Real Emotions of Real Estate

by Lee Abraham

Excitement. Joy. Empowerment. At 22 years old, my first listing, and then shortly after, a sale and a paycheck, were exhilarating experiences. These were real, tangible, “money in the bank” transactions that painted a rookie’s blank canvass with colorful splashes of possibility and success.

I didn’t realize it at the time, because I was too young to have an historical perspective, but the market was rough in the early ‘80s. Interest rates were sky high in the 17-18% range and business was slow. Didn’t matter to me. In fact, I didn’t know any better. Fresh out of college I had very low overhead and no problem getting on the phone and cold calling.

My niche was expired listings. I’d go thru the MLS Book each week (smile a knowing smile if you’ve been in Real Estate long enough to remember the good old heavy as a brick, weekly MLS books!) calling as many owners of expired listings as I could. And there were plenty to call.

Sure enough, I got my share of listings and sold a few houses but soon realized I wasn’t ready for the emotional roller coaster of dealing with buyers and sellers. In short, I started to see that times were tough and people were pissed. So I got into appraising Real Estate instead of selling it. Many years later I got back into sales, but that’s another story for another time. Right now I want to focus on the real emotions of Real Estate.

Mood Swing?

As the wheels of our economy slowly turn, there are now early signs the overall Real Estate market is recovering. Not everywhere, but in a lot of places. Locally, here in Arizona things are picking up and that’s a good thing. Call it a mood swing. Particularly for us Real Estate agents. Hey, we’ve got to eat too!

And yeah, a lot of investors are also putting on a happy face. Done licking their chops while waiting for prices to bottom out, savvy property people are taking their cue and sinking their teeth into good, solid investments.

Don’t forget the first time buyer. $8,000 bucks, low prices and ridiculously low interest rates (if you can qualify for a loan – more on that some other time) will put a smile on any buyer’s face, first time or otherwise.

OK, fine, there’s a bunch of happy people in the current Real Estate market. More power to ‘em. May their cup runneth over and their song always be sung. As a Real Estate agent, it’s great to work with happy people. But there’s one more group I want talk about. And they’re not particularly happy. I want to talk about Sellers.

In the Red

Rare is the happy seller in today’s market. From the terribly upset old timer who has owned their property for years and still has some equity even in today’s battered market, to the distraught, emotionally shattered, embarrassed, angry and pent-up-with-energy bread winner who’s out of a job, flat broke and leaning on friends and relatives just to survive, sellers come in all shades of red.

No details needed. We all know someone whose life has been torn to pieces by economic forces beyond their control. And unfortunately, many of those down and out innocent victims have a ball and chain around their neck called “home.” You know the “Short” story, the house is worth less than the mortgage and there’s no money to make the monthly payment.

As a Real Estate agent, it’s no fun talking with these people. In fact, dealing with property owners who are selling under hardship is one of the most challenging aspects of the Real Estate business. Always has been. Death, divorce, illness, and many other traditional reasons people sell their home, are seldom pleasant, but mix in the financial devastation of today’s market and it’s even uglier.  

Let’s face it, Real Estate agents are paid to help people buy and sell houses. And stay out of trouble doing it. But in today’s market, the agent’s ability to help a seller manage the emotional roller coaster and stress they’re under will be remembered long after the deal is done and numbers forgotten.

Maybe it’s just a reassuring conversation and taking a few extra few minutes to listen, let the seller vent, knowing their voice is heard and feelings recognized. Or a tension breaking laugh at the irony of it all. Maybe just a simple note to say “Thank-You” and how good it is to do business with such a nice person. Make no mistake, there are plenty of little things a Real Estate agent can do to add value and compassion to the seller’s painful process.

Little things? Yes. Big impact? Maybe. Worth the extra effort? Only if you want to seize every opportunity to be the best you can be, doing the things you have control over in this life to help someone struggling emotionally as well as financially!

More than ever, success in Real Estate is about real emotion.

Long Forms, Paper Cuts and Short Sale Offers

by Lee Abraham

When I first started in Real Estate back in ’82 there was a lot less paperwork. For starters, shorter Purchase Agreements and Listing Contracts. No, make that MUCH shorter. As in two pages vs. the nine page Purchase Agreement we use today in Arizona.

