Larry King, Foreclosures and Short Sale Taxation

Wednesday I had the great opportunity to be interviewed by Larry King on his show about foreclosures, short sales and the housing mess.

A lot of people have contacted me regarding the final segment in the show.  Two supposed “real estate experts” both made a huge error.

They stated that after a short sale, the home seller will be required to pay taxes on any debt forgiveness.

This is totally false.

While a bank will 1099 a home seller for any debt forgiveness on the loan, there are provisions in the tax code so the home seller does not have to declare this as taxable income.

Unfortunately, I was not on the final segment to make the correction and it stood as fact.  Hopefully I will have the opportunity to go back on Larry’s show and correct the record!

House Swapping – Valuable Service or Waste of Time?

I recently spoke with SmartMoney magazine about all the home swapping web sites that have come out of nowhere over the past 6 months.

These sites have received an incredible amount of publicity on national TV, in newspapers and throughout the web.  The pitch is this – if you can’t sell your house, why not trade with someone else in another market that also can’t sell their home.  The stars align and you can trade homes without having to worry about selling on the open market.

No question these sites are making easy money.  One claims over 40,000 listings at $20 a pop ($800,000 in revenue in less than a year).  Most of these sites also sell your information to real estate agents, mortgage brokers, foreclosure “rescue” companies and the like creating another lucrative revenue stream.

The question is: Is anyone actually swapping houses?

By my estimates, much less than 1% of people who contact these sites ever “swap houses” with someone else.

None of the home swapping companies will release how many houses are actually swapped – and with good reason.  If swappers knew that they had almost no chance of a successful transaction, they wouldn’t pay the $20 or more to one of these companies.

Just thinking through the logistics of what has to happen for a swap to be successful makes it clear that very few (if any) transactions are completing.

If your home will not sell on the open market (listing with a real estate agent), and a discount property buyer won’t purchase it, the likelihood of finding someone that is in a market you want to move to, and has a house you would like, and is in your price range, that also wants to move to your market, and likes your house, and your house is in their price range – is minuscule at best.  If you ever do find a match, the real work of getting financed and the logistics of closing begins.

Distressed home sellers have a number of viable options in this market, swapping houses is not one of them.

USA Today Housing Roundtable – Just Walk Away?

I had the opportunity recently to participate in a USA Today roundtable on the housing market .  It was a great way to share some of my thoughts on investing, foreclosures and what home owners should do given the current housing market.  I was surrounded by some very smart people from various industries.

One of the questions posed by the reporter was “What if you can’t pay your mortgage, yet can’t sell your home for enough to pay off your mortgage? Should you mail in your keys and walk away?”

Unfortunately, one of the supposed “experts” actually suggested this is a perfectly rational choice for many people –

People should consider the risk to their credit rating vs. how much
they can save. In some cases, walking away might be a perfectly
rational choice. People may owe $500,000 on a home that is now worth $300,000. You (might be able to buy a much cheaper) home across the street and put $200,000 in your pocket. That might be worth the risk to your credit rating. Furthermore, since this is happening on a very large scale, my guess is that plenty of lenders will still be happy to issue loans in a couple of years to people who walked away.

I am amazed that this continues to be the opinion held by some in our community.  Home owners need to take personal responsibility and try to work things out with their lender. “Just walk away” is the head-in-the-sand type of attitude that got many home owners in the place they are in.

If you are a home owner facing foreclosure, the very first thing you need to do is call your lender, be up front about your situation, and try to work out a payment plan.  Most lenders are very willing to work with you.

If you can’t work something out with your lender and you have some time, list your home at a discount with a real estate agent.  Find someone who is very experienced with short sales, be sure they have closed successfully on at least 2 or 3 as the listing agent.

If time is short, call a reputable real estate investor in your local market.  Experienced investors can purchase your home quickly and prevent a foreclosure on your credit report.

CNBC Interview with Jeremy

Last Friday CNBC interviewed me on the state of the real estate market as it relates to investors, foreclosures, short sales, and a few other things.  They also spoke with one of our great investors in the Philadelphia area who was able to talk in more detail about what he is doing with short sales, and how the market is for him.

In short, I said that now is a great time for residential real estate investors.  It is separating the serious business-minded investors from the “seminar junkies” who have been following a formula to buy (flip) houses, and don’t know what to do as the market shifts.

For the serious business person, you must change with the times, constantly re-evaluate your strategy, and not get complacent with what works today – because it likely won’t work tomorrow.

With the glut of inexperienced investors being churned out by afternoon TV shows, late night infomercials, and “real estate gurus” – I believe the market shift is a welcome sight for most experienced investors.

Be looking for the CNBC segment sometime later this week!

CNBC Blog Post on 1-800-CashOffer

Short Sale Basics

1-800-Cashoffer & Credibility

It is true that the best ideas are sometimes driven by necessity!

We recently launched a company called 1-800-CashOffer because we saw a huge unmet need in the marketplace.

