Nick's Real Estate Blog

Mortgage Planning

Nick Miller (Coldwell Banker Graham & Assoc.) — Sun, 06 May 2012 07:15:23 -0700

I found these two great articles on Mortgage Planning and the new Qualified Mortgage rule:

http://www.kcmblog.com/2012/04/26/proper-planning-for-your-mortgage-application/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeepingCurrentMatters+%28The+KCM+Blog%29&utm_content=Google+Reader

http://www.kcmblog.com/2012/05/02/what-is-qm-and-why-does-it-matter/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeepingCurrentMatters+%28The+KCM+Blog%29&utm_content=Google+Reader

BofA to test new Foreclosure Pilot Program

Nick Miller (Coldwell Banker Graham & Assoc.) — Sat, 24 Mar 2012 12:10:20 -0700

Bank of America has started a new foreclosure/lease program where they will allow some delinquent home owners transfer title back to BofA (forgiving their mortgage) and in return,BofA will lease the home back to the owner at or below market rents for up to 3 years. In my opinion, this "Mortgage to Lease" pilot program will never work and is merely a way of trying to regain favor in the public eye.

Why do I think it will never work? The same reason why "Deeds in Lieu" are never a successful (and rarely sought after) alternative to foreclosure. The typical person who is behind on their mortgage isn't just delinquent on that debt. There are often second mortgages and liens (HOA, Contractor, etc.) that may be placed against the house as well.

If a bank takes title back without foreclosure, they assume all of the debts and liabilities that may be attached to the home. There not going to do that.

I applaud your effort BofA...but I will be extremely surprised if this becomes a viable solution (or one that has any kind of impact) to the foreclosure situation we are currently in.

Robo Signing Settlement may Release a Backlog of Foreclosed Properties.

Nick Miller (Coldwell Banker Graham & Assoc.) — Sun, 11 Mar 2012 14:14:04 -0700

The $25 billion robo signing settlement was reached with 5 banks recently, but what effect is this really going to have. For most of us, nothing. But even for those who will receive payment from the settlement it will be very minimal.

However, this will have a hugh impact on the market. These banks are most likely getting ready to release a ton of foreclosures on the market that were previously unreleased because they were tied up in this litigation. Now that they have settled, and they know that they can move forward with the foreclosures, get ready,

If you are a licensed agent and not actively listing or selling foreclosures, now is a good time to start.

If your a buyer waiting for a great buying opportunity...well it has been here but now it is about to get even better.

"We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," said RealtyTrac CEO Brandon Moore in a press release. http://tinyurl.com/7cff2la

Distressed Property Statistics

Nick Miller (Coldwell Banker Graham & Assoc.) — Sun, 04 Mar 2012 09:53:39 -0800

I just returned from the Coldwell Banker GenBlue Convention in New Orleans. I attended several great courses including the CRS 112: Guiding the Buyer in the Distressed Property Market. This course offered good statistics and facts regarding the distressed property market:

100% of all Real Estate Owned (REO's) will be sold

50% of all owner occupied homes will be sold

Average market price across the U.S. is $200,000.

The Treasury Department predicts that this market will continue for another 10 years.

Currently their are 6 million homes in default or underwater.

30% of sales in 2011 were distressed properties. That is 1 in 3.

Beurau of Census states that 1 in 10 houses are empty.

25% of buyers in the market today are investors.

These statistics can look bleak to some, but to others they represent a great opportunity.

If you are a buyer, foreclosures represent a great buying opportunity.

If you are a real estate agent, listing and selling foreclosures is a great business opportunity.

What is your BATNA?

Nick Miller (Coldwell Banker Graham & Assoc.) — Sat, 14 Aug 2010 13:28:42 -0700

If you have ever read the book Getting To Yes by Roger Fisher and William Ury, or a number of other books on negotiations, you would know that BATNA stands for Best Alternative to a Negotiated Agreement. Developing your BATNA, or knowing your BATNA, before going into negotiations will greatly increase you chance of achieving favorable terms in a negotiation. So, what is your BATNA?

Whether you know it or not you have a BATNA. Your BATNA may not be that attractive. It could be as little as going back to the way life was prior to you receiving an offer or starting negotiations. Again, not very attractive, but it is an alternative. On the other hand, your BATNA could be very attractive, such as multiple offers with similar terms. In this situation you feel confident that if the offer you are negotiating does not work out you at least have another one that may.

Consider this example:

You are a home seller and your house is listed for $165,000. After spending 100 days on the market a buyer decides to do you a favor and make an offer of $135,000. Now clearly there is a price difference there that may not be conducive to a "Meeting of the Minds." The buyer, assuming your desperation do the the number of days on the market, feels that this is a reasonable offer. You, on the other hand, may feel differently. But what is your alternative?

