#BrokerThoughts: selling commercial real estate

February 6th, 2012

Part I: Have a financing package available.

It is unlikely that a buyer of an investment property will present an ‘all cash’ offer.  Although you might get lucky in working with an investor who puts the money up front, a more prudent strategy is to assemble commonly requested lender information in advance of taking a listing, as financing will most likely be required. Lenders request essentially the same information in reviewing a financing application, such as rent rolls, leases, tenant acknowledgements, previous financial statements, previous appraisals, fire/electrical certificates, environmental reviews, etc., so the request for information from buyer to buyer should be fairly consistent.  Time is wasted if a realtor must chase the client for information after an offer is presented, especially for information that should be available on day one.

The realtor with a professionally prepared info package can charge a premium for the property because all the guess work has been eliminated for the buyer, which equates to less risk on the deal for them. You will also attract qualified buyers because your property has, in effect, been pre-approved for financing.

Questions, suggestions?  Join us on twitter: @BruceSmithLive #BrokerThoughts

Tomorrow we discuss: the VTB discussion.

We welcome your comments.

 

 

 

Tags: , , , , , , , ,
Posted in Casb Management Group Inc. | We welcome your comments »

Do you want to sell more commercial real estate?

February 3rd, 2012

Selling commercial real estate is a different animal when compared to selling residential homes. Realtors need to appreciate that the buyers of commercial or likewise investment properties are doing so to make a profit, pure and simple. It is a business decision and as such it usually comes down to the numbers. Given this assumption there are several things realtors can do to maximize the value of the property they are listing and facilitate quality offers from qualified buyers. On Monday, February 6th, 2012, I will begin a three part series on what realtors can do to sell more commercial real estate.

Any ideas you’d like to share or concepts you’d like addressed?  Tweet us @BruceSmithLive or #BrokerThoughts

Tags: , , , , ,
Posted in Casb Management Group Inc. | We welcome your comments »

What’s in a name?

January 30th, 2012

“What’s in a name? That which we call a rose by any other name would smell as sweet.”  - Shakespeare

The University of Western Ontario, or as it is now known, Western University of Canada, recently undertook a major re-branding of its name and logo. This struck me as strange as I was not aware of any branding issues at the university. It is not like accounting firm Arthur Anderson, which lost all credibility after the Enron scandal and quietly rebranded into Accenture. To my knowledge and in observing the changes made, I don’t see how this repositioning does anything new that could not be achieved under the old name.

Branding is important in terms of image, recognition and market positioning. I am constantly amazed that I can still view television, radio or print media advertising and have no idea what product is being offered.  I thought Branding 101 taught us that you tell people what you do in your name. We brand under names like Advantage Business Financing and Centum Future Mortgage Group so hopefully people have some clue as to the services we offer. The University of Western Ontario worked for me. It even provides insight into the location of the school.

In a business such as mine where personal relationships and the competency in ones craft is important, I find that branding of the person is as important as branding of the company. An experienced real estate agent for example will market themselves and not their broker such as Re/Max. People will know them first and foremost and not necessarily remember who they work for, which is great if they ever need to change employers. Alternatively, newer agents may need to market the brokerage as it may be the only brand creditability they have as a newbie in the business.

Here is link to detailed info on Western’s transition.  We welcome your comments.

Tags: , , , , , ,
Posted in Casb Management Group Inc. | 3 Comments »

Tom Cruise is they key to success in 2012

January 22nd, 2012

I had the opportunity over the holidays to see the new Mission Impossible movie starring Tom Cruise. It took me back to my favourite Tom Cruise movie, Jerry Maguire where Cruise portrays the sports agent of the same name. This movie produced some famous lines including “you complete me” and “show me the money,” but I think my favourite line from that movie occurs with Maguire explaining to Rod Tidwell, played by Cuba Gooding Jr., why he has not secured the big sports contract: “help me help you; help me help you,” pleads Jerry.

