Discover the Top 15 Secrets of Successful Commercial Property Ownership!

Category:Commercial Property

1.) What’s Your Type?

There are many different types of commercial properties that you can purchase including:

o Office
o Retail Space
o Warehouse Facility
o Restaurant
o Commercial Condo
o Strip Mall

The first step is clearly defining what type of property you want to purchase and how you want to use it. The following information will help you maximize your investment dollars to get the best possible deal when purchasing your property.

2. Build Equity With Your Investment

Equity is Money

Building equity is the primary if not the ultimate reason to buy instead of rent a commercial property. Let’s face it. It’s money in the bank. In fact, it’s better than money in the bank because you can’t get the same kind of return on your money when it’s sitting in the bank as opposed to when you’re building equity. Moreover, if you choose the right financing for your commercial real estate purchase, you can not only build equity through ownership, but you can also leverage your capital saving in order to grow your business, hire additional employees, or even purchase an additional location when the time comes.

Owning beats renting because you can sell your investment once you outgrow the space or sell the business. Even if commercial property in your area has not appreciated (which is unlikely), you can recoup your investment by renting out the space once you move out and by selling when the time is right.

If you plan on growing into your building, buy something larger than your current needs, and rent out the extra space until you need it for expansion. This will provide you with steady income that you can use to help pay your mortgage or invest in your business.

3. Calculate Your Savings And Your Potential Profit

Lower Monthly Payments

Consider buying commercial real estate as a savings for your business. Real estate costs are the third largest business expense, behind payroll and taxes. Long loan amortizations mean that your monthly payments could wind up being less than what you would pay for rent, since landlords usually charge more than their monthly loan payment. In other words, owning your own commercial property may actually be more affordable, depending on current market conditions.

Ask your lender to provide you with an analysis of the current market in your area so that you can see which scenario is best for you (renting or buying). The lender should be able to explain your options in detail with examples of monthly rental costs vs. monthly loan payments and the benefits of each.

Analyze the Rent Value

Upon finding a property that peaks your interest, find out the status of the current tenants (if it is a multi-tenant property) in terms of how much rent they are paying. Check the current market to see if the rents are undervalued, meaning below what you can get in the current market. Your realtor or lender should be able to help you figure out how much you could charge for rent and determine how much of a profit you can make each month.

Tax Advantages

There are many tax advantages to becoming an owner of a commercial property. In most cases, you can deduct part of the value of the building at tax time, as well as improvements you’ve made as depreciation, which can save you more money on your taxes. Buying the property under your business or corporation’s name is also a better tax strategy than under your personal name.

4. Do Your Research

The more you can learn about property types and options, mortgages, financing, zoning and remodeling; the better position you’ll be in to make wise decisions concerning the acquisition of a commercial property.

However, you don’t have to know everything. That’s where putting together a powerful team of professionals proficient in their areas of expertise may be your most important step. Building a team of advisors – people you can trust to steer you in the right direction is critical to your success.

Understand Current Market Conditions

Keep your eyes open for news articles pertaining to the commercial real estate market. Is it “hot” right now? Is it a buyers’ or sellers’ market? What kinds of interest rates are available?

The Internet is a great place to start. Conducting a Google search for “commercial real estate market,” for instance, will give you results that include news and resources for national trends, analytics and market research.

In addition, many realtors, lenders and lawyers across the country offer free and timely articles on their websites that shed light on current commercial real estate trends nationwide. Again, make sure you listen to both sides of the story.

Tap Expert Resources

National market research companies can give you specific information about the area where you’re preparing to locate your business. You can also find information on demographics including the median age, household income, breakdown of ethnicities, and more from censuses available from the U.S. Census Bureau.

Also contact commercial lenders or realtors for additional resources. In looking for help, it’s usually better to talk to a lender or realtor with nationwide experience and up-to-date information than a small-time operation that might not have recent data for you. If the lender/realtor hasn’t gotten updated demographics since 1996, you’ve essentially wasted your time. Also, a lender or realtor that specializes in the type of property you’re looking for will be more likely to have the specific information you need, which will save you time in research.

Study the Current Vacancy Rate

Research what the vacancy rate has been over the past few years for the area you’re taking into consideration. If there seem to be high levels of vacancies, try to find why. Is it a bad neighborhood? Talk to store owners in the immediate area and find out how long they’ve been doing business there. Ask if they have any concerns that you as a potential property owner should know about the area.

Research Commercial Realtors

It’s important to research commercial realtors that specialize in the type of space you’re looking for. Grill the realtor you are considering selecting on the entire purchase process so you know what to expect. Ask how long the process usually takes so that there are no surprises. Check their references and their track record (more on finding a Commercial Realtor in #5).

Examine Experienced Commercial Lenders

Choosing a lender and financing program is just as important as choosing the property. Again, find out the entire process of financing, as well as your different options. Don’t assume that just because you’ve had a relationship with your bank for years that using their financing is the best choice.

Banks don’t always offer the lowest rate for commercial loans, and sometimes have a far longer turnaround than non-bank lenders. Some banks require that you transfer your accounts to them in order to qualify for a loan. Be aware of any stipulations when seeking a bank for a commercial loan.

