Archive for October, 2011

Snatching Victory From the Jaws of Defeat (Part II)

So what was our mistake???

Actually, I discussed this in a previous post: see The Importance of A Listing Agent

Our mistake though was not solely picking the incorrect listing agent initially.  It was also exacerbated by not realizing our mistake and taking corrective action immediately.  For months, three months to be exact, we let the property linger on the market, with the wrong agent, and be passed over while other properties opened and closed escrow, despite their higher prices and lack of upgrades.  We were either paralyzed or mystified, but one thing we were not was proactive.

I made it a personal goal of mine to not do this again.  While we try to be loyal to agents that have performed well, it is a simple fact that certain agents can sell certain areas better than other agents.  Whether it be their comfort level selling the properties features, their ability to market to their social spheres, or their willingness to hold more open houses and do more to market the property than put it in the MLS and forget about it, all of these things will affect the sale.

So, with this, it allowed a new policy to blossom from within Real Estate Legends.  Agents are evaluated on their performance on a monthly basis, and not allowed to continue to list properties they are not effectively marketing.  It is our opinion that this will lead to higher performance, ultimately translating to quicker sales at higher prices.

That certainly was the case with a few recent properties, which you can read about in my next post, “Desert Hot Springs is HOT!”

Snatching Victory From the Jaws of Defeat (Part I)

When you buy a property at a significant discount to market value, it is, for all intents and purposes, pretty hard to screw up the deal.

Here’s a little anecdote about how we came pretty close to doing exactly that.

401 S El Cielo was purchased at Trustee Sale Auction (as all of our properties are) on 4/26/11 for $69,606.01.  I include the exact amount here because it is indicative of the limited competition at the Riverside/Corona courthouses, that is not the case in LA/Orange counties.  Why is it indicative of limited competition you ask?

In bidding for properties at Trustee Sale, the protocol works as follows:

1) Beneficiary provides a published bid- this is the amount owed on the property, plus liens/judgments etc.  This is provided days, sometimes weeks in advance of the property’s sale date.

2) Beneficiary provide an opening bid- this is the beneficiary’s perception of current market value of the property.  This is provided sometimes the day before the sale date, but usually the morning of the sale.

3) Bidders qualify for properties by providing cash or cashiers checks (realistically, no one rolls to the courthouse with a wad of Benjamins for this purpose, it is always cashiers checks) in amounts greater than the opening bid.

4) The auctioneer opens the bidding on a property at it’s opening bid amount.

5) The first bidder, if any, bids $.01 over the opening bid amount (this is called a “penny over” bid- we Trustee Sale folks aren’t particularly creative).

5a) If no bidders, the property reverts to the  beneficiary.  This homeowner has now been foreclosed, and the property is officially an REO.

6) A second bidder, if any, bids a minimum of $99.99 over the most recent bid.

7) Any further bids are increased by a minimum of $100 until there are no further bids.

So why did I walk you through that?  Because any time you are able to buy a property on a “penny over” bid, it means you:

A) Bought something no one else wanted/qualified for/had on their radar.

B) Either got a tremendous deal or will lose your shirt.

We at Real Estate Legends try to keep our shirts, whenever possible.  If you’ve ever been to the beach with any of us, you would probably agree with that sentiment.

In any event, 401 S El Cielo was a penny over bid, and we were excited.  Once we were able to access the property, it was determined that the property did not require extensive rehab, minimizing both our investment and the amount of time it would take to re-sell.  Again, stoked.  Very stoked.

But then… we made a mistake.  A big mistake.

I’ll talk more about that in Part II, next week.

The Importance of a Listing Agent

“Real Estate Agents are a dime a dozen.”

Perhaps.

However, I think that the right listing agent in the right situation can sometimes make all the difference.  When would this be the case, you ask?  Consider the following scenario:

A property is located in a gated, condo community that has some nuanced features that only a resident would know about.  In addition to this, the HOA decided that it was no longer allowable for agents to give out the gate code in order to allow showings.  As you might imagine, this makes it difficult for buyers to see the property, and knowing that agents are generally lazy, they move on to easier to show properties quite quickly.  What’s more, if you as an agent are the one listing this property and do not yourself live in the community, you are probably not likely to be available at a moment’s notice to arrange an appointment for the persistent buyer’s agent who DOES call and such a “high-hanging fruit” type listing.

So… what does one do in this scenario?

We decided that our inability to sell the property was, in this case, due to the Indian  Native American and not the arrow.  That isn’t to say the listing agent was bad, necessarily.  By most measures, and with previous properties, he had actually been quite productive.  On this property however- it was best to move on to a new agent.

After 90 days of marketing, no offers, and being the lowest priced unit in the complex, we decided to find an agent that specialized in not only the area, but this particular condo community.  Sure enough, by only reducing our listing price by 1.275%, we were able to generate an offer within 4 days of marketing the property with this new agent.  What’s more, it was her buyer, allowing us to save slightly on commission paid.

The property closed this past Friday, 10/7/11.  It wasn’t our best flip, but it serves as an important lesson: The listing agent might actually matter a great deal.

Find out more about the adventure that was 401 S El Cielo in my next post: Snatching Victory from the Jaws of Defeat.

My Inspiration

On the advice of people much smarter and web-savvy than myself, I decided to start a blog about my latest adventures in real estate.  Some of you may have accidentally found yourself on my initial blog, balboapeninsula.blogspot.com, which was my half-hearted attempt at hyper-local branding.  Two years and zero peninsula listings later… that has probably run its course.  This new blog, however, has the potential to be quite a bit more captivating, for the following reasons:

1)      The very nature of flipping houses lends itself to blogging.  There are always new tasks, always constant inventory, and each new flip is entirely unique.  The amount of money to be made in such a short time is also compelling, and in this real estate addict’s opinion, exhilarating!

2)      The process of buying at trustee sale auction is not well known, and I know how to do it pretty well.  You might want to learn, and I’m happy to teach you how.  That doesn’t suck, right?

3)      I’m often told “wow, that’s risky” or asked condescendingly “how’s that working out for you?” by skeptics.  My main ammunition against skepticism is transparency.  How could I possibly be more transparent than blogging our every move, including property acquisitions, CFK negotiations, UD actions, rehab, listing and closing escrow, in addition to how much we’re making on each deal?  In fact, I dare you to find another business out there that is as transparent as we are.

So, now that you’re here, take a look at what we’ve done thus far.  You’ll notice that our acquisitions prices are quite compelling, and our annualized returns are unlike anything you would ever see for a flipping business in Orange or LA counties.