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This previous story about Drunk Jim illustrates the worst thing that can happen if you do absolutely nothing to help yourself. The only thing the bank can do to you is evict you from your home and place a negative report on your credit. That’s it. That’s the worst of it. Hell they can’t even evict you as long as you leave before the sheriff shows up. As the title of this chapter says, the bank can’t shoot your dog. The fear of the unknown is what paralyzes most people. People tend to make a bad situation worse in their imagination. The fear of foreclosure is usually worse than the actual event. I have worked with many clients who have told me that they actually felt relief when the foreclosure was complete. They report to me that the foreclosure was actually a fresh new beginning for them, not a tragic end.

Let me paint a different worst case ending for you. In your case the absolute worst thing that will happen is you will fight to keep your house. You will try to modify your loan, get a forbearance, a reinstatement, file bankruptcy, do a short sale, whatever is most appropriate for your situation. You’ll follow my techniques to exercise all of your options. If none of these attempts pan out you will lose your home to foreclosure. But you are smarter than Drunk Jim. You will start talking to your lender as early in the process as possible and sort through and try all of your options. You will buy the most valuable commodity: time.

The worst thing that will happen to you is you will live in your home rent free for a period of time, you will save your money, identify how you got into this financial mess and take steps to prevent it from happening again. You may lose your home to foreclosure but you’ll exercise all your options even then. You may decide to take the cash for keys offer from the bank or you may decide to stay in the house right up to the eviction. As long as you move out at least a day before the sheriff shows up you will avoid the fate of Drunk Jim. The important thing is to take control TODAY and delay the process. Your options will dwindle as time passes.

It’s been a few months since I finished my first book “The Code Of An REO Warrior”. You can still buy the book at BPOs4 REOs.com. It will also be available on Amazon.com in a few days.

Today I am starting my second book. I will be writing this book in a different way. I will actually blog this entire book and post it here as a work in progress. This book is for homeowners who find themselves underwater on their mortage and are facing foreclosure. This book will give homeowners facing foreclosure a plan of action to save their homes. I will be posting the first chapter today. The working title of the book is “The Bank Can’t Shoot Your Dog”. I look forward to any and all feedback. Please feel free to post any comments or sugestions. If you are a homeower facing foreclosure i would love to hear your story.

The next wave of foreclosures is poised to hit.

The best way to ride this wave is to become an REO agent.

The question every agent has is How Do I Get REO Listings?

Here is an article from DSNews.com.

I’ve reprinted the highligts of it below

Industry experts tell us that over 7 million homes will be sold at the courthouse steps over the next year.

Ths number – which is about 5.5 times larger than 2005’s rate of foreclosures – a “huge shadow inventory” that threatens to further erode the national housing market that had shown signs of stabilizing.

Loan modifications have delayed foreclosures while actually worsening many homeowners’ positions.

There’s going to be a flood REO’s listed for sale soon,” John Burns, a real-estate pundit based in California, told the Wall Street Journal. He thinks prices will drop at least six percent this year. Analysts at Amherst predict an 8 percent drop, while a report by Barclay’s predicted a 13 percent drop, saying the worst of the housing crash is “decidedly underway,” with increased foreclosures sucking “the strength of the recovery in all but the best of scenarios.”

One cause of the worsening problems is unintended consequences from “well-meaning efforts to keep families in their houses.” Foreclosures have been stopped by state moratoriums, as well as by banks and servicers who are using the time to find out if troubled borrowers are eligible for loan mods.

“We’re going to have a big jump in foreclosures as people go through the loan mod process but discover they can’t qualify for mods, a Bank of America Corp. spokeswoman told the Journal, adding that government pressure to stop foreclosures had reduced their foreclosure sales to “abnormally low” levels.

Evidence is mounting that even when modifications are successfully written, the chances of a borrower defaulting again, and entering the foreclosure process again is very high. That’s because even a big reduction in interest and/or principal won’t save a homeowner who’s underwater. Many of these borrowers will default later, if they stay in a negative equity position,” they added.