Residential real estate investors serve a very important function in the real estate economy. By purchasing, fixing up and selling property that is in disrepair they improve neighborhoods, increase property values, and provide an outlet for property that would otherwise sit vacant. They purchase homes going into foreclosure and both save a person’s credit in a tough situation and provide an outlet for the bank to quickly sell the property (banks do not want to foreclose, they do so because they have to).

Unfortunately, because of the actions of a few un-educated, un-professional, and un-scrupulous investors that have gone to a get-rich-quick seminar – the industry has started to get a black eye. The increased rate of mortgage fraud some so-called investors have been involved in has not helped any.

1-800-CashOffer was created so that scrupulous, honest investors that have the ability to purchase a home for cash and close quickly, can operate under a national reputable brand that consumers can trust.

Home sellers can feel confident that they will be treated right and that the real estate investor is experienced and will follow through on their commitments.

We have combined 1-800-CashOffer with our “Certified Professional Homebuyer” program that certifies an investors experience level and ability to purchase a home quickly for cash, in addition to holding them to a higher standard of ethics.

Ken Blanchard – The One Minute Entrepreneur

I recently had the opportunity to meet Ken Blanchard and his wife Margie Blanchard, son Scott Blanchard and Scott’s wife Madeleine Homan.

What a talented family They were speaking to a group of entrepreneurs about Ken’s upcoming book – “The One Minute Entrepreneur” that is similar to “The One Minute Manager” in format but focused on helping entrepreneurs think through the skills needed to create a successful company.

I was able to review a manuscript and I believe it will be a great resource for those thinking of starting a company. It covers a lot of the basic skills and “common sense” things that unfortunately aren’t as “common” as they should be. The forward is by Michael Gerber, who has an amazing track record of helping small businesses to
create processes and systems to succeed.

If you ever have the opportunity to hear any of the Blanchards, especially Ken, speak, I highly recommend you do whatever you can to attend. They are all highly sought after speakers who do an excellent job of engaging their audience while
providing a lot of in-depth data and analysis.

And when “The One Minute Entrepreneur” comes out, be sure and pick up a copy!

When NOT to go public by GoDaddy’s Bob Parsons

It seems that nearly every business owner out there has dreams of taking their company public.  This is especially true in the technology industry where you can be losing money but generate a windfall of cash by offering shares to the public.

An article earlier this month by Bob Parsons, founder of GoDaddy.com outlines why, after doing all the filing needed and receiving SEC approval, he decided to withdraw his registration with the SEC to become a public company.

One of the primary reasons cited in his post are the stringent accounting methods that the SEC would require them to use if they wanted to be public.

With the ridiculous Sarbanes-Oxley Act requirements, many companies (and their the CEOs who are now ultimately responsible for financial errors) are deciding to either not go public, or to go public in a foreign market to avoid the overbearing requirements of the US market.

SOX was a typical over-reaction to the Enron/Tyco/etc scandals of the past few years.  Just like preventing you from bringing hair gel on an airplane probably doesn’t make you any safer, but makes you feel safer because “at least they did something“, many of the SOX requirements don’t do anything to stop fraud, while making it much harder to do business as a public company.

Do we really want US companies to feel like that have to go to foreign markets if they want public investment?  Business is what drives our economy.  Let’s figure out how to make it easier for business owners to operate, not hamstring their efforts to grow (and create jobs, and buy buildings, and pay taxes).

Bob Parsons of GoDaddy – 10 Rules

This is a great posting by Bob Parsons, the founder and CEO of GoDaddy, and former founder of Parsons Technology (sold to Intuit for $64 Million).

One of the interesting things from his business history is that with both of the companies he founded he was the sole investor.  He never raised money and created two companies with revenues in excess of $100M.

Of the 16 rules Parsons has come up with, here are a few that are my favorite:

1. Get and stay out of your comfort zone. I believe that not
much happens of any significance when we’re in our comfort zone. I hear
people say, “But I’m concerned about security.” My response to that is
simple: “Security is for cadavers.”

7. Always be moving forward. Never stop investing. Never stop
improving. Never stop doing something new. The moment you stop
improving your organization, it starts to die. Make it your goal to be
better each and every day, in some small way. Remember the Japanese
concept of Kaizen. Small daily improvements eventually result in huge
advantages.

8. Be quick to decide. Remember what General George S. Patton
said: “A good plan violently executed today is far and away better than
a perfect plan tomorrow.”

You can view Parsons’ entire post at Bob Parsons – My 16 Rules.

Spot Runner – TV Advertising Made Easy

SpotrunnerHave you seen Spot Runner?

It has always been difficult for small businesses to effectively advertise on television.  Quality commercials cost a lot to produce, and for those that try to shoestring it..  We’ll we’ve all see those poor quality commercials that look like they came off a VCR tape.  Does that help your brand or hurt it?

Spot Runner leverages national buying power for commercial spots, and has commercial templates that allow you to insert your phone number/voice over without spending tens of thousands (or more) on video production.  All this at a fraction of what it costs to go produce your own commercial and then pay top rates to have it play.

If you do very much marketing at all, I suggest you check out SpotRunner.com, they will be a company to watch in 2006.