5. Choose the Right Commercial Realtor

As mentioned before, you need qualified partners to help you with the process of buying commercial property. Start with a terrific commercial realtor.

Some commercial realtors work exclusively with individuals interested in investment properties. Others work with owners/users of commercial real estate, and among those some specialize in property management, which can be an added value to you.

Who Do You Know?

Referrals from trusted sources are usually the best way to find a good commercial realtor.

Ask Questions

Set up a meeting with more than one potential commercial realtor. Find out as much as you can about their professional background, education, and experience with your type of property. You can ask for a list of recent transactions to give you an idea of what they deal with on a regular basis, and how many properties they’ve actually sold in the last year or two. And most importantly, ask for client references (testimonials)! Real client feedback is the most effective measure for potential success.

The Right Match

Make sure you choose a realtor that understands your specific needs. If you are a small business, you don’t want to work with a realtor that normally handles multi-million dollar deals. Your project may become less of a priority when that particular realtor gets a bigger commission to worry about.

6. Consider Your Time Frame

If the reason you are looking for commercial property is because your lease is ending, think twice before jumping into a decision you might regret. Finding just the right space, securing financing and going through the process of obtaining a commercial property can take months. If you don’t have that kind of time, you may need to rent month-to-month for now.

Take Your Time

While you may be in a hurry to move into a space, take your time. Buying any kind of property is a major decision, and buying commercial property is even more important for the development and growth of your business. Selecting a property in the wrong area, or a space that doesn’t allow you to grow can hinder your company and even cause it to fail, so plan carefully.

If the realtor or lender gives you an estimate of three months from start to close, plan for longer – just in case. Keep in mind there are many people involved in the process of buying property, from the seller, realtor, lender, appraiser, surveyor, paperwork approvers, secretaries, and more and this process can often take slightly longer.

7. Location, Location, Location

One of the most important factors in considering commercial property is location. If a property is located on a busy corner that is difficult to get to, your business may not do well (in fact, that’s probably why the property is for sale). If you want to operate a dog kennel and the property you’re considering is in a residential area, not only will your business disturb the residents, the zoning laws may prevent you from operating there.

Foot Traffic

For a retail business, look for areas with high foot traffic that will give you the exposure and increased walk-ins you need to be successful.

If you are looking for an industrial or manufacturing facility, then you can stay out of the retail limelight and buy something in a warehouse district. These areas are usually cheaper than retail space.

Easy Access

Make sure your location has easy access from the road. Look to see if the site is at a difficult intersection. Is there construction going on that seems like it won’t be ending any time soon? On the other hand, what’s the potential once the construction is completed?

Check out the Competition

If you want to open a bistro in a neighborhood that has several bistros, you might want to try somewhere else with less competition. However, a healthy population of restaurants usually means a healthy population of customers.

Know Your Customer

Find out the demographics of the area you’re interested in. If you want to move your sports apparel shop to a new location, you’ll probably want an area with a high percentage of youth and active adults. An urban area with a lot of pedestrian traffic might be better for this kind of retail shop than a suburban area in a retirement community.

8. Free Parking

We’ve all spent time driving around and around looking for a parking spot. It can be very frustrating, especially when you’re running late. Whenever possible, you want a location that has ample parking for your visitors.
If you have a retail store, restaurant, or other high-traffic business, estimate how many customers or visitors you’re likely to have at any given time and consider rejecting any properties that have fewer available parking spaces than your estimates. Again, use your best judgment and consult your realtor.

Avoid Headaches

Also pay attention to how your parking is situated. If it’s located just off a major road, it may provide a headache for people trying to back out of the parking space, and may even cause accidents. When visiting the property, see how well you can maneuver the parking. If it’s a hassle for you, it will be doubly so for a potential customer or visitor.

9. Get in the Zone

Before you begin the negotiation process for a commercial property, make sure to investigate the zoning laws, as well as what types of businesses you are able operate there. There are zoning laws about the type of business that can be conducted in certain spaces.

For instance, some spaces do not permit food and beverage to be served, or may have restrictions on how late a business can operate. The typical zoning districts in most cities include: residential, commercial, industrial and mixed-use.

Don’t Assume

Zoning can be tricky, so do your due diligence on this topic. Don’t assume that just because the previous tenant of the space had a restaurant that the property you’re looking at is necessarily zoned for food and beverage. Many businesses slide under the radar for months or years while violating zoning laws. Making assumptions can cost you big time and big money when it comes to zoning.

Regulations

Zoning laws can regulate not only the type of business that can operate, but also parking, signs, water and air quality, waste management, noise, appearance of building and more. Find out any and all regulations regarding the property in advance.

Visit your local library or zoning office to get information on all the zoning laws, rules and regulations that apply to the property you’re considering for purchase. Talk to people at the zoning office if you have concerns or questions prior to making the investment. Ask your realtor to double-check your efforts to ensure you’ve covered all your bases.

10. Inspection

Normally, if you are considering buying a home, you have an inspector look at the structure, pipes, electrical system, etc. A commercial property requires even more of a stringent inspection, not only to meet your needs, but also the requirements of the local government.

