I really wasn't prepared for what a gift it would be to meet very Active Brad in person. When I dropped by Saturday morning, he was actively giving out bear hugs and 'Safe SEO' advice to anyone who could come up with a good bear story . . .
You see, when Brad was but a wee lad of 12, he was camping out under the stars when he was awakened in the deep of the night by a bear performing a lice check on his noggin. Fortunately, he's found a way to transcend the terror of that encounter by facilitating a support group he calls "Bearly Recovering" for folks, like me, who have been through a Major Ursa ordeal.
OK, obviously I'm having some fun here, but that's what it was spending almost 45 minutes there on the couch with Brad . . . fun.
I felt self-conscious of the fact that I was taking up so much of his time and attention, but he wasn't very good at projecting an awkward vibe, or darting his eyes about, or anything that would suggest he was ready for me to get lost. He was extremely present and generous with his time . . . I basically got Rain Camp 101 accelerated (if you miss him at NAR, you'll have to make it to Rain Camp at Inman Connect 2010 in NYC next January).
As a special bonus, he made me cry when he shared what it was like dropping off his son at college for the very first time. With 4 teens at home ranging from 16-19, his words shot straight through my heart. Empty nest syndrome is right around the corner for me, and I'm excited and dreading it at the same time.
Brad is passionate and real, and embodies what it takes to be an effective blogger and social networker.
"Write like you would talk to someone over a frothy cappuccino. Share, don't sell, use photos and videos, and put in 3-4 links to other sites for every 1 taking someone back to your outside blog... " [Quotation marks used recklessly]
I was touched and inspired by my visit with Brad and the vision of Active Rain that I really hadn't been able to get my head around before. And guess what? The point of Active Rain is not to get points (but all the same, you're going to use your God Console to grant me a few extras, right, Brad? ;-)
I'm grateful to Bill Exeter and the Deferred Sales Trust for getting me to the conference . . . making that personal connection has made all the difference.
P.S. I really did get a nice bear hug from Brad . . . anyone else score this year?
According to a poll released recently by LoopNet, an online commercial real estate marketplace, 46% of commercial real estate professionals say the commercial RE market will not rebound until 2011.
Fifty-three percent (53%) expect further price declines of 11% or more. “Lack of access to debt financing” was the No. 1 cited barrier to recovery. No one can get loans these days.
That’s why my whole conversation is about putting buyers and sellers together without the need for new bank financing. Intelligent, legal, ethical non-traditional ways of putting real estate transactions together is all I talk about.
We just need to choose the right strategy and engineer the transaction in such a way that it addresses the short and long term interests of both buyers and sellers.
Sometimes price is the most important thing to a seller, sometimes monthly income, sometimes capital gains. But one way or another, it’s about quality of life and creating desired outcomes. What does the seller want to be doing with their time and energy?
Do they have health problems?
Are they tired of managing property?
Are they moving out of town?
Would they like the freedom to relax and travel and enjoy their retirement?
Would a little more cash each month make all the difference?
A few days ago, I was talking to an agent that was trying to put a commercial real estate transaction together. His client owned a desirable 9,000 sqft property free and clear on historic El Camino Real in Northern CA.
A couple years ago, the property would have fetched close to $3 mil. Now it was listed at $1.6 mil, and there was one lone buyer who wanted it, only he couldn’t get traditional financing.
He would pay the $1.6 mil if the seller would take $400,000 down and carry the rest at 6.5% over 30 years.
Well, because the seller didn’t want to pay ANY capital gains, his agent was exploring the possibility of selling the note so all the proceeds could go towards a 1031 exchange.
Good idea, except for this…
The discount on a green 75% LTV (loan-to-value) commercial note, even with good down payment and credit, would be so high that it just wouldn’t make sense, especially with that low interest rate!
Here’s what I might say to the seller:
Just carry the dang note and be happy that you get to defer MOST of your capital gains through the installment sale . . . you’re getting your price, for heaven’s sake! And after some seasoning, you can sell the note for a smaller discount!
Drop the price 20% and hope for a cash buyer (or one that can actually get a loan) so you can do a 1031 Exchange or set up a Deferred Sales Trust.