This line resonates with me because I see many professionals in similar positions as Tidwell, not meeting their expectations year after year.  Ironically, these professionals continue to conduct business the way they always have, while expecting different results. That is the definition of insanity, is it not? If this pattern is followed, how will 2012 be any different?

Help is in abundance. The internet is a wealth of information. Business mastermind groups can be formed. Mentors can be sought out. There are people willing to help you succeed, at no cost to you. Reach out to them; let them know that you need their help.

My personal expertise, of course, rests in the realm of mortgage financing, business financing, management and investment opportunities. So, to the Rod Tidwell’s of real estate and real estate related businesses, entrepreneurs, home owners, and financial planners, drop me a line and let’s chat.  “Help me help you” and I will “show you the money.”

We welcome your comments.

Tags: , , , , , , , , , , , , , , ,
Posted in Casb Management Group Inc. | We welcome your comments »

Interest Rates and Home Values – Outlook for 2012

December 16th, 2011

Several people have asked for my opinion on where interest rates and home prices are headed in 2012.

In 2011 we found that interest rates remained at historic lows and threats by the Bank of Canada to effectively raise the prime rate beyond 3% never materialized. Talk in the fall was that they might actually be lowered, but expect no changes for the remainder of this year, with the next review scheduled for January 17, 2012.

Moving forward we can expect much of the same for 2012. The Bank of Canada would like to raise rates as they remain at historic lows, but balancing that is the volatile economy, a worsening recession in Europe and continued housing foreclosures in the United States. There is simply no economic stimulus I can foresee for 2012 that would justify a significant increase.

So what does that mean for housing prices? I can speak best to the local London, Ontario market. Prices softened overall in 2011 simply as a function of supply and demand. At the end of November, 2011, 3414 properties were listed in the London/St. Thomas board with only 379 properties sold during the month. That works out to a 9 month inventory of homes on the market. If I was selling a home today that would make me nervous. Homes that are priced aggressively will continue to sell quickly, but those expecting top dollar may have a wait on their hands. Some niche markets will continue to do well. Quality residential investment properties remain in strong demand. I also expect newer homes to remain popular as they are equipped with the on-suite bathrooms, larger kitchens, full basements, and attached garages that seem to be the “must haves” homeowners expect today.

Overall it is always a good time to buy/sell real estate. Rates are low, and there are plenty of housing options.

We welcome your comments.

Tags: , , , , , , , , , ,
Posted in Casb Management Group Inc. | We welcome your comments »

A Wake-Up Call for Jim Flaherty.

December 5th, 2011

I was against the tightening of mortgage rules and blogged about the topic back on January 17, 2011. Glad others are beginning to clue in as to the real financial problem facing Canadians. Moody’s has yet to offer me a job but I will keep you posted.  Here is the latest article regarding Jim Flaherty’s movement from Vernon Clement Jones of mortgagebrokernews.ca:

A report from Moody’s is vindicating brokers by pointing out unsecured debt – and not secured mortgages – poses the real threat to RBC and other Canadian banks.

“It’s an uncertain world that we’re living in,” said author David Beattie, VP and senior analyst at Moody’s Investor Services in Toronto. “The macro environment is unclear as to what negative shocks may occur, and the banks that have positioned themselves a bit more aggressively against an increasingly leveraged Canadian consumer could run into problems in the event that we have some adverse economic developments.”

To be perfectly clear: that possible bump in the road is unsecured debt, says the report.

RBC, for one, had the highest exposure to all types of uninsured consumer debt among the Big Six at the end of its fiscal 2010 – some 24 per cent of its total managed assets. Scotiabank’s accounted for 21 per cent of its overall assets and CIBC’s exposure stood at 20 per cent.

Those levels are coming dangerously close to the 30 per cent of total managed assets Moody’s says would negatively impact their ratings.

The analysis jives with that of brokers who argue the government’s focus on tightening up mortgage rules has been misplaced, leaving the country exposed the more-urgent problems associated with easy access to credit card debt.