Before purchasing commercial property, hire professionals to thoroughly examine the electrical system, including the sprinkler and security system, as well as the plumbing, phone, and Internet systems. Since you will have already done your homework on zoning and regulations, you will be aware of the building codes. With the results from your various inspections you can get an estimate of how much work, if any, will need to be invested in order to get the building “up to code.”

A Good Foundation

Hire an architect or engineer to examine the foundation and structure, especially if you have frequent natural disasters such as earthquakes or hurricanes in your area of the country.

Communication

If you are looking at an older building, there may be quite an investment up front to either meet city standards or meet your own standards. Don’t overlook the importance of a high-tech phone and Internet system, especially if you have a lot of employees. If there is not already a T1 or fiber optic network in place, build this cost into your purchase, as it will save you money and headaches in the long term over more traditional (and older) phone and Internet systems.

Make sure to hire an expert to tell you if the changes you need are possible and within your budget. With most commercial real estate loans, you can include these remodeling costs in your financing. Again, make sure to ask.

11. Map Out Your Plan

As a business owner, you understand the importance of carefully planning every move. Buying a property requires no less preparation. Before you begin looking for a building, sit down with your finances and figure out how much of a mortgage you can afford to take on.

Create a Budget

When calculating your budget for buying property, don’t leave out taxes, insurance premiums, and repair and maintenance, as well as costs involved in customizing the space to meet your needs. Failing to create a budget for these often overlooked expenses will quickly put you in the hole with your new property. If you need help creating this budget, ask your realtor or your commercial lender for advice.

Room to Grow

To determine the amount of mortgage you can afford, assess your income and expenses. Your mortgage and property expenses should leave you enough room to operate your business without cutting into your normal expenses.

Sometimes it is necessary to take a cut in profit in order to purchase the kind of space you need to grow. Think of it this way: buying a larger space will allow your company to stretch its wings, which will result in more profits down the road. It’s a risk you sometimes need to be willing to take if you want to grow. Remember, if you buy more space than your company needs immediately, you can acquire tenants who will provide rental income that can significantly offset your monthly mortgage obligation.

Planning Ahead

It’s almost always a good idea to buy slightly more room than you currently need. You can lease out the additional space until you need it. If this is your plan, map out how this will bring in income to help subsidize your mortgage. Remember, however, that you may have periods when some of the space is unoccupied, so don’t rely on the rent coming in to cover your mortgage every time. Make sure you can cover the mortgage on your own.

Have an Exit Strategy

So, how does it all end? Hopefully with big dollar signs. After all, that’s why you’re investing, isn’t it? To eventually cash in on your investment. Therefore, you need to have an exit strategy.

You might choose to hold onto your commercial property through retirement, as real estate is a great asset that can provide you with a steady passive income stream: a lucrative retirement strategy.

12. Before You Sign on the Dotted Line

Having a carefully drafted contract is key in your commercial real estate deal. You are required by law to have a written sales contract, and it is to your advantage to have one with each detail of the transaction documented.

Also, make sure to leave ample time for due diligence and closing, especially if any construction is involved!

Details

Despite the stories of real estate contracts being thicker than phone books, all you really need is a contract that lays out the important elements of your agreements. First, it needs to describe the property and the purchase price, as well as whether the price is due at closing or in installments.

Equipment, etc.

The contract should include any equipment, machinery, or personal property that is included in the purchase price. It should list any contingencies that must be met prior to completing the purchase. A common example of a contingency is whether you are able to obtain a loan to finance the purchase.

Don’t Forget…

The contract should cover how the property taxes and utility bills will be pro-rated between you and the seller, as well as what type of title insurance you must provide. The date for closing and delivery of possession should be in the document, as well as what legal recourse either the buyer or seller has in the event that the other party defaults on the agreement.

And Always…

Once the contract has been drafted, have a lawyer review it prior to signing it. A lawyer may be able to help you negotiate a better deal than what is originally presented.

Unfortunately, not all property sellers are honest, and some will try to hide their true purpose in technical legalese within a contract. Having a trusted lawyer and commercial realtor review your contract will keep you safe in your transaction.

13. Choose a Lender with Care

There are many types of lenders available to assist you with your commercial real estate financing. But keep in mind: not all are created equal. Do your homework in finding a lender that meets your specific needs.

It’s important to find a firm that can give you broad access to capital, understand your priorities, offer you the best deal on your loan and complete the process in a timely manner.

Types of Lenders

There are three basic categories of lenders: direct lenders, indirect lenders and hybrid lenders. Direct lenders lend their own funds. Some examples of direct lenders include commercial real estate lending institutions, banks, and private lenders. Indirect lenders place funds on behalf of others, and include mortgage brokers and mortgage bankers, as well as financial intermediaries. Hybrid lenders both lend their own funds and lend on behalf of others, and include certain investment banks, investment advisors and credit companies.

Banks usually generalize in services, and offer a wide array of products. While this may sound good, think about it for a moment. Would you rather have a lender that knows a little about many financing options, or a lot about three or four products designed specifically for you?

Lending institutions are more specific in nature, and are experts in the products they offer. Banks are more traditional in their financing products, while lending institutions are more entrepreneurial and creative.

Banks often require that you move all of your financial relationships under their umbrella, including deposits, LOCs, etc., while non-bank lenders only work with your real estate loan.