Banks, too, are part of the shadow inventory problem. Afraid of the added costs of taking back foreclosure properties and selling them, many banks have simply decided not to foreclose on borrowers. A report by LPS Applied Statistics indicates that banks haven’t even started the foreclosure process on 1.2 mil homes that are 90 days+ past due. In July, 217,000 mortgages that were a year behind on payments hadn’t even received an Notice Of Default– a number that’s doubled since last year.

Lenders have also lowered the opening bids on the courthouse steps. That’s letting outside investors buy some homes at a deep discount: ForeclosureRadar.com says that 19 percent of homes sold in August in California trustee sales went to investors. Thats a 500 percent increase since last year.

What this all means is that the shadow inventory will soon change the economy’s recent sunny outlook.

“The favorable seasonals will go away over the next few months, and the truth of a 7 million-unit housing overhang is likely to set in,” they said.

This is an email I sent to a friend who sent me a great article about economic theory. I thought you might enjoy it. It pretty much sums up my feeling about experts.

Here is a link to the article

Here is the email.

The problem with economics as a science is that is studied by mathematicians and not psychologists and experts in mob behavior.

Economists are in search of the holy grail of steady predictable growth with little inflation or unemployment.

Systems involving humans do not function that way.

They are always cyclical, not linear.

Bubbles and recessions will NEVER be stopped.

The business cycle and the field of economics is dominated by two things and two things only.

Fear and greed.

Fear brings recessions and greed brings bubbles.

The Efficient Market Theory is a big crock of shit.

The markets are efficient in a sense in that they will always become overheated and then overcorrect.

Financial markets will always function like a drunk weaving down the highway.

Economists and politicians want to ruin the fun by keeping the drunk driving straight but the drunk is incapable of doing it.

In the short term the markets function as a casino or a voting machine.

In the long term the markets function more as a scale that determines value rather efficiently but only in the long run.

The role of economists and government should be to moderate the bubbles and the recessions, not prevent them.

When you try to prevent a recession you allow the markets to overheat and that is what leads to recessions.

If there is one thing this recent economic crisis has done, it has convinced me that my own judgment is as sound if not sounder than anyone else in the world including any Nobel peace prize winning scientist.

This is not to say that I am always right, far from it.

All I’m saying is that others are equally wrong no matter how many degrees or awards they have.

The belief that other people have better judgment than you leads you to doubt your own mind .

This is why so many people turn off their brains and go with the herds…which leads to bubbles and recessions.

Alan Greenspan has even acknowledged as much.

He said that of all the economic data he is capable of ingesting, if he could just get a “fear” index, he would be a better economist.

Here is the first chapter of my new book; The Code Of An REO Warrior. Enjoy!

It’s no secret that real estate has the lowest barrier to entry of any of the professional white collar jobs. Here in California all you have to do is pay the license fees, fill out the application, take some online classes, pass a test and presto, a brand new real estate agent is minted. The public perception of a real estate agent is a life of easy riches with little or no work. When you combine these two things what you end up with is a lot of real estate agents. A lot of agents all fighting for leads, clients and transactions. In California we have over 532,000 licensed real estate agents. That’s one real estate agent for every fifty adults. A full two percent of the working population is licensed.
This low barrier means an almost inexhaustible supply of new recruits for the real estate brokers. The traditional business model of real estate is what I like to call “Churn em and Burn em”. It’s not good for agents, clients or brokers but it’s the way things are done simply because this is the way it’s always been done. Here is how it works.

THE TRADITIONAL BUSINESS MODEL OF REAL ESTATE IS
“CHURN EM AND BURN EM”

HotShot Realty is hiring this month. What you should notice is that HotShot Realty is hiring every month no matter what the housing market conditions are like. They hire a few agents every month, give them little or no training and then let them loose. They tell these agents to contact everyone they’ve ever met in their life, commonly referred to as their sphere of influence, and ask them point blank if they know of anyone who may be interested in buying or selling a house. This puts their friends in a bit of a bind. Of course the friends of this newly minted agent want to see their amigo be successful. They just don’t want to entrust the single biggest financial transaction they will ever make in their lives to someone who just recently skipped over that famously low barrier to entry. Occasionally a few of these newly recruited agents will convince a few members of their sphere of influence to send them their business. Pretty soon the new agents run out of friends and then they get to experience the absolute soul crushing rejection of cold calling and door knocking. It’s not a pretty time in any real estate agents career.

