to be excellent
Sub-To prospects. Now, the entire mailing list conforms to a similar profile. I know who's not going to call me. No acreage owners; no farm owners, no condo owners, no massive fixer owners, no McMansion owners, etc. These are not popular properties to resell. The buyer pool is smaller, and the resale time is LOOOOONGER.

Meanwhile, when Buying, unlike the amateurs who think they need fancy websites because guru "X" says they're the "bomb", or whatever, I only provide my cell phone number to Sellers. If the Seller is too unmotivated to call me on the phone, they'll be too cool to say, "yes" to me asking for their deed, taking over their payments, and leaving them on the hook for a loan.

I only want to bother with desperate, anxious Sellers that don't know they have any other options, and are willing to overcome their fear of the unknown by calling me directly on the phone.

Websites serve as "bug zappers" for the unmotivated, and/or the idly curious.

I encourage the competition to always rely on websites for Buying property! he he. They've got lots of time on their hands. Meanwhile, I've got too many fish to fry to screw around with either the curious or the "web sniffers".


Saturday, August 22, 2009

Walking Around In A Dreamer's Dream.

Home Movies At DisneyLand - 1956 from Jeff Altman on Vimeo.

My new friend, Jeff Alman, discovered a 16mm film made by his grandfather in 1956.

Lo and Behold! Help us Hannah!

There was his grandmother shaking hands with none other than Walt Disney himself! She's the one wearing the white cowgirl outfit and hat.

I post this because Walt Disney is a role model for me and anyone who won't take anything less than "yes" for an answer to their dream(s).

Walt stuck, and stuck, and stuck, and stuck to creating high quality animations that he hoped would become profitable...but failed; went bankrupt; borrowed again up to his neck; was ripped off...and that was just his first attempts to realize his dreams. Of course Walt finally achieved his dream of creating profitable, high quality animations. Animations that set him apart from all others, apart from being profitable.

We know, too, that Walt Disney was a dreamer. He also had goals. Furthermore, he lived with self-imposed, goal-related deadlines all throughout this life and career. And of course he understood that goals without deadlines were just daydreams. Walt was no daydreamer.

Watch this precious, previously unknown, and un-circulated video showing off the realized dream that Walt so persistently drove for. Thanks Jeff.

Sunday, August 16, 2009

There's No "Due On Sale" Jail!

Even if there was a jail for Sub-To "violators", the jail would be empty.

Read my response to a guy who was warning off about 2,500 would-be investors “that banks call loans in on Sub-To investors because they want to make sure they're on the hook for the loan."

Dear So and So,

"I admire your efforts to keep folks out of trouble. And with all due respect to your desire to keep us informed of what banks will and won't do with Sub-To, I can say from experience that banks do NOT "invoke" the DOSC to assure [that] the TRUE owner of a property is on the hook," as you've postulated.

Meanwhile, in the event of a transfer of equitable interest, subject to the existing financing, the DOSC allows a lender to exercise it's right to either call the loan due, or require the new owner to qualify for a new loan, and/or assume the existing loan(s) --- as a practical matter. However, the motivation for calling a loan due, if it's ever happened with a "current" loan, is NOT to mitigate risk, but to otherwise secure a better interest rate on the existing financing, and certainly NOT to create more REO's for itself.

The only reason the banks started inserting the DOSC was because there was a rash of Sellers in the late 1970's and very early 1980's that were seller financing their homes at 10%, because buyers couldn't qualify with the bank's 18% interest rate. As a result, the banks were losing business --- because they wanted 18%. So the DOSC, short of a default, is all about making money, not mitigating risk.

Today, the bank interest rates are very hard to compete with. Seller financing is usually more expensive than bank financing. So Buyers will look to get bank rates as soon as possible.

As an aside, I'm fairly certain that banks know that their rates are generally more attractive than the average seller is offering. So, short of a credit issue, they're attracting most of the potential "profitable Buyers" already.

There's no need to force the rest to qualify, or mitigate risk, or create REO's for themselves. It would make no sense for the bank.

Anyway, I appreciate your conservative approach, but in practice, what you're suggesting just is not happening. If bank rates climb back up to 18%, your scenario may very well become likely, but not before.”
What I didn't mention was that there is already a person "on the hook" for the loan. Yes, it's the original borrower. Sub-To financing doesn't change this.

