Owe More on Property Than it is Worth? – Ideas to Sell Rather Than Lose It

Fallon is a farming and ranching community about sixty miles east of Reno, NV. I went to school in Churchill County schools in Fallon, NV. The reason that I bring this up is to associate my upbringing with the way that I see life today. Those who know me well, know that I am a small town guy with big dreams. I am also sincere. I believe in fairness to all and have an affinity for honest, hardworking Americans, who are struggling with today’s economic challenges.

One thing that I learned in the small town atmosphere is that you have to be fair to your neighbors and friends. We depended on each others hard work and honesty. If a neighbors cow got out we all chipped in to get her back in. If someone had a barn fire, we helped rebuild it. When we lost a member of our community, we all grieved. In some ways, the big cities have some of the same characteristics. I believe that small clicks called “neighborhoods” do watch out for one another.

I believe that my small town experiences led to my successes and my failures in the big city. Let me explain: When I left Fallon I went into the US Air Force. My AFSC was a 90250 which is a surgical assistant and PA. To make a long story short, I passed instruments during surgical procedures ranging from knee replacements to open heart surgery. During this time period I became proficient at OB-Gyn and birthing. I learned at that time how precious life was. I witnessed many living births as well as had the unfortunate experience of watching death. My desire was to become a surgeon and I continued on in school at BYU majoring in a preprofessional (medical) program. After leaving BYU, I returned to Las Vegas, NV. and went to work building a career. I was a single father raising my two sons (Leland and Adam). Adam spent more time with his mother than Leland. They both turned out to be excellent American citizens.

I took all of the skill sets of my young experiences and excelled in auto and real estate sales and investing. I started investing in real estate while in my early 20s and did quite well for a young man with no father in his life. My father died when I was 23. He was not a part of my life since I was about 8 years old. I did see him from time to time, but; it was mom who raised me. My first real estate purchase was a Las Vegas rambler about 2100 square foot VA foreclosure that I picked up for $42,700. I sold it 45 days later for $87,900. Most people would have loved to make that kind of money, as I did! There was only one problem that I had with the transaction. After closing on the property and receiving my $43870 check at closing, I started to feel guilty. I felt guilty for the people who lost their home and felt guilty that I had just “Made a Killing” on the new owners. My guilt soon led to joy as I realized that I could have sold that home for $99000. I realized that the new owner actually ended up with equity and that the lender got rid of “Bad Debt”.

Making money has never been a problem for me, however; I have not always the best money manager in my own life and have had my ups and downs over the years. One thing that stands out the most to me in my career is the lessons of “Life’s Hard Knocks!” I have experienced many failures and many successes and have watched others make many of the same mistakes that I have made. I believe that I have learned well from these experiences.

One of the greatest assets that I feel that God has blessed me with is the love of numbers and a good vision of problem solving. Anyone who has known me over the last 30 years can attest that I understand finances and financing as well as anyone in the country. I bring this up to share with you that what I am about to tell you is credible and it is true. This article is written in order to help individuals who may not know where to turn or what to do in their current situation. I do not have all the answers, nor; do I pretend to have them. I am merely asking you to continue to read this article to see if there may be an answer for you or someone that you know. I am not giving legal advice or financial council. I do recommend that you consult with your own financial advisor or attorney prior to entering into contracts or agreements with anyone or any company.

Let me begin by talking about a real estate or a vehicle purchase and tell you a few things regarding these transactions that you may or may not be aware of. First, and foremost, unless you have a buyer’s agent in a transaction, you are not represented in that transaction. What this means in simple terms is that the seller is represented by the listing agent and the agents loyalty is bound to the seller, not you as the buyer. The same is true of the RV, boat, or auto salesman. They are 100% committed to selling you a car and getting as much profit as is possible from you, the buyer.

I am going to talk a little bit about the real estate transactions first and then we will address the auto or vehicle transaction next.

When you are negotiating to purchase real property, everything is NEGOTIABLE! Just remember that the name of the agent that is on the sign is the seller’s agent, not yours! His or her job is to sell the property for the seller and sell it for the most amount of money possible and with the least amount of contingencies (conditions) on the offer to purchase contract. It is your right to have ANY offer submitted as you request. Too many times the listing agent bumps the buyer up or refuses to take an offer to the seller. It is his or her job to make every offer to purchase to the seller in a timely manner. The law requires that a listing agent presents your offer to the seller. Keep in mind during this offer negotiation that the average real estate commission in a transaction is about 6%. It is possible for a BUYER to negotiate part of the commission out of the deal in order to get what he needs to complete the transaction. In most cases it is best to have a buyer’s agent represent you in the transaction. They are usually aware of these, as well as other items, that can be negotiated out of or into the deal. Things like personal property are usually not allowed in the financing of the home and most lenders cap the concession items at $3000, or a small percentage of a sales price. Contingencies are things like furniture, big screen tv, swingsets, or other items that are considered personal property and are not permanently attached to the structure or the land.

