All Forum Posts by: Walter Holmes

im very intrigued about the Decision tree methodology algorithm , sorry my expertise is not the tech part of the process in my firm but I understand the "idea" of this process and im very intrigued if applied properly I think it has huge potential to be applied in lead generation. 

My advice is to find an expert in whatever field or market so he can lead the tech team in the process of gathering data, sorting, analyzing and have a final input.

The biggest problem with data analysts and projects like this which can lead to huge waste of time is hoping to "find something " in data (commonalities , trends,  ect) to get a "magic " final output that is valuable. There are just too many variables to account for and if 1 is missed the results are just not worth the time.

so for example you want to use data to find short-sale leads get a short-sale expert , when i say expert i mean someone who has work in lending that knows the process of how  short-sale offers are approved or denied....match those characteristics with properties in public records and you'll be on your way on getting solid leads. Ofcourse this is easier said than done, it takes good engineering but the key is the "arquitec" that knows exactly what those characteristics are..

I'm experienced in loss mit and did those analitics for lenders biggest problem I had was the amount of short-sale inquiries I would get from brokers for underwater  properties with second mortgages,  huge hoa debt and other liens ...99% of the time those were denied almost on the spot...

220k appraised property where a 1st position is owed 250k , the sales contract comes at $180k but after paying other liens the 1st position  ends up receiving $140k (thats 70k difference)... The lender would rather proceed with fcl, wipe the liens and safe harbor the hoa debt paying a smaller % of the debt or simply high bid at auction $180 for an investor to buy and collect an additional 40k.

so, if i want a good lead for short-sales I find properties with no additional mortgages or liens .

Again , I know what im looking for and its up to the engineer team to put the tech to work and find those properties.

I think real estate is in the stone age when data is concerned and i dont mean finding data , but how to apply that data. 

Key risks from the are basically title issues that can come from Lien position or the least i hear anyone talk about but it is a BIG problem is when a reforeclosure is needed because of a jr lien or party not added in the foreclosure action.

check the defendants listed in the action vs the liens attached to the property and make sure they are listed and served properly. 

Pay special attention to actions with a deceased borrower (estate of ____) its important that probate is done right and  adding guardian ad litem , next of kin or whatever the county requires.

missing these things are a nightmare because you would basically have to reforeclose in order to get clear title.

Take the complaint and read it EVERY TIME , check summons and service returns.

Due diligence should start by going to the case docket first, if you familiarize your self with case dockets and the docs you will have a huge advantage over any title company when understanding what truly means to do due diligence for any prospect...plus its free!

Wow,  sorry but that is not only a horrible generalization but also so short sighed..

REI a "relationship business "?What kind of "relationship" are we talking about here?

What does process improvement have to do with "talking to people"?

with all due respect but you are either blind to the huge problems in real estate or have no clue about this subject....or both.

Real estate is the biggest market in the world by far and arguably the most archaic in their processes.

And the only people who pay the price are consumers ...And this is true in both macro and micro.

Or did 2008 teach you nothing?

To this day I see people being victims of others who "talked them into a relationship business " 

This is a business like any other business...money in money out  don't try to romanticize it! 

Now "this data stuff" im guessing  you are "old-school " and "still get the newspaper delivered because you like how it feels in your hands" or rather call than email or text "because is so much personal" ?

You can argue whatever you want about the way someone is implementing data and automation and i would agree but saying is a waste of time is throwing the baby with the bathwater.

Let me start by saying that I haven't had many experience in foreclosures in California and even though all judicial and non judicial are in their core the same they all have their own intriquecies but i think i have something to contribute.

First, don't worry about the lender's "opening bid" which is really their "highest bid " not an opening bid.

keep this in mind, lenders are in the LENDING business they have investors to answer to. These investors put money on instruments that for X amount of time will give them X amount of return on their money. (Ofcourse There's always exceptions but this is true for most)

I don't understand why so many people buying at auction pay so much attention at what the lender's high bid will be. There's little to no advantage to know the high bid since you are competing with other buyers who also have their own "high bid". 

I can sit there and with enough data give you a very close number to all mayor lender's high bid but other than as an educational tool so you can incorporate this type of process to the way you set YOUR high bid, its really of no use.
Why? Because what we are really talking about here is a math problem that at the end should end in a positive number ($) that only YOU know to be enough for each deal you do, the model you want to follow and the type of investor you want to be or can be based on your goals.

Hedge Funds buying most of the properties at auction are successful doing that because most buy to hold based on projections that a particular location will see increase on property value so in order to out bid competition they pay 10-5% or even market value for properties ...but their model works because of gains through rentals, increase on value or just waiting for the right buyer who wants to pay JUST above market value ...having 25-50 million a year gaining 10% return is not too shabby...but thats their model smaller margins on volume.

Typicaly Lenders in the other hand are in here "outside their business model" they want to minimize losses or liquidate the collateral so the money can go back to the pool again as quick as possible...very few if any have a "rehab department " with contractors ready to start work on a newly property acquired at auction... it doesn't make sense because their business is lending for investors who want to see that % gain every month so the money not gaining interest is a "cost" added to the time and $ spend to rehab or wait to sell ...

Someone like you will spend the time and $ to rehab in order to sell at top $ but need bigger margins and a quicker turnaround than the hedgfunds so to compete don't restrict your area.

Become a pro on your investment strategy and learn your due diligence so you can repeat the process over and over.

