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My Sellers Disappeared

About 4 months ago I received a referral from one of my clients to two very nice guys who needed to sell 15 single family homes in Columbus, OH. Overall the properties were nice. They had tenants and the tenants were paying the rent.

The problem was that their loans were maturing. Their payments were about to go up. The rent would not cover the new payments. On top of it, the market for their type of property is down about 30%.

Market Drop + Increased Payments = Screwed Seller

Why did the market drop so drastically? I think it is because about 50% of the buyers dried up when the 0 Down loans took a dive and lending restrictions became tighter. It used to be that anyone could get a loan. It was the "anyones" that were buying this stuff.

Right now, the buyer is the professional investor. The guys are paying cash. These are about 50% of the deals that I am closing compared to about 10% 4-6 months ago.

Unfortunately, my sellers did not want to renew their listings with me. At the expiration, they were already planning to come to the table with $100,000 in cash on their side to get out. They cancelled their appointment to re-list and it has been about 3 weeks since expiration. I have called them a couple of times and emailed. Mostly I wanted to see about getting the lockboxes and keys.

Yesterday I found out that they are filing bankruptcy. It is all due to their real estate portfolio. These are good guys who really tried hard to do the right thing.

Who's to blame? I don't know, but it's not them.

Posted by Rich Kruse on 05/22/2007 05:51 AM

Comments (15)

bankruptcy, columbus oh, investments, portfolio, 0 down

Originally posted at: Asset Management & Recovery: My Sellers Disappeared

15 Comments on My Sellers Disappeared

MAY

2007

Well when the 0 down went good bye- it did seem to take away a lot of buyers- especially if they are multi family homes- you are not going to see any 100% financing anymore. That's too bad for the sellers- can you try to sell them on a quick sale for them or is it too late?

Rich, it's nobodys fault. In my opinion, if we were hit with some other truly catastrophic event other than a market adjustment, it would be the same end result. These guys didn't look long enough term at their investments- wanted a quicker buck- and things changed. Too bad they couldn't hold on longer... now the market will be saturated with 15 more duds.

We had a builder last month lose 5 spec homes because he overbuilt.

Rich it is their fault they did not plan for the eventualities of Real Estate and are in the position of a lot of people that thought that the market could only go up and let the good times roll.

Maybe they just bought up too much too fast---that "0 DOWN" is killing alot of people. It's too bad they won't at least call you back to talk about your lockboxes and keys. Sounds like a tough situation... GOOD LUCK!

Rich, when people leverage themselves highly, they're taking a risk. When they hit it right, they often think they're smart. Sometimes they're just lucky. Our capitalist system rewards risk, but the potential to lose everything is always there. That's why risk is rewarded so well when it works.

Our free market system is built on the hopes of guys like your former clients. I hope they can recover eventually from their losses.

Thanks for the comments. I think what I was trying to say is that I have seen a lot of people do stupid things with real estate investing. these guys did it all right. The situation and market went against them. Bad luck I guess.

The streets seem to be littered with buyers and sellers that have this sort of predicament. What a shame for the sellers....and their tenants, too. What will become of them?

It's hard to pinpoint the blame if there is blame to be pinpointed in the first place. I do think the day where anyone could get a loan is thankfully over, that is good for us all....including the anyones in the long run. I hope your sellers recoup, recover, & get back in the game.

That's too bad - a lot of people have made good money doing what they did....if we only had a cristal ball!

Rich, As you know investing is a risk. You win a few and you lose a few. I try to keep minimum 30% equity in my rentals just in case. Plus I purchase for the long term. The market is down but I have no intention of selling so it doesn't matter.

Rich, this is common everywhere we look. We have had a few owners lose their homes this year. The tenants got booted. It is becoming more common and we are putting together a plan to handle these kind of situations.

Rich - it seems to me that if they filed bankruptcy your buyer may still have a shot at it.... who knows maybe you could auction it off

MAY

2007

Rich,

I don't believe it! The real estate was no reason to file bankruptcy! If they had no other reason then the only reason to file was so the attorney could get paid.

You know that my partner for many years was an attorney and that my favorite daughter is also, but it never falls to amaze me how often the only one that benefits from legal advice is the attorney.

Better Luck tomorrow!

Bill

JUL

2007

A seller called me the other day about listing one of his 8 homes all very nice current market about 150-229 k homes he bought them in 05 for what they should go for now his previous agent sold all of them to him and was the list agent then as well . He was talking about going South America and not coming back

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