Pre-screen your rental inquiries to save time and effort

Prescreening defined:  eliminate time wasters!  Improve your odds of closing a “deal” with an applicant.  This means getting them to apply, get approved, pay the funds, and move in!

 Know your 10 second commercial:  Mine is “we screen for credit, criminal, eviction, employment, and landlord verification.  The screening fee is $40.00 per adult over the age of 18.  All parties that will be on the agreement apply.”

 After you have given your commercial you can explore the caller’s reaction.  “Do you have credit, criminal, eviction, employment, or landlord issues you would like to make us aware of prior to renting?  Will any of these screening areas be a problem for you?”  Have a conversation.  Be aware that tenants will tell a story.  The screening facts matter. 

 Don’t try to define your criteria or establish if a caller can pass it.  Offer to provide it in writing and invite all callers to apply.  Treat all parties the same.  “We provide screening criteria and lead based paint disclosure and photos prior to booking an appointment to show.  Do you have email?”

 “Have you driven by the property yet?”  Explore if they are familiar with the area.

 Next you can move on to your property rules.  Questions such as the following are helpful.

 “Do you have pets of any sort? – reiterate your pet policy.  Ours is “we do not accept any aggressive breeds.  Pet visit at your home may be required prior to approval of a pet.”

 “What date are you interested in moving?” – reiterate your move in policy.  Ours is “we do not hold homes more than seven days once an applicant is approved.  Upon approval you will have 48 hours to pay an execution deposit and sign an execution agreement.  These are certified funds.”

 “Do you have any “musts” for a property that we should know about before showing you the house?”

 “This house has __________________ heat.”  “The tenant pays for all utilities except ___________________.”

 “This house is (small) or (duplex) or has a (garage) that is used primarily for storage.”

 “We are showing the property at ___________________________.  Would you like to be present at that appointment?  What is a good cell # for you? _______________________”

 We require a confirmation phone call prior to our dispatching to the appointment.  Please call to confirm when you are on your way to the home or cancel at ________________.  We don’t go to the house without a confirmation call.

If you would like help buying or selling a home in Oregon and Washington please give me a call!

Kathryn King 503-997-9035, kathryn@kjkproperties.com

The I-5 Columbia River Crossing (CRC) project

Dear neighborhood leader, The I-5 Columbia River Crossing (CRC) project has moved forward in the past year with refining the project’s designs based on technical analysis and recommendations from advisory committees. We’d like to update your neighborhood association on the latest developments and provide an overview of the next steps in project development. Please consider putting us on your meeting agenda sometime between mid-March and June. Please call me or provide the following information by email about the meeting you’d like CRC to attend: Meeting date: Time: Location: Number of people expected to attend: Length of presentation desired (usually 20-30 min.): Any specific topics of interest: Thank you for your interest and involvement in the Columbia River Crossing project. I look forward to hearing from you. Dennis Sandstrom Columbia River Crossing │ Communications and Public Outreach 360.816.4038 │ 503.256.2726 x4038 │ SandstromD@columbiarivercrossing.org Project update The Columbia River Crossing project is a long-term, comprehensive solution to ongoing safety and congestion problems between Portland and Vancouver. The project will replace the I-5 bridge, extend light rail to Vancouver, improve closely spaced interchanges and enhance bicycle and pedestrian connections. In 2009, the CRC project’s eight advisory groups made several key recommendations, including design guidelines for the replacement I-5 bridge, pedestrian and bicycle path elements, the Hayden Island light rail station, and a preferred alignment for the Marine Drive highway interchange. This year CRC will continue to work with communities to finalize pedestrian and bicycle, transit, and highway designs. The final environmental impact statement will be published this year, describing project details and community and environmental effects. More information about CRC can be found online: www.columbiarivercrossing.org Dennis Sandstrom Columbia River Crossing │ Communications and Public Outreach 360.816.4038 │ 503.256.2726 x4038 │ SandstromD@columbiarivercrossing.org

Do you wonder what “seasoning” is? A common loan term…

Seasoning, sometimes called flipping means that the common guy like you and me cannot enter in to a contract to sell a property without a given amount of time passing.

