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Posted over 14 years ago

Preliminary Protocol: The investor’s worst nightmare

Truthful, patient, reputable, honest and resourceful businessmen and women in the REO market are an endangered species. Although there are a few out there, they are outnumbered by those who make their work that much harder.

  

For example, certain procedures banks use make sense. Proof of funds is enough to see you’re dealing with someone who has enough cash to proceed. An LOI can specify interest and provide specific parameters. Unfortunately, for some involved in the bulk REO market, these don’t cut it anymore.

  

A new wave of individuals have become unnecessarily adamant about using their own documents. When asked why, all they say is “it’s standard protocol”. Somehow their LOI or POF forms are magically more enforceable. Or perhaps the brokers involved (who oftentimes are kept secret until the fee agreement is mentioned) aren’t honest enough to say they prefer to have their company name & logo on the document because paranoia tells them they won’t be compensated otherwise. It’s even too much of an inconvenience for them to specify what terms your paperwork may be missing just so you can edit it.

  

As a result, buyers all over are wasting money on retainer fees from their attorneys reviewing contracts that A) could easily be consolidated, and B) rarely lead to the closing table.

  

 Another alteration (and probably the most counterproductive one yet) is the request for a deposit from buyers (commonly 10%) BEFORE due diligence! How on Earth is a buyer even going to determine what that 10 percent equates to when the purchase price isn’t even agreed upon?

  

I am sincerely open to listening to anyone who can explain how sellers will benefit by implying that the purchase price is pre-determined and asking buyers to blindly deposit funds?  All I’ve heard thus far is that it’s meant to weed out those who are “fishing”. Aren’t all buyers fishing, searching, looking for a way to benefit their portfolios?

  

The REO market appears to be driven more by emotion than logic. Fear of losing what has yet to be acquired.

  

It is just amazing that so many sane said-to-be-professionals could allow a couple of 1-2 page contracts stop them dead in their tracks. A little flexibility, problem solving and common sense is all it would take to increase business efficiency.

  

One of the many mysteries I suppose.

 


Comments (4)

  1. I completely understand. Receiving full transparency has been like applying for the circus - too many hoops to jump through.


  2. I took that "said-to-be-professional" s as a newbie pretending to be a professional and many are afraid to disclose their plans to resale, ect especially on REO's. That is where I was comming from as well as those who wont disclose all the potential repairs that might be needed that they are aware of to the purchaser so a true purchase price can be reasonable derived.


  3. Very true Jim. My blog wasn't really referring to the newbies, but rather the experienced who feel these changes are improving the market and sifting out the brokers. Many buyers have decided to wait it out too as a result. And what specifically did you want disclosed? Possible solutions?


  4. A "said-to-be-professional" can learn to be professional. They do not have to let things stop them. Dont be afraid to disclose.