The U.S. Small Business Administration (SBA) is a great resource for small companies looking to expand their business or purchase real estate for commercial use. The SBA offers tools that can help you plan your next move, as well as loan programs for a variety of business purposes. The SBA itself does not offer loans, but works through banks and non-bank lenders to provide small businesses with loan programs that meet their needs.

Get Started Early

It is important to choose your lender early in the process so that you can maximize leverage and get a lower cost of funds. Your lender will ask for certain forms in order to determine your eligibility for financing, as well as to figure out what kind of deal you can negotiate.

You will need to provide your income and expense statement, balance sheet and personal financial statements from all prospective owners of the property. If you don’t have them written already, you will need to create profiles of the management team, including information on education and employment background, as well as experience relevant to your business. Other documents needed include a property appraisal, contract of sale, and plans for the use of the property. Providing these documents early can help streamline the process. Again, your realtor and lender will help you through the process.

14. Know Your Financing Options

While you are in the “shopping” phase of looking for a commercial property to purchase, you should begin to research your financing options. There are many kinds of commercial financing options available, so it is important that you find the one that best suits your needs. It’s also very important to know how much you’re qualified to borrow. This will help you and your real estate broker find the right type of property for you faster.

No matter what type of loan you wind up getting, negotiating the loan will be based on the same basic factors: anticipated use of the property, expected returns from the property or business conducted there, geography, type and size of real estate, perceived risk to lender and market conditions. There is no one rate applicable to all commercial financing. The rate you receive will be based on your specific situation.

If interest rates are low, securing a low fixed rate will mean you pay less interest over the entire mortgage. A variable rate, which is considered by some to be more risky, can give you a lower payment for a period (before it increases), which will let you use the money saved for other investments.

In weighing your financing choices, remember that some debt is good. Don’t assume you should take the loan with the highest down payment requirement so you can “pay off your debt faster”. Putting down more money means you have less to invest in your business.

Term Loans

Based on how much money you need to borrow, there are different financing options available. One option is a term loan. Term loans can be used for a variety of purposes, including financing permanent working capital, new equipment, refinancing, expansion, acquisitions and, of course, buildings.

There are loans specifically designed for commercial real estate or equipment. Banks typically lend up to 80% of the value of the real estate to be financed, and the loans must be repaid in 15 to 20 years. If you are able to come up with the remaining 20% on the cost of the property (and don’t have anywhere better to invest the money), this is an option to consider.

Up Up and Away

Beware of balloon payments. While paying a very low monthly amount at the start sounds great, you often end up spending additional money to refinance your commercial mortgage as lenders reset interest rates or reexamine you and your business over the life of the loan.

Credit Line

If you want a more flexible loan, you may have the option of a credit line that can provide you with cash on an as-needed basis, up to a cap amount. Credit lines almost always have a variable rate, and have interest-only payments for the first one to three years.

Equity Financing/Joint Ventures

Equity financing involves joint ventures with investors that have the capital you need. Usually, the investor will receive a percentage of your business’ profit in exchange for the capital you need to purchase the building or stock in the company if it is public.

Some investors will take a back seat to your executive decisions, while others will want a say in the operation of your company. Joint ventures are not for everyone, so keep in mind all of these factors when considering one.

The SBA 7(a) Loan Program

The SBA has a variety of financing products that are ideal for small businesses. The most commonly used SBA loan is the 7(a) Loan Program. The loan is provided through banks or non-bank lending institutions.

In order to be eligible for a 7(a) loan, your business must be for profit, and you cannot purchase real estate for investment purposes. There are many other guidelines to qualify for a 7(a) loan. The maximum amount a business can borrow from a 7(a) loan is $2 million. Furthermore, all SBA 7(a) loans have prime-based floating interest rates. This type of interest rate structure can leave you vulnerable to monthly/quarterly interest rate swings that can have a significant impact on your monthly mortgage payment.

Now you can see why it is so important to find a commercial lender who can help you digest all of this information and take the time to explain your options.

15. The Best Kept Financing Secret

One of the main reasons small businesses choose to rent instead of purchase their own commercial real estate property is the perception that they can’t afford the down payment. Many of them are not aware that SBA-guaranteed loans are available to qualifying applicants and can provide up to 90 percent loan to cost financing.

In fact, the 504 loan program was designed to assist small businesses in building or purchasing properties while spurring business growth in the local economy.

Only 10% Down

While in some parts of the country, use of the 504 loan program is widespread, there are other areas, such as those east of the Rocky Mountains, where this program isn’t getting the attention it deserves. If you are unable to put down much of the loan cost, the 504 is worth looking at: it only requires 10% – and there are no closing costs in addition to the 10% down! (Please note that there are certain basic criteria you will need to have to qualify for the 10% down program. A good lender work with you to do his or her best to help you qualify for this benefit.)

The other 90% of the financing comes from two places: up to 50% of the total cost (land, building, renovations, and soft costs) is paid for by a senior lien from a private-sector lender, and up to 40% comes from a junior lien from a Certified Development Company (this portion is backed by a 100 percent SBA-guaranteed debenture).