“What may have been more effective as for the government to place limits on credit card interest and force the credit card companies (and banks) to do better underwriting to minimize default,” said Curtis Cannon, a sub-mortgage broker with TMG The Mortgage Group in Prince George, B.C., this summer.

The worrying level of debt at the big banks includes uninsured mortgages as well as personal lines of credit.

Moody’s and, indeed, brokers, will get a close look at that exposure later this week when the first of the big guys share their fourth-quarter earnings.

 

We welcome your comments.

 

Tags: , , , , , , , , , , , , , , , ,
Posted in Casb Management Group Inc. | We welcome your comments »

Educate, educate, educate.

December 1st, 2011

I have been asked to comment on the article Londoners grapple with new ways to solve old problems written by Glen Pearson, co-director of the London Food Bank. Hat off to Glen and the excellent work done by this organization. It is one of my personal favourites and I believe I am still recovering from the Thanksgiving Day 6 kilometre Gobbler Gallop run.

In my line of work I am exposed to the struggles of every day Londoners as they attempt to make a better life for themselves through home ownership.  My view on these ‘old problems’ is that efforts are treating the symptoms of the issue rather than the issue itself. I find that many who struggle have never been educated on basic ‘financial literacy’ such as establishing credit, maintaining credit, budgeting, paying off high interest debt first, living within ones means etc.  A course within our education system would solve much of this problem; it will minimize the need to treat issues, caused by a lack of education, with social resources down the road.

The first step in addressing the problem at the source is taking personal responsibility for ones actions.  It should be the expectation that family members help family members who struggle financially; use of the social safety net should be viewed as an exception, a short-term solution, and not as a preferred way of way of life.

I would be happy to volunteer my time to teach others about financial literacy. An open invitation to all Londoners. We welcome your comments.

Tags: , , , , , , , , , , , , ,
Posted in Casb Management Group Inc. | 2 Comments »

Are Big Banks Killing the Independent Mortgage Broker?

October 31st, 2011

In short, no.

A common question I receive from clients is: how can a broker obtain a better rate from a big bank, than the client can by walking into their own branch?  I tell them it is due to efficiency. The truth – though the banks would never admit it publicly – is that they actually enjoy receiving applications from independent mortgage brokers because we are typically more competent, better trained and more efficient than the bank’s staff. Additionally, we only receive payment on the actual deals we close, as opposed to the direct bank employee, who is paid regardless of what they actually produce. For virtual banks, independent brokers are the preferred sales channels as well. There is a need and place for the independent mortgage broker.

Recent news on this subject has caught my attention. The first concerning an article in Mortgage Broker News, that a major bank is paying realtors a direct fee for referring mortgage clients. This is not new; it has been happening for years. I don’t see that practice as offensive, all is fair in love and war, but I would question the realtor that advises clients to deal directly with a major bank as opposed to an independent mortgage broker. A bank’s advice is obviously biased towards the bank and their products, while the independent broker has no such biases and works in the best interest of the client.

The second article dealt with lenders squeezing out the independent brokers who cannot bring a significant number of yearly deals to the lender, or who have poor closing ratios. Again this has been a trend in our industry for many years and has basically eliminated the “mom & pop” brokerage because they simply can’t compete. I have no problem with closing ratios, but Mortgage Brokers should not be taking the “shotgun approach” to finding a lender (sending a deal out to 30 lenders to see who accepts) out of desperation to close a deal. That approach is a waste of time and resources of the 29 lenders who don’t ultimately fund the deal. If we want to supply the best rates and service then there needs to be built-in efficiencies.

I do take exception the minimum deal requirements as this practice is very short sited on behalf of lenders. When I am talking to lender representatives on this subject I ask them: “Is your top producer today the same person it was 5 years ago?” The answer is always “no.” My follow up question is,”So if you had cut off your top producer when they were just getting started, you would not have that business today, correct?” At that point, they recognize the flaw in minimum deal requirements. I get a chuckle on these lenders who try to buy my business through volume bonuses and other perks. If you “buy me”, then I become biased in my advice. If I let that happen, I should go work for a bank.

