[5-DayForum] harsh reality - Position Clarification

Sun Sep 2 20:36:54 EDT 2007

David

I am from England and in England thousands of properties are sold via an
auction each week. The starting price of most properties are way below
the amount owed on the mortgage, and way below the reserve that the
owner is willing to accept.

Does the auctioneer tell people the starting price is below what is owed
or what the owner is willing to accept - NO!

Do you as the bidder know that you are bidding below the price the owner
is willing to accept - NO!

Is this unethical - NO!

That is what auctions are all about, people start off low and end up at
a fair market value for the property. In England it is normally 85 - 90%
of the appraised value.

What happens if the price does not reach the reserve? The auctioneer
says "I am sorry this did not meet the reserve, you can talk to us after
the auction and we will let you know what the reserve is"

Just my 2 pence (oops sorry 2 cents) worth.

________________________________

From: capndave2k at netscape.net [mailto:capndave2k at netscape.net] 
Sent: Saturday, September 01, 2007 6:48 PM
To: 5-dayforum at mailman.howtosellyourhomein5days.com
Subject: Re: [5-DayForum] harsh reality - Position Clarification

Thanks for your input Bill,

I'm certainly not trying to tap dance.  I don't want to poison the
process and my only concern with revealing the amount was not wanting to
alienate buyers by having them think they had to start with that.  I own
this property and two in Las Vegas (which is where I actually live).  It
was purchased because at the time, I was working in the Phoenix area.
My income is sufficient to continue making the payments, however I
prefer to sell the house now at a loss rather than continue the carrying
costs until prices improve.

David

-----Original Message-----
From: Bill Effros <bill at effros.com>
To: How To Sell Your Home in 5-Days
<5-dayforum at mailman.howtosellyourhomein5days.com>
Sent: Sat, 1 Sep 2007 9:17 am
Subject: Re: [5-DayForum] harsh reality - Position Clarification

David,

No.

Don't get involved in any of that stuff with anybody.  Just tell
everybody the unvarnished truth.  If somebody asks the amount of your
mortgage, tell them.  (It's all public knowledge anyhow, even if sellers
don't realize it.)  If they ask if you're really going to sell it to the
high bidder, explain just why you are going to exactly that.

If you are going to lose money, tell the buyers who ask that you already
know you are going to lose money, the only thing you don't know is "how
much" and everybody is going to know that very soon.

Tap dancing is just a distraction.  You are not judgment proof.  Your
lenders are going to make you pay back every cent, and you know it.  If
your home is worth less than your mortgage just throw your buyer into
the same room as your banker and let them work something out.  If they
can't, then the buyer won't buy, but it won't be because you were not
prepared to sell to the high bidder.

Then what will you do?  You can either find another buyer and see if the
bank will take less the second time around, or chip in some money to
make the first deal go through.  You can't seriously believe you will
get substantially more in the near term while you continue to pay
carrying costs.

I was doing publicity in Arizona 4 months ago when half the people I
spoke with knew there was a problem with home prices and the other half
insisted things were still selling like gangbusters.  Now I read in the
newspaper that everyone knows prices are tanking, just like they did in
Florida, 4 months earlier.

Continue to tap into this Forum from time to time for a current reading
of housing markets all over the country.  5-Day Sellers know the score 6
months ahead of the general public whether prices are going up, down, or
stagnating.  I think you are doing the right thing, and I think you will
get as much as it is possible to get and lose the least it is possible
to lose if you follow the 5-Day Method to the letter and get out of your
situation as soon as you can.

Bill Effros

capndave2k at netscape.net wrote: 

Since I originally posed this question, I've been reading more of what
Bill says.  

I should clarify that I personally have no undisclosed reserve.  There
are factors that are out of my control (The mortgage and 2nd).  I'm
committed to selling on that weekend even though I could potentially
loose all of my initial investment.  My view is that the loss will be
made up within 18 months by the cash I will keep in my pocket every
month.  

So the question is, do I answer the question as I've suggested below?  I
think I'm being truthful and I'm not holding anything back but I don't
want to limit the potential buyer pool by poisioning the bidder pool
into thinking that I won't sell the place.  I will!  