Smaller Payments

Since most banks and loan programs require a minimum of 20-30% of the property cost, and do not fold in soft costs and closing fees, 504 loans are a great way to get the best of everything: by paying only 10% down, you retain more capital and are able to make smaller payments over the life of your mortgage.

Because you have two separate loans with the 504, you end up getting a blended rate that is below market. The first loan is either fixed or variable, and is at or slightly higher than conventional financing rates. The second mortgage (the 40% loan) is considerably lower than market interest rates, and is fixed for the life of the loan. Having a lower interest rate lets your company retain more capital.

Buying a Condominium: What to Know About Condominium Associations

Category:Condominiums

Condominiums can be a wonderful home ownership option for many people. The reduced maintenance and shared community space are appealing to many types of buyers who also want to own their own dwelling. But condominiums also come with extensive legal frameworks. If you are considering purchasing a condominium, you should first make yourself aware of all the structure surrounding condominium ownership to determine if it is the best fit for your situation.

When you buy a condominium, you are purchasing an individual unit within the condominium complex—basically you own everything within your walls. You are also purchasing a share of the condominium at large—the shared property. This shared property includes any common space, such as lawns, pools, and roofs. In order to maintain this shared space, condominiums collect ownership fees or dues.

Condominiums generally asses your portion of ownership based on the size of the unit that you purchase. The assessment of your unit size along with the expected upkeep of all shared property determines the association fee that you will be required to pay on a monthly, semi-annual, or annual basis.

The collected fees are used to pay for the upkeep of shared condominium property, and can include:

• Lawn Services

• Pool or club house maintenance

• Roof, sidewalk, outdoor building repair

• Road maintenance

• Trash removal services

Condominiums are regulated by laws that are recorded along with the plat of land and unit division at the local land office. The condominium association is the legal entity that is responsible for establishing and enforcing the bylaws. While all unit members hold ownership of the condominium and are technically members of the condominium association, a board of directors typically holds the powers of the condominium association.

Condominium associations vary in what types of rules and regulations they set forth. All condominiums will have a clear structure dictating what individual owners are responsible for maintaining and what the association is responsible for maintaining and repairing. For example, condominium associations are often responsible for the community pool, but individual owners may be responsible for maintaining their own patio space.

Rules and regulations may set forth:

• Who is allowed to be on the premises of the condominium shared property

• Regulations about pets

• Restrictions on parking or the types of vehicles that can be parked in condominium parking lots

• Regulations about how the outside space of a condominium should appear

As legal entities, condominium associations are able to fine, place liens against, or even force foreclosure on an association member who does not follow the rules. Even so, condominium associations do not have complete power—the types of rules and regulations they can establish are governed by local, state, and federal laws.

If you are having a dispute with your condominium association, you should contact a condominium real estate attorney who has experience with condo associations.

You should not try to battle your association on your own. Condominium bylaws can be complicated and lengthy, and an attorney can review the laws to see if you must comply or if loopholes, illegal rules, or contradictions within the laws exist.

If you are considering purchasing a condominium, you should sit down with an attorney who can review the bylaws of the association with you. Never purchase into a condominium association or homeowners association until you know all the rules and regulations that will govern your property ownership.

Foreclosure Defense Strategy – Clients in Search of a New Paradigm

Category:Foreclosures

Documentary Clearing House and Associates (“DCH”) has pioneered a new strategy for attorneys who defend foreclosure cases. To date, DCH has produced three motions to assist attorneys implement the new strategy.

Viewed from afar, the short, unpleasant history of foreclosure during the last three years presents a sorry spectacle. Far too many judges in foreclosure proceedings have stopped behaving like judges and instead become advocates for the foreclosure mills. The parties that foreclose continue to ignore and avoid alternate dispute resolutions.

The government’s efforts to stem the tide of foreclosure and encourage alternate dispute resolutions have been feckless and dissipated. Most people being foreclosed have not discharged their legal obligation to defend themselves. Instead, many if not most foreclosure cases go to summary judgment uncontested. The resulting assault upon American homeownership has been systemic and overwhelming.

Many homeowners in foreclosure believe that legal representation is unaffordable. Unable to make monthly mortgage payments, they conclude that they have no means to hire a lawyer. The public sector which defends people who cannot afford a lawyer has been unable to mount an effective counter- response to foreclosure.

Too much time has been spent on tactics; too little time has been spent on strategy. Foreclosure defense is preoccupied with finding omissions, defects and deficiencies. The tactics tend to show that a rule has been violated.

Too many courts are inclined to forgive and forget. The courts dream up notions such as finding the non-compliance merely “technical” or that the foreclosure is within the “four corners of the loan agreement”.

DCH is calling for a change in strategy. What is needed is a new strategy which is effective and affordable. DCH’s new motion addresses both these requirements.

1. Employ generic defenses to make defense against foreclosure affordable to most of those facing foreclosure.

Instead of a case specific defense custom designed to meet the unique questions of fact and law unique to each case, a defense which most clients confronted by foreclosure can ill afford, DCH is providing pleadings and discovery where one size fits all. DCH is creating generic defenses. The foreclosure mills have declared war on defaulting mortgagors. The cost effective response to litigation filed by the foreclosure mills is counter-measures from a defense mill. DCH provides the bullets for attorneys to fire. By putting foreclosure one the assembly line, every client can afford to retain his or her own hired gun in a foreclosure battle..

