Presenting a Short Sale to a Homeowner

Well the economy has changed and seventy-five percent of the homes are upside down (term of art which simply means that the mortgage is higher than the market value of the home) and our locators run into homes that we can not purchase unless the banks will take a loss. So how do you get a homeowner to agree to take a short sale on a home?

One of our locators has had the opportunity to perform two short sales during the month of July both were signed by the homeowners. This article will focus on the basics of a short sale from the locators view and the packaging of the short sale to the homeowner.

What is a short sale?

A short sale (sometimes known as a pre-sale by the banks) is a loss mitigation technique for the banks that allows them to move the property without having to foreclose upon the property. Yes the bank will lose some money and may need to get permission from the insurer on the loan to allow a short sale, but the bank is looking at it as less money lost than would be if they were forced to foreclose and then sell on the open market.

In our first example the homeowner had listed her property on the market for $299,000.00 and had lowered to $270,000 130 days later. The listing had expired by the time it came into the system.

We first placed it in our system on July 20, 2006. Administration thought that the house had equity. Last sale of the house was in 1992 for the sum of $128,000.00 dollars. The same owner continued to own the property. It was placed in a route first visit was on July 22, 2006 at 10:30 in the morning. Locator met the homeowner and scheduled a presentation for Monday July 24, 2006 at 10:00 a.m.. Based upon the note of the locator more research was completed on the property ( an index and rehab budget). It was the position of administration that the property had a value of $265,000 fixed and that if it could be purchased for 156-165,000 it would be a good deal. The locator visited the home on the 24th and wrote the following note:

Visited 7/24/06; 10:15AM. Presented HO with Fresh Start Program. Secured release; faxed to Admin. HO indicated that she will be 4 months arrears @ end of July. Monthly mortgage is $1700. Principal due is $209K before fees. HO indicated that the furnace is defective and will need replacement. Current system is steam by oil. Oil tank is in the basement and appears in good shape. Basement is unfinished, stone foundation with cement floor. Basement was wet; not flooded. Difficult to photo because there were no lights that worked. Water is probably due to the failing/rotted bulkhead door. There is no inner door leading out to the bulkhead. Clutter everywhere. HO indicates that the roof was redone 5 years ago. No leaks were observed except around the primary entrance. Some damage due to a problem with the gutter backing up. Entire yard is knee deep in grass. House is surrounded by overgrown shrubs. Interior is primarily open living. Windows – sill rot. One bathroom – needs rehab. Kitchen – cabs are in good shape; gas stove; no overhead range. Don’t recall seeing a dishwasher. Wood floor is in good shape on main floor. Basically, two bedrooms with an oversize utility room that could be made into a third. All carpeted and will need replacement. Ceilings and walls in good shape. Addition is a huge room that needs new floor as well as paint. Deck appears to be in good shape. Above ground pool – liner intact, cover is destroyed. Not sure about the pump and filter. HO did indicate that the septic needed replacement. fireplace on the main floor is used regularly. Not impressed with the wood stove in the “Great Room”. Roof line between the Main house and the addition has a visible seem. Poor construction. Property has potential as a good starter home I suspect. Certainly a stretch to call this a “3 bedroom”. No clean way to set up a 2nd bathroom or a laundry room without major rehab. Could be wrong.
Based upon the note we now knew that we needed to purchase this property for under what is owed. We needed to do a short sale. On July 27, 2006 the documents were placed up on the site for a short sale at a pourchase price of $155,000 plus 10,000 in a bill of sale for the fixtures in the house.
The locators presentation was scheduled for the following evening at the homeowners brothers house. The locator spent at a minimuim of one hour preparing for the meeting and took portions of the short sale memorandum, the index to complete a package for the homeowner to review while he discussed the pricing f the property.

From our conversations with the locator he started with the purchase price of the home in excellent condition being $265,000.00 dollars. Once the homeowner agreed that was the purchase price he went through the list of things that needed to be fixed. (deferred maintenance) Septic system and the cost of replacement. Heating system and the cost of replacement, paint of the interior and exterior. Windows etc. The homeowner agreed that the cost of the rehabilitation of the property should reduce the selling price to a minimum of $225,000.00 dollars. With that and a brokers fee the homeowner would walk out with little to no equity.

