[5-DayForum] harsh reality - Position Clarification

Mon Sep 3 10:37:58 EDT 2007

Harlin,

Americans understand auctions too.  We might not be used to the idea of buying houses that way but we have had auctons for property every day.  Unfortunately, until Bill Effros wrote the book, most of these auctions took place so that the bank could unload a property that was in foreclosure.  They, the banks, know that it's a fair method of selling and they don't generally take less that what was owed either.  

That's why Bill stresses telling the people who call exactly what you're doing.  That way people will know what's going on and accept that you're not doing anything shady.  Of course the idea of Bait-and-Switch has no bearing on this because you are only selling one house.  You don't have a shack for 1/2 price and another better property that you really intend to sell.

David

-----Original Message-----
From: Harlin Seritt <harlinseritt at yahoo.com>
To: How To Sell Your Home in 5-Days <5-dayforum at mailman.howtosellyourhomein5days.com>
Sent: Mon, 3 Sep 2007 6:42 am
Subject: Re: [5-DayForum] harsh reality - Position Clarification

I have to say I totally agree with you Nick. There is nothing illegal that I can think of with this approach even here in the U.S. Unfortunately though, most Americans are not money-shrewd or hardcore capitalists like other ones are. I believe most Americans are very used to the price tag way of dealing. Many of us here will find something besides a fixed-price an affront and start accusing others of doing something dishonest if it even has the slightest appearance of impropriety. Toying with peoples' time and emotions will add to it. 

Though we are pretty much like anyone else in the world, Americans are polite in business and expect the same in return even if it's a bit over-the-top. A lot of this probably stems from bad feelings from bait and switch tactics that car and furniture salesmen did way back. As a result, bait and switching is illegal and anything that looks like it, people will assume it is. We had one person on here who was threatened with frivolous legal action because of their action. Sadly we are a very litigious society.

I do believe though that as long as you are not harmed financially, you should not be allowed to sue. All investigations/inspections/shopping of products/services take a certain investment of the prospect's time. If a hidden reserve is not met, I really don't see how prospects are harmed -- though they may use their consumer rights -- freedom of the market -- to not do business with you. And this is the key. You have to weigh risk/rewards in all things. Though I fully agree with you, things are different here for better or for worse.

Regards,

Harlin

Nick Ellsmore <Nick at ellsmore.com> wrote:

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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Visit the Yahoo! Auto Green Center. 

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