Just the other day I was having a conversation with a couple of realtors from my friend’s real estate office and the topic of investors came up. Both of them said flat out they will not work with investors. When I asked why they said they are too hard to work with, only want to steal a property and don’t care about the seller or the agent.

And when I ask investors why they don’t like working with agents they say they are lazy, don’t return calls in a reasonable amount of time and don’t understand the business of investing in real estate.

So there you have it: a complete breakdown of communication.  And since I am a realtor and an investor let me try to explain each point of view.

The biggest issue I see with the realtor/investor relationship is lack of communication. First the investor fails to make it completely clear what he or she expects from the realtor, what type of property they are looking for and what they are willing to pay for it. Realtors often fail to ask for specifics from the investor, and so can’t understand what the investor is trying to accomplish. As a realtor, when I work with investors, I get the details of what they expect, and also an idea of their exit strategy. If the investor doesn’t have an exit strategy I know it’s going to be a uphill battle. So I work on that before even trying to find a property.

So let me start with the investor side of the story. First and foremost we are buying property to make a PROFIT not to live in it or get a warm and fuzzy feeling about the color of the walls. Many realtors fail to make sure they understand completely what the investor is looking for and not bring a bunch of stuff that doesn’t match their exit strategy or their perceived exit strategy.

Both realtor and investor need to make sure they each have the same definition of what ‘timely manner’ means for returning calls and getting other information. This causes big problems when someone thinks 2 hours is timely and the other party thinks the next day is timely. In dealing with realtors all over the country this is the one issue I find the hardest to deal with. If you say you will have it to me by 6 PM you need to get it here or call and say it’s going to be late. This is nothing more than the same consideration you would want from me.

As a realtor, I know I’m not alone in finding that too many investors think their own time is valuable and treat everyone else’s time as unimportant.  I can’t tell you how many times I’ve talked to investors who say they have ten realtors trying to find them homes in the same area. I ask them why and they say who cares, it’s free and not my time. Too many other investors don’t value the relationship they have with a realtor; they will see one house with one realtor and write a contract with a different one.  Eventually these people will find that no realtor will work with them, and they’ll wonder why.

All these issues cause needless problems for the realtor and the investor and make the buying process much harder. Clear communication and the respect of one professional for another would eliminate this.

                 1181 South Sumter Blvd Suite 301                                             695 Mansell Road – Suite 120

                   North Port, Florida 34287                                                           Roswell, GA  30076

                    941-716-2597                                                                                  678-287-4800

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com                                                     

(Secure and Fair Enforcement for Mortgage Licensing Act of 2008)

According to the HUD interpretation of the SAFE Act anyone who sells any single family house or 1-4 units and does not live in it as their primary residence, and who wants to offer the buyers the benefits of a seller carryback note is a potential criminal who needs to be watched, regulated, licensed and taxed. This despite the fact that “seller financing,” “seller carrybacks,” “seller-held notes” or any other synonym doesn’t appear anywhere in the Act — Source the paper source

These property sellers have to have government approval via licensing before they hold a note or even discuss terms of a note with a buyer who is not a member of their immediate family.  If they are not licensed they will be fined.  If they don’t pay they will go to jail. Source the paper source

Ok, now that I have your attention we can move forward.

We investors and realtors must pay attention to all the laws that are changing in our business daily and the SAFE Act is a great example of this. I have scoured the internet and have spent time with both of my lawyers to make sure I am following the rules.

You need to know that it’s not as bad as it looks. Some people are making it sound like the end of seller carrybacks or seller held notes.  But only the rules have changed and you need to adjust to them, period.

You can find copies of the SAFE Act on the ‘net so I’m not going to talk in detail about it here. Basically the Act is designed to protect consumers from getting loans they can never pay back or from not understanding what they are signing. So the feds have come up with this Act which requires testing and designates who can talk about mortgages and who can discuss terms of the loans. This is where seller carrybacks or seller financing comes into effect.

I want to look at this as an investor first and then as a realtor. As an investor who has used owner financing, I find it’s a good way to sell property and to improve your bottom line. There are a couple ways this could be done. The first is investors loaning money to other investors so they can buy property and the second is investors holding seller carry backs to the end user.

