NOW WHAT DO I DO? Advice for Agents: How to survive this market?
The wave of defaults and foreclosures continues to sweep through the country, closely preceded and followed by all the “bad” news that’s fit to print and broadcast. I’ve often been curious and confused by the inherent bias of the news that’s produced for the masses to read and hear. The news is filled with doom, gloom and a healthy dose of wishful thinking.
Foreclosures, and Defaults, and Short Sales – Oh MY! But we’re just around the corner from the rebound, or the correction to the correction, right?
SUBPRIME! SUBPRIME! SUBPRIME is the cause! I’ve heard this repeated over and over again by “experts” and non experts. (how can you tell the difference when they’re all saying the same thing?)
But let’s not confuse results with causes here. Subprime, alt –a, no doc, signature only, etc. loans are a RESULT, not a cause. You actually have to sift through the news to get at the truth. It all starts with the question:
Where did all that ‘easy’ money come from? There is no way to get a loan from a bank or lender if the “money” is not available. Every cent of the money was made available through the Federal Reserve Board and the large Money Center Banks that hold the majority of stock in the Federal Reserve Corporation. Between the years 2000 and 2003, the Fed Funds rate was lowered to an historically low 1%. This historically low rate in addition to 10% reserve requirements caused an increase in bank reserves and consequently, the amount of money available for banks and lenders to lend. Within a matter of months, almost anyone who could fog up a mirror was able to borrow money. Eventually, financing mechanisms became more and more creative until purchase money was available to just about everyone. And just about anyone was able to purchase a home or three.
Housing prices continued to spiral upward as more and more money flowed through our financial system as homeowners traded up to larger homes and in some cases multiple homes. Our friendly neighborhood and national news pundits and prognosticators constantly touted how great the markets were because “everybody was getting rich."
Reports from all fronts were about how great our economy was as big screens, big cars, big trucks, big boats, big rv’s, and every other big ticket item available was purchased by a nation of big spenders. It was as easy as calling your bank and saying I need a big loan because I have big equity in my big house. As long as the money was available and the price of the house kept pace with spending, there were no problems. We were all lulled to sleep with the complacent idea that housing prices would never come down. “It’s different this time” is what the experts were saying… …Famous Last Words that beg a new question:
Where did all that ‘easy money go? We are in the current state of crisis/opportunity simply because the purchase money is no longer available. Banks and lenders are no longer willing and able to lend money as freely and easily as before. Lending requirements have changed to the point where 20% down with Grade A credit and low debt to income ratios will get you a seat at the funding table.
Unfortunately, this has caused a significant number of Real Estate and Lending Professionals to leave the business and go back to the 9 to 5 jungle. What’s left for the rest of us? OPPORTUNITY!
The opportunities are sometimes hard to see when we are constantly bombarded with news of how doomed our economy is. It’s also impossible to see when the other constant is the advice that a rebound is right around the corner. The truth is, none of that matters.
What does matter is what we do about it. Real Estate Professionals are slowly waking up to the realization that we are finished with the easy money market and transitioning into a wholesale market where a sizable portion of the inventory, (over 800 billion), is either bank owned or will be in a matter of months.
This “new” market requires that agents will have to learn new ideas, strategies, marketing and sales techniques. It requires more than just a peripheral understanding of the expectations of the new players in this market; Banks, Asset Managers and Investors.
Even if you are one of the fortunate few that currently have a line of qualified buyers knocking at your door, you’ve no doubt asked yourself the question; “how long will this last?” You will eventually be showing properties listed by a qualified REO or Short Sale agent. Your client will eventually ask you to show them the foreclosure down the street.
Even if you have no interest in becoming a specialist in the Asset Disposition segment of the market, you will be doing a disservice to the clients that you represent if you don’t learn about the processes, advantages and disadvantages of this segment of the market.
There are thousands of educational materials and workshops available on the subject of REO’s, BPO’s, Short Sales, etc. If you haven’t yet taken the time to learn about the explosion of opportunities inherent in this type of market, now is the best time to get started.