And then there’s the Addenda, or extra pages to specify various details not covered in the Purchase Agreement itself.

Back in the day, there were no “Standard” Addendums, like the “As Is” and “Short Sale” forms that are the current ink and paper signs of our times. People wrote their own contract language on a blank addendum, which after being signed by both parties, becomes a part of the contract. And that hasn’t changed. But over time, we picked up a number of specific forms and documents which are now standard paperwork for a Real Estate transaction in the current market. 

Common Forms

A few of the most common standard forms deal with disclosure issues (“SPDS” Seller Property Disclosure Statement, among others), properties in Planned Communities and Condo projects  (“HOA” Homeowner’s Association Addendum), Inspection/Repair Issues (“BINSR” Buyer Inspection/Seller Response Notice), Financing (“LSR” Loan Status Report), as well as other standardized forms for properties with a private water well, septic system and just about anything else you can think of.

OK, fine. I get it. Good, bad or indifferent, the Real Estate authorities have tried to protect buyers and sellers by standardizing all the wild and wacky hooweenoowee that can happen in a Real Estate transaction. And in most cases they have done a good job.

But what does all this mean in Terms of Short Sales? Here’s the deal: the Short Sale phenomenon has created some weird Real Estate voodoo. Can you say “Time Warp?” In most cases, it takes forever for a bank to respond to a Short Sale offer and almost invariably, other competing offers also come in while you are waiting.

Paper Wars

Multiple Offers usually lead to the seller responding with a Multiple Counter Offer, in other words, telling all buyers “submit your best and final offer.” The result is a Bidding War and yes, more paperwork.

Here’s another twist in the ‘hurry up and wait’ world of Short Sales: buyers are making offers on multiple properties at the same time to expedite the process and increase the chance of actually securing a property.

As you can see, this conversation can go in multiple directions, and it will, but for now I just want to talk about the paperwork involved in a Short Sale.

Guess what? In addition to all the standardized forms, smart Real Estate people dealing in Short Sales throw in a few extras for good measure because they understand the risks and rewards created by the drawn out process and passage of time waiting to hear from the bank.

Specifically, when writing a Short Sale offer, also prepare at least two executed copies each of a blank Addenda, Counter Offer and Loan Status Report for the file. Particularly in cases where the Real Estate Agent and client don’t see each other often or easily.

Why is it absolutely critical to have the flexibility provided by a well stocked arsenal of paperwork before diving head first into the troubled waters of  Short Sales? Find out next time, when our Adventure in Real Estate Continues…

Short Sale: The Monkey of Rejection

by Lee Abraham

On the surface, rejection is the last thing homeowners considering a Short Sale need. After all, behind in mortgage payments, out of a job or going through some other financial hardship is a tough place to be.

And then there’s the emotional wreckage. Forced out of the home you love, anger, guilt and shame always tag along for the ride.

Wait, there’s more. Think about the stress, day-to-day problems and general pain triggered every 30 days or so when there’s too much month at the end of the money.

Face it, homeowners considering a Short Sale are human pressure cookers. And like it or not, one more wave of rejection may be needed to get the Short Sale monkey off their back.

Rejected but Approved?

Last time out we looked at two types of Short Sale, Approved and Unapproved. Bottom Line: Approved is where we want to be. And that’s the point of this post. Approved Short Sales almost always start with a Rejected Offer. Huh?

That’s right. I’m still waiting to hear of a good hearted mortgage banker who picks up the phone, calls a homeowner behind in payments and as a gesture of goodwill or kindness, warmly advises the stressed out customer, “Don’t worry, we are willing to let bygones be bygones…just go ahead and sell the house for half the mortgage amount.”

No, banks are only going to react to what you do or don’t do. And if you’re looking to do a Short Sale of your home, bringing an offer for the bank to react to is the most effective way to jump start up the agonizingly slow Short Sale process.

If the offer is accepted, great, you are on your way to getting this thing over with. If the offer is rejected, the bank will usually come back with a counter offer. Unless of course, if the offer is ridiculously low, the bank might simply reject it with no counter offer, leaving you without any idea of what they will take.

Different Types of Offers – Your Option

I know what you are thinking. You don’t know anybody who wants to buy your house, so bringing an offer seems unrealistic. Maybe it’s time to consider offering an “Option” to purchase.