Investors loaning money to investors, according to both my attorneys, is not as a big of a problem as loaning to an end user. But they made the point of saying the investor lender must have on file all the requirements for a standard 30 year fixed mortgage. Yes, that means you need an up to date credit report, a complete mortgage application with documentation and proof of income, and proof the buyers can pay the loan back. And you need to be careful of interest and points charged as well. You must supply a good faith HUD and all required disclosures.  If you use these tools and consult an attorney, follow all the laws and use proper disclosure you should be ok.

Now if you are an investor selling to an end user you have a different set of requirements and you need to take heed. You are the one who has a “BIG TARGET ON YOUR BACK” if you continue to offer owner financing like in the past. At that time some investors just took their buyers’ deposit, gave them a loan with a high interest rate and waited for them to default on payments. Then they would take the house back and sell it again and again with the same deals. I think you’ll agree with me that those days are over, and good riddance.

The law states that you must be a licensed mortgage broker to offer and discuss terms of a mortgage. It doesn’t say you can’t offer owner financing, it says you must have a mortgage license and they (Buyer) must be able to pay for the loan.

So you need to hook up with a local mortgage broker who will handle all the requirements to meet the law. They will need to do a complete mortgage application, as already mentioned. Debt to income ratios need to be in line with standard FHA guidelines. Loan to value ratios should be the same as FHA.  In my opinion it’s going to be hard for the government to say you misrepresented your loan or cheated someone if you used all the same guidelines as FHA. And the loan should be a fixed 30 year with no points or pre-payment penalties. Very important that you own the property free and clear or pay it off when you offer the loan to the new buyer. None of this ‘wrap-around mortgage’ or ‘subject to’ stuff. If you do business that way, then you default and the end user ends up losing the home you’re going to jail quick, fast and in a hurry. Bottom line is that Congress and the banking industry think of us as parasites taking advantage of people and needing to be watched carefully. They’re more than ready to make an example of someone so use your brain.

As Realtors we have special issues to deal with relating to this law and we need to be careful we know all the facts. A good many realtors are unaware of the law or have not taken the time to look it up. Each state has different views and different interpretations. So first thing is to call your local board and get the most up to date information they have. Spend some time on BING and GOOGLE. As a realtor you cannot negotiate a mortgage without a mortgage license. This causes us a potential problem when we are helping our seller and buyer to negotiate a contract and the seller wants to offer financing. The issue here: is this their primary residence (and how long have they lived there -Check for IRS rules here) or are they an investor. Every state will be a little different here but you must know the Federal Law states that a Licensed Mortgage Broker can discuss terms.

My Real Estate attorney says that if he had a Real Estate license the first thing he would do is double the E and O insurance and triple the malpractice insurance.

We Realtors must make sure we do a good job for our clients and steer clear of any part of the seller financing option if there is one. I also think that each broker office needs a disclaimer form that states the law and how they need to proceed with owner financing. I would interview at least 3 mortgage brokers/lenders and find out if they will be offering loan services for owner financing. I would also look up private lenders and get their information so you can offer them to your sellers and buyers.

To summarize: New financing laws and regulations are being put in place frequently and rapidly. We must keep up with them, pay attention to those that affect our clients and our business and make sure we are doing the right thing and also protecting our selves and offices.

Over time the heavy hand of the government will loosen its grip and we will get a clearer understanding of what we can and cannot do. But in the mean time you need to be very careful how you operate your business.

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at

941-716-2597

                                 paul@pauljdacosta.com

Real Estate investor

Ok, now that I have your attention we can move forward.

??      

THE PERILS OF TRYING TO HIRE INDEPENDENT CONTRACTORS

Or

HOW TO MAKE SURE YOUR WORST NIGHTMARES DON’T COME TRUE

I was completely BLOWN AWAY by the firestorm I created when I decided to place ads on Craig’s List for an EDITOR and a GRAPHIC ARTIST.