THE BROKERS CHURN AND BURN THE AGENTS
AND THEN ENCOURAGE THE AGENTS TO
CHURN AND BURN THEIR FRIENDS AND FAMILIES

The results are predictable. After a few months of little or no income, all retirement money is sucked out of the newbie agent’s savings for marketing costs, desk fees, technology fees, MLS fees and the simple cost of being alive in the twenty first century. The vast majority of agents crash and burn and are forced out of real estate within the first year. Most of the agents who survive the first year go down in flames by year five. The brokers know these statistics. That’s why they’re always hiring. It doesn’t cost them anything to hire a new agent. That’s what those various fees are for; to cover the broker’s costs of hiring. The brokers churn and burn the agents and then encourage the agents to churn and burn their friends and families.
A slim minority of new agents do survive this system and they become the agents that handle the vast majority of real estate transactions. The famous Pareto Principle should tell us that eighty percent of the real estate transactions are handled by only twenty percent of the agents but this is not the case. Over ninety five percent of all real estate transactions are handled by less than five percent of all agents. The average real estate agent does zero to two transactions per year. This means that any agent who closes three deals a year or more is in the top percentile of agents. That’s great for your ego if you do three deals as a new agent but good luck eating that shiny Magnesium Commodore’s Club Award you get for real estate excellence from your broker.
Are you ready for a career in real estate after hearing all that? Good. I knew what the odds were when I got into real estate. I believe that’s one of the reasons for my success. The agents who make it are the agents who come into this arena with no illusions. If you want to get rich quick in real estate with no money down and no work required you should put this book down and go buy lottery tickets. There are plenty of books that promise easy real estate riches. I promise genuine real estate riches. My secrets may be simple but they’re never easy.

YOU CAN HAVE EVERYTHING YOU WANT IN LIFE.
YOU JUST HAVE TO BE WILLING TO
PAY THE PRICE UPFRONT FOR SUCCESS

You can have everything you want in life. You just have to be willing to pay the price upfront for success. The price is not as high as you think. This book will tell you what you need to know to succeed as an REO agent. While this book will give you some specific actions you need to take, the most important thing you should take from this book is the mindset that is required to succeed as an REO agent. Your attitude towards your work, asset managers, tenants, former owners, your team and yourself is the crucial component that only you can change.
Systems are great. I love systems. I’ve bought and used real estate systems from others that greatly impacted my success. I’ve created my own systems. The dirty little secret of all those systems is that without the right mindset, the right code, you will be ineffective in implementing those systems. This is why this book is the first and most important part of the BPO’s 4 REO’s system I sell. You can have success in this field without my systems but you won’t have any success without the right mental attitude.
Blood Sports are won by the warrior who is prepared and ready to do whatever is needed to win. Warriors operate with a code. A code that guides and informs them as they navigate their way through the day to day ordeals every one faces while striving to win. Real estate is no different.

THE REO FIELD IS A VERY UNFORGIVING ONE

Brian Tracy teaches that “Success leaves tracks.” What he means is if you want to obtain an outcome then study what a successful person in that field did. If you find out what they did to achieve success then do exactly what they did, the outcome is all but a foregone conclusion. This is how I learned the secrets that I’m revealing in this book. I took a look at the agents that were getting the REO listings and I found out what they did to get them. I also learned from and benefited from their mistakes. Learning from the mistakes of others is always the best route. You get the benefit of their errors without the stain on your own reputation.
The REO field is a very unforgiving one. You need to know what the pitfalls are so you can avoid them. When you are just starting out as an REO agent it only takes one or two mistakes to kill your career. Asset managers are like real estate brokers, they also have an almost inexhaustible supply of new real estate agents to give business to. If you don’t give the asset managers the service they require they won’t complain more than once or twice to you. They will simply find another agent to handle their work. They’ll complain about you to the agent they reassign all your listings to. (This is one of the best ways to learn from other agents mistakes.)
Asset managers need agents who exhibit good judgment, possess a sense of urgency, know how to value homes, have a sound marketing ability, and a sense of their fiduciary duties.
Asset managers don’t have the time to constantly hire and train new agents. They want to find one or two good agents in each local area and use those dependable agents for all their transactions. This is why a very slim minority of agents have the bulk of all the REO listings. Those successful REO agents have proven themselves capable and dependable to the asset managers. This book will go a long way to ensure that you are the type of agent that asset managers depend on.

