Yes folks, it’s definitely all about the short sales. With 1 in 6 San Diego houses underwater many homeowners are opting for strategic defaults and walking away from their properties.
The hungry agents out there are simply working the NOD (notice of default) list and finding plenty of anxious sellers who want out as their home is now only worth roughly half of their loan amount. This presents a huge opportunity for investors and home buyers willing to wait out what’s frequently a slow process.
After scouring MLS for weeks for REO’s and swimming with all the sharks out there I decided to switch gears and actually get on the phone and start networking with the short sale agents who are on the front line with all the distressed deals.
I’ve quickly come to realize that you have to make your own deals, not just look for one. Not every agent however who has a short sale listing is capable of influencing the deal, much less even closing it. There are third party professional negotiators who seem to have the process wired though. A good short sale negotiator can hammer the lender and dispute their BPO’s, even sometimes providing their own appraisals and documentation as to the value and condition of the property and build in the margin rehabbers need to make a profit.
The downside is it can take 2-6 months to close a short sale so we are filling our pipeline up with as many as possible. Knowing who these agents are and networking with them is key, once again its not what you know in this market but who you know. If you are a homeowner looking to do a short sale in San Diego, make sure both lien holders give you a “non-deficiency”, it holds you harmless for the portion of the loan amount thats been forgiven. Our short sale agent has 100% success ratio getting this and has done over 150 transactions. If you are interested in a short sale please contact me.
Calling All Contractors! Contact me if you want to be a part of our team!
Moving here I had the long term plan of stepping away from the labor part of the rehabs and just doing design work and overseeing the contractors. Afterall, these arent huge projects, mostly cosmetic stuff. I had given myself a 3 year window to get to that point but after arriving here its evident that this needs to be my new business model right out of the gate.
I’ll be hiring all the construction out so I can do multiple projects simultaneously so if you are a GC or know of a reliable one let me know please. Maybe once the market picks up for move up buyers I’ll do some larger structural projects again but the money to be made now is on the entry level stuff, that only needs light rehabs.
The profits wont be as large as we were used to but with increased volume we should be able to make it up and then some. I’m super excited, our California LLC is set up now, we have over 30 offers out there and some are very close to reaching acceptance so I’m looking forward to finding solid team members on the construction side.
Also, many people are reaching out to me, new blog followers and old alike. I’m stoked to meet all of you, after the machine gets running we’ll be open to joint venturing on some deals, offering some of our overflow deals to you or even using private investment funds so contact me if you are in San Diego and want to chat about all the opportunities we are seeing with the local real estate market.
I’m not totally over the bungalow craze so fast though, I’ve got an offer on this amazing California Craftsman REO, I hope it pans out. I’m competing with conventional retail buyer offers that are higher but hopefully the lender will opt for my all cash offer instead.
I utilized my “write the offer with the listing agent” strategy on this one: ). No matter what we start buying we’ll do some fun stuff and try to set our rehabs apart from the crowd by hopefully offering a little more attention to detail and some cool design sense. I’m really making headway, once we have more deals than we know what to do with I’ll share a little more about how I figured it out.
Stay tuned and thanks for following.
Just read you latest blog, good job as usual.
I am rehabbing here in Virginia and the contracts to purchase are 10-20 pages long. In order to get more deals, I need to make more offers. It takes so much time to fill out just one single contract.
Do you use the California contracts when you make offers or do you have a shortened contract that you use and later fill out the official contracts in the effort of saving time?
Good luck with the new business model.
Great point Kareem. Yes, you have to write tons of offers to get deals. Its a huge waste of paper and requires printing it out, signing and scanning. The purchase contract here in CA with addendums and disclosures can be 17 pages then you add copy of earnest money check and proof of funds and you have a 20 page .pdf file. We use an auto fill .pdf template and insert electronic signatures. That way we never have to print it out. There are electronic signature companies online you can subscribe to but they charge you per transaction so it can add up quick. The best way is to have the necessary signatures and initials brought into photoshop and cut them out and just insert them on the contracts, its free this way and really goes fast. We also have alot of the info like terms and our company name preset on the contract, that way we only type in the missing fields. Try finding a .pdf file of your local contract and having it unlocked, most local Realtor boards also offer online autofill contracts via WinForm or WinZip. Occasionally we see a listing agent requesting “wet” signatures but it’s not the norm. Regarding the non-realtor approved shortened forms, I just thought its better to look as professional as possible and not take any chances of not getting our offers taken seriously so I never use those. Even when dealing with private sellers and no realtors involved I still use the authorized forms. Keep writing those offers and thanks for the great question Kareem!