Lease the property out and be prepared to wait AT LEAST 10-15 years before you find someone willing to offer $1.6 mil again.
I think this particular seller ended up leasing the property to the prospective buyer instead of selling it to him . . . which is fine, if he’s truly happy owning the property.
Just because the financial markets are in a mess doesn’t mean we can’t put savvy, potent real estate transactions together. And the economy needs us to do just that.
[Also included below as a random tangent and not related to business at all (except I did make it here to write this post): Bare to Bear - a True Tale of Grim Survival and Wobbly Knees] . . .
A title holding (land) trust is a great way to hold title to property, and personally, I will never again hold title to any piece of property in my own name, or even in an LLC or Corporation.
First, it'll go into a land trust, and my entity of choice (LLC vs. S Corp) will be the beneficiary.
When the trustee is deeded the property, the trustee is said to hold bare legal title. The trustee holds legal and equitable title, but does NOT have the power of direction . . . that resides only with the beneficiaries.
The trustee does not have the ability to take any action with regards to the property or related paperwork without the express written consent of all beneficiaries. This is why, in most states, there is unparalleled asset protection:
not only do you have killer anonymity and privacy in ownership,
but your ownership is consider personal property, not real property (which means it's usually protected from partition, judgments, probates, divorce proceedings, IRS tax liens, etc)
Judges, police officers, politicians . . . these people never want to show up on public record, right? They don't want anyone to know what they own or where they live, and no one should in a society where lawyers are looking for a reason to snatch away your net worth. Hey, wait a minute . . . are they working for the government???
Contrastingly, BEAR legal title refers to that right that a large mammal, known for its prodigious strength, has when it wants your property . . . or at least to get in for a snack . . .
It usually doesn't ask for written or even verbal permission . . .
I had an especially exciting conversation with a Realtor recently . . . one of the few that totally gets how a little knowledge of the discounted note business helps put more real estate transactions together.
Instead of going broke with many of her colleagues, she's a real estate broker, turning note broker as well.
So here's what she's doing . . .
She's taking all these good buyers who can't qualify for bank financing, and hooking them up with FSBOs who are willing to carry paper (of course, she does a lot of educating in the process).
She collects a consultation fee from her buyers after she qualifies them, and knows they have a decent down payment.
Then, she goes out and finds FSBO sellers who are having a hard time competing with all the short sales and REOs. She shows these sellers how they can carry paper (offer owner financing) and still walk away with cash when they let their note season for 1-12 months, and then sell it.
And guess who will most likely be brokering that note?
So, she may not make a big commission selling the property, but she'll make a commission when she helps those sellers/note holders get cash for their note. And because she understands the note business, she knows how to help those sellers create a note that will sell for a decent price on the secondary market.
Fun, huh? She's a visionary and a leader, and she's passionate about helping the economy, and preserving the dream of home ownership for her clients.
Real estate brokers should be note brokers, as well. These markets dovetail nicely, and the specialized knowledge can make the difference between a broker going broke . . . or not.
I’ve never witnessed a tsunami first hand, but I’ve been told that before the devastating wall of water devours everything in it’s path, like a hungry sea beast coming in for a glorious feast, there are a few moments in time that seem quite magical to the innocent and unsuspecting.
The water line temporarily recedes, making it excruciatingly tempting to prance delightedly along the shoreline collecting shells, fish and other treasures that have suddenly become accessible.
And apparently, it can be such a fascinating and engaging activity that you might fail to notice the darkness forming on the horizon as you fill your goodie bag to overflowing. By the time you do . . . well, it’s usually too late.
“If the economy is improving, do we really have millions more foreclosures coming? According to the U.S. Treasury, the answer is yes. In written testimony to Congress, Assistant Secretary for Financial Institutions, Michael Barr said that, regardless of the success of mortgage modification efforts, we should still expect millions more foreclosures.
Mr. Barr’s testimony is certainly not welcome news for those anticipating a significant recovery in the housing market. In fact, it is an indication that significant recovery is still years away.