Lets say you owe $135,000 on the home so, if the buyer is unwilling to come up on his offer and you accept, that would leave you at break even, minus the closing cost you may have to pay which might put you in the negative a bit. That doesn't sound like a very good deal to me. So what are your options?

Lets say these are options that you have already considered:

1. Rent to your sister for a year for $1000/mo, which basically covers the PITI, in hopes that the market will be more favorable to you after that year.
2. Keep it on the market in hopes of a better offer.
3. Let the home go into foreclosure and walk away.

Obviously numbers 1 & 2 are better than #3, but these are all alternatives. And these alternatives my be what influences your opinion of how good the offer of $135,000 is on you home.

You can see how these alternatives to the above example may put power in the buyers driver seat. But lets say we have a fourth option, which is, you stay in the house and take it off the market. You decide that you really don't have to move, you were only wanting to sell if you got the full asking price. Now we have just shifted all of the negotiating power to you. Feels good doesn't it.

You can see how having a good BATNA can help increase your chances of getting what you want in a negotiation. But be aware that the buyer will have a BATNA as well. You should always prepare before going into negotiations. Knowing what you want as well as your options if an agreement is not reached will greatly strengthen your position and help you reach favorable terms.

"Or suppose a king is about to go to war against another king. Will he not first sit down and consider whether he is able with ten thousand men to oppose the one coming against him with twenty thousand?" Luke 14:31-32

www.nicksbusinessjournal.com

www.facebook.com/jacksonmsforeclosures

OWS Disrupting Foreclosure Procedures

Nick Miller (Coldwell Banker Graham & Assoc.) — Wed, 01 Feb 2012 10:51:17 -0800

I found this article the other day on the Christian Science Monitor where Occupy Wall Street protesters were disrupting foreclosure auctions and foreclosure proceedings.

It is interesting the mentality of this group of people. I think some legitimately want to make a positive change in this country, though they may be misguided, but others I think just want to be disruptive and be involved in a "Revolution". They may have a romantic idea of what that means. This is unfortunate because they could easily be lead to protest or do anything, whether they know what it is or not. Group mentality can be a dangerous thing.

I have worked foreclosures for 8 years now and I have seen the human side of the business. I have had to evict many good people who were in difficult situations and it is heart breaking. There is a human element to everything and it is not always business as usual. But disrupting the process isn't going to solve the problem.

I would like to know this; if a OWS protester loaned someone $100,000, and that person didn't or couldn't repay the loan. I wonder how forgiving they would be of the debt and how much they would appreciate someone disrupting their ability to collect the collateral on the debt.

http://www.csmonitor.com/USA/2012/0129/What-s-next-for-Occupy-Wall-Street-Activists-target-foreclosure-crisis?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+feeds%2Fcsm+%28Christian+Science+Monitor+%7C+All+Stories%29

Adventures of an REO Agent

Nick Miller (Coldwell Banker Graham & Assoc.) — Tue, 24 Jan 2012 23:18:18 -0800

It was a cold February morning. I was standing on the porch of an old rundown home built around 1920 that had been vacant and abandoned for years. The home was located in downtown Jackson on the appropriately named Hooker St. Right behind me were two guys hired from Labor Finders by the owner of this dump to complete a trash-out of this property.

Now this place was full of trash...up to your knees in feces, old urine stained clothes, porn mags, used condoms, furniture, dead rats, roaches and just about any other disgusting item you could think of. I knew this because I had been in the house a few days before. I didn’t have a key to the place so to gain entry I had to kick the front door in, which I have had to do an many occasions.

Now this door was big and heavy, not like most doors today. This door was made back when thay actually used real wood. It weighed at least 100 pounds. It wasn’t too hard to kick in because it was hanging on by one rusted door hinge. When I left, I just propped it back up on in the frame, which leads me back to where the story began.

So here I am on the porch with the two guys from Labor Finders. I have to show them what all needs to be trashed out. Knowing that the door was just leaning against the frame, I push it over. As the door falls (which seemed to be in slow motion) I notice a candle flickering in the corner of the room. The first thought that registered with me was., “that’s odd.” That was about the only thought I had until the door hit the ground. Shortly after that, I heard a bunch of hollering and screaming. I was so fixated on the flickering candle I didn’t even see the homeless man sleeping in the room right behind the door. Well sure enough, to his surprise, my surprise and the two guys behind me, who were so startled they almost ran down the street, this man’s alarm clock that morning was a solid 100 pound wood door falling on top of him.