Simply put, an Option is an agreement between a buyer and seller giving the buyer the “Option” to purchase the property at an agreed price for a particular length of time. No real commitment, it’s an OPTION.

And here’s the good news: the dollar investment to secure an Option can been minimal. In fact, handled properly, an Option to Purchase can start the Short Sale process with the bank just like an Offer to Purchase.  

In other words, you’ve just created an Approved Short Sale with minimal investment and no obligation!

Want to know more? Please contact me today to discuss whether a Short Sale is the right option for you.

Two Types of Short Sale: Circus Clowns & Elephant Acts

by Lee Abraham

If Real Estate is a three ring circus, Short Sales are currently the most popular Elephant act under the big top. And while watching the action safely from the stands is fun and entertaining, actually stepping into the ring and doing business with the trainer and his big bad beast can make a Circus Clown out of anyone.

Let’s face it, getting involved in a Short Sale can be tricky. Not to mention risky. Particularly for newbies. Lots of twists and turns to navigate and pitfalls to avoid.

So what do you say we sharpen our skill set a bit before we belly up to the investment buffet, dig in and eat the Short Sale elephant one bite at a time?

Let’s start at the beginning. Short Sales happen when the mortgage loan balance is more than the property is worth. Let’s say the house is worth $100,000 but the owner owes $150,000.

Throw in hardship. You know, a sad situation where the owner lost a job, can’t pay the bills and is behind in the monthly mortgage payment. Unfortunately, in the current economy we all know somebody in that predicament.

Finally, a buyer comes along who is willing to purchase the property for $100,000, and yes, the seller will agree to anything just to get the property off his back, but what about that darn lender who’s left with a $50,000 loss?

I’m glad you asked! Depending on the circumstances, the lender may or may not decide that accepting a new buyer at a $100,000 purchase price who pays the mortgage is better than a delinquent borrower at $150,000 who doesn’t.

We’ll get into the details on the bank’s decision making process some other time, for now I want to make the following point, there are TWO types of Short Sales: Approved and Unapproved.

An Approved Short Sale means the bank has already indicated they are willing to lose the $50,000 and will accept $100,000 for the property. This is the type of Short Sale you want to deal with.

An Unapproved Short Sale means the list price (and amount of loss the bank will agree to) is a mystery. The homework hasn’t been done to determine exactly what the bank WILL take.

Trust me, dealing in Unapproved Short Sales can be a nightmare. Why? The list price is almost always an illusion, way below current market value, inducing multiple offers from aggressive, bottom feeding investors looking to make a killing, and almost always resulting in a bidding war and final highest offer price measurably above the list price. 

And even then, there is no guarantee the bank will accept the highest bid. Result: lots of wasted time and energy, as well as possibly missing a great opportunity on another property because you were distracted with the unrealistic allure of the Unapproved Short Sale list price.

Bottom Line: whether buying or selling, play the Real Estate game stratigically and know in advance if the Short Sale you are getting involved with is Approved or Unapproved.

Want to know more? Join us next time as we look into the process of getting a Short Sale Approved, when our Adventure in Real Estate continues… Follow Abe on Twitter!

Appreciate the Local Market vs. Local Market Appreciation

by Lee Abraham

Like any other market, Real Estate is all about supply and demand. Scarce supply and growing demand create appreciation, or price increases. More supply and less demand results in lower prices.

Sure, both supply and demand are complcated little buggers, lots of variables in each playing a role in the value appreciation/depreciation equation, but for now let’s just stick to the basics.

Over the past year and half, my local market has suffered from increasing supply and less demand. Your area is probably the same.

Good news: the combination of low prices, low interest rates and the 1st Time Buyer Tax Credit has lit a fire under the demand side of the equation in many local markets around the country.

Specifically the entry level, 1st time buyer segment of the market, as well as long term investors who see the very attractive positive cash flow opportunities created by current low price levels and strong rental demand. 

Although limited, this increased market activity is important because without demand, property values have no choice but to drop.

But here’s the deal. Don’t confuse activity with appreciation. The fact that houses are starting to move is only the first step in the Real Estate market’s overall recovery. There’s a long, make that very long, way to go before demand begins to outpace supply and the value of real estate starts to go up again.

For now, the simple fact that houses are starting to sell is something to be appreciated.