There is a conundrum caused by the litigation protocol used in defense litigation to represent clients in foreclosure: It is effective and counterproductive at the same time. Lawyers are taught to approach each case as unique and upon its own merits. We are also taught to employ tactics to complicate the other side’s case and discover damaging information. Lawyers also try to use discovery to find errors and omissions in the other side’s case. A proficient litigator wages war upon the other side with motions, depositions, production of documents, interrogatories and requests for admissions and stipulations. Attorneys are taught that litigation cases are won and lost in pretrial preparation. Many believe that a successful outcome is predicated upon pre-trial strategy. Such tactics are p[art of the litigation protocol and have over time proven themselves to be effective and productive.

The problem lies neither with the tactics nor the strategy. Lawyers approach a litigation case like a tailor making a custom suit. Each case is entitled to receive its unique defense to custom fit the facts and law applicable to the case. The problem when it comes to foreclosure cases is the client. A client who cannot make mortgage payment can ill afford a custom suit. One reason so many cases go to uncontested adjudication is that the client has no way to pay for a custom tailored defense. Three of the four major areas for defense- a defective or fraudulent note, the provenance of the note and consumer protection and consumer fraud statutes and regulations- require an extensive proof of facts. No matter how meritorious the defense, it is not serviceable if a client cannot financially afford it.

Too many foreclosure defendants find themselves between a rock and a hard place. They lack the money required for a custom tailored defense; they cannot obtain legal services pro bono publico; and there are no neighborhood services available for which the defendants qualify financially. Many of these defendants wind up having to appear pro se and lack the ability to do so. A trained attorney litigating against a lay person is an unfair contest for which the lay person is ill equipped to succeed. For every individual who can manage competently to defend against foreclosure, there are countless scores who cannot. Compelled by foreclosure to defend themselves and unable to do so, these homeowners are buried by the judicial system without having a day in court before they lose their homes.

Under these circumstances, lawyers must begin to consider a different strategy. Maybe if a client cannot afford a custom suit, it behooves counsel to take a suit off the rack. To accommodate a wider base of foreclosure defense cases, it is necessary to develop and implement generic strategies where one size fits all. Such strategies would not be dependent upon the facts, circumstances and laws unique to each case. Instead, such a strategy would be dependent upon facts, circumstances and laws which a large number of foreclosure cases have in common.

In this connection, DCH has concluded that the fourth area of defense, securitization, provides a uniquely fruitful field for generic defenses. Factors common to and endemic in all securitizations of mortgages are vulnerable to attack in cases after case where a mortgage has been securitized. A one size fits all defense tactic which is replicable in case after case becomes exponentially more cost effective than a client specific, one time use defense.

The foreclosure mills have stolen a march on the mortgage defense bar. The client base of the foreclosure mill is determined to foreclose at the lowest possible expense. Accordingly they have provided a large number of cases at a fixed rate of compensation per case. This has caused the foreclosure mills to put foreclosure on the assembly line. The tendency to file the same pleadings in case after case irrespective of the facts of the case has led to untold abuses of foreclosure. Nonetheless, by treating foreclosure pleadings as scalable, the foreclosure mills achieve the economies of scale. This serves to reduce the average cost per case.

Defense counsel can succeed by following the example of the foreclosure mills. Instead of custom designed defense, counsel must substitute off the rack, scalable defenses. Such a change in strategy opens up a new and different set of tactics. To date, DCH has produced two motions attacking securitization. One argues that the mortgage is unenforceable. The second argue that the mortgage note is unenforceable. Both apply to any mortgage which has been securitized. DCH has developed a third motion to use in Florida which asserts that the trust is unregistered and therefore unenforceable. All three motions are generic and are not unique to a specific case.

2. Proactively anticipate and address the concern of most judges regarding unjust enrichment if the debtor prevails in a foreclosure defense.

What the courts are saying is that foreclosure defenses as presented defend the indefensible. That a creditor should forfeit the loan because of a technical defect is an inequitable outcome. The debtor is not entitled to an unearned windfall which is precisely the result for which the defense consistently argues. So long as nullification of the debt is the outcome if defendant wins, defendants will continue to lose. Defendants will not succeed in overturning foreclosures unless and until defendants explicitly seek a remedy other than cancellation of the debt.

To succeed, a defense against foreclosure cannot be a one way ticket to a free lunch for the debtor. Most judges will not render a judgment they deem to have an inequitable outcome. Unjust enrichment of the debtor from an undeserved windfall often is used as a rationale which justifies disregarding defects in the foreclosure proceedings. Most judges believe that the debtor borrowed and received the money and should be obligated to repay the loan.

DCH’s most recent motion explicitly states that if the motion is granted, the court should use its equitable authority to declare a constructive trust or constructive mortgage and afford defendant a viable opportunity to effect an alternate dispute resolution. In short, instead of leaving the decision concerning modification at the sole discretion of the parties controlling the securitization, the court would now makes its own determination and more equitably protect the rights of all parties concerned. This affords the defense the proactive opportunity to address the issue of unjust enrichment. It also allows the court order an alternate dispute resolution where the outcome would reduce the loss inflicted upon the creditor.

