Why That REO Agent Won't Call You Back

You know the sang "it's not about what you know, it's about who you know"?

Never more true than in a market with limited supply and high demand.

Consider the following scenario:

You're an REO agent. You have a property that is deemed "a good value" by cash investors, financed investors, retail buyers, and wholesalers (in order of people you would prefer to work with). Upon uploading the property to the MLS, you get calls upon calls requesting silly information on the property, like what bank owns it or how long it sat vacant. You get even more emails from people asking if the property is still available. It doesn't make sense to call or email any of these people back, because your time is better spent focusing on your listings that aren't selling, not the ones that definitely will sell.

Within a few days, you have 20 offers, most of them over the listing price, 6 or 7 of them cash. One of these will ultimately be accepted and will close. If it doesn't, one of the others will close in its place. If the other offers came from an agent, they aren't your buyer, and they probably aren't worth following up with. If they came directly from a buyer, you have determine whether or not you should spend time with this person. If they have "real cash", then maybe they will get a call back from an assistant. If they don't have "real cash", then its not really worth your time as an REO agent trying to chase down some silly novice investor who thinks they are going to assign a contract.

So why does it matter who you know? Because it matters who knows you. If you're an REO agent, or any agent with a compelling listing, you want to know that the offer that gets accepted will close. How do you know that? Because they closed before. AM's will bring you their good stuff when they know you will ALWAYS perform. Not most of the time. Not this one time I screwed up because I didn't have the funds liquidated from my uncle's super secret safe investment program yet. ALWAYS.

If you have "real cash" and can develop the reputation as someone who will always close, you will get callbacks from REO agents, I promise. You might even get some interest from the AM's that are pulling their strings, wondering what crap they can dump on you, knowing that you'll probably close on a lemon every now and then just for the relationship.

All in all, if you look at things from everyone else's perspective instead of just your own, understanding REO agent psychology (and life in general) gets a lot easier.

Why Zillow is Stupid

I have seen from time to time people, sometimes even Realtors, include in a blog or forum post that they use the Zillow "Zestimate" as a baseline of value, "and then do their own analysis".

Very little makes me more frustrated than statements like these, for a number of reasons. First, because the Zillows/Trulias/Cyberhomes of the world do not exist to provide relevant and accurate valuation models, they exist solely to aggregate consumer information by providing wildly inaccurate estimates and calling them "data". This is at best, misleading, and at worst, detrimental to the industry.

However, it is often difficult to find a concrete example of Zillow's inadequacies to prove to their users how wrong the Zestimates are, again for a couple reasons. First, because valuations are subjective and even those trained in valuing property rarely come up with the exact same valuation for a particular property. Second, because the type of people that would think to use Zillow for a valuation are by definition not sophisticated enough to understand why they are wrong, and thus it is difficult to make logical points to them.

During my bi-weekly run along the beach, I usually take a glance at the current housing inventory, to see which (if any) of the oceanfront homes have come on the market, had their price reduced, etc. Yesterday, it hit me that there was a vacant lot on this path, and that I should look up the Zestimate on a vacant oceanfront lot, just to see how far off they were.

Here is the link:

http://www.zillow.com/homedetails/614-W-Oceanfront-Newport-Beach-CA-92661/25134676_zpid/#{scid=hdp-site-map-bubble-address}

What you'll notice is that while Zillow is smart enough to pinpoint the exact address, it is unable to determine whether there is actually a structure on the land. Thus, it has valued the vacant land as a 3/1/1500, and gives it a value of $1.075 M.

Is that the kind of AVM you want doing your ARV calculations for you?

I Love Listingbook

Did the amorous alliteration get your attention? I hope so, because very rarely do I get excited about technology, and even more rarely is the technology I'm excited about so simple I can actually explain it to someone else.

