Dear Sue,
I don’t know what the big hoo-ha is all about. Everyone is talking like it’s the worst real estate market we have ever seen. Some even liken it to the Great Depression of the 1930s.
Having lived through it as a boy I can tell you it’s not even close. During the Great Depression 40 percent of U.S. banks failed. Depositors lost everything. Investors jumped out of windows. Farms and factory’s went bankrupt. Unemployment was at a staggering 25 percent in 1933. It is 5.5 percent today. Shantytowns and breadlines were everywhere.
I remember the men down on their luck coming to our back door for food. My mother fed the poor men we all called hobo. We all knew in those times that anybody could be down on their luck.
We have experienced Real Estate Owned (REO) markets during every real estate cycle, approximately every 10 years. Good businessmen plan around downturns because they know they are inevitable. Conservative home buyers live below their means and plan for down turns as well.
Back in one of the other downturns, I was working for builder George Holstein in Southern California. I was in charge of marketing. We had been selling homes at the Eastmont tract in Orange on a land contract.
I think we were asking for $95 “to move right in!” The contract was for three years at which time the buyers would be required to get the necessary bank financing and pay Holstein off.
The contract’s just covered the loan payments that Holstein had with the bank. His goal was to just cover his carrying costs. He figured that he would get some of the homes back on the “drop dead date” (due date) in about three years when the original land contracts were up.
Three years later the folks who couldn’t come up with the financing started moving out. Some of the homes were in terrible shape, but as history repeats, they were worth much more than the original price. As planned, Holstein cleaned them up and resold them at a profit.
During the period of the many move-outs, we ran ads for “Mr. REO.” We didn’t have a sales office so we borrowed a little RV trailer from our sign painter. We had him paint the trailer bright yellow and parked it on a side street close to the project.
Our ads directed people there. It was staffed by an old real estate agent named Rollie Jones, AKA Mr. REO. It was working well until one night the Orange police took the trailer and impounded it in their yard.
The trailer contained Mr. REO’s sales contracts and paperwork. We got it out and continued the Mr. REO campaign but without the yellow trailer.
You buyers out there need to get off the fence. Interest rates are starting to creep up from 5.5 percent to almost 7 percent in the last year.
Markets go up and markets go down. When they are on their way up people think it will never stop. When they are going down people think it will never stop. But it will. It always does.
Three years from now this market will be looked upon as a fun and challenging time!
— Mr. Seen It All
Dear Seen It All,
You are absolutely right. I love your “Mr. REO” story. Nothing is really new is it?
Even though markets cycle, there is always a market. The key is to work with what is like your old client, Holstein.
If today’s home sellers really want to participate in the market, they need to price their properties accordingly. They need to compete with the abundant number of distressed properties that are on the market. They cannot act like they don’t exist and expect to sell.
Buyers are always looking for the best value. They are comparing distressed properties with those that are not. I appreciate your perspective.
Keeping the big picture in mind and working with the current market is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com.