Real Estate Appraising is Tricky Business

Real estate appraising is tricky business. It is an arbitrary business based on opinions. And you know what is said about opinions.

Determining property values in our business is critical. Use the wrong value going into a deal, could mean a disaster on the other end.

My experience with appraisers over the years has been one of a love/hate experience.

An appraisal report, no matter how official it looks is nothing more than someone's opinion. A calculated guess even.

Years ago a very experienced appraiser told me his business was an art, not a science. The personality of the appraiser enters into the formula as well. Conservative personalities usually spits out a conservative report.

Anyone who spends a little time in the real estate business will soon discover appraisers can be deal killers or deal makers.

Lenders base their loan to value ratio on the appraiser's report. A few years ago during the boom years, real estate refinance loans were hot. Banks were flush with cash!

In that case appraisers were pressured to come in with the highest value possible to make the loan possible. In the market of today the opposite is the case.

With cooling market sales, banks, even hard money lenders, have tightened their lending standards. Caution is the current feeling.

One thing is for sure, there is no more accurate appraisal than that from a human being.

So what is up with the electronic appraisals? Technology is being used more and more to attempt to value property. Banks have been using their own software programs for years to determine value for properties.

There are many free websites today, which will (supposedly) give an accurate value for properties. Some are more accurate than others. However!

No matter how sophisticated the software program, there is no replacement for the man on the ground.

The computer can not get down on its hands and knees to poke, prod, smell, inspect or physically touch a subject property.

Property values can be misleading. A computer can never account for current condition and location like the flesh and blood, clip board carrying appraiser.

The savvy appraiser on the ground will take into account the property's condition, and actual location on the street. I call this the pebble in the water approach in my wholesale manual.

Neighborhoods have pockets of both good and bad trends which a computer is unable to catch. But, the man on the ground certainly will.

The national appraiser's union has opened a law suit against a large mortgage lender for taking their reports and loading them into a database to use for future appraisals.

The alleged violation is that the man on the ground sends back his report to the lender, only to never get follow up business. The lender loads that report into their database for future use or even to sell that same data to others.

If this is the case, it is not a smart move on the part of the lender. Appraising is a case by case business. Technology can never replace that man on the ground who can see, touch, and smell the property.

As far as the electronic appraisals go, you can use them as a guideline. But more intricate info is needed to grab the finer details of the value of a property.

Remember, ours is a business of numbers, not emotions. You must get the best numbers to get the best deals.

Take Action!

Ken Williams
www.thewholesalewizard.com

Wholesale/Retail - Two Different Worlds

The topic has come to my attention that many are confused about the two vastly contrasting worlds of Wholesale and Retail real estate.

Let me begin by emphasizing why I do not like the term Flipping. Mainly because flipping often involves the commingling of the wholesale and retail markets.

Also many people who use the term have no idea what they are even talking about. But when you decide to think of the real estate business in clear cut terms such as wholesale or retail your business life will become so much easier and better focused.

The wholesale world in real estate involves investors and their affiliates. The retail world involves consumers and their many advisors.

Sadly enough far too many people mix the two, to a disastrously counterproductive outcome.

Investors are guilty of mixing, such as assigning to retail buyers or attempting a bank loan when buying an assignment contract.

Agents also mix the two worlds when they try to sell a junker property to a retail buyer at retail prices.

Wholesale real estate, involves, investors who deal directly with the source. Within the wholesale side of the business institutions play a minor role in the overall equation.

I personally prefer the wholesale world and avoid dealing with the retail side of the business as much as possible.

I like dealing directly with the home owner, skipping the agent or other 3rd parties when buying. I also prefer to deal with fast acting money sources such as hard money lenders or private lenders.

I do not care that the rates are higher. I factor that into the price. It is about the ease and availability of the money, not the cost. (You factor cost into the price).

I prefer to deal with other investors when selling my properties. I avoid the endless hassles of the retail buyer and their army of advisors who can kill your deal at any stage of the process.