Of course the first thing I thought was law suite, then I realized that he didn’t know who I was, and I sure as heck wasn’t about to tell him. I demanded that he put his hands up where I could see them, then drug the door off of him. I asked him if he was okay and if anyone else was in the house with him. He said his partner was sleeping in the other room. The man got up, got his partner and ran out the back door.

I showed the guys all the trash they had to clean out and said, “have a nice day.” Later that afternoon, around 4:30, the Labor Finder guys called me up and asked if I could come pick them up so they could buy some gas to put in their car. It was getting late, they were scared and didn’t want to be in the house after dark. Of course I am the last person that would want to be in the area after dark as well, dressed in slacks and a button down. I would stand out like a sore thumb. But I relented, because I felt bad for the guys. I picked them up as the sun was going down and drove to the nearest gas station.

I let them pump gas into a milk jug as I went in to pay for it. The gas station attendant was standing behind 2 inches of bullet proof glass. He started arguing with this druggie who cut in line in front of me to by a Swisher Sweet because he cut in front of me. He forced him to get behind me. I thought, this is very nice, but your behind two inches of glass and I am standing next to the man. I don’t mind if he cuts. But of course you can’t show fear. So I stepped in front, payed the $3 worth of gas and quickly left the building. As the man who had originally cut in front of me left the building, he preceded to turn around and re-leave himself all over the front door of the gas station. At this point I remember thinking to myself, the few hundred dollars that I will make on the sale of this home isn’t worth all this trouble...but this is the life of an REO agent.

This is an excerpt from a book I am writing called: "Buyers Guide to Foreclosures"

www.nickmiller.biz

Combating Loss Aversion

Nick Miller (Coldwell Banker Graham & Assoc.) — Thu, 19 Jan 2012 18:41:14 -0800

This was originally posted on by business blog at www.nicksbusinessjournal.com, but I thought the underlying principle could be useful and applied to our real estate business...though you may not want to ask your sell to do a money back guarantee or 30 day free trial. But you may want to give it some thought and see how this could be applied to either your sellers, or to your business as you recruit clients.

Loss Aversion Definition - Peoples tendency to strongly prefer avoiding losses to acquiring gains.

Concept: Psychologist quantify the pain of loss to be twice as strong as the joy of gain.

For instance: Lets say your stock portfolio is up this quarter netting $10,000 in gains: You are pretty happy.

Next quarter your stock portfolio is down, losing $5000 in value. You are devastated (and probably ready to find a new investment adviser).

How does this affect your business? Loss aversion applies to all of us; you as well as your customer. Your customer has a finite amount of money, which can either be saved, spent on your product or service, or spent on something else. You are competing for that dollar against all other options they have.

They hate to lose. They don’t want to walk away feeling like the made the wrong decision by spending their dollar on your offer and not the other options. If they fell they make the wrong decision it will far outweigh the feeling of joy or satisfaction they will get from your product of service.

This could keep them from making a purchase in the first place.

How to Counter Act Loss Aversion: Make them feel like a winner.

Offer a guarantee of free trial (two potential options).

A money back guarantee will help alleviate their fear of loss because they know that they could simply return it if the do not like it.

A free trial will allow them to test the product before buying. If they like it they will buy it knowing that they are getting good value for their money.

www.nickmiller.biz

New Year. New You. www.livefitandhappy.com.

Hide notes

Foreclosure isn't always a 4 letter word

Nick Miller (Coldwell Banker Graham & Assoc.) — Wed, 11 Jan 2012 22:32:16 -0800

This is an excerpt from a book I am writing called: "Buyers Guide to Foreclosures." I would love to hear from the AR community regarding feedback, comments or suggestions on the below statements.

Now, I want to challenge your assumptions for a moment by making a statement that may seem counter intuitive or heretical: foreclosures aren’t necessarily a bad thing, and banks aren’t necessarily bad for foreclosing on a home (a view you may argue with if you have been foreclosed on). Because of the banks legal ability to foreclose on a home, you and I are able to obtain a mortgage. Think about the difficult, or necessary requirements, to get a loan if a bank could not use the property you were borrowing against as collateral. The home is what gives us the leverage, and the bank assurance, to make the loan.

Please keep in mind that I am not an advocate for the banks or foreclosures. I just want you to have a healthy and balanced perspective. The media and others can demonize banks because of the current housing crisis and increasing number of foreclosures, but they don’t always paint the whole picture.

Not all foreclosures are due to corruption and fraud, though that certainly did take place (for more insight into that I recommend Michael Lewis’s book “The Big Short”, which is mentioned later in this book). Sin has been in this world since the fall of Adam and Eve, and there are some who prey on the misfortune of others. But most foreclosures are legitimate, legal and necessary in order for banks to maintain the ability to offer loans (be it for homes, cars, business, etc.) to all of us. As the saying goes, we can’t have our cake and eat it too (which is a misinterpretation of the original saying; we can’t eat our cake and have it too).