The bank still has a person it can "go after" in the event of default. So it's not like the bank has lost anything in the transaction. What's more, there is now not one, not two, but three parties that are motivated to keep the loans "current!" It's the bank itself, of course, but also the borrower, and the new sub-to title holder. That's a better position for the bank than what they originally bargained for.

So banks don't deliberately "switch out" borrowers just because they can.

However, if the loan becomes delinquent, all bets are off.

Share this with anyone who claims banks are calling in "current" Sub-To loans.

Sunday, August 9, 2009

"Bigger League Negotiations" Let The Seller Say, "Yes."

Loon wrote [PropBot Forum - 5+ Units - 8/8/09]

"I always start at zero, assumptively[sic], and make the seller explain to me why that won't work. If I pay more than 5% I expect a real bargain price. It all depends on what your competition might be offering, but don't assume there even is any competition until your seller shows their hand."
This short post by "Loon" from demonstrates tremendous sophistication. So many investors are afraid of negotiations. They just are. They're afraid of the Seller and/or his reactions to a profitable offer. Worse, the amateurs fall into a trap of offering their "last best offer" trying to achieve a clean, acceptable deal. That is usually stupid, unless there's lot of competition. If so, then I ask why am I competing with anyone over any property in the first place?

Notwithstanding, doing this undermines the ability for both the buyer and seller to "work" for a closing --- and achieve satisfaction for doing so.

Yes, we all once dreamed of making clean, acceptable, profitable offers --- where all the chips fell into place with just one offer and no "pesky" negotiating. Well, that's reserved for dreamers, not for professionals. The fact is, if there isn't some emotional satisfaction involved by both the Buyer and Seller in reaching a deal, the deal will likely not happen. This is sad.

It's sad because the essence of getting either good terms, or a good price is allowing the seller/buyer to achieve emotional satisfaction from the negotiation effort. And we do that by opening the bid far away from where the seller/buyer wants to "end up,": as it were. Otherwise, what Seller doesn't want to say, "Yeah, I finally ground that guy down until he paid me what I wanted," or a Buyer bragging about how he beat the Seller to a pulp?

I say, ahh the satisfaction of getting exactly what I wanted by "forcing" a Seller to "cave" by making me to pay 50% of retail value!" Get it?

Well, the Seller's achievement may be debatable from an objective point of view. However, the point of this post is about negotiating "assumptively" to coin "Loon's" phrase here. Loon suggested assuming that "zero" percent interest is acceptable for all parties, and unless the Seller can prove this won't work for him, (apart from his greed, and no competition), the Seller has to show his cards and/or cave, all the while put the Seller on the defensive regarding the interest rate. I love it. Why not assume things are in your favor when initiating negotiations? The post goes further...

Someone commented:
"Loon, Did I understand you correctly? They [the Seller] gave you free carry back financing?" [talking about one of Loon's four "zero" interest loan deals]

Loon: "Absolutely. You rarely get what you don't ask for. If they insist on interest, well, then let the negotiating begin!"

This is is so important. Let the Seller defend his position. But the Seller won't feel compelled to defend his "greed," if we don't put him in a place where he MUST defend his greed. That means starting low, and working to the satisfactory conclusion. BTW, the satisfactory conclusion has nothing to do with an objectively equitable position.

I've seen Seller's cave to fantastic prices just because other things were more important than price. So, if we don't know what the Seller's motivation is, it's very good that we assume the Seller wants to finance us, and finance us for free --- or.... give the property to us...because.... (he's dying with no heirs; likes us a lot; hates his children and doesn't want to give them a dime; has a lapse in judgment....etc.), or otherwise force them to defend charging us anything.

[As an aside, about 15 years ago a guy in my church made friends with a freight shipping company owner. He asked the owner to literally give him the company in his will. The owner had no wife or children. My friend ended up with the company just by asking. He simply made an offer "assumptively" and gave the owner the opportunity to say, "yes". My friend went from earning $60k a year to making $$760k a year.]

As Loon puts it, "....[we] rarely get what we don't ask for."

The moral is to ask for the moon, and expect to get it. This is precisely what big league negotiators do in the real world. It also provides a way to create satisfaction in the deal for everyone. That's how we get into the big leagues.