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By Joe Klock, Sr.

Real estate analysts (and what American is not among them these days?) tend to survey the sea of sale signs in most areas and join the gloomy headline writers who conclude that there are not enough ready, willing and able buyers in the market place.

Not so, gentle reader! The shortfall is among sellers, of which there are relatively few treading water in the aforementioned sea.
“Whoa, Nellie!” you might exclaim (ignoring the by-line clearly displayed above), “any fool, including the by-lined fool, can see that it’s buyers that are now in short supply.”
In so doing, you might cite the hordes of hungry house-hunters who roamed the house-hunting roadways during the many months of a recently-deceased feeding frenzy, fueled by mortgage lenders with deep pockets and all the fiscal restraint of sailors on leave.
It is a now a fact of real estate life in most areas that their numbers – and that financial fuel – have shrunk like last month’s birthday balloons, and it’s true that there are fewer prospective buyers rummaging through the current logjam of listings.
Enter the law (not the theory or fantasy) of supply and demand, which dictates that when the number of consumers is dwarfed by a surplus of products, either prices take a hit or activity takes a holiday.
That reality underpins my contention that, while there may be too many homes for sale, there are too few legitimate sellers offering them.
This position is backed up by more than a half-century of experience on and behind the firing line of real estate brokerage, during which I have seen and survived several cycles of inflation, deflation and stagflation, as well as so-called sellers’ markets which morphed into buyers’ markets and vice versa.
Through all that trauma, certain facts remained unchanged – facts that are being ignored by too many would-be sellers and, sadly, pseudo-professionals. They are as follows:
1. No home in history has ever sold for a penny more than the best offer obtainable from the best buyer available in the then-current market.
2. The only way to determine the true value of a home is to thoroughly and aggressively test the market and challenge the competition. That process need not be a lengthy one, since buyers and their agents do comparison shopping and readily react to an attractive offering.
3. Once that procedure has been pursued, properties remaining unsold for an extended period of time are, quite simply, overpriced. Forget about what similar houses sold for in the past (which is history), or what those would-be sellers might have invested in their homes (which is irrelevant), or what qualified appraisers say they are worth (which are only opinions). The critical test is exposing one’s home to the greatest practical number of prospective buyers and active agents, and then analyzing the results.
4. A home that is appropriately priced and effectively marketed, preferably by competent professionals, will ALWAYS attract attention, generate activity and ALWAYS sell for what it’s worth (refer to Fact #1 above).
The problem today is not that there are too few buyers. Demand is what it is and neither wishful thinking nor wistful memories will increase its size.
The more serious shortage is of genuine sellers; i.e., those who meet these specific criteria:
a) They are willing and able to accept the best price obtainable from the best buyer available in the current market, and
b) They have something to lose if they don’t do so.
“Sellers” who do not fit that mold are not sellers at all and should be encouraged to take their properties off the market. (Realistically, they’re not actually ON the market, anyway!)
The market is not always kind, but it is never wrong – and those who believe otherwise pay a heavy price for ignoring “The Facts Of Life For Home Sellers.”
FOOTNOTE: For a further dose of this perhaps-unpleasant medicine, visit and click on that caption. You have nothing to lose – except, maybe, a pipe dream.
If that doesn’t work for you, take two antacids or a short snort and DON’T call me in the morning!
Here’s the bottom line – take it to the bank or to any nearby Wailing Wall: When proper pricing is combined with effective marketing, there is a buyer for everything and, given those conditions, any home can be sold in any market.
The ritual dances of negotiation may change with market fluctuations, but the drumbeat of reality does not!

Mike Carraway

1100 East Park Drive, Suite 104
Birmingham, AL 35235
Valleydale Branch
4500 Valleydale Road, Suite 160
Birmingham, AL 35242
24/hr Info: 800-634-0511
24/hr Fax: 800-634-0511

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Mike Carraway
1100 East Park Drive, Suite 104
Birmingham, AL 35235
Valleydale Branch
4500 Valleydale Road, Suite 160
Birmingham, AL  35242
24/hr Info:  800-634-0511
24/hr Fax:  800-634-0511

Should You Start Off With A High Sales Price?

Because of the change in real estate market conditions, more sellers are competing for fewer buyers. So once again, it seemed important to challenge a long-standing “myth” of real estate.

“The initial listing price isn’t that important because the price can always be adjusted down later.”

Many homeowners believe this.
It is a myth.
Not true.

If most buyers first viewed your house because of a newspaper ad, a magazine, the internet, brochures, or the sign in your front yard, the initial listing price probably would not make a difference. The house would always be “new” to those seeing it.

But most buyers do NOT come to your house because of various types of advertising. That is the another myth.

Sure, buyers call on an ad, they often LOOK at that house, but not always. Once they talk to an agent, they may discover it isn’t what they need (or want) at all.

However, they ARE talking to an agent. That agent knows the current inventory and will know of other property that DOES fit their needs.

Those are the properties that buyers look at, and THIS is how most buyers end up looking at your house, too. Because of other agents, not because of your ad.

Hardly anyone buys the house in the ad.

As a result, you need to get other agents interested in your property, and this is where your listing agent comes in…and why a good listing agent is extremely important. The listing agent gets buyer’s agents looking at your home.

Those agents have clients who called in on other properties.

Buyer’s agents are not swayed by advertising. They look at the needs of the client, where the client wants to live, location, condition, and other details of the property…
And most importantly….

If your house is overpriced, agents are going to show similar homes that are priced more attractively. Your listing will get passed over.
Agents pay MOST attention to homes newly on the market. There are fewer NEW listings than current listings. It is easier to keep an eye out for what is NEW, compared to the vast number of current listings.