The judicial choice is not limited to either conferring a windfall upon a defaulted “deadbeat” or allowing large financial institutions to flout existing laws. There is no reason that the note does not properly evidence a debt which has not been paid-even if the note holder is not evident.

Even if the note is legally unenforceable, the court may declare a constructive trust. The court can declare a constructive trust or constructive mortgage and assure payment of the trust and certificate holders. As a constructive trust or mortgage, the court may impose conditions. For example:

(a) Review foreclosure fees and charges.
(b) Consider compliance with consumer protection laws and avoidance of consumer fraud. Where damages have been suffered by the debtor, the court may allow a set-off.
(c) The Court may order mandatory mediation or arbitration.
(d) The Court may modify in any way deemed equitable and appropriate, the mortgage to enable the debtor to make timely payments and the creditor to recover payment of the debt.

The court may consider a wide range of modifications to the note to allow an alternate dispute resolution. This would go a long way to mitigating financial loss to the creditor and moving foreclosure from a first resort to a last recourse.

3. In an adversarial system the person sued is under a legal obligation to defend against the cause of action. Every person in foreclosure requires a competent legal defense; and an affordable legal defense is available.

Our adversarial system of justice legally obligates a person who is sued to appear and defend. A defendant who fails to appear and defend loses the case by default. In civil proceedings, the law provides each defendant only with the opportunity to defend, not a defense. Judges preside to hear a case and make judgment. The judge does not represent or defend the rights of the party filing suit or the defendant. It is shocking and saddening to realize how many Adult Americans do not realize and understand their legal obligation to defend when they are sued. Such ignorance is a function of an inadequate educational system and an indifferent media.

The avalanche of foreclosures resulting by adjudication in uncontested cases demonstrates how many homeowners fail to realize that they have an opportunity, duty and obligation to appear and defend against foreclosure. The message is lot that effective, affordable and realistic defense of foreclosure has the highest likelihood of achieving an alternate dispute resolution whose consequences to the debtor are significantly preferable to foreclosure.

The members of the bar who want to defend clients against foreclosure need to get out a message. Every person in foreclosure requires a competent legal defense; and an affordable legal defense is available. Most families in foreclosure believe they are helpless victims, overwhelmed by forces beyond their control. The foreclosure mills are posed to exploit this state of mind.

A different message needs to be published and widely disseminated. Most people today have learned that with the advances in modern medicine it is far better to treat a disease than succumb to it. The same principal applies to defense against foreclosure. Most people, however, are unaware that affordable “treatments” for foreclosure ailments are available.

There are many public spirited people, including members of the bar, who have selflessly given their times and work product to enable individuals to act pro se and represent themselves. In many places, people in foreclosure are invited to participate in symposia which are aimed at educating defaulting debtors regarding their rights and remedies. To the extent these programs educate the public about the choices and expectations relating to foreclosure of a home, they perform a valuable public service. The non-profit mortgage counseling conducted by HUD affiliated counselors is an excellent example of public education about debtor’s options and choices in foreclosure.

To the extent, these symposia try to empower a debtor to defend pro se against counsel from a foreclosure mill, the undertaking is an exercise in futility. The average homeowner is unable to effectively defend against a foreclosure in a judicial proceeding. Busy, overworked judges have no patience with quixotic tyros tilting against windmills.

4. Use asymmetric defense tactics to thwart foreclosure mills.

The profitability of foreclosure mill operations is a function of the number of cases resulting in uncontested foreclosure. For these operations, time is money. The less time allocated to successful adjudication of a case, given the fact that compensation is capped, the more profitable. Conversely, the more time required to prosecute a case, the less profitable it becomes. DCH’s motions to dismiss require opposing counsel to do extensive, time consuming legal research. A response will consume substantial legal resources and billable hours which are not billable.

In defending a foreclosure, every attorney should have an off the shelf, standardized discovery package. Where a mortgage is securitized, DCH is working on a discovery package of requests for production of documents, requests for admissions and interrogatories, motions to compel answers and production if required, document checklists and annotations and notes explaining why a specific document is required or question needs to be answered.

The ultimate goal is to bring down the cost of legal care, just like health care, to make it affordable to one and all.

Conclusion

DCH is respectfully calling for a change in foreclosure defense strategy by implementing the following tactics:

1. Employ generic defenses to make defense against foreclosure affordable to most of those facing foreclosure.
2. Proactively anticipate and address the concern of most judges regarding unjust enrichment if the debtor prevails in a foreclosure defense.
3. In an adversarial system the person sued is under a legal obligation to defend against the cause of action. Every person in foreclosure requires a competent legal defense; and an affordable legal defense is available.
4. Use asymmetric defense tactics to thwart foreclosure mills.

How to Turn Every FSBO Listing Into at Least 2 Additional Closed Sales

Category:FSBO

Working with a FSBO seller can be very rewarding yet once we are done with that listing we need and want more FSBO sellers to work with. You can turn every FSBO seller into more closed transactions by following several repeatable steps on each and every transaction that will uncover more FSBO sellers as well as bring you buyers for your other properties.