This is a requirement of lending.  Lenders do not like to see “flipping,” and require that the title “season” before they will loan on the property.  Without seasoning, the lender cannot package the loan for sale on the secondary mortgage market.

The secondary mortgage market is what we commonly hear called “Fannie Mae” or “Freddie Mac,” two of the largest buyer’s of mortgages in these times.

Recently I learned that this even includes an investor who transfers a title in and out of their LLC for lending or liability purposes.  Doing so renders a buyer unable to obtain a loan, no matter how long the “real seller” has been a constructive owner.  The law only cares that the title transferred.  This is a serious point to consider.

Why would this matter?

If the loan cannot meet underwriting guidelines the lending fails.  The lender won’t loan, the mortgage insurance company won’t insure the mortgage, the lender can’t sell the loan.  All around it makes selling a property impossible unless it is a contract sale, a loan that doesn’t require mortgage insurance (such as a 20% down mortgage), or a cash offer.

For a lenders description of this, I obtained the following explanation from Cecelia Kern, of Mortgage Trust:

“Purchase transaction require the subject property be owned by the seller for at least 90 days from the date of the purchase agreement unless the seller meets one of the following conditions:

Individuals, companies or investors who purchase foreclosed properties and sell them are not eligible for this exemption.”

Breaking News: President Signs Tax Credit Extension & Expansion

Breaking News: President Signs Tax Credit Extension & Expansion
 
President Obama signed into law legislation that extends and expands the first-time homebuyer tax credit this morning. This enacts the legislation into law making the extension and expansion effective immediately after today. To learn more about the jobless benefit extension and the extension of the homebuyer tax credit visit: Obama signs jobless benefit extension.
 
Who Qualifies for the Extended Credit? 

First-time homebuyers who purchase after today and before April 30, 2010, are eligible for the extended tax credit.

(November 6, 2009)

Home Affordable Foreclosure Alternatives Program (HAFA)

Home Affordable Foreclosure Alternatives Program (HAFA)

Short Sales explained by Oregon Association of Realtors

Short Sale Single Offer Clause

Q.  Can a buyer have a provision in their offer on a short sale that says the seller cannot submit other offers to the lender until the lender has decided on the buyer’s offer?  What happens if the seller gets three such offers, each with the same clause?

A.  Sure the buyer can have such a clause.  The question is what will happen if they do?  Short sales are seriously misunderstood and difficult transactions.  There is tremendous ambiguity and uncertainty for both the seller and the buyer in a short sale.  The seller wants to avoid foreclosure and may not care much about price.  The buyer wants a deal.  Neither needs the uncertainty associated with an ongoing bidding war conducted by serial offers being presented to some distant, unresponsive, disinterested, overworked employee of a troubled lending institution.  The clause you reference is just the kind of thing you’d expect a buyer seeking to reduce uncertainty would come up with in such a dysfunctional market.

Whether a seller can or should accept an offer with such a clause depends on the situation.  In a short sale, offers are going to be contingent on the seller getting the lender’s consent sufficient to clear title.  That means two agreements.  One is the real estate deal between buyer and seller.  The other is the agreement between the lender and the seller regarding the seller’s debt to the lender.  Making the real estate deal contingent on the seller/lender agreement doesn’t make the lender a party to the real estate deal itself.  The seller therefore retains the right to accept or reject any offer on any terms.  Retaining a right doesn’t, however, mean the seller can do whatever they please.

Whether a particular seller should (normative question) accept an offer with such a clause depends first on the seller’s position.  If there is a chance the lender will demand a personal note for the deficiency, or the seller’s taxes will vary with the deficiency, the seller may have no reason to accept such an offer.  On the other hand, if time is short and the size of the deficiency doesn’t matter that much to the seller, they may like the idea of one offer.  It is, in the first instance, their call. The concern, of course, is that accepting such an offer may somehow defraud the lender or involve the agents in misrepresentation.  Everyone is, and ought to be, a little paranoid about lender fraud after it brought down the whole real estate market.

