The Odysseus Medal: “Failure is a costly but cogent instructor”

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Here are the Odysseus Medal winners, finally. My apologies for being two days late, but my little hop to Las Vegas put me way behind on everything.

I run with a fast crowd here, but I don’t cut them any slack. I am never nice for the sake of being nice, and I don’t ever hesitate to tell what I believe to be the complete truth. Even so, I don’t love it when one of our wins the Odysseus Medal, because I don’t want anyone to even suspect that I might be swayed by personal considerations. But great work is where you find it, even if you find it at home. So this week’s Odysseus Medal goes to BloodhoundBlog’s own Brian Brady for HR 3915: Open Letter to Senator Dodd from a Veteran Mortgage Originator:

Dear Chairman Dodd:

Soon, HR 3915 will be endorsed by the House of Representatives and most likely referred to the Senate. The committee you chair, will have an opportunity to read, discuss, debate, and amend this bill before recommending it to the general Senate for vote. I am a 20 year veteran of consumer financial services with the last 14 years in mortgage lending. I have helped over 700 families finance their homes and closed some 1700 loan transactions. I humbly submit my expert opinion to you for consideration.

The Libertarian in me begs you to do absolutely nothing; it’s the borrowers’ cavalier attitude towards financial planning that caused this mess. While my statement is true, it is but a component of the underlying malaise in the residential real estate industry; we adopted an even more cavalier approach to loan approvals and that irresponsibility is being felt by the investors who trusted us to perform adequate due diligence. Failure is a costly but cogent instructor; to discourage failure on both the borrower and investing lender sides of the equation might be more costly in the long run.

I oppose individual originator licensing in its proposed form. It doesn’t demonstrate true expertise and might induce a false sense of security to the consumer. This very act may very well damage the consumer by perpetuating the adolescent approach to financial planning the average American exhibits. It transfers the responsibility of prudent money management from the consumer to the license issuing body; sadly, those bodies are not up to the task.

I am a pragmatist so I know that my remarks about licensing, while philosophically pure, are impractical from a political view. Inasmuch, I recommend that the licensing requirements be strengthened to include any and all participants in the origination process: originators, processors, and underwriters. I further recommend that the license be national in scope so it is more consistent with the standardization mortgage securitizations induced. State regulations are onerous, inconsistent, and ineffectual when it comes to enforcement- make the license consistent with the industry.

The Black Pearl Award goes to Steve Leung of the Silicon Valley Real Estate Blog for Considering the Reverse Offer:

With continuous days-on-market numbers getting higher for many (but not all) homes in Silicon Valley, savvy agents know they need to do a little extra to generate interest for a motivated seller — especially in areas and quartiles where inventory is high.

The technique goes by several monikers and it can be the difference between being a motivated seller and a motivating seller.  Some call it a “reverse offer”, others use the term “preemptive offer”, or even “seller-initiated offer”.  In any case, the technique is the same: the listing agent draws up a purchase contract that specifies terms that the seller will accept and gives it to one or more buyers. 

The contract is the same one that a buyer’s agent would write up when making an offer, except written by the seller.  All a potential buyer needs to do is sign on the proverbial dotted line.

Most of the time, reverse offers are used to open a line of communication, hoping to create competitive a competitive situation between multiple buyers, or to attract the attention of one buyer deciding between several properties.  But there are key considerations when for both buyers and sellers when the seller writes a reverse offer.

Jim Watkins from the BiggerPockets.com investment weblog wins this week’s People’s Choice Award with True Equity – In the Real Estate Sense:

“Equity” is a word that is used a lot but in my opinion, there are a lot of people who might not understand how it can be very misleading.

Having read the responses of the board veterans, I really can’t offer any insight over & above what they have said already.

I wanted to relay a story that I think might offer another way to view “Equity.”

Two years ago, I was in the office and a woman who was a new investor, was talking to the receptionist about an REO deal she had. I overheard her say, “I got a great deal!. I got $100,000 equity on a house I bought for $300,000.”

My head spun around so fast, that I thought I would get whiplash. I said to the woman, “You didn’t close on that deal, did you?” She said she had and I shook my head and said, “You don’t have $100,000 in equity.”

She became irritated with me and said to me, “Oh really? And how exactly do you figure that? I bought it for $300,000 and its ARV is $400,000.”

I asked if she was going to rehab the house and sell it and she said she was.

I took out some paper and said, “Let me break it down for you and ask some questions.” She folded her arms and nodded, ok.

If you didn’t look at this week’s nominees for The Odysseus Medal, you should. As always, if you come upon a splinter of universal truth, nominate it.

Deadline for next week’s competition is Sunday at 12 Noon MST. You can nominate your own work or any post you admire here.

Congratulations to the winners — and to everyone who participated.

Technorati Tags: blogging, real estate, real estate marketing