The BAILOUT

Here are some of my thoughts on the events occuring and my guess as to how it might affect us specifically as property wholesalers.

We are still very early, and I think (I know) I could spend a small novel about what I think is going on and how it will affect us.  I will restrain myself right now, however, because it is so early pretty much almost all of what I have to say at this point is conjecture, there are so many different ways this thing can play out.

Rather, I would like to talk about how we find our deals and why I think what happens “out there” will most likely have little effect on our day to day operation.

How do we find and acquire our deals?  I have written extensively on how we do it- and it comes down to one key word, we take advantage of inefficiency in the marketplace.  What do I mean by this?  Well, just imagine I walked up to you and asked you to sell over 10,000 properties strewn across the United States as fast as humanly possible…I mean, I want them gone yesterday.  How would you do it?  How can you accurately find the perfect price point for each property?  …answer; “YOU CAN”T”.

CIndy and I sometimes have a difficult time ascertaining the value of a certain property in our own urban village- it could be on a very unique street, it could be the only “big” or “small” oddball property in the area.  It could be the only one with a pool…etc. etc…can you imagine trying to find value on such an elusive asset class as real estate for such a hugely diverse geographical location as the whole of the United States?

Hence, this is how we get our deals in a nutshell…we know VALUES better than ANYONE for our local hunting grounds.  We study our marketplace 24/7, we use our relationships with brokers, we use automatic e-lerts from the MLS, we know about every price drop, every new listing…if a dog pees on a corner, WE KNOW ABOUT IT!  I know I win the “beat a dead horse to death” award, but the very simple key to getting real property for 60 cents on the dollar and much less in this environment is KNOW the marketplace, and STRIKE when the marketplace presents INEFFICIENCY

Let’s take a look at the stock market, for example.  The stock market is EXTREMELY efficient, which is why day trading is not easy- pretty much any and all news gets immediately absorbed and then factored into the market.  Not so with individual foreclosure property that floods the market in your area- it is EXTREMELY inefficient.  Asset managers are buried, inexperienced, and often completely out of touch.  By being aware of your marketplace, you STRIKE fast and hard when you spot a large discrepancy between sale price of a property and the actual market value.  It is all about hitting the right ones fast, NOT low balling randomly and hoping your offer will go through, it usually won’t.

This brings me to what may happen with this bailout.  Regardless of who is in charge of liquidating assets, these inefficiencies would be extremely if not impossible to correct.  If more authority is given to the brokers to determine price, again sale prices will be subject to the subjective unique opinions and prejudices of each broker.  if the government takes over I would imagine they would have to rely on the established asset managers to some extent because they simply don’t have the administrative resources to deal with liquidating these properties; could they do a much better job?  i mean, i know the government is extremely efficient and all ; ) – but I don’t think there exists an administrative juggernaut that could do the job.

Now, granted, what may happens is that government restricts the supply of foreclosure inventory hitting the streets.  This could ease the pressure of having to dump inventory at all costs, but it’s not as if the crisis and the emergency will instantly end!  There is still a huge need to move these non performing assets, and I don’t see anyway anyone is going to want to slow the acquisitions of these things by investors and end users…bottom line?…sorry, gotta go now and make some offers! (keep going my investor brothers and sisters, don’t slow down, we will all make it through this).

Be Happy and Prosper,

Kurtis

http://www.FarBelowMarket.com