To start these numbers are paramount to know;

1. Proceeds from liquidation: Make sure you price the properties as best as humanly possible (you can price as is and rehab)

in you example : $500k

2. Costs: Rehab, any expenses associated with filing fees, title company,  attorneys, realtor fees etc.

Average rehab 10k, realtor 6% 35k, misc 5k =50k

3.Debt attached to the property = any surviving liens like taxes, hoa, violations, violations,  municipal etc

Now, subtract the costs and bebt to the final proceed from liquidation.

I.e 

$500k - 50k=$450k

Now, we now that your break even bid amount is $450k.

This is where YOU come in...ask yourself what is the LEAST im willing to make on this deal?.. 20k? Ok..

$450 - 20k = $430k 

$430k ..THAT'S YOUR HIGH BID 

a lender has different costs the same for a fund. If you are holding then rental is a proceed so as you can see depending on your strategy some numbers are irrelevant to YOU.

As you gain experience you'll get those numbers down as well  as find the strategy that fits your "minimum willing to make on a deal" .

This will clear out all the "white noise " and let you scale your investment strategy.

since you are starting

RULE 1. NEVER EVER EVER bid on anything that is not 1ST POSITION.

RULE 2. NEVER EVER EVER bid on anything that is not 1st position. 

RULE 3. see 1 and 2.

RULE 4. Learn your numbers= Proceeds,  Cost and debt.

hope this helps!

It depends what your goal is and what deals you are looking for.

in my case i wanted to cut the time it took me to do due diligence on properties sold at auction so that I could go through as many properties as posible to be able to compete with funds that had teams doing this. 

My problem was not how to do due diligence or wanting to cut corners on the quality of work but the long hours I spent working on properties ONLY to disqualify them as a deal. Unfortunately the only way to disqualify them was going through the process until I found the property was a second position, hoa, foreclose was deficient, surviving liens etc..

Creating a report with only relevant data, grouped and ordered a certain way would allow me to see disqualifying characteristics very quickly...so that what i set out to build I started with only a few fields (case number, folio, address) used that data to look for other data like owner names , then that data to check for liens, mortgages, court dockets , violations, tax bills, permits,  etc..

it was definitely a challenge to say the least.

Data is vast and its spread out in many sources all with different  challenges i.e search parameters, integrity and availability To name a few...

"Finding deals" is a broad term that needs to be defined first so that the data can be curated and presented in a way that makes sense for the person who is looking for those specific deals otherwise is like building a puzzle with missing pieces and pieces from other puzzles all combined.

I started backwards, I knew exactly what data I needed, how, and where to find it so that i could quickly recognize missing pieces or pieces from other puzzles For my target deals.

Imo the mayor problems in our industry is the lack of centralized data sources, the level of complexity on deals in each niche "sub-market" (i.e distressed properties can be segmentedo in short-sales,  auction, refi, wholesale etc) each needing a level of expertise. 

So imo the starting point should be a deal or sub-market you are an expert on choose a starting point and build backwards you'll see the parameters that add value as you start gathering data.

I found this to be true with my build..

i.e

Distressed properties are my market.

Starting point ?  properties been sold at auction (due diligence specifically ) so i did something like this.

I gather only relevant data>identified parameters that added value (disqualifying characteristics to filter prospects>identify prospects >attempt to close deal.

What quickly came afloat was that the "disqualifying" characteristics for some properties were only disqualifying them for an investor wanting to buy at auction but making it a positive characteristic for other type of deal.

i.e

one disqualifying characteristic for properties at auction are properties with equity , these have a high possibility of cancelation these properties are good prospects for a short-sales.(ofcourse There's a little more to it)

When i work with investors I explain to them that my job is to tell them where NOT to invest or what strategy fits best any given scenario. I do that by looking at disqualifying characteristics for each strategy i.e a property worth 100k with a mortgage payoff of 120k is a good prospect for a short-sale but if there are high hoa fees, a second mortgage or other liens it makes it near to imposible for the short-sales to be materialize. 

The first position will continue through foreclosure in order to remove the other liens, apply the safe harbor for the hoa and mitigate their losses.

So data wise concentrating in disqualifying characteristics will allow you to assign the investment strategy to each scenario.

Its definitely a fun challenge but very time consuming in my opinion real-estate is in desperate need for innovation.

Go to the Tax collector site and property appraiser, enter the property address if the property is non-homestead you should see a mailing address for the owner.

yes it does.
Unfortunately once the first position forecloses,  it will foreclose on you too.

It's totally worth it in judicial states your foreclosure attorney should be able to include it in the complaint, through service you can verify if there are tenants then motion the judge to grant the assignment of rents.

The court order goes straight to the tenants. 

Couldn't agree with you more on how searches are done and lack of experience or "expertise" 

same goes for attorneys in 5 year where i managed a 1200 npl portfolio my biggest struggle was finding firms I felt confortable with...must have gone through close to 100. 

Going back to this case. I stand by the fact that the huge discrepancy between the judgment amount and the property value coupled with a borrower lack of action on over 100k of equity should've raised mayor redflags....starting with the loss mitigation department.  

interesting post!

 I think what you are asking is if the judgment document it self helps you know what debt is  attached to the property?

What if I told you that you can have access to a free full title search? Not only that but an attorney will review it for you and go as far as to put it in a story form so you can understand it better?

That is exactly what the Complaint is. Best learning tool for anyone in this industry is the court docket and the documents in it.

Start with the complaints, read as many as possible and learn what everything in that document means .... 

You definitely should hire an attorney to help you make sure you don't loose your $ buying a inferior Lien but you should learn enough where you can filter out obvious like hoa liens, second positions, and overall title issues.

good luck my friend!