More FSBO Listings By Helping One FSBO Seller

Often it is one piece of valuable information that is shared with a seller or buyer that puts them over the edge in deciding to work with you. One of the most powerful ways to get more FSBO listings very quickly is from taking just 1 FSBO listing. If worked correctly 1 FSBO listing can turn into 5 or more FSBO listings very quickly.

This can be done by making sure to share the experience with as many people as possible. Some immediate ways to pick up FSBO inventory is by taking the following actions:

Calling all of your current FSBO prospects and sharing – That’s right share with them that you are helping one of “their own”. FSBO’s often like to stick together and if they know you are helping one of “their own” this will allow you to pick up additional FSBO listings.
Update your website with the new FSBO listing – whether you have a blog or a website let the world know you are helping a new FSBO seller. Make sure you tell the “story” of how it all came about.
Get the FSBO seller to record a “Why I chose to list message” – Do this as quickly as you can in the relationship with the FSBO. Preferably have them record it on a system that allows you to put it on the Internet so even more people can hear about. At the very least it should be recorded on a hotline that people can call in and listen to.

Unlocking the Power of Buying Leads on FSBO properties

Buyers are often overlooked as many real estate agents view them as a “hassle” yet the reality is they are needed to close a real estate transaction. Even if you don’t want to work with the buyers you can always refer them. On all of your FSBO listings I would recommend the following to generate more buying leads:

· Toll Free Hotline – People love calling these hotlines even today with where technology is so they can hear about the property and what the details of the property are.

· Text to Phone Service – These services are just now becoming popular and provide buyers with the ability to text, using their cell phone, for information on a property. This allows buyers to quickly and easily see details of the property and the agent receives the users cell phone number for follow-up.

Out of the buying leads that you generate there is at least 1 if not 2 buyers in the group who will buy within 60 days provided you follow-up with them.

FSBO listings can be difficult to get if you aren’t following a system and a pattern for success. I recommend that all my agents treat every FSBO like gold and to not only help that FSBO seller but to find other highly motivated clients that they can help within the next 60 days.

Joseph Bridges is a Coach and one of the founders of the Real Estate Success Program that empowers agents to use marketing to generate leads of motivated buyers and sellers in their market place.

The systems that we coach,train, and use are to generate leads through effective real estate marketing. All aspects of real estate marketing, scripts, and lead conversion are answered in all facets of real estate.

Traditional real estate marketing is blended with the new world of Internet marketing to create a can’t miss approach for real estate agents and the new challenges that they face in today’s market.

Green Real Estate Education Presents a New Era Coming to the Industry

Category:General | Green Real Estate

Real Estate Investors can see a new era coming in the green revolution. It is no longer business as usual. Years ago, all professions in real estate were forced to become part of the information age, a new information revolution. Fifteen or so years ago, in many areas hard copy paper descriptions of homes for sale and lease and commercial properties were hand delivered. When the information highway came about, computers delivered property information and allowed people to access public records and tax information, providing up-to-date statistical property reports.

We now look to the next 20 or so years from a real estate investment standpoint. In an age where values are declining, it is time to know why green can cause a major shift in a buyer’s decision. A selling price is and always has been what a buyer is willing to pay. Well, thanks to the media — through newspapers, websites and TV, especially HGTV and other stations — education for consumers is being offered. The days of accepting a piece of real estate with the the risks of unhealthy indoor air quality are becoming fewer as consumers become educated.

Through our company, Green Real Estate Education, those in the industry have a green certification program that close to 5,000 now see as an excellent first step to understanding why green building is growing so quickly. Green Real Estate Education is educating those professions such as Real Estate Agents, Home Inspectors and Mortgage Professionals and even government professionals who are planning infrastructure for the future to spread the news that going green while considering renovations and upgrades can save money. If I think back to when I was practicing real estate, if you could give me a property to market that had special beauty, or an attribute to stand out in the marketplace, I was glad. If I showed a property that had “more to offer” than others in the neighborhood, it was exciting. A home that showed lower utility bills would not have stood out as it would today.

When we teach our certification classes, we hear agents say over and over that buyers are asking about more energy-efficient product and systems in properties. Energy Star from EPA and the Department of Energy initiatives are helping consumers realize the tax incentives available to them. Those in the industry are embracing our courses for many reasons. They want to know their part so they can become leaders in the Green Revolution.

The Realtor must understand what a green certification is. Agents and home inspectors must allow energy raters into their circle of influence. All in the real estate arena must begin to help building code officials offer fast-track permitting for those who want to renovate to become more energy efficient. Mortgage professionals, underwriters and loan processors must get in the game to understand green underwriting standards coming down the pike. Appraisers are scurrying to substantiate these green renovations and upgrades for higher value. Taking the actual direct savings in utility bills is a great start for the mortgage industry. There are special forms for energy-efficient mortgage loans for consumers.

We’ll keep training so those responsible for your real estate investment can offer suggestions that can only add to its value. Make sure you look for an agent, mortgage professionals or home inspector who displays our GREEN HOUSE LOGO as a Green Certified Real Estate Professional with our Green Leadership title to lead you in the right direction. Go green save money!