When selling or renting properties to the consumer I prefer to contract that out. I am too impatient for the red tape mentality.

The wholesale world is fast, mostly unregulated, discounted, creative and all about the bottom line.

The Retail world on the other hand is the complete opposite. The Retail world is bloated with regulations, laws and customs created to protect its players but actually often kill creativity and the deal.

Mostly institutionalized, the retail world is slow, burdensome, and is process oriented. Results, it seems are an after thought. Rewards and certificates are valued more so than actual income.

Another stark contrast between the two worlds is that investors are concerned with NET dollars per transaction. Agents, on the other hand, are more impressed by total gross dollar sales. Never mind that their NET was a drop in the bucket by comparison.

Some real estate brokers even brag about the number of agents they have in their office. Never mind that a third are dead weight and few are doing little in the way of actual sales.

Let me sum it up, the Retail real estate world is more about the warm and fuzzy. The emotional side of the business. The Wholesale world is about the bottom line. Get in, get it done, and get out!

Some might argue as I have heard many agents, make the point. That investors are cold fish, and out to get a fast buck. I can see their point and will agree there are many investors whose attitude reeks of selfishness. But they are the exception, not the rule.

Finally, I say to you to each to his own. Enter that world which best suits you. But be careful to never mix the two.

Keep things clear, clean, in the right lanes and watch how simple life is meant to be.

Take Action!

Ken Williams aka The Wholesale Wizard....

http://www.thewholesalewizard.com/

Why Agents Should Work With Investors

Some real estate agents just do not get it! Especially those who work in a relatively active market.

I read a USA Today article about the dismal numbers agents deal with to make a living. The numbers I am talking about are income, broker splits, hours spent driving around finicky buyers, and marketing dollars spent on listings which go stale.

According to the article agents average income is dismal during the firsts two years. In my opinion their numbers are painful even for the experienced who hang around for 16 years or more.

Check this out. The article quoted these numbers from the National Association of Realtors (NAR).

Average annual income during first two years is $15,300 (before taxes and expenses). Income for 3 -5 years, $44,200. Even the grizzled veterans who stick with it for 16 years or more average $76,200. And believe me they earn every dime with constant hard work, no time off and crazy hours.

And these numbers are getting worse all the way around!!

Just think, by contrast the average profit of a new wholesaler is as much as the annual income of the agent with 2 years in the saddle. And, I might add, with a fraction of the work. But, that is another story. Do not get me started.

The agents I meet who get it, by IT, I mean they understand where the real money is in this business. I usually meet these renegade agents at a real estate investment seminar.

Just last week I met an agent who works in the Northern VA market just outside DC. Now, this guy gets it! His business model is to work with fast action cash paying investors.

This agent is extremely rare in his market. He has figured out how it is better to string a few fast closing deals together without the usual hassles of a retail deal. He works in the wholesale side of the business.

He has dedicated himself to locating properties at wholesale prices. He analyzes them quickly, makes a brief call to one or two of his HOT buyers who jump into action. In less than a month the agent is in and out of the deal, with check in hand. Do that a few times, the commissions add up quickly.

Sure, there are a few REO (REO= Bank owned) agents doing similar tactics. Mostly in markets where things are slow. However, when the real estate retail market is hot most agents forget about investor buyers.

Even though sales have slowed here in my DC market, most agents still do not get it. Here is an actual example:

Agent lists a junker house at $750K, which has an ARV (retail value) of $850k. He is told by Joe the handyman the house needs $50k to fix. The agent is holding out for a sucker.....er, eh I mean a retail buyer who will pay top dollar. As a result the house sits. It sits for a year, and the agent still does not get it.

The agent wastes everyone's time. Usually he is driven by greed and ignorance. What a combination.

Now lets look at how a savvy agent might look at the same situation. She does her homework; ARV is $850k with 60 days to sell. She contacts a licensed reputable contractor, who actually does renovations. Fix up is $150k, she advises the sellers of the numbers. She is in charge of the situation.