SUCCESS IS YOURS
ALL YOU HAVE TO DO IS TAKE IT

The bright side of this is the knowledge that most people are not willing to do what is needed to succeed. Jerry Rice of football’s Forty Niner’s once said “Today I will do what others won’t so tomorrow I can accomplish what others can’t.” The average agent won’t do the things that I suggest in this book. They don’t want to do the work upfront for success tomorrow. You bought this book so you’ve taken the crucial first step towards success as an REO agent. If you consistently do what I recommend with the heart of a warrior then you too will be successful as an REO agent. I wish you luck. Success is yours. All you have to do is take it.

There is an interesting article from The LA times blog. They say that the banks are not foreclosing on homes in CA.

Click here to read it

I know the banks are holding off on trustee sales in CA. My own experience tells me that. Personally I think that the banks are in negotiations with hedge funds, private equity firms, and other investors and are trying to do bulk portfolio sales. Wells Fargo just announced a deal to sell $600,000,000 in sub prime loans to Irvine CA based Arch Capital Group. I think that these types of deals are being worked out as we speak.

I don’t know what is happening for sure but something is shifting in the REO world. Spidey senses are tingling.

When I decided to make the leap into the REO business model I studied it before I made the jump. The first thing I noticed was that my local market was dominated by a handful of big players. It seemed like 6 agents had about 80% of the bank foreclosure listings. My first reaction was pure jealousy but I immediately put the kibosh on that unproductive emotion and focused on what they were doing.

Success Leaves Tracks.

I like this guy. He seems like a cool wealthy uncle who is always good for some “walking around money” and some fatherly advice.

The concept is if you study what a hugely successful person did and just do what they did, your success is all but assured. I decided to look at what these local REO Kings and Queens were doing and figure out how I could duplicate their success. I asked myself questions like “How did they form relationships with the banks?” Why did the banks prefer to send the bulk of listings to just a few players when there are literally thousands of agents screaming for the business?” “How do I find out the information?”

The last question was the hardest one of all. Finding the information was the biggest obstacle. Call up your local REO King and ask him what you need to know in order to duplicate his success. Go ahead. Give it a whirl. Yea they’ll spill their guts to you no problem. The wall of secrecy around how to get REO listings is practically impenetrable.

The first thing I noticed was that the successful agents used leverage to their benefit. One of the problems with traditional real estate is that people only move about every 5 years. You work hard to develop a relationship and then you only get one deal from each relationship. When you cultivate relationships with the banks and in particular the asset managers you are able to leverage each relationship into multiple deals.

This heavy volume is both a blessing but also the curse that kills the careers of most new REO agents. You MUST leverage BPO’s, systems and people to deal with the heavier volume of work in order to manage the workflow. If you don’t use the leverage of others you will shoot yourself in the foot by dropping balls. This is why the asset managers prefer to work with a handful of agents. Your local REO king uses leverage to make sure that the work gets done with little or no dropped balls.

The REO business model is the most efficient business model in real estate. It lends itself to systems. While the relationships are important, they are nurtured by different criteria than traditional real estate. Asset managers don’t care about what kind of car you drive, where you live, how you look, or how smooth talking you are. Asset managers want predictable results. Results that can only be duplicated on each listing if you are leveraging systems and people. By giving predictable reliable results you leverage your relationships with the asset managers.

Asset managers know competence when they see it. They reward it. They chase after it. They are loyal to it. The competence of systems will make your asset managers look good to their superiors. Making your asset manager look good is your only goal. Take care of that and everything else will fall into place.