“They say money talks. All mine ever says is goodbye.” – Red Skelton
My father-in-law is an excellent negotiator. He expects a deal wherever goods and services are exchanged. This includes Best Buy, although I’m told they don’t negotiate prices. From his Ford Expedition to the tux I wore at my wedding he will always ask for, and usually get an excellent deal.
Many of the cash buyers entering the Phoenix real estate market remind me of my father-in-law: skillful, tough and flush with cash from years of careful saving and planning. I actually enjoy negotiating with these buyers. I appreciate their financial prowess. So-called industry experts label these all-cash buyers as speculators. They warn of more bubbles bursting and market implosions. The reality is these are sophisticated investors that recognize two things:
- Real estate is a hedge against inflation, which could be imminent because of the government’s involvement in the banking industry.
- The cash-on-cash return from rental income earned on a median priced single-family residence exceeds the stock market.
But not all cash home buyers are created equal. Just this week I received two cash offers from out-of-state investors. Even though both offer prices were very reasonable and their agents were pros, early on my hunch was that these buyers were not very serious or sophisticated. How? Both asked for a 30-day closing. This could mean that they don’t have the cash on hand or they really aren’t sure about the home and need plenty of time to back out.
So how do you find out if they are for real? Counter, counter, counter. In this case we countered the purchase price ($2,000 more), closing date (from 30 days to 16) and current proof of funds (printed from an online source with today’s date.) If the buyer really wants the home they will pay a little more, close a little early and will have access to online banking. If they don’t they’ll take the time to get it.
However, in this case neither buyer was serious. One agent sent me the counter back rejected and the other called to say “no deal.” At least we didn’t have to wait 30 days to find out.
I worked in TV news for 15 years before I got into real estate. I was commonly referred to as the “cameraman”, but I liked the title “photojournalist” much better. Because I was behind the scenes the dress code wasn’t nearly as strict as it was for the on-air “talent”. Many of my colleagues chose to dress down every day, probably because it was cooler and certainly more comfortable.
To succeed today your financials must dress to impress. I have found that there is no better software tool out there to help you do this than
I was first introduced to the book,
Last week I played doctor. This week it’s forensic pathologist. Admittedly, I’m not very good at either one. I let a real estate deal flat line and the cause of death remains unclear. Fortunately, there is a lot that can be learned when you dissect a paper corpse. The writers of CSI could have never dreamed up an episode this good. Come to think of it this story is actually more like a dark comedy than a murder mystery.
Suddenly the bad guys don’t seem so bad. My client and I conclude the lender hired a competent, local appraiser that applied some common sense to the process. He carefully reviewed the subject property and three other comparable homes using similar criteria but the appraisal came in a little low. It happens. Of course my client is disappointed about it but the margins on this deal are still very good. So is it time for the nice family to ride off into the sunset? Not so fast. Enter the next evil doer, Mr. Desk Review Appraisal. This is starting to feel like a Batman and Robin movie…too many villains. And Mr. Desk Review Appraisal plays the part of the Joker. Here are a few lines from the script, I mean the review appraisal:
“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things,” Adam Smith, author of ‘Wealth of Nations’, 1776
There are certain seasoning requirements I absolutely love. For example, if I’m cooking halibut on the grill I must coat it with olive oil and add Emeril’s Essence. And no rib eye tastes right to me without McCormick’s Montreal Steak seasoning. For other great recipes see the
Why does the FHA have this requirement? Obviously, because it prevents flipping! Believe it or not there are a few bad apples out there that have manipulated values and artificially driven up prices in certain areas. Rather than dealing with the bad guys it was easier for the FHA to create a policy that today not only harms the buyer and seller, it also severely hinders a real estate recovery. I believe these are called ‘unintended consequences’. It would be nice if the FHA recognized that while there have been times when investors were poison to the real estate market, at this critical point in time they are the anecdote.
It would be easy to slam the
So what needs to change? For starters, apple to apple comparisons for terms of sale must be made. If the appraiser can’t do an apple to apple comparison allow them to go further out. Next, factor in days on market (more value should be added to the property if it goes under contract quickly, and conversely value should be deducted if the home sits for months on end.) Additionally, consideration must be given to how many offers are received on the subject property. Finally, the HVCC must be eliminated (see Inman News story from yesterday,
Last fall my wife made me a delicious lunch to take with me to the office, which of course I forgot. The next day she put my car keys in the lunch cooler so I would remember to grab it. Needless to say, discussing stuff like real estate recovery roadblocks and the Case-Shiller Home Price index may seem a little above my head, but here goes… 
I have a good friend who works for Intel. Every 7 years the company gives him an 8-week sabbatical with full salary and benefits. He will start his sabbatical, the second since he began working there 14 years ago, in the fall. Intel does this so their employees can rest and recharge. Studies show job burnout usually occurs within 5-7 years of hiring.