However, I would rejoice in the day when foreclosures are no longer necessary because everyone has the means to afford and pay for their homes (and not because the government regulates housing). In that event, I may be out of a job, but I could only imagine that, in that scenario, there would be plenty of work and money to go around and I would happily find something else to do.

Using a FHA 203k Loan to Purchase a Foreclosure

Nick Miller (Coldwell Banker Graham & Assoc.) — Sun, 08 Jan 2012 22:52:13 -0800

This is an excerpt from a book I am writing called "Buyers Guide to Foreclosures" (generic title but to the point).

Financing can be a major hurdle for some buyers wanting to purchase a foreclosure because of the condition of the home, which may keep it from qualifying for conventional or traditional FHA loans. The 203k is a great option. I encourage all agents to familiarize themselves with this loan program.

There are two types of FHA 203k loans. There is the Streamline and the Standard.

The Streamlined is used for homes that need minor repairs such as replacing a roof or flooring, interior and exterior painting and HVAC system replacement or upgrades (doesn’t really sound like minor repairs). This loan has a maximum rehab limit of $35000 with no minimum. Therefore, you can make repairs that cost as much as $35000 or $5 - but you really wouldn’t need the loan if you only plan to make $5 worth of repairs. The rehab funds are placed in an escrow account with half dispersed to the contractor up front and the remaining funds released after the repairs are completed and inspected.

The Standard 203k is for homes that need major repairs such as structural and/or foundation repairs, adding a room to the home and major landscaping improvements. With this loan, the total rehab cost must be greater than $35000. There is a $5000 minimum of eligible repairs or improvements required, such as structural repairs, termite damage, etc. After the initial $5000 is met, the remainder can be used for cosmetic repairs and upgrades. Again, rehab funds are placed in escrow and are released as repairs are completed and inspected. The Standard also allows up to six months of your mortgage payments to be included in the rehab costs if the Housing and Urban Development (HUD) consultant determines that you must be displaced during the repairs.

The 203k loans can be used to purchase a 1 to 4 unit residence. To qualify the borrower must occupy the home as their primary residence. Maximum loan limits are based on property type and location. Also, luxury items such as installation of a swimming pool, hot tub or barbecue pit are not eligible.

A Lesson for Sellers

Nick Miller (Coldwell Banker Graham & Assoc.) — Thu, 05 Jan 2012 18:32:00 -0800

I am still reading through "The Personal MBA" by Josh Kaufman and came to the chapter on finance. In this chapter, he has a subsection on Value Capture.

In that he states: "Value Capture is the process of retaining some percentage of the value provided in every Transaction."

There are 2 approaches to Value Capture.

1. Maximization approach - attempt to capture as much value in each transaction as possible.

2. Minimization approach - capture as little valure as possible, as long as the business remains Sufficient.

I think most people default to approach number 1. But there is a danger in that.

Kaufman explains: "When something is a "good deal" customers tend to continue to patronize the business and spread the word to other potential customers. When a business tries to maximize revenue by "nickel-and-diming" their customers or trying to capture too much value, customers flee.

As long as you're brining in enough to keep doing what you're doing, there's no need to fight for every last penny. Create as much value as you possibly can, then capture enough of that value to make it worthwhile to keep operating."

Is there a lesson here for sellers? I think so. While a seller is not building a business, they are still selling a product (their home). And in order for any sale to take place their must be a customer willing to purchase their product.

Now obviously sellers are not worried about re-peat customers. Most of them just have 1 home to sell. But they do need to worry about the 1 customer, who still makes their purchasing decision based on whether the home they are buying has more value to them then their money. And customers do buy based on whether they perceive that they are getting a good deal or not. Trying to capture all of the value from a sale takes away value from the purchase, which in today's market, will cause a buyer to speed walk away from a deal, especially if they have a good buyer agent representing them.

I have heard it said that we judge ourselves based on our intentions and others based on their actions. Beware of a seller that will nickle and dime a buyer to death on the sell of their home, then expect a good deal on the next home they purchase.

The Value of Agency

Nick Miller (Coldwell Banker Graham & Assoc.) — Sun, 25 Dec 2011 13:56:44 -0800

Another excerpt from The Personal MBA: by Josh Kaufman.

Agency as described in Kaurfman's "Twelve Standard Forms of Value"

"Agency involves the marketing and sale of an asset you don't own. Instead of producing value by yourself, you team up with someone else who has value to offer, then work to find a purchaser. IN exchange for establishing a new relationship between your source and a buyer, you earn a commission or fee."