Listingbook is, to me, the best real estate tool around. Much is made of the various AVM sites (Zillow, Trulia, Cyberhomes) and there is plenty of advertising done by self-interested data providers Realtor.com and Redfin. Ultimately, however, the real test of a site is how quickly does it aggregate data and update its feed, while respecting your privacy. It also allows you to build precisely the type of relationship you want to build with your Realtor. The kind of relationship where you interact and ask for their opinion and expertise on only properties you specifically are interested in. Specifically not the kind of relationship that has you hounded constantly with information you don't want and didn't ask for. It is the perfect link to keep licensees accountable give their consumers access to the best information source available.

Listingbook also gives you a great deal of information when you are selling your home. You have access (again, real time) to the competition, so that if your neighbor drops his price, you will know as soon as all of the other agents out there. You also will know exactly how many buyers with Listingbook accounts have search criteria that matches your property, and also how many times one of those buyers views your property or selects it as a "favorite".

Lastly, Listingbook is even useful if you aren't actively buying or selling property. If you own a home, and want to know what the value of it is, there aren't a lot of great options currently at your disposal. You can go on to Zillow, where you will know the value of your home within 30% of what is accurate, or you can go to your local Realtor who will give you a more accurate value, but may or may not pester you about how this is a good time to sell and how you should obviously list your home with them. Listingbook can provide the same data the Realtor can without the unwanted sales pitch.

So, if you've read this far, you know that I obviously feel strongly about the product. It is free and a value-add, and all you have to provide is a name and email address. So if you would like this service, please contact me however you see fit and I will get you squared away.

Is McMonigle a Black Swan?

First- let me point out that I certainly don't mean to assert that John McMonigle and Natalie Portman have anything in common, and in fact I have not yet seen, nor intend to see the movie "The Black Swan".

What I do mean to reference however is Nassim Taleb's "The Black Swan", which to summarize (probably inadequately), details the probability of world-changing events, the unlikelihood of accurately predicting said events, and how it is human nature to try to explain the events by looking at all of the evidence that could have caused them to be "predictable".

What McMonigle has done in has career is no doubt extraordinary. One need only Google his name to find the accolades and accomplishments he has to display. What this week's events do call in to question however is at what cost he achieved this greatness. Who did he need to take advantage of, swindle, or steamroll over in order to get into the position he is in, or was it completely on the up and up?

Not having accomplished anywhere near what McMonigle has (although in fairness I've had far fewer years), I certainly cannot sit in a position of judgment of results, only a position of judgment of character. What seems to overwhelmingly be the reaction is that his refusal to service debt is not in fact his "business savvy", nor is strong-arming those to whom he is indebted a particularly good strategy. It is simply the inability to service debt. Almost as egregious an error in business acumen was the seemingly insatiable appetite for expansion- which in turn ultimately led to his two biggest failures: Villa Del Lago and the HQ.

Maybe I'm wrong. Maybe years of blood, sweat, and litigation later, McMonigle will be vindicated, OneWest Bank will finance the completion of Villa Del Lago, restructure his debt on other properties (including the office), and all will be "right" again in Orange County Real Estate. There is something to be said for the fact that despite all the negative press, he is still the premier agent in Orange County with listings that most of us "plebians" could not fathom in our wildest, tiger's blood induced fantasies.

What is relatively clear is that he is not a particularly good developer. Then again, neither are many of the developers who have folded since the bubble. Development isn't easy. There is a lot of uncertainty, and every now and then lenders will sometimes do annoying things like cut off your funding. Usually, however, the trait that a lot of successful developers have in common is that they are perceived to have the utmost integrity. The idea being, of course, that it is their integrity that facilitates their success, and not the other way around.

So that leaves us with a question. Are these accusations of thievery, financial ruin and underhanded business dealings a public attempt to explain a black swan? Or are they a legitimate summary of the actions that took place during McMonigle's meteoric rise to some combination of prominence and dominance, while he was able to fool the public into believing he had the sterling reputation and integrity that were the backbone of his success?

While probably only John and those closest to him know for sure, it will be interesting to see how this unfolds.