The locator then explained our short sale procedure and what it would net the homeowner if we were able to get the bank to agree to the process. Here the homeowner would receive $10,000.00 dollars for her dishwasher, washer and dryers and other personal property in the home. Consequently, the homeowner signed the deal because it was netting her more money than a regular straight sale.

OSRAM – The Five Components of an Effective Presentation – Part 2 of 5 the Speaker

How do you give an Effective Presentation? What makes the difference between an average presentation and an effective presentation? This is Part 2 of 5 focusing on The Speaker.

There are five main components of an effective business presentation. The acronym OSRAM should help you to remember them and help you to light up your audience. The five components are:

  • The Objective
  • The Speaker
  • The Room
  • The Audience
  • The Message

You should consider each of these components in turn to maximise the effectiveness of your presentation. Neglecting any individual component can ruin an otherwise successful presentation. Put them together correctly and you will turn on a light in people’s heads; brighten up their lives; get your audience to see and understand things, about which they were previously in the dark.

This series of articles looks at each of these components in turn and discover what needs to be done to ensure the success of that component.

The Speaker

That’s you! Like it or not if you are giving a presentation you will be judged. Knowing that you are being judged is often a major factor in why people are nervous about giving a presentation. It is a perfectly normal reaction. My advice is to recognize that you are nervous, tell yourself that it is okay to be nervous and that it is perfectly normal to be nervous before a presentation and then try to put it to one side and get on with the presentation.

The biggest factor in your success as a speaker is your confidence. If you are confident you will come across far better than if you are timid and nervous. One technique to improve your self-confidence before a presentation, is to say aloud the following statements, preferably before anyone else arrives in the room:

‘I am poised, prepared, persuasive, positive and powerful.’

‘I feel composed, confident convincing, commanding and compelling.’

Write these two phrases on your first Cue Card. Say them aloud to convince yourself that they are true and you are more likely to give a confident, effective presentation.

Confidence is all a matter of self-belief. You need to believe in yourself and you will be more confident, and come across as confident. Do not over do it though. Do not talk down to your audience they will never forgive you!

Eleanor Roosevelt said, ‘No one can make you feel inferior unless you agree with it’.

As perception is far more important than reality, looking confident can mask an awful lot of nerves that are bubbling up under the surface. The aim is to look like a swan gracefully gliding across the top of the water, keeping the feet, which are paddling like mad, hidden from view. Like the majestic swan, how you look and how you dress are very important in instilling that confidence in yourself and in your audience.

Look out of place because of the way you are dressed and it will affect how well your message is taken. Although many businesses have a dress down policy these days, if you are presenting to a business audience it is usually advisably for a man to wear a suit and tie and a lady to wear a suit or similar business attire. Shoes should also be polished, as it is surprising what assumptions are still made about a person in business, based on the state of their footwear.

When you are addressing a group of factory workers who are all dressed in overalls and you want to influence their behavior, then a more casual appearance may be beneficial. You may want to appear less like one of the managers and more like one of the team. Every situation is different but there is never an excuse for not worrying about it.

By wearing clothes that make you feel good, it will help to boost your confidence. Looking good is just part of it you also need to sound good. This means three things:

  1. Speaking loudly enough so that people can hear what you are saying.
  2. Speaking clearly enough so people can understand the words that you are saying
  3. Omitting unnecessary words, grunts and groans.

When you are projecting your voice, you use your diaphragm. This is completely different from shouting, which is achieved through muscles in your neck. It should not hurt to project your voice unlike it does if you shout too much.

Finally, the most comforting thought to have before a presentation is that your audience want you to succeed. From the very outset, they are on your side. It is very rare to have an audience who does not want you to succeed, after all why would they be there. Why would they want you to waste their time listening to someone who is a poor presenter or who does not have anything worth listening to. So go give it, with enthusiasm, emotion and energy.

Negotiating the Best Price on a Home

Nobody wants to pay too much for something, especially something as expensive as a home. No doubt you have friends or relatives who always seem to get great deals. What you should recognize is that there are proven tactics to negotiations, ones you can learn that will help you get a good deal on a home.