To see complete list of 12 visit: http://book.personalmba.com/12-standard-forms-of-value/

visit my page at www.nickmiller.biz.

Merry Chirstmas.

Basic Principles and Models for any Business.....including Real Estate

Nick Miller (Coldwell Banker Graham & Assoc.) — Thu, 22 Dec 2011 10:04:48 -0800

I am an avid reader and love books on business and history. I have ready a lot of good books, and a lot of bad books. I recently picked up The Personal MBA: Master the Art of Business by Josh Kaufman (I couldn't recall from high school English if I am supposed to italicize, underline or put in quotations the title of a book). I am on page 15 and have already found great value in this book, and can that it is going on my recommended reading list. I wanted to share an excerpt from the book that outlines the basic business principle's, which can even work for real estate.

"very successful business (1) creates or provides something of value that (2) other people want or need (3) at a price they're willing to pay, in a way that (4) satisfies the purchaser's needs and expectations and (5) provides the business sufficient revenue to make it worthwhile for the owners to continue operation. pg 15

Continued on pg 15: "As I deconstructed each of those factors, I found additional universal requirements. Value can't be created without understanding what people want (market research). Attracting customers first requires getting their attention, then making them interested (marketing). In order to close a sale, people must first trust your ability to deliver on what's promised (value delivery and operations). Customer satisfaction depends on reliably exceeding the customer's expectations (customer service). Profit sufficiency requires bringing in more money that is spent (finance)." The Personal MBA: Master the Art of Business; Kaufman.

To see my entire reading list and recommended books visit my LinkedIn profile at http://www.linkedin.com/in/nicktmiller

www.nickmiller.biz.

Living in a Dead Zone

Nick Miller (Coldwell Banker Graham & Assoc.) — Sun, 18 Dec 2011 22:14:43 -0800

Imagine being one of the first home buyers to purchase a home in a new subdivision where the developer has plans to build out at least 100 homes, only to go broke shortly after your purchase, leaving the neighborhood a virtual wasteland. There are several neighborhoods in my area where this was the case. Maybe 10% of the projected homes were built out, the rest are just vacant, overgrown lots.

Let's say the value of your home was $200,000 when purchased. But that value was largely based on the assumed completion of the neighborhood. But now that development has stopped way short of completion, and no one is wanting to purchase in your subdivision, you values have been cut in half. So you have a home worth $100,000, which most likely no one would want to buy, and a mortgage around $200,000. What do you do? Would you walk away?

That is an interesting dilemma. And a real story. CBS 60 Minutes just profiled 6 neighbors who are living this situation: http://www.cbsnews.com/8301-18560_162-57344513/there-goes-the-neighborhood/?tag=cbsContent;cbsCarousel

Interesting, though, out of the 6 profiled, only one walked, and the was because of medical issues which kept her from making the payments. One of the neighbors made the profound statement that, even though her homes value declined by 50%, she was still going to pay the mortgage because she was still able to pay. The decline in her homes value didn't affect her ability to pay the mortgage that she agreed to when she closed on the loan.

Also in this article, which profiles the city of Cleveland, Ohio, it states that city officials have already demolished 1000 vacant homes and plan to demolish another 20000 in the future. That has to make quite an impact on a community.

www.facebook.com/jacksonmsforeclosures

Foreclosures in the Market. Is There Recovery Insight?

Nick Miller (Coldwell Banker Graham & Assoc.) — Thu, 15 Dec 2011 09:19:06 -0800

When will the market recover? I guess that depends on who you talk too, but in my opinion, not soon enough. I found this interesting article on cnbc at http://www.cnbc.com/id/45507581. It states that "the average loan in foreclosure has now been delinquent a record 631 days." That is a long time for a loan to be delinquent.

This article also states that foreclosures are at an all time high at 4.29 percent of all active homes and that new foreclosures are outnumbering foreclosure sales 3:1.

So what does this mean? It means that foreclosures will continue to flood the market for years to come. There is a large shadow inventory building, and, as more delinquent borrowers are allowed to stay in their homes for extended periods of times, other borrowers who are fighting to keep up with the mortgage may decide to take their chances with foreclosure and live in their homes rent free for 2 years or more.

But that news isn't all bad. It could mean great buying opportunities for home buyers and investors. It is also a good time to learn to sell foreclosures as a real estate agent, which I can help with as I have written a course on REO Agent Fundamentals. If your interested in the material, let me know.

www.nickmiller.biz

Sick and tired of being sick and tired? Visit www.livefitandhappy.com