See, the book I’m writing is almost done so I need an editor and someone to design the covers. I know that this process can be a big hassle if you don’t hire the right person. My business mentors Dan Kennedy and Bill Glazer have told horror stories about hiring independent contractors, and how to avoid some big problems. So I decided to follow their recommendations.

The first thing I did was post ads on Craig’s List for an editor and a graphic artist.

 Here are the ads:

Ad #1

“Looking for the right person to help edit my new book. Please send me your contact information and the following 1) How many books have you edited 2) How many years have you been in the business 3) How long of a turnaround time do you have

I will respond to all inquires with further details.”

Ad #2

“Looking for help with cover for my new book. Please send me your contact information with the following items 1) Copies of your work (no more than 3 please) 2) Referrals 3) Time in the business I will respond to all inquires with further details”

Nothing real hard I thought. But I was wrong! I got three e-mails asking how I dare ask such questions and why I thought I deserved more than a resume. Only 15% of the responders forwarded exactly the information I asked for. All the rest sent a link to their web sites and/or wrote about how great they are. Not one asked about the book or about me.

So I sent this response:

“Hello and thank you for your response regarding my need of someone to edit my book.

Please go to my web site and look it over www.pauljdacosta.com. Listen to a video, read a newsletter or my blog. This will give you an idea of who I am and what I do. I want someone who can understand that Real Estate is a business.

I will have the book finished by September 1st. and it will be around 12 chapters with 10 to 15 pages each chapter. But we can work through that when the time comes. My publisher will take it after it is edited.

After you have done that, if you still want to be considered for the job please send me a short essay as to why you’re the person for the job. My last editor was difficult, did not like my style and felt it was his job to change that instead of editing what I wrote. I plan on avoiding that again at all cost.

Only fax your response to 941-423-7964 only faxes will be accepted at this time.  Thanks Paul”

Can you believe this set some people off?! I got some of the most vicious comments I’ve ever received. One of the mild ones: “… why don’t you send me the budget you’re thinking about, then we’ll laugh at it and tell you to get real…..” This from a “professional”?? Many wanted to know why I felt I deserved such special treatment. Gee, I didn’t realize that asking someone why they are the best person for the job was asking for special treatment.

Most made a point of saying they were busy and did not need someone telling them to look at a body of work just to read a stupid book they are writing. Holy %^&, Batman! And these people actually get hired? God help the person they are working for.

On a good note, I had 3 potential editors send me faxes with the information I requested and we have had phone interviews already. I will be making my decision later this week. These 3 found it quite interesting that I wanted people to respond and write an essay. They asked if I got a lot of responses. I told them mostly e-mails and faxes calling me names!

The graphic artists were not as bad as the potential editors but still went out of their way to criticize me and  demand to know where I got the idea I have the right to ask questions before I hire them. HUH??

 I decided to try 2 artists, and asked them for their ideas. Both of these people thanked me for giving them the chance to show what they can do.

All this tells me that as business owners we must be as diligent about choosing whom we hire as we are about what type of property we purchase. Imagine if I hadn’t asked them to go through all those steps. When would their true persona have surfaced? And how much would it have cost me in time, aggravation and wasted energy to fix the mess?. What sounds like a minor issue could actually become your nightmare.

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com                                                      paul@pauljdacosta.com

“HOUSING MARKET STUMBLES”

I love it when I read these types of headlines. I always get a chuckle and say “So, what did you expect?” The $ 8,000 home buyer credit was not renewed. FHA, Freddie Mac and Fannie Mae have tightened lending requirements. The “BIG BANKS” are imposing their own ridiculous rules on top of the government rules. And you expect the housing market to thrive. To quote a cartoon character, “DOH!”

Here are some of the particulars in the story: The U.S. Census Bureau reports single family housing starts in June fell by 0.7% to a seasonally adjusted annual rate of 454,000. The U.S. started 1.47 million in 2006 before the bubble burst. The article goes on to claim that a variety of factors have led to a flagging confidence including a sluggish labor market, global turmoil and falling stock prices.

