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3 Ways to Avoid Getting Caught in the Subprime Maelstrom - updated

Unless you've been sleeping under a rock and avoiding ActiveRain for the past weeks, you've probably caught wind of the meltdown that's been happening in the subprime lending sectors, with 30+ lenders shutting their doors and many more in trouble. It's fairly obvious that rising credit guidelines and risk premiums will make it harder to get your buyers approved; far less obvious are the steps you should take to survive in an interest rate and lending environment the likes of which we have not seen in perhaps 10 years. Here's a few tips that from me on how I think the top professionals will weather the storm; please share your thoughts with me too.

1. Become a Short Sale Expert. Working with a distressed seller and a reticent bank with a pending foreclosure on its hands meets no one's definition of a fun and easy sale, but creating this skill set early could reap great dividends. Developing a good working relationship with your local bank representatives will likely set you on a course for steady business in which you and only you are the local expert.

2. Start Creating your Buyers. Now is the time to start creating new buyers by having First-Time Home Buyer Seminars, Credit Repair Seminars, and coaching these new would-be buyers to expect higher down payment and credit requirements early. A good lending representative and perhaps a financial planner would be great partners to have to help you pull these off successfully.

3. Slash Marketing Costs Now. With so many homes on the market, traditional marketing may be a case of too many dollars chasing too few buyers. Are you taking advantage of free listings on Zillow.com, Oodle, craigslist, LiveDeal, Propsmart, GoogleBase, Trulia, HomeGain, and not to mention blogging your listings on Localism.com? No? Then why are you spending bucketloads of cash on traditional (read: print) advertising when the ROI on free advertising is limitless? Failure to do this quickly enough may see you in a cash crunch when listings you've dumped huge advertising money into won't sell.

Hopefully this perks up a few ears and sparks a few ideas on successfully navigating the impending foreclosure wreckage. If you have any comments or questions, I'm all ears.

Posted by Jose Luis Ramirez on 03/07/2007 05:16 AM

Comments (23)

foreclosures short sales, subprime meltdown, exploding arms marketing real estate, web 20

Post is included in group: Colorado Lending
Post is included in group: Mortgage Professionals for an Ethical Industry

23 Comments on 3 Ways to Avoid Getting Caught in the Subprime Maelstrom - updated

MAR

2007

Jose,

Excellent post for those that are concerned about the mortgage market and where things are headed. I'm certain that many will bookmark your link....Mortgage Lender Implode O Meter. Stay tuned as more to come! thanks!

Thanks for the excellent post. How do you recommend becoming a short sale expert?

Great post. I was wonder about short sale as well.

Jose - Thank you for the post on this topic. Another important aspect is that Realtors need to be asking more questions when they encounter a lender that they do not know - I have encountered a few (mortgage brokers) who are not up to speed on the wave of changes that continue to occur and in one case had been pursuing a loan product that no longer exist. If we can help one buyer and agent avoid the ultimate closing day suprise, it will be worth 1000 blog post on this topic.

Great advice!

James

Thanks Jose, great ideas. I'm printing your post and making an appointment with a lender to get up to speed. I use craigslist and zillow, thanks for posting the other sites!

This is very insightful - I especially like the marketing ideas which I'm trying to implement in my business. I've been in the business 1 year (yesterday - yee hah!) and have encountered the short sale situation sooo many times it's now commonplace (I'm in Michigan). There's classes/seminars constantly offered just for this topic.

Additional Free Listing sites: Myspace, Live Expo (MSN)

Good post .... Judi and Christy.... do a search of short sales or foreclosures here on Active Rain. There are a few very well-written articles on these topics. The sad part of all of this is that this has been going on for over a year. If people have been paying attention, many experts have known that this was going to happen over a year ago. The public and media is just catching up now.... just my opinion.

Jose,

Excellent post. Although we are not in the miseries that a good deal of the country is in we are creating our own buyers for our buyers agent through seminars. Cost management is one thing we do regularly so the feebees are high on our list, so is an interveiw with the local fish wrapper to discuss first time buyers needs, marketing needs and so forth. Tahnks for your short sale advice but unfortunately we aren't expriencing a large need in this area so we seldom have to resort to that practice.

Thanks for sharing these toughts with us today Jose. This is a scarey time in Real Estate for sure. We've been wondering why so many 100% Buyers have been coming out of the woodwork ourselves. I keep saying that it seems to me that I must be old world in my way of thinking that you shouldn't go shopping without money in your pockets. I thought I was just getting old or something!

Marketing Costs are a good idea...

There are a lot of monies that can be used elsewhere to get just as good an impact.

Jose - I thought the first two points were best. I was surprised to see the amount of groups you posted this to. It seems like you are shotgunning the community.

Good Post. I think the thing about short sales is to really make sure both buyer and seller are aware of all the things that happen in a short sale. For the seller it is really important that they know the shortfall in sales revenue will be credited to the seller just like income and they will be responsible for the taxes on that money.

For the buyer it is not as precarious but I have counseled many sellers of looking for other options and looking early in the process not when it is too late.

"With so many homes on the market, traditional marketing may be a case of too many dollars chasing too few buyers."

Not to mention I don't get 1/5 of the response from paid advertising as I get from my free web ventures.

Good post.

I think now would be a great time to be a buyer in the markets that are getting hit. Where are the cities that are being most affected?

Keenan, I would think that lower-income and newer communities would be hit the hardest, as subprime loans are for people with lower credit scores and the vast majority have been made in the last couple of years.

I agree with the third item, it is not about how much money you spend, it is about the exposure your home gets.

Jose I have bookmarked this one....thank you for the info on all the sites for free listings (I didn't know about them all). You offered great ideas, now I just have to become a short sale expert! They have been talking a lot about short sales at my office recently. Doing things the traditional route isn't going to work much longer is it?