Have you ever heard the old saying, “don’t go grocery shopping on an empty stomach”? Very simply, it means that you shouldn’t put yourself in a situation where you’re apt to buy without thinking. This is very important if you want to negotiate a good price on a home.

The best time to buy a home is when you don’t absolutely need to. You won’t be feeling pressured to get a house before you have to move out of your existing home. When you’re not feeling pressured, you’ll be able to clearly spot a deal, and you’ll feel more comfortable walking away from negotiations that aren’t going the way you want them to.

Of course, in order to spot a deal you have to know what the going prices are. If you’re looking to get the best price on a house, spend some time researching homes that have sold in the areas you’re looking at. Pay particular attention to the homes that most closely resemble what you’re looking for.

Obviously, the best time to buy is in a down market such as we’ve seen in 2007 through 2009 (and maybe beyond). There are many times, though, when certain areas of the country are experiencing depressed prices. These times are to your advantage as a buyer.

When you’ve found a home you’re interested in, and you know its approximate value compared to other homes that have sold, you need to size up the seller. Is he wiling to negotiate? If not, it may be due to a few reasons: he isn’t strongly motivated to sell; he’s reduced his price as much as possible already; or he’s just being stubborn. If you don’t think the home is priced fairly, and the seller won’t budge, walk away. Chances are you’ll still see it on the market months later, and the seller will probably be more inclined to haggle on price.

Negotiating the best price on a home shouldn’t be a negative experience. In fact, the more pleasant the transaction, the more likely you are to get the best deal. The art of negotiating involves making the seller feel as though he’s winning, even if he isn’t.

Perhaps you’ve experienced this when buying a car. The sales person is ultra-friendly, comes across as being on your side, and wants to be as helpful as possible. When you make an offer on the car, though, the sales person has to “run it by the sales manager.” All the sales person is doing is letting the sales manager be the bad guy, and letting him say “no” to your offer.

You can do the same thing when negotiating a home price. Do your best to get concessions from the seller, then say that you need to run it by “the boss.” The boss could be your spouse, your father, your realtor, or just some imaginary person you created on the spot. The point is that you want to let someone else say no to the seller’s offer, while you remain his friend. If the seller has already made some concessions to you, there’s a good chance he’ll make more to satisfy “the boss.”

If the seller agrees early on to a price you think is good, don’t accept it right away unless you absolutely have to. Remember, you want to make the seller think he’s winning the negotiation. By accepting right away, you’ll make him wonder if he’s made a mistake. If you come back with a counter offer, he’ll likely think that he’s still winning, and may be open to reducing the price further.

Your demeanor is an important factor in negotiations. Most people talk too much after the other party presents an offer. It’s much better to say something along the lines of, “you’ll have to do better than that,” then wait to see what the seller has to say.

Contrary to what many people think, your demeanor shouldn’t be cool and collected when the seller present his offer. A look of shock or surprise on your part can throw the seller off balance and make him think he’s made a big mistake. If he really wants to sell, your reaction may get him to reduce the price further.

In almost every transaction, one party says, “why don’t we split the difference.” Don’t let that party be you. If you let the seller offer to split the difference, you’re again making him feel like he’s winning. If the negotiating continues, you’re still the one in control.

It always helps in negotiations to have something in your back pocket you’re willing to give up, even before the negotiations begin. It can be almost anything, as long as it makes the seller feel as though he’s winning.

One thing you must absolutely have in your back pocket is a clean offer. You wont’ be in any position to negotiate if you have to wait for the mortgage lender to approve you for a loan, or if the purchase is contingent upon the sale of your existing home. If you want to be able to negotiate, get pre-approved for the amount you want to borrow, and either sell your existing home or get approved for a bridge loan so you can carry your existing mortgage until the house sells.

You’re not going to be able to wheel and deal on every home you come across. Some homes attract buyers like bees to butter. Other homes will be so attractively priced that trying to negotiate would be pointless. If you come across one of these, and you want the home, buy it without reservation.

If the process of haggling on home prices isn’t something you enjoy, consider having someone else do it for you. Many people use realtors as buyers agents to good effect. The realtor will know the market, and should have the negotiating skills to get you a good price.