I find it amazing that these so called experts in Washington and New York are clueless as to why we are in trouble on all fronts. Let’s take the labor market. I’m no economist or Harvard scholar but I can sure figure out why the job market is in such turmoil. How about the constant barrage of criticism, rules and regulations that keep CEO and the local business owners guessing “what’s next”

Over the past 4 years the auto industry, banking, financial, and insurance industries have been terrorized by Washington and special interest groups. They have to explain everything from CEO pay to why they’re not being green enough for the environmental groups.

Don’t get me wrong, Wall Street and the banking sector went on a GREED spree like none in history. But with that said, all of the banking and financial sectors have been placed under government rule with all kinds of draconian regulations that have stifled creativity and confidence. Washington has taken their typical reactive and not proactive stance.

Now let’s take business, especially big business. They have tax incentives to take jobs overseas. Does it make sense to anyone for businesses to be laying off people here and exporting jobs elsewhere? Obviously it makes good business sense. The biggest complaint is that taxes overseas are better than and not as high as the U.S. This might be the case but I have seen some reports that show most major companies pay very little federal income tax and most get a major credit. So, is it really taxes, or could it be something else? Cheap labor in some third world country may make the quarterly P and L look good for stock holders but eventually that catches up to you when no one here has any money to buy your product.

Global economic turmoil and falling stock prices are all a factor of Governments around the world becoming so big and cumbersome they stifle growth. In some countries the retirement age is 55 and then people live off the government dole for the rest of their lives.Tax rates in some countries are in the 80% range to pay for all the government social programs and an ever increasing portion of the population doesn’t pay taxes at all (sound familiar?). And you wonder why Europe is on the verge of collapse. Is this a model we want to follow??

Back here in the US all we hear from our leaders is negativity. Words matter and you have to understand they say them more for political reasons. A scared population is a compliant one that will agree with your political ideas. And this has worked well: think 9-11, war in Iraq, TARP Stimulus 1 2 or 3 (I forgot, they keep adding them on), saving GM ‘for America’, and the list could go on. In all of these events our leaders increased the fear factor to new heights making people believe if they did not go along all hell was going to break loose and we would all be out on the streets. Americans and most of Europe are paralyzed with fear escalated by our elected leaders. The job market and the housing market won’t turn around till Main Street starts to feel good about its future.   

So what does this mean for Real Estate investors? You need to pick your markets very carefully. The criteria I use is my Three Tier marketing system which was published in my September 2009 newsletter. Here is the link:  http://http://archive.constantcontact.com/fs050/1101755221758/archive/1102703583402.html.

The best markets may not be where you are investing now. For example Florida, my home state, is very anti business. The Government seems to go out of its way to discourage business from moving here. They want tourism, service jobs and retirees. That is living in the past. We need high paying good quality jobs if Florida is to survive and thrive in the market place.

On the other hand, just to our north, Georgia is grabbing every job that brings in good pay, health care and is a asset to the community and the State. Companies from all over the world are signing lease contracts and purchase contracts and plan to hire tens of thousands of Georgians. Both states have housing problems and job losses but one is being proactive and the other is sitting on South Beach having a cold one and taking in the sights!!!Which state will improve faster?

All over the country this is being repeated, with some states fighting for every job while others are living in the past. There have been a number of articles in national publications that more and more companies and people are moving to Southern and Mid Western States. Don’t believe it’s because of the weather. Northern States and Western States are still living in the 50’s and 60’s mentally when government was supposed to know what was best for the people and the business community. They are all super high tax states and still not able to see what their problems are. They are all on the verge of bankruptcy   and they blame everyone but themselves. Think California, New York, New Jersey and any one of the New England states. So as an investor you must really do your homework before you invest in an area especially if you are not from that area. What was a good bet in the past might not be safe any longer.

Due diligence is more important they ever. Take the extra time on this part of your Real Estate business and big profits will come your way. Because the rest of the world is scared to death and can’t or won’t make decisions so profits are there for the taking. You just need to have courage to go where others are afraid to. 

