by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Mortgage squirrels, searching for some nuts, during what I believe could be a long winter, might consider this idea:
There should be a lot of listings hitting the market when the shadow inventory eventually gets released. Banks are not very attentive sellers inasmuch as they care less about condition and price than expediency. Rather than pump money into property improvements or work with HOA’s to get the financial statements in order, they reduce the price until a cash buyer comes along. Zillow showed us that REOs tend to sell for 3/4 of the market price.
Equity sellers might be having a tough time moving condominiums because (a)- the REOs are priced lower and/or (b) the HOA hasn’t taken the time to secure an FHA and VA approval for the complex. Mortgage squirrels can focus on (b) and add value to the sellers by broadening the market. While assisting the HOA secure complex approvals will help the REO sellers, those sellers often prefer cash offers.
Consider targeting condominium owners who have had the property listed for more than 60 days. Send a letter to the owner and carbon copy the listing agent and HOA President. Highlight these points in the letter:
- a complex approved for FHA or VA financing will open up the market and attract owner-occupants
- more buyers means higher property values
- gov’t loans are assumable which could translate to even higher values when rates are higher
It is possible that listing agents will be upset with you. When you explain that you are not an agent and you are trying to help them and their customer to sell the property, they will be open to your proposal. HOA Presidents may have no clue about this because property management companies (that manage HOAs) typically don’t want to address this with the HOA boards. The sellers may be skeptical but will offer you a chance to present your proposal.
You have a chance to be a hero with (a) someone who intends to buy another home (b) a selling professional who could be a great referral source for future business. and (c) an influential owner within the complex who might suggest that other owners patronize you.
FHA and VA complex approvals are simple but tedious. If you have some down time, and want to position yourself as a professional (as opposed to another mortgage squirrel) to influential people, you might consider this idea.
Ashlee Pannell says:
Great article. This def. makes you think about other ways to help out.
February 6, 2010 — 9:19 pm
Tom Johnson says:
Sent this to my lenders I need one squirrel…
February 7, 2010 — 2:57 pm
Brian Brady says:
I suppose there is a way agents could make this work, too. Agents might consider a letter to all the unlisted properties, with an offer to speak at the next HOA meeting about this.
February 8, 2010 — 8:17 am