Throwing Out the Book With the Bath Water

avatarthumbnail.jpgIf you’ve ever watched baseball on television it’s almost inevitable that you’ve heard the announcers discussing “the book.” As in, “the book says you don’t put the winning run in scoring position” or “the book says not to trust sushi being sold in a stadium nowhere near a coastline.”

There’s no actual book, etc. But “the book” represents the accumulated so-called wisdom regarding the game. Few managers make decisions in contradiction to “the book” in part because such strategy is risky and, more relevant, any deviation from “the book” will cause said manager to be ripped on ESPN, sports talk radio and in the living rooms of fans whose own baseball careers petered out at age 11.

While there’s no real book in baseball, there are books in existence that discuss how to purchase real estate foreclosures. And while the book in baseball is the sum of more than 100 years of accumulated wisdom from those in the game, these books on buying bank owned homes are filled only with the vague theories, many expoused by those who’ve never been in the business.

Picture, if you will, a book on baseball strategy being written by the same nabobs in Section 13 who are as enraptured by the video hot dog race as they are by the pitch sequence as a pitcher tries to escape a bases-loaded jam late in the game.

Would you buy that book? Even if you did, how much faith would you put into the ideas and strategies put forth?

The art of negotiating a real estate purchase is just that – an art. Or, if nothing else, it’s far more art than science. There are some general guidelines to follow, all derived through experience helping people purchase these properties (and in some cases helping the banks sell them), but until you’ve been in the process it’s hard to discern the valuable ideas from those just filling the remaining pages.

One client suggested to me yesterday that we ought to include a letter of explanation regarding a proposed offer to help the lender understand the logic behind the price. This, after all, is what the book said to do.

What the book doesn’t tell you is the lender couldn’t care less about the justification for the offer. The lender doesn’t get happy or sad, insulted or elated. All the person on the bank’s end wants is to plug your offering price into the computer and see if it’s a good enough deal for the bank to accept. Letters of explanation appeal to emotions that aren’t in play.

Now, if you want to know what does matter to a lender, the list is short:

  • Financing. Cash is better than a loan, though still not enough for a buyer to be able to purchase a home for pennies on the dollar.
  • Ability to close. One reason many lenders require buyers to be prequalified through their own people is they want the confidence that the sale will take place.
  • Relatively short closing time. If you’re looking to close 90 days down the line, move on to a different type of property. Banks want these homes off the books.

That’s about the extent of it. None subjective. None based on emotion. Can you close or now, how soon and how are you going to pay for it.

Cut and dried.

The books don’t tell you this because then they wouldn’t be books, they’d be pamphlets. And pamphlets haven’t sold well, at least not since the issuance of Common Sense two-plus centuries ago.

[tags]Phoenix real estate, bank owned homes[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at