New listings are on the “hot” sheet circulated in real estate offices. The MLS computer identifies new listings. Your listing agent may hire a service to distribute fliers to all the buyer’s agents. There are office previews and MLS tours to showcase new listings. A lot of attention is focused on what is NEW.

With agent’s looking at newly listed homes so aggressively, a properly priced home gets attention.

An overpriced home gets passed over.

You may be thinking, “But I’m willing to negotiate!”

Buyers aren’t thinking in advance about how much you are willing to negotiate. They are comparing your asking price to other asking prices.

Plus, when your house is new on the market, you may not be willing to negotiate as much as you will later, once you’ve realized your error. Keep in mind that statistics show, quite often, the first offer is the best offer.

So what happens if you overprice in the beginning and get more realistic later?

You don’t have all those important Buyer’s Agents looking at your listing because it is NEW. A price reduction later in the listing cycle often gets overlooked. It is just one of many listings, not one of a few new listings.

As time passes, you could actually become desperate to sell because you’ve accepted a new job or because you have already bought a new home.

That is a recipe for receiving lowball offers, so you could end up selling for less than if you had priced the home correctly in the first place.

Agents know this stuff, but many sellers still mistakenly believe they should “price it high” because they can lower the price later, if necessary.

That is not the best strategy.

Can my Agent Give me a Rebate?

I hear this questions a lot in the daily real estate game, “can you give us part of our fee back after the closing?”

The answer is yes but only if done in a certain way.

RESPA, the Real Estate Settlement Procdures Acts, requires a couple of things that need to be mentioned. The first thing is that payment cannot be made for services not performed. The second one is that if any payments are made, they must be disclosed on the HUD-1 Settlement Statement.

Futher, Alabama License Law, and most states License Laws, require that no “rebate” be made to any party in a real estate transaction from another party. Another section of the code also requires that the TRUE terms of a real estate transaction be diclosed to the lender or lending institution.

What does all this mean? For starters, if your agent says they can give you cash back after the closing, in nearly every case, this is both against case law and the license law governing the licensees in your state. So – in short – don’t do it. If you are a participant in a transaction and you recieve cash back later, after the closing takes place, then you are participating in loan fraud. Fraud is a crime. Because the lender didn’t know that you were receiving additional cash proceeds from the sale, they are not aware of the TRUE details of the transaction. Alomst every loan program for the purchase of a home has the provision that the buyer cannot receive what is called “cash out” – that is – get money back when they make a purchase. This, in essence, would be overfinancing the home. on a refinance, however, this is okay.

The way to get a credit back from your agent is to have the credit put on the settlement statement as a CREDIT to you and then the credit is applied to any costs you have to pay at the closing table. This applies whether you are buying or selling.

Basic Rule of them: If you can put the cash payment on the HUD-1 settlement statement so that it is disclosed to all parties, including the lender, chances are it’s AOK to do it.

What Happens to OLD Foreclosures?

A bank or mortgage company forecloses on a property. After a few months of legal hassles, the lender finally gets clear title to the property and hires a local real estate agent. Of course, the lender, at this point, wants to try and recover almost all of the money lent on the property.

6 months or a year go by and this period is full of price reductions and repairs to the property. The property may have been vandalized, lived in by squatters, had new carpet and paint, even had new landscaping. The problem is usually that the lender refuses to set the price where it should be so the property, although shown many times, continues to sit on the market.

There is a hidden time limit for this lender. Does anyone know how long it is? How long can the lender keep a non-performing asset on its’ books? How long can the property be an REO? We aren’t talking about government foreclosures here (FHA and VA loans), the government can keep them forever. We are talking about bank or lender owned foreclosures.

I have a done a little research and it appears that the time limit that a private lender can keep an REO on its’ books is 2 years plus or minus a little.

The questions is… What happens to the house or property AFTER the statutory time period has expired and the lender is forced to “get rid of the property at any price”?

Unfortunately, researching this topic has produced very little in the way of usable results. However, I did happen upon a few references to something called The REO Black Hole List. Apparently there really is a place that lenders can “dump” their old REO inventory as a last measure. And, they dump them at dirt cheap prices – usually for thess than lot value.

My research has found that there appears to be a handful of asset managers, companies that buy these old REO properties in bulk, that lenders turn to when they absolutely must liquidate the non-performing assets. These asset managing companies turn around and sell, in bulk, to a “secret” list of private, seasoned investors who actually purchase 50 to 100 to 400 houses at a time.

And guess what? These investors are able to purchase these homes, on average, for $2350 to $5000 per house! I kid you not. I actually spoke to an investor who bought around 182 houses direct from Fannie Mae for $400,000. You do the math. That is under $2500 per house.

The thing about this kind of setup is that the investor must buy all of the homes in a package – whether they are vacant lots, burnouts, or condemned. AND – they are not in one location but spread out all over the country. That’s why the average price per home is so cheap…to spread the risk. But, these homes have all been in an MLS system somewhere – they were all REO properties at one time – so there is a way to find the market value pretty easily: Call a local agent!

AND since the investor may live in Maine or south Florida, he or she will also call a local agent to list these properties. They usually pay a high commission because the price will be low and because they have very little invested in the house. Does anyone have any experience with these types of investors? Or – if you know a local investor, would they be interested in this kind of “bulk buying”?

One other little tidbit I found out: a lot of the packages that these asset managers sell consist of only 10 or 20 homes. Think about that. You could buy 10 homes for $30,000 or $40,000. While some of them may not be the jewels you would want, several of them will always be great fix and flip homes that will sell for as much as you paid for the entire package.

Again, little information can be found on this “underground network” and the only place I could get any information was at this REO site. I know it exists. If you know how to get on this list or how to get in touch with the investors that participate, please post it! If you are in Ohio and I am in Alabama, we are not competing against each other!

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