And there are other factors that confirm the fragile state of both the economy and the housing market. Recent reports have indicated that there are almost 3 million active, interest-only loans with a total value of almost $1 trillion, with loans of about $500 billion set to reset within the next 30 months. Then we have a large group of Option Arm mortgages set to recast during the next 2 years. These loans have a combined value of more than $125 billion.
The rising number of bankruptcies, up 36% in the second quarter over last year, with wealthy families filing at double that rate, creates a ‘perfect storm’ of disastrous consequences for the housing market. With the likely prospect of millions more foreclosures coming, home prices and home sales will remain depressed until the market can achieve stabilization. And achieving stabilization will be a slow and painful process.”
Of course, certain areas of the country will be hit harder than others. Even here in California, (one of the hardest hit together with Florida and Arizona) there are pockets that are devastated, and pockets that seem almost immune.
And I don’t especially care for being a Prophetess of Doom . . . my brand is ‘Note Queen,’ which is rather harmless and mostly silly, really.
It’s just that I feel strongly about helping people triage (can you tell I used to be an RN?) their financial lives carefully. The real estate market may be fine where you are, and it may get even tougher. And if it does, how will your quality of life be affected? If you’re holding on for ‘just a couple more years’ until the market ‘recovers,’ then stop it. Sell now, especially if you’ve got negative cash flow and your net worth is less than $5 million.
If you’re happy owning your property for the next 12-20 years no matter what happens, then fine. Hold out for your price and terms. But if your emotional and financial well-being depends upon the successful sale of a piece of property in the next 10 years, then quit dawdling.
And if deferring capital gains is important to you, download your free copy of a report I created entitled “How to Avoid Paying One Red Cent to Uncle Sam When You Sell Your Property” at www.AvoidCapitalGains.net.
There are a lot of investors out there picking up pre-foreclosures and REOs like sea shells before a tsunami. Prices seem good now, but they could get even better, despite all the government’s shenanigans in the ‘free’ market.
Perhaps our souls are burning along with the forest as we experience the shock, sadness, anger, fear and confusion of watching the mountains, once rich with life, turn desolate moonscape.
In a stupor of smoke, we watch homes evaporate, and wonder if ours might be next. With ravaged hearts, we mourn brave heroes, and imagine the innocents . . . thousands of creatures with nowhere to go, but up in flames.
When I was young, I used to take my Golden Retriever up Santa Anita to Chantry Flats. From there we’d wind our way down to First Water, then Hermit Falls to spend lazy afternoons jumping into the frigid pool and thawing on granite by turns.
Other times I’d hike up to Sturtevant Falls and let the mist moisten my face as well as my sandwich.
In 1994, we formally joined the historic canyon community above Sierra Madre known as the Big Santa Anita Canyon. We bought a cabin when the oldest of our four children was barely out of diapers.
We spent hours upon hours in front of the fireplace, mesmerized by the flames, roasting marshmallows, happy to be warm in the middle of winter. By candle and lamp oil, the children played with wooden blocks and formed clay wonders as we read “The Lorax” and “The Pokey Little Puppy” for the 89th time.
Over the years, it’s been one of those places where we can step out of time. Without TV, XBOX, cell phones or internet, we’re free to experience the pure joy of being together, and the simple pleasures of slow and thoughtful food preparation, chopping wood, talking, laughing and telling stories.
And we can travel from our city life to our ‘real’ life in under an hour. Door to door is usually about 45 minutes, which has been an unparalleled gift to us over the years. Rural, peaceful, turn-of-the-century living within minutes of the madness.
Our small little space is a regenerative refuge by itself, but we’ve also grown to love, adore and belong to the crazy, eccentric, generous and loving community of cabin owners. The canyon has a life of its own, but it’s definitely become increasingly rich and colorful as we’ve built relationships and shared experiences with our friends up there.
If you’ve lived in this area for any length of time, it’s likely you’ve taken the opportunity to experience the beauty of the canyon first hand.
Perhaps you’ve noticed how your cares unwind with each step you take down the road from Chantry to Roberts Camp, where you’ll decide whether to explore Winter Creek, or continue on to the Falls and beyond.
A walk through Nature’s playground is one of the most powerful ways to ground, clear and balance ourselves.
