Posted on

Submitting a very low offer on an REO, agent perception

Question:

Hello Tony,

Thanks for your excellent “tip” after the Inland Empire Investors Forum meeting in Corona about pursuing the REO Pendings, instead of the Actives, for any that fall out.

I have one question that I hope you can lend some perspective on.

If the REO Broker’s lender accepted the high, over-listing offer that keeps happening in Moreno Valley on the homes that I’m making offers on… what is the conversation like with the REO Broker when I can still only offer 65 percent of ARV minus repairs, and that isn’t very close to the listing price… lower than probably several other all cash or hard money offers they got the first go-round?

Obviously, your brokers call you and they know what you’ll pay. I am dealing with these brokers for the first time, as I will not use my buyers agent. I’m going to be asking these REO brokers (or their own buyers agent) to write up my offer directly if the pending sale falls out… but it will more than likely be much lower than the asking price.

Because of the over-bids on low REO inventory, I get the feeling I would be upsetting them or getting off on the wrong foot with them with the TNG offer I need to make.

Just curious how you perceive that conversation if you were me (essentially unknown to them), how you think that would go, and is it a risk for the first impression or relationship building you teach in your course.

Also, as I mentioned, I’m interested in your small group mentoring program when you get it up and running again.

Thanks for your consideration.

Best regards,

B.S.

Answer:

Sorry it’s taken so long to get back to you. Here’s the short answer, I never worry about how an agent “feels” about my offers or me, for that matter, that’s counterproductive. Next time you’re speaking to an agent, start the conversation with a question. Ask them this, “If you’re listing a property for sale, and you had one of these two offers to choose from, would you like the highest offer or would you like the one that’s going to close escrow?” Obviously, they would love to have the highest one close escrow. But, in today’s market that’s far from reality. There are just too many hurdles to clear from the moment the offer’s accepted to that closing that can screw up that deal. It’s not your job to educate experienced brokers and agents. But unfortunately, that’s exactly what you end up having to do. And this is exactly the reason why I place such importance and emphasis on you staying on top of the specific day to day changes affecting your target market.

40.5% of buyers could not secure a mortgage. 36.5% of buyers changed their mind. 5.6% of buyers did not have a down payment. 0.0% of owners decided not to sell. And a whole bunch of other ones ran like hell once they figured out how much they’d have to spend on fixing that house.

Do yourself a favor, stop worrying about all the other offers – cash or otherwise. Focus your attention on the numbers that you need to hit so you can secure a profitable deal. Stop listening to your mind giving you all the reasons and excuses why everyone is going to hate you. If I’ve said it once, I’ve said it a million times,
“your mind is not your friend.” – Vernon Howard.

Focus on providing a solid offer that you can stand behind and close on without hesitation. Make sure that you remind the agents you’re working with of the percentage of fall outs that are presently being experienced in the market due to all of the reasons that I’ve already stated. Over time, this is what will give your offers their strength and solidify your deals.

This may take a little bit of time and some effort on your part. But just like any other mental conditioning, it’s your job to consistently remind them of the nightmare of accepting a supposedly “higher, better” offer that will, more than likely, crash and burn, in exchange for your superior offer that WILL close escrow and secure them a commission check.

Piece of cake, right?

Best,
Tony

Posted on

Banks not looking at offers less than 85% list price

Question:

Tony:
I am following your course more or less to the letter and made some good listing agent contact. I have to admit I am surprised how these guys are surprised to have me come to their office and just chit chat about general things rather than fly in saying I am an investor and need some good deal. I have never come into their office and said I was an investor and that really seems to take tension down a notch or two. Of the 3 I have met one has already asked me to come again for lunch and he was putting me on his 1 call list. I also have a couple of cash buyers and made a few offers. I am stoked!

One thing all the agents have told me though is the banks (fannie mae) won’t even look at an offer less than 85% of the mls list. The properties I am looking at are for the most part not the ones just on the MLS but older properties and have either been a BOM or had price reductions. Have you faced this “nothing less than 85%” threshold? I am going to keep doing what I am doing but not spend time on the fannie mae and freddie mac properties.

D

Answer:

D, I LOVE YOU! YOU’RE DOING A GREAT JOB! It’s wonderful to see when somebody gets it! It’s not that complicated, is it, D? It’s not like we’re reinventing the wheel here.

The 85% thing is real. However, so are the deals that fall between the cracks. The bottom line is this, all listings that do not sell during the initial listing period MUST be reduced until sold – NO EXCEPTIONS! No one at the lenders office owns this property personally. No one at the lenders office holding the title to this nonperforming dead asset gives a hoot about holding onto this pig longer than they have to, that property has got to be sold at some point. And that always occurs when the listing price is lowered enough to motivate someone to pay for it.

Now here’s the thing, every time an REO listing sells, what I mean by that is goes pending, and then falls out before the close of escrow, the asset manager’s as well as the listing REO broker’s motivation for liquidating that property increases at an alarming rate. When a deal falls out of escrow that’s the time that the REO agent and asset manager are most highly motivated to cut listing price and accept concessions to get rid of that property. And if anyone tries to tell you any different, they are full of crap.

You have to make a lot of offers at your prices, meaning, at prices that make profitable sense to you as an investor. Always respectfully, intelligently, and calmly explain to the listing agent or your buyer’s agent how you’ve arrived at your final offer price. Always remember that if an REO listing agent is hinting at the fact that they do not want to submit the offer on a Fannie Mae or Freddie Mac listing because it is not within the 85% of listing price AND you know that number will not work for you, it is important that you explain to the agent not only that that price doesn’t work for you but that you are still interested in purchasing that property once it is reduced to a reasonable listing price. Remember to always leave the agent with those words “I WILL BUY IT.”

One final note, please remember that all of these regulations, these 85% rules, these 90 day restrictions will all get kicked to the curb sooner or later. The problem is we never know how or when. Here is what I do and I suggest you do, stay the course. Ignore the chatter, be aware of these senseless stupid rules and regulations that they keep adding and removing faster than you can spell them. In other words, this market, if anything is fluid, ever changing and will eventually turn completely to our benefit as investors. And the only reason this will happen is because the lenders are completely motivated by greed and self-interest. This is the only thing that you can absolutely unequivocally rely on. These guys will hand us their butt on a plate when they finally realize that is what will put the most money in their pockets. How do ya like them apples?

Big Hug
Love,

Uncle Tony