She explains to them that to get a quick sale, she could contact her investor/developer clients who can purchase in less than 30 days. But, the price must be reduced to the low $500s a realistic number. You will be in and out with your money in hand with no hassles, she tells them. She will even refuse to work with them if they are uncooperative.

In the second scenario everyone wins. The sellers are rid of a time and money sucking junker house. The investors have a project the paid a fair price for. And this smart agent is in and out with commission check in hand. Ok, the check is smaller, but she is done four such deals like this while the first type of agent sits on a stale listing for a year or more only to eventually bring his price down to the $500k range.

Another thing the smart agent understands by working with investors is having a solution for those seller crises which have a short fuse. If there are just days left before an auction, most agents walk away. If the seller owes more on the property than it is worth the agent walks away. Same with liens, structural damages, legal damages etc.

As an investor it is up to you to show the agents in your area why they need to work with you. Show them how working with you will benefit their business. This will be easier if you are in a slow or declining market. The challenge is if you are investing in an active market. Agents will not get it.

The NAR has predicted the continued dropping of agent incomes this year. Many, 25% of agents, were licensed over the last five years, during the boom years. These agents are most vulnerable to the changes. Gone are the easy deals where you stick your sign in the yard, sit back and wait for competing offers.

Many of these new agents are bailing out of the business with tails tucked. So, while you go about your daily business of locating and selling properties, add a few agents to your team. Work only with the ones who get it.

Here is another tip to grab the agent's attention. Offer to give them leads for listings. That's right. As you market and talk to sellers you will realize many do not have urgent situations and would be better off listing with an agent.

In turn your new agent contact will gladly pull comps for you and work with you on various deals.

Remember, agents need us whether they realize it or not.

Take Action!

Ken Williams
http://www.thewholesalewizard.com/

Webinar Replay A Must See & Hear !

I am so fired up about this real estate management software that I am sending it out again as a replay Webinar.

If you missed the call here is your chance to see this software in action. Even if you made the call and want to hear it and see it again here is your chance.

Once you click on the link below, be sure you give the player a moment to download the video, as we had a little technical delay on the call with our moderator feature.

Be patient...... Ok, click now on this link:

If you missed my emails last week and do not know what I am talking about, first of all shame on you!

What I am so pumped up about is a software program which has more relevance to us as real estate investors than anything else I have ever seen.

Listen, I do not hide my personal disdain for most software programs aimed at real estate investors. Most are just hyped up, costly and unnecessary gimmicks.

This my friend is totally different. It is a combination of several high quality programs rolled into one. It will easily replace 5 employees if used as intended. Oh, and the software is receiving new features in a week or so.

Not only that, but the part that makes me most enthusiastic is this software is web based, and can be run from anywhere in the world with an internet connection.

If you are like me and like to travel, this is perfect. So without further ado, I suggest to take a moment out of your busy day and click this link to get the Webinar replay started.

Remember to allow a little time for the download.
Please click here for the demo.

At the end of this approximate 1hour demonstration you will have an opportunity to grab this software for yourself. The price is miniscule compared to what it will save you even in the short run.

Not only that but my guest Greg Clement has made this investment very easy to get your hands on it with his Finance Me Now Program. Get the software now, take your time making payments. What else can you ask for?

I will tell you what else! There is a way you can get this program for FREE! That's right FREE! Greg has what he calls the 3 and It is FREE program. Get three of your friends to invest in the program and receive a 100% refund of your purchase.

I have been around this business a long time now. It is rare something truly revolutionary comes along to make our lives easier. This is it!

So take action to click this link to get started viewing and listening to the demonstration. Remember to allow time for downloading:
please click here for the demo

Take Action!

Ken Williams aka The Wholesale Wizard

PS. you get a second chance to view the awesome software demo via this Webinar replay: click this link now: please click here for the demo

Ken Williams
http://www.thewholesalewizard.com/