Perhaps you’ve had the good fortune to stumble upon Sturtevant Camp where you can pick up the Mt. Wilson Trail, or head over across Newcombs Pass. If you haven’t, and if by some miracle you ever get the chance to again, you must make a trek there.
Historic Sturtevant Camp was established in 1893, and is the only camp from the Great Hiking Era which is still in operation in the San Gabriel Mountains. Surrounded by the largest virgin stand of Big Cone Spruce trees in the United States, Sturtevant’s setting provides the perfect opportunity to experience the local wilderness.
You’ll be absolutely enchanted by Chris and Joan Kasten, the gentle on-site caretakers. Sturtevant (www.sturtevantcamp.org) is an oasis of generosity where thirst is quenched, the lost are found, and the curious are met with polite helpfulness. Chris . . . he’s the most egoless man I’ve ever met. He’s a unique, Woodstocky blend of Stephen Hawkings, Mr. Rogers and Jesus.
And perhaps you’ve refreshed yourself with an ice cold beer at Adam’s Pack Station after a long, hot assent up the hill, while your kids squeal with delight at the goats, chickens and mules (that are still used as pack animals serving cabin owners up and down the canyon).
By the time this is published, we’ll know if the part of our Collective Soul known as the Big Santa Anita Canyon will remain a haven for local residents and cabin owners . . . . or not.
As of this writing, we are forced to prepare to surrender to forces beyond our control . . . to surrender our way of life for a very, very long time. It’s humbling. We’ll pray and give thanks for assistance both earthly and otherwise.
But perhaps while dead brush accumulated over decades goes up in walls of furious flame, we can invite a fire of renewal to burn away the tired baggage we’ve been dragging along in our souls over the years.
What is it time to let go of? Are we ready to forgive ourselves and each other? Are we ready to receive a renewed sense of gratitude for life and each day that we’re given to live it?
Paul Bowles, near the end of his life said,
“We get to think of life as an inexhaustible well, yet everything happens only a certain number of times, and a very small number, really. How many more times will you remember a certain afternoon of your childhood, some afternoon that’s so deeply a part of your being that you can’t even conceive of your life without it? Perhaps four or five times more, perhaps not even that. How many more times will you watch the full moon rise? Perhaps twenty.”
When we get older, or when we experience events like the Station fire, life takes on a special poignancy precisely because we realize that time is limited. We realize just how fragile life can be.
It becomes more important than ever to spend time with the people we love . . . to create and savor simple, precious moments.
“We just don’t want our property any more . . . it’s too much stress. We’re tired of being soaked by the bank, and we’re not going to send them another dime.”
This frustrated woman and her husband bought a penthouse condo in Pasadena just above Cal Tech for $510,000 2-3 years ago. It’s in a great location and has beautiful views of the San Gabriel mountains, but the mortgage payments are draining the life out of them.
In fact, they’re in the process of getting a divorce.
They bought because their broker promised them that it would be a good investment and definitely be worth over $600K in no time at all.
Whoops . . . that crystal ball thing can be kinda tricky.
In today’s market, it’s probably worth somewhere between $425K - $450K, and they owe about $470,000.
The $408,000 first is a 5.7% fixed, and the $60,000 second is variable but capped at 9%. The payments on both mortgages plus the HOA comes to about $ 3,700 a month (this does not include taxes and insurance).
They didn’t want the hassle of listing the property, but wanted to ask me what they should do. They’d like to preserve their credit if they can (they both have 775+ FICOs), but mostly they just want out.
I advised them that they might have a couple of exit strategies. There may be a buyer out there who can afford the payments, but can’t qualify for a loan for some reason.
This type of buyer may be willing to take over the payments on this slightly over-encumbered property in exchange for ownership (a beneficial interest in a land trust) without having to obtain their own bank financing.
I continued,
“I have already sent out feelers to buyers I know that are looking for some sort of ‘lease-to-own’ scenario, so perhaps I will have a lead for you in the near future.”
“However, as you are likely upside down, you may want to simultaneously get a short sale process started. I have an all cash buyer that is expert at negotiating with the banks.”