Are the big banks killing the independent mortgage broker? Why bite the hand that feeds you?

We welcome your comments.

 

Tags: , , , , , , , ,
Posted in Casb Management Group Inc. | We welcome your comments »

Re-licensing education for mortgage brokers- Elevating the level of professionalism in the industry or simply a way to purge the ranks and eliminate competition?

October 16th, 2011

The Financial Services Commission of Ontario (FSCO) has set March 12, 2012 as the deadline for completing new licensing requirements for mortgage brokers within the province of Ontario, with the stated purpose is to improve the level of professionalism in the mortgage broker industry.

The move is being applauded by mortgage associations such as IMBA and CAAMP and on the surface would appear to have the support of the mortgage industry. Nor surprising is that both associations will offer the required training for those willing to pay the fee or offer it “free” in exchange for membership in their association.

The speculation has already begun on what effect this new requirement will have on purging the existing ranks of mortgage brokers in Ontario. Is this simply an attempt to eliminate the weakest of the competition or perhaps a cash grab opportunity for the associations?

I fully support all efforts to improve the quality of mortgage agents and level of professionalism in this province but I do question the motives. If we are serious about professionalism then why not impose minimum educational requirements as a prerequisite to obtaining a mortgage license. I would suggest a bachelor of commerce degree or equivalent. That would quickly purge the ranks, but I also suspect many of the decision makers in our industry would be out of work as well. We do need tougher accreditation and training standards that actually promote professionalism and competency.

I am tired of associations like CAAMP promoting the Accredited Mortgage Professional which can effectively be “purchased” via membership and by taking classes whereby the only absolute requirement is that I simply “show up”. Where is the professionalism in that?

We welcome your comments.

Tags: ,
Posted in Casb Management Group Inc., Mortgages, Rant | We welcome your comments »

Debunking the Myths of “Rent To Own” Real Estate Transactions

August 22nd, 2011

I  am a big proponent of “Rent To Own” real estate transactions. If properly structured it results in a win/win/win arrangement for the home owner, investor and the realtor. Unfortunately there are a lot of  misconceptions surrounding the process and not many professionals offering unbiased advice. Many lawyers and realtors have never facilitated a rent to own transactionand therefore don’t understand the process. There are different ways tostructure a rent to own deal so this adds to the confusion. We help unlock the mystery.

Benefits of a Rent to Own

For the home owner – Allows homeownership without the immediate need to qualify for a mortgage. A typical rent to own candidate lacks the income, credit or full down payment to qualify for a traditional home purchase. They simply rent the home until such time as they qualify for a mortgage. The investor may assist them in a savings program in order to accumulate the balance of the down payment. The mortgage broker assists with the credit repair.

For the investor – Attracts a better quality tenant during the rental process given the pride of ownership. Allow the property to be pre-sold without the need for additional real estate fees. Provides financial protection in the event the homeowner reneges on their responsibilities.

For the realtor – Allows them to qualify more purchasers. Clients that can’t obtain financing may still represent a potential sale opportunity.

What a Rent to Own is Not

  1. A VTB (vendor take back mortgage). If the investor is transferring ownership to the homeowner on day one and holding a mortgage on the property, then this is not a rent to own transaction.
  2. An arrangement where all rent is applied to the down payment. It seems unlikely that an investor would agree to this when they could simply rent out the property for market rents. Typically someportion of the rent is rebated as a means of assisting in the accumulation of a down payment.
  3. A cash grab for the investor when the homeowner defaults on their responsibilities. Aside from unscrupulous investors, most playing in this investment vehicle want the property to ultimately sell as their profit is predicated on a successful transaction.
  4. For properties priced above market value. Investors need to make money on the resale of the property. Price it to high on the resell and the homeowner will never obtain the required appraised valuation required for financing.
  5. It locks you into specific properties owned by the investor. Many investors let you select the property of your choice as long as it meets their own investment parameters.

We are happy to answer any of your specific rent to own questions.

Tags:
Posted in Investments, Real Estate | We welcome your comments »

« Older Entries