David Cron

-----Original Message-----
From: capndave2k at netscape.net
To: 5-dayforum at mailman.howtosellyourhomein5days.com
Sent: Fri, 31 Aug 2007 12:56 pm
Subject: Re: [5-DayForum] harsh reality

Mark,

I've looked at most of these posts too.  Here's what I plan to do with
my sale in Arizona next weekend (9/8-9).  I will advertize exactly as
Bill describes in the book because I believe him when he says that
modifying the format of the advertising will reduce the price as well as
having an "undisclosed reserve" that you tell buyers about.  

Now, that having been said, When I'm asked the question about what is
the minimum I will take, my response will be something like the
following:

"As long as the high bid will satisy the leinholders and transfer costs,
we will sell the property.  I am not in control of the third parties.
That having been said, we put a substantial down payment on this
property when it was purchased so there shouldn't be any problem with
the high bidder satisfying that requirement.  In the unlikely event that
the high bid doesn't satisfy that requirement. I will provide
documentation ot the high bidder of the amounts owed and work with them
at their option to complete the sale." 

Everything in the foregoing is true.  The house was not purchased on a
100% or even a 90%LTV and I will accept any offer that covers the loans
and closing costs.  If the high bid is below the amount owed I have no
problem at that time disclosing the amounts (I can document from the
statements from the mortgage holders).  This home was purchased in 2006
and I'm expecting to take a capital loss on it,  (although I'll be
thrilled if that doesn't happen).  I'm not in distress here and the
loans are current so I don't expect the mortgage holders to accept a
short sale.

Does that work for you ethically?  Bill, what do you think?  Comments
anyone?

Thanks in advance for your responses.

David Cron

-----Original Message-----
From: Mark Conway <sanford5daysale at yahoo.com>
To: 5-Day Forum <5-dayforum at mailman.howtosellyourhomein5days.com>
Sent: Fri, 31 Aug 2007 6:20 am
Subject: [5-DayForum] harsh reality

Folks, I'm going to stir the pot a bit with this note. You've been
warned.

The forum has become pretty discouraging reading for me. It seems common
for people to run 5-Day Sales with an undisclosed reserve, a bidding
threshold below which they will not sell their home. In and of itself, I
don't see this as a problem. It's the real world. Homeowners have
mortgages for which the banks hold them financially responsible. What I
find disturbing is when I see a 5-Day Seller making a conscious decision
not to inform prospective buyers of the existence of the undisclosed
reserve at the outset. It's a deceptive practice. It's misleading to
bidders who believe their bids are taken seriously, not conditionally,
by the seller.

Sure, many 5-Day Sellers list a rule that says that bids aren't binding
on the buyer or seller until a contract is signed. It's a comfortable
escape clause that, as much as anything, can be a platform for
negotiation. As much discussion as there is about this issue, however,
that rule ought to be in over-sized type, bold, underlined and listed as
the very first rule on the Bidding Rules document so bidders fully
understand how seriously the seller takes this provision. List the rule
that way and see what kind of questions it prompts from potential
bidders. It's better that discussion happens before and not after
bidding.

Clearly stating the minimum bid that will be accepted is one approach
that has been mentioned in the Forum. That seems straightforwardly
honest to me. Phrases like "Highest/Best Bidder" and "Best Reasonable
Offer" are just seller's weasel words used to ease the seller's
conscience and reduce his or her anxiety while still concealing the
complete truth from prospective buyers.

When a seller has a "hidden" undisclosed reserve and a prospective buyer
comes to inspect a 5-Day Seller's home and asks the seller, "What's the
minimum amount you'll take for your home?", the seller's answer will be
indicative of his or her character. One answer could be, "I can't tell
you what the reserve is." That's evasive but truthful. Denying the
existence of the undisclosed reserve at that point would be lying.
Period. Rationalization doesn't change that.

There's a fair amount of talk on the Forum about having to make that
difficult phone call after the round-robin bidding is over to tell the
highest bidder that the seller is reneging on the commitment to sell the
home to the highest bidder. That phone call is difficult because the
seller has been disingenuous with the bidders. That's a seller's
conscience kicking in, albeit too late.

5-Day Sellers who want their bidders and prospective buyers to treat
them with integrity should be modeling that behavior themselves. What
goes around, comes around. If a 5-Day Seller is not truly prepared to
take the highest bid, then they should NEVER make that claim.

Here's to 5-Day Sales run in a manner that respects the integrity of
buyers and sellers.

Mark Conway

________________________________

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