“All she would need is your short sale package filled out, and she will take it from there.”
“I don’t think you can lose attacking the disposition of your property from both angles. In either case, you will have the weight of it off of your shoulders in a relatively short period of time.”
“Also, even if your credit ends up taking a hit, it won’t necessarily affect your ability to acquire property down the road should your objectives change.”
“The last 2 properties I purchased were closed with seller financing. I make a point of closing most of my transactions without the need for new bank financing.”
If any of you readers out there know of someone who would be interested in taking over the payments on this fully furnished Pasadena penthouse, be sure to contact me as soon as possible.
This is a typical scenario for FSBO’s and if they’re willing to be flexible, they can often create a winning transaction in today’s market:
Hi, Dawn:
Thank you for the wealth of information in your website. I’ve learned a lot, but I still have so many questions.
I’ve been trying to sell my rental property in California for a few months now. It has 2 houses in 1 property, about 2/3 ac, in a good neighborhood, built around 1940s, great rental income ($1,775/month), etc. I have it listed at Craigslist for $299,000 and I have an FSBO sign in front.
I’ve been getting a lot of interest, but almost all of them ask if I will carry the note. I don’t know much about this, only that it sounded really scary. When I tell them that I am not interested in carrying the note, I never hear from them again.
What should I do?
My current mortgage on it is about $256,000 (about $1,600/month not including property taxes and insurance). I’ve only been paying the interest and the interest will be increasing (I think) next year.
I listened to your 9-minute video, but I’m still undecided what I should do. How does seller financing work? Should I modify my loan to a 30-year fixed before I do seller financing? If the buyer gives me a down payment, what should I do with it? If I sell the note, will I need to pay my current lender the entire amount that I owe? So should I keep the down payment just in case I’ll need to pay off my entire loan or can I use it to purchase another property? How long should I hold the note?
How much do you charge to handle the seller financing transaction? I appreciate your advice. Thank you.
Regards, Flor
Hi Flor,
Yes, offering seller financing is really a powerful way to move a property in today’s market, and you need to seriously protect yourself and use the right strategy.
It sounds to me like you should probably get good long term financing in place (especially if it’s †easy for you to do), then you can pass that on to a potential buyer through the Title Holding Land Trust.
You should get some cash at closing, and a perhaps some positive cash flow each month. It depends on how we structure everything.
Seller financing strategies work especially well for non-U.S. residents wanting to buy property here. I recently received this email:
“Hello,
We’re Canadians interested to purchase residential and/or commercial properties in the US (Florida - Kissimme/Orlando/Ft. Lauderdale or Boston areas) with the least down payment. We’re looking for the best financing option. We’re based in Toronto.
We’d appreciate it very much if you can help us on this. Thanks very much.
May”
Dear May,
There are many ways to put a deal together without conventional financing, however, you must understand that you will have to stick with properties that are NOT corporate owned… no short sales or bank REO foreclosures. They always want cash or cash to new loan in exchange for a low price.
Statistically, one-third of residential properties in the US are owned free and clear, or have very small mortgages. There are many more that have attractive long term financing that they could potentially leave in place for you.
The particular strategy that will be most effective for you will be determined by the unique circumstances of your transaction. There is no ‘one size fits all’ approach.
A straight seller carry back with a note(s) and deed(s) of trust (which the seller can sell at some point) may work. But in many instances, using the Title Holding (Land) Trust will give you the best options for getting in with the lowest down payment possible, and give you the ability to take over existing financing without risking negative repercussions.
I am available on a consultation basis. If you choose the comprehensive option for $495, then I will be available to help you negotiate the opportunities you will be interested in until you are able to consummate a successful transaction.
You may want to sign up for ‘Seller Financing on Steroids,’ to become more familiar with seller financing, and to have access to specific details of transactions that I am helping other sellers and buyers put together.
The "Note Queen" is a Seller Financing Expert. Her book "Seller Financing on Steroids" teaches sellers how to safely sell their property (and their note) for top dollar regardless of market conditions. No new bank financing needed. Avoid capital gains.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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[Also included below as a random tangent and not related to business at all (except I did make it here to write this post): 