Closing costs are usually negotiable with the seller, mortgage broker, and even sometimes with the agents and escrow company. Everyone is willing to take a small cut if it means the difference between a deal closing or falling apart. Make sure that you do your homework on your particular transaction “PRIOR” to closing. The wrong time to find out that you could have gotten a better deal is after you have closed your deal. If you do this one thing it could make a difference down the road if you ever need to sell.

By negotiating a skilled deal (a fair price and terms transaction) you have set yourself up to be in a more liquid position when you do sell. Every real estate deal should be met with an exit strategy prior to closing. What I mean by this is what happens if you have to sell at a future period of time? For example if you buy at the top of the market’s value today and the property declines in value by 10% more in the next two years and you are forced to sell, what is your exit strategy? Compare this scenario to buying your property at a 90% of fair market value today and then having to liquidate in two years for a 10% reduction off market value, your position would be good.

If you do find yourself upside down in your home and you do not have a way out, there are many options for you. There are do it yourself training kits available for short sales and loan modification. You may be able to stall or forego a foreclosure on your home or other property by using short sales techniques or by obtaining a government loan modification. A short sale is selling a property or vehicle for less than the loan balance in order to obtain a lien release and a free and clear title. Some lenders are willing to negotiate the transaction in order to alleviate the foreclosure or repossession fees and processes. A lender reduces a negative portfolio by negotiating a settlement offer with you as the seller in order for you to dispose or liquidate your property in the event of a financial hardship. The government has set up many plans in order to stimulate the lender to re-negotiate on your behalf.

Now let’s address automobiles briefly and then summarize both real and personal property liquidation and acquisition techniques.

When I was selling cars, I was a seasoned and skilled negotiator. Many times I would know what the customer was thinking before he or she ever responded. We were trained to look for buying signals and we are very skilled at overcoming objections and closing sales. We are commissioned to work for the dealer, not the customer. Our sole job is to sell as many cars as possible and for the highest profits. We are paid to get the most amount of money from you the buyer. A dealer has many ways of making that money. Even if he sells you a vehicle at invoice, there are many other profit centers available to him. One thing that is a huge profit center to many dealers are “add-ons” to the list price. Things like custom tires and wheels, desert protection packages, custom paint, alarm systems, paint or fabric protectors, and many other things that are added as dealer options. These are huge profit centers as they are nearly 100% pure profit in some cases. When I am buying a new car, I do not add to MSRP for aftermarket items. My negotiating start from MSRP! Most of the after market items that are listed on MSRP as an addendum give absolutely zero value in the NADA or Kelly Blue Book valuations. If you pay for these items upfront you will be in a worse position than if you had negotiated them out before closing and taking delivery of your new vehicle. Most people are also tricked as to the trade in value of their current vehicle. Dealers establish an ACV for your trade in and then show you a different value for trade allowance. For example if a dealer says that he is paying you $5000 for you 2000 Malibu, his ACV may actually only be $1500. He in essence buys your vehicle for $3500 less than what you thought you were getting. He does this by keeping his sales price $3500 higher than what he would have sold the new vehicle to you. Just remember, I am not against a dealer making a profit, I just want it to be a fair profit.

To keep it all in perspective, remember this: If our car dealers do not make a profit, they go out of business, creating higher unemployment and making it impossible to keep your new vehicle service and in good repair. Be fair to the dealer, while being fair to your future at the same time.

If you do find yourself upside down (owing more than your item is worth) and you do not know which way to turn, here are a few ideas to consider: Real Estate is different than autos, boats, and rvs. The title on real estate can pass from owner to owner without ever paying off existing loans and liens. When you sell a car or rv, you MUST payoff the lien in order to get a free and clear title. When you sell your home you can sell it own owner finance terms by executing a deed of some sort (this transfers title). What this means to a seller of real estate is that you do not have to sell to a buyer using conventional financing. A potential buyer may be willing to pay more than fair market value for your home just for the availability of full or partial owner financing or lease-option terms. You in reality become the bank. Doing this transaction could trigger what is known as a due on sale clause that could cause your lender to call your full balance due. Make sure that you consult with your attorney or a qualified real estate attorney prior to entering into this type of contract. If you are the buyer in a owner financed transaction make sure that you have not only had a title search done, have consulted legal advice, but; that you have also setup a contract collection company to fund the payments that you have scheduled. It is always better to use third party funding like a bank that will collect and disperse all payments including the impound accounts.

Owner financing is just one element of liquidating this type of asset. You may also proceed with short selling or loan modification.

Many people that owe more on their property than it is worth do not know how to obtain other equity in order to pay down their existing mortgages and financed loans. I believe that with a little research we can all find a solution to our financial stresses! The key is to do something early enough in your financial difficulties to avoid your financial ruin.