Fraud and misrepresentation by silence require hiding material information.  A seller negotiating with a lender regarding the seller’s debt to the lender owes the lender the duties of good faith and fair dealing. They cannot hide information from the lender that would be material to the lender’s decision regarding the debt.  Here, that means they could not deliberately hide subsequent better offers without the lender’s knowledge.  In this case, however, that is not a problem.  If the seller accepts the offer, the single offer submission term will be contained in the offer forwarded for the lender’s approval.  If the lender doesn’t like that approach all they have to do is say no.   Of course, that may take a month or two and by that time the seller may be foreclosed, but that just takes us back to the normative question of “should” the seller accept such an offer.

The “two agreement” nature of short sales means the seller must consider both their own needs and their duty of good faith and fair dealing to the lender.  Their own “needs” means answering a context-specific normative “should” question.  Once the seller has that answer, the issue becomes their obligation to deal honestly and fairly with the lender.  That can be done just by submitting the offer with the “one offer clause.”  It could be done by working with the lender ahead of time to determine how to handle such things.  That can be done by phone and confirmed by email.  Remember, on the seller/lender side we are talking about disclosure of material facts relevant to the seller’s debt to the lender.  All that means is not hiding important things from the lender.  The single offer presentation clause is actually an easy one because the disclosure issue is taken care of by the provision being presented to the lender in the offer.  It is secret procedures like unilaterally deciding to take backup offers and submit them serially to the lender without the lender’s knowledge that may cause real problems.

Alright, so what about the multiple offers all with the same single offer presentation clause?  It’s the same thing.  First the seller deals with the offers as offers.  A seller with multiple simultaneous offers will normally reject all offers and ask each buyer to make their last best offer.  It doesn’t matter if the buyers come back with last best offers that all contain the single offer presentation clause.  At that point, the seller will (assuming it is in their interest to accept any offer with such a clause) simply accept the best offer and forward it; just like they would had they received only one offer.  It is just an application of how to deal with multiple offers coupled with how to deal with short sale negotiations.  For more information, you should read the new “Dealing with Multiple Offers in Short Sale” section of the Oregon REALTORS® Risk Management Toolkit.  Contact me at kathryn@kjkproperties.com if you’d like a copy.

September Market News

September Market News

Overcoming objections at a showing

How do you know when a potential resident has an objection?  Why would it be important to know this?  By understanding the potential resident and responding you can increase your likelihood of getting an application.  What is the best way to work for the application when there are objections?  Some ideas: asking open ended questions, listening for their comments, and by watching the resident’s body language.  Let’s roll play.

I am a renter coming to see your home for rent. When I am inside the property I want to be able to look around without you crowding me.  How will you know this?  I will turn my attention to the property and will not be engaging with you.  I may walk away from you when I am inside the unit to “take charge” of my own direction without being led.

What should you do as the owner?  Observe my body language and let me look around on my own.  Perhaps comment that you are going to do a few things and will be available for questions.  This is a great time to change bulbs, sweep the floors, shake the entryway rug, etc.

When I have come back through and am ready to head out, ask a few open questions about the property such as:

Are there features you find appealing?

Can I tell you more about the parking, storage, amenities?

The home has electric heat, public water and public sewer.  The garbage is paid the owner’s

responsibility.

Perhaps I have some objections to the electric heat and I say: I don’t like electric heat; I have heard it is expensive.

How would you respond?  A reply could be “the heat is zonal electric and very consumer friendly.  You don’t have to heat the entire house like with gas or oil heat.  This can be a great cost savings, as you are in charge of how much or little you use.  Gas and oil prices have increased over the years and it is not uncommon for electric to be comparable.  Would you like me to check the total electric bill for the prior year and see if the past resident will share any usage patterns?” 

This invitation could engage me.

What if I have other complaints about amenities?  Perhaps I mention that there are not washers and dryers in the home. 

Try this response:  “we decided that because many renters have their own washers and dryers it would be better to keep the rent a bit lower and not provide them.  We could look into the cost of providing them at a higher rent, would you like us to do that and get back to you?

When the visit is almost over, is that when you begin to ask for the application?  It is probably a better idea to always assume they will be applying and phrase your comments accordingly.

“Let me give you my card.  I will be available this afternoon and all day tomorrow to collect applications.  Our screening company screens seven days a week.”

Give it about 24 hours and then do a follow up call to see where the resident stands.  Ask questions and see if there are more concerns you can help to resolve.  Don’t be afraid to ask for the application!