Just explain to some of the Canadian members who don’t know what AVR or REO stands for!
Thanks, lots of properties North of the border!
Oh Sorry Chris, funny you say that because as I was typing I asked myself does averyone know what these terms mean, guess not.
ARV = After Repaired Value, or Average Retail Value. This is the retail rice we calculate the home will sell for after we do the renovation.
REO = Real Estate Owned, it means it’s owned by the lender or the Bank in most cases. A REO has already gone through the foreclosure process and is a bad asset in the banks portfolio.
NOD = Notice of Default. This is what homeowners receive if they dont pay their mortgage payment. Therefore, the NOD list is a list of “preforeclosures.”
NTS = Notice of Trustee Sale. This happens 45 days after the NOD. It’s a letter the homeowner gets that tells them there is an auction scheduled for the sale of their property. Usually the trustee sales are on the courthouse steps but not always.
Great question. Lets hope you guys in Canada dont get too familiar with the last three terms ; )
Good stuff Tom. One thing my Realtor and I do to shorten the signing process is to have most pages prepared in advance. While our contract is only 13 pages, only 1-3 need signatures or change of info. Those get changes for each contract, the rest of initialed and ready to go in advance. We also use realfast, which allows us to save a type of contract setup (short sale, reo, individual etc). Still not a quick process, but saves 20+ mins per contract.
Been meaning to shoot you a note for several weeks now. Just wanted to says congrats on the move and good luck back in sunny CA…
My wife and I both miss California terribly, but maybe your success will help convince her that we should move back and start flipping on the west coast! 🙂
Good luck out there, Tom. I keep checking back to your site, hoping to find news that you found a great deal to start renovating in style. Keep up the hunt!
@J Scott. You guys should seriously consider it. We’re running into alot of investors who are just moving back. The opportunities are everywhere and you wouldnt believe the volume of rehabbing going on here right now. Thanks everybody for the support! J Scott, call me if you want to chat.
Check out Jim’s latest:
Seems like an opportunity for a six-figure return on that one.
Great blog as always Tom, your always so attentive to the comments you recieve, so many “investors” are too wrapped up in themselves to give anyone any help/advice! Keep it up…we use that same strategy on every offer up here in Sacramento, we always ask if the listing agent will write the offer for us (secretly hoping they will pull the strings to get us the deal and double end comm.) but so many have declined, many banks frown upon that. Even tho we are brokers, getting the deal is everything (as u know!). Keep up the great blogging, as a newbie, I’m learning as we go and your site helps!
Thanks for taking the time to leave comments Troy, maybe you found someone to network with in Sacramento here, that would be cool. Writing the offers with the listing agent can work sometimes but like you said some wont want to even play that game. It’s easy to tell once you contact them. Some offices hold all their listings with the broker, then maybe you can get preferred treatment if you write the offer with another buyers agent in the same office. We lost a great SS last week, the listing agent sat on our offer until the last day before the trustee sale hoping to double end it, and then called in a panic on the day before trying to get a postponement. Needless to say it didnt work so the house went back to the bank at 163. Our contract amount was 128 which was what the bank previously countered with. Now it will hit mls and get bid up by everyone in town. ARV is around 250. Keep pluggin up there in Sac town.
“1 in 6 San Diego houses underwater”
That’s a scary reality..one that we were warned of.
I see the same trend here in Northern NV (Reno) where every other agent are short sale expert because they work the NOD list!
As always, thanks for the helpful post, Tom.
P.S–Bungalows and single story is also selling pretty good here.