Proficient Note Buyers
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August 18, 2008
Lifting the Veil of Ignorance
I recently had a conversation with a note seller about real estate values in the city she lived in. Our BPO (Broker Price Opinion) came back lower than expected, essentially saying the property was worth about $5,000 less than she sold it for in 2006. Consequently, I had to lower my price.

When I discussed the fact the property had lost value over the last two years, she literally laughed over the phone, insisting she could sell that property tomorrow for $10,000 more than she sold it for two years ago. REALLY???

Maybe the two owners of the foreclosed houses on the same block would like to use her services. After all, they are listed for $15,000 LESS than she sold her property for, and had been sitting on the market for well over six months. The house next door to this property sold last month for $2,000 less than the BPO said our property was worth. All the other sales and listings on the BPO were within half a mile of the property and all had more square footage than ours.

Since my experience with this seller is far from abnormal, I tried to determine what causes rational people to think where they live is somehow immune to the larger housing crisis. Is there really a NIMBY (Not In My Backyard) affect with most people? By and large, I'd have to say yes.

I know my home value has dropped substantially since late 2005, and I don't even live in a 'bubble' area. I need look no further than my neighbor's house, which I've blogged about before and is STILL on the market after two years of sitting empty. He's dropped the price seven times now, and still no takers. The house isn't the problem...his pricing combined with our market is.

Take what you want to out of this entry. If you are someone who currently holds a note and are thinking about selling it, I have three requests. First, put aside those rose-colored glasses, or better yet, throw them on the ground and stomp them to pieces. Second, try to get an unbiased third party to give you a value estimate on the property you sold. (This is key - nobody really cares how much it was worth when you sold it...we want to know how much it's worth NOW.) Third, call me to discuss how I can help you get a lump-sum cash payment for your note.

Just because property values have fallen in most areas of the country doesn't mean you're stuck long-term with your note. Ask us about a partial option, where we buy a set number of payments from you. Our exposure in the property is limited, you get cash now, and the note reverts back to you after our entitlement is paid in full. It's a win-win for everyone involved.

We deal in reality here. Wishful thinking doesn't build bridges or pay the bills. The current market is what it is - there's nothing you or I can do or say or hope to change that. If we can get past the NIMBY Syndrome, we can get you cash in the short-term, all the while being cautiously optimistic about the future.

Make it a great day.


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