These simple tips are great for home buyers as well.  I would employ these strategies at one of my open houses any day.

For more tips like this, great landlord education, or to search for homes and rentals, visit my blog or monthly meetings at:  www.landlordstudyhallblog.com.  My group Landlord Study Hall meets the 2^nd Wednesday of most months at All Saints Episcopal Church at 4033 SE Woodstock Boulevard.  We have been meeting over six years and have a well informed group of rotating speakers.  If you or someone you know needs to buy or sell a home they can reach me several ways:

e: Kathryn@kjkproperties.com

Twitter: catincluded

Facebook: Kathryn@kjkproperties.com

P: 503-997-9035

Kathryn King, KJK Properties, 1603 NE 16^th Avenue, Suite A, Portland, OR 97232.

I look forward to hearing from you soon.

Should I Sell active real estate in trade for passive real estate?

Reasons for considering a trade of one or more assets for another asset of the same class:

• Selling in a depreciating area to purchase in an appreciating area. Consider selling in a glutted market in order to leverage the equity into an apartment complex at a discount in a market affected by lack of available financing to increase cash flow and hedge against further loss of value
• Estate planning. Exchanging several homes into larger apartment complexes so that the apartments later can be sold by the estate and the value split equitably amongst the heirs, or so that the asset may later be transferred into a trust for estate planning purposes.
• Increased cash flow. Single family residential can be more expensive on a price per square foot basis, exchanging for apartments or NNN commercial can reduce maintenance expenses and increase cash on cash return.
• Termination of active management duties.  Apartments and NNN commercial complexes are easily outsourced to management companies so that the owner may travel, etc.
• Moving equity into a property that can be refinanced.  Many owners of bare land have not considered the income stream that can be created by exchanging into an income producing apartment which would provide income in retirement.
• Moving equity into property or properties that are considered more liquid – an example would be exchanging two apartment buildings for single family residences in urban neighborhoods close to the city center.
• A hedge against inflation – In uncertain economic time’s one thing that is certain is that rents tend to rise.  You can safely plan for moderate to aggressive rent increases that improve your financial performance.
• Leveraging relationships – Contracting with a professional management team will give you direct access to the immediate attention of their vendor relationships saving you costly time and repair dollars during ownership.

Case study: Mr. Jackson is considering converting several single family residences into one large apartment.  He has been an active landlord for thirty years and feels safest in real estate because it is a commodity he understands.  He has had several health issues and maintaining several rentals has become a strain.  He has reasonable income from the homes but no longer wants active real estate responsibilities.  Mr. Jackson takes the homes and sells them totaling one amount of relinquished debt and one grand total of sales price.  Within the timeline of his exchange, he identifies an apartment complex in an area of town close to the tech sector with healthy wages.  His cash on cash return increases because of increased rent per square foot and a lower cost per unit acquired in the apartment.   This value is net of the cost of active management.  Mr. Jackson elected to employ a new management firm and deliver to them management standards so he could travel without worry.  The new management is active in the field and aggressively markets, providing Mr. Jackson with a lower vacancy rate than he himself could obtain.  His asset is protected by their effective maintenance relationships and practices.  Monthly reports and income checks are now the extent of his participation.

What about the investor that wants to sell into a passive investment?

Case study:  Mrs. Choo has 7 rental properties, 5 of them houses she bought over time and two of them duplexes that she built.  She knows she wants to retire in 15 years at age 50. 

Margaret could choose to pay additional to the principal of the loans to pay them off at a 15 year amortization during the time she is earning a steady income.  At the time of her retirement, Mrs. Choo places the properties for sale with a broker specializing in land sales contracts or mortgage and trust carried by an owner. 

Seven buyers are found with attractive terms to Margaret.  The down payments total $220,000, which she is able to invest with her financial advisor in the stock and mutual fund market, and the payments from the land sales contracts have in turn created a stream of income to her of a total amount of $10,000 per month. 

Mrs. Choo graduates her sales clauses in each contract so that she is paid off in graduated steps, according to the wishes of her tax advisor; likely in step with the reduction of her other taxable income or to offset anticipated future losses.  The money from each satisfied contract is invested with her financial advisor.  The additional money is invested to create an additional stream of interest income and increased principal investment in the account.

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