                              Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

http://www.pauljdacosta.com

mailto:paul@pauljdacosta.com

And It Doesn’t Matter Whether You’re a Real Estate Investor or a Realtor…

Every now and then a member of my Real Estate Group asks this question: Is doing an open house more profitable when you do it as a licensed Realtor? I do open houses both as a Realtor, and as an investor in states where I don’t hold a license and my answer is:

I do both types the same way, no changes, and I always get traffic!!!

First, you must plan your open house at least 5 weeks in advance. This is not the time to do spur-of-the-moment things hoping for traffic. You must plan in order to generate traffic. I always do the following before I even schedule the date.

Here are 6 things I ALWAYS include to make my Open House work:

®    If your house is listed ask your realtor to supply you with the names and complete addresses (including e-mail and phone numbers) for all the realtors who have sold at least one home in your zip code or within 3 miles of your property (if the neighborhoods are similar). Then ask your realtor to break down the list to find agents who have sold 2 or more homes. Don’t worry, in most cases it is not more than 10 to 15% of list. My recent list had 235 realtors and only 28 had sold more than 2 homes.

®    I know what you’re thinking: I’m not a Realtor and don’t have access to the MLS. I am licensed in Georgia only, but have property in 6 States. If you have your properties listed your realtor can supply the info. If you’re selling them yourself just ask a Realtor to get the information for you. When I do it this way I pay $ 10.00 per hour. It takes about 8 to 10 hours depending on the size of your area and number of sales. This will be a very targeted list as all names will have sold homes in your area. And if you have ever bought a list from a names broker you’ll know this is a low price.

®    After I have the names I sort them into in two groups (2 saIes, more than 2 sales). Then I do the following: The large list I send to Handy Mailing (Call Julie at 316-944-2231; she handles most of my printing and mailing needs). I also send her the flyer I had made for my property. She prints and sends them to the names on the list so they arrive about 7 to 10 days before the open house. Then I have my web guru (Steve Tickner 941-228-7810) upload all the e-mail addresses into my web server. I send them emails at the following times: 2 weeks out; 10 days; 7 days; 5 days; 3 days; day before; and the day of the open house. I have the Realtor e-mail the flyer to their office and contact lists. I also upload the flyer to my social networking sites (like Yahoo and Face book) to let everyone know about my open house.

®    Now for the small list: this is the list of realtors who have multiple sales in your market. I have a 3 page sales letter I send telling them the reason I’m contacting them is that I know they are among the top sales people in the area and I want them to see my houses and bring me a contract. I offer the buyer a few bonuses such as $ 2,000 in closing costs and a home warranty. For the agent I offer them 4% commission and $ 100.00 gas card. Along with the letter I have mock checks showing them what the commission would be and a DVD of the house. (I have a DVD made of each house; cost is $ 99.00). The video company I use puts the DVD up on their web site with its own URL, so I go to Go Daddy and buy the domain name for my property. I always use the street address.

www.3021delmonicodrive.com

www.2880belvederelane.com

(The URL’s also go on all my E-mails and social media sites). I send this packet to the top agents so they get it between 7 and 10 days before the open house. Remember, they are also receiving the Emails as well. Right before the scheduled date, I call each one of the top Realtors to see if they got the letter and answer any questions they might have. I personally ask them to please show and sell my home.

®    Another media type I make use of is the local paper. Most of the areas I have homes in have a number of papers, and I usually choose 2. I include the number of bedrooms, baths, address, open house hours and the web site address. I also buy extra 3 lines on top and 3 extra lines on the bottom and bold the whole add. This way it’s bigger than all the other ads and stands out.

®     And the final thing I do is put out signs. I use a combination of hand-written and pre-printed. I like to use the arrow open house signs that are pre-printed as they stand out better and the ‘sign police’ leave them alone. I usually put the signs out late Friday; you need to do what is best for your area. I also display a 4 x5 banner on the house on Wednesday before the open house date.

These actions and your advance planning will drive traffic to your open houses, whether you are a Realtor or an investor.

 1181 South Sumter Blvd suite 301 North Port Florida 34287 941-716-2597

695 Mansell Road Suite 120 Roswell Georgia 30076 678-287-4800

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at

941-716-2597

www.pauljdacosta.com

paul@pauljdacosta.com