The Bank Wants Your "Highest and Best"

We've all been there.

You have finally found that perfect property, and despite it being at the upper end of the acceptable price range, you go for it. You're all in, short contingency period, 20% down, 30 day escrow and a full price offer.

Then you are excited to see the listing agent's phone number come up on your caller ID. "REO broker's don't bother to call everyone back, your offer must be receiving serious consideration" you tell yourself as you mentally prepare to subdue your jubilation of potentially closing on this property.

Then you hear "Hi Jake, we've received your offer on 24 Avocado Ln, we would like you to submit your highest and best offer. This is a multiple counters situation."

Crap.

All of the hard work you go through to find your client this property is now for naught because some idiot is going to overpay for it. Or maybe it is just you, and the multiple offers are bogus? OK, OK, let's raise our offer by 10% just to make sure we get it.

Whoops. That's exactly what the bank WANTED you to do! The "Highest and Best" tactic is a perfect example of why you should decide what the top number you're willing to pay for a property is BEFORE ever making an offer. That way, no matter what tactics are used in the negotiation, you will never go over that number. It's kind of like setting a pre-determined limit when gambling. So, decide what your ceiling is, and either offer that initially, or be willing to go up to but not over it, and you'll never have to worry about the "highest and best" trick again.

-Jake

The Real Estate Investor/Agent Manifesto

Over time, one sees that there is much of an opportunity for friction as there is for synergy amongst real estate investors and real estate agents. I'd like to share my thoughts on the matter below, with regard to the responsibilities of each party.

Investor Responsibilities

1) Define your criteria. Are you a buy and hold guy? Are you a flip guy? Both? What's your budget? Are you cash or financed? Are there any areas you won't touch? Are there areas you'll pay a premium for?

2) If I send you a property, and you don't like it, tell me why. I wouldn't have sent it to you if I didn't think it would be a good fit, so just telling me "pass" isn't constructive. Telling me precisely what about it you don't like will help me avoid properties like that in the future, and save both of us time.

3) Be able to close. Whether you are cash or financed, bailing on an escrow is going to suck for everyone. If you legitimately get new info during inspections and want to back out, that's totally acceptable. But if you just want to back out because you got cold feet or you couldn't find the money in time, that's not really a good use of anyone's time.

Agent Responsibilities:

1) Be discerning. A 4 bedroom SFR is not a 3 bedroom townhome no matter how much you want it to be. Nor is a neighborhood necessarily similar to surrounding areas. Don't twist an investors desires to meet current market inventory.

2) Be innovative. Anybody can access the MLS, but calling canceled listings, withdrawns, expireds, and sourcing pocket listings in your own ways are vital to finding deals ripe for the picking. Having good relationships with REO brokers helps here too.

3) Understand your client's schedule and motivations. If he can't be there to see the property and you think it will go quickly, then YOU be there and bring a video camera.

4) Don't make your client wait on you, but don't flood him with information either. Be in touch with your client precisely as often as he wants to hear from you, but not more than that.

5) Don't forget that women invest in real estate too. Using solely male pronouns in a list of responsibilities is a surefire way to piss a lot of female investors off. Whoops...

Would you read an e-book on "How to Buy Real Estate?"

At a family holiday dinner, a writing sample of mine from long ago was passed around as it detailed my family's history and lineage, sparking a number of interesting conversations.

After everyone had been able to get their two cents in about their holiday dinners, my aunt suggested I begin writing as everyone appreciated my writing style. Since the two things I know the most about are real estate and football, and there are already a lot of well established writers about football, I thought it might be interesting to give this a try.

Would you, specifically as someone who already goes online to find out information about buying a home, want to purchase such a book? How long should it be? What would you want covered? What might you pay (if anything) for such a book? How important would interactivity with the author be (i.e. the ability to ask for clarification or elaboration in real time)? Would you see the benefit of this as opposed to the various blog sites available?

All thoughts and criticism are appreciated.