Jesus (Jesse) Gonzalez

A fixture is Personal Property that has been so affixed to land or a building that by law, it becomes part of the real property. (Modern Real Estate Practice 17 Edition)

To help you understand this a bit better, let me give you some examples of what a "fixture" is.....

•1. Heating and cooling system.

•2. Kitchen cabinets.

•3. Built in entertainment cabinetry or built in electronic systems.

•4. Anything that has been added as a permanent part of the building is considered a fixture.

To help you determine if personal property is a fixture a simple test can be done to determine the intent, they are.......

•1. Method of Annexation: Was the Personal Property installed in such away that it was meant to be permanent. Just ask, "Can we remove the Personal Property without damaging the surrounding property?" If the answer is No, then most likely, it is a fixture and should be conveyed with the property.

•2. Adaptation to real estate: How is the Personal Property being used? A great example is your refrigerator. Many would consider this item as Personal Property however, that wouldn't be the case if the refrigerator was designed to un-questionably match the cabinets. In many high end homes, the appliances are styled in such a way that they hide and appear as part of the actual cabinets.

•3. Agreement: What did the parties involved agree to? What was stated in the Purchase and Sale Agreement as to what would and would not convey. If you ever have a question that something is or isn't a fixture.....it's always important to list it out in the Purchase and Sale Agreement if you want to ensure you get it.

The ultimate lesson here is Test 1 (Method of Annexation) and Test 2 (Adaptation to real estate) is subjective at best. I can say that with confidence because the truth of the matter is that courts have been very inconsistent with their rulings. Most of the time, they rely on Test 3 (Agreement), I can't stress how important it is, if you want it, you better include it in the Purchase and Sale Agreement.

Yes, that's right, don't get offended but, before my seller will seriously consider your buyer's offer, they want them to get pre-approved by my seller's lender.

Once that is done, you can choose any lender you want but, the truth of the matter is, most pre-approval letters aren't really "approval" letters at all!

So, before you put an offer on my seller's home, you best bring us an approval letter from our lender first!

True, this once was offensive to me until I started listing more and more homes. I would get well meaning Realtors submitting me offers from buyers who had "approval" letters but, around the time the banks appraisal was completed, all of a sudden these buyer's weren't so "approved". Come to find out, your buyer failed to mention to anyone that they hadn't paid back taxes or they weren't completely hones about their debt to income ratios.

Let me be more specific, just in case you don't understand. If the bank / lender printed out a "pre-approval" letter without once allowing a underwriter to look at the buyers application......well, then........you got suckered into working with someone who may not be approved. I am not going to lock up the listing and change it to pending in the MLS for a buyer who ultimately HAS ABSOLUTELY NO APPROVAL!

Unless you have an approval which states the buyer's application has been reviewed by the underwriter for the lender and it has been approved, then be prepared to get a 2^nd approval from my lender as well.

Trust me, it's nothing against you or your client......it's just I have experienced enough "pre-approvals" that now I know better.

Don't purchase leads, let me tell you why!

Many new and, for that matter experienced agents get suckered in to these Lead Generation sites promising to send you 10, 20, 30, 40, 50+, leads a month for a one time set up fee of $250.00 (+) and a monthly 39.99 for 12 months and, you get an exclusive territory that only you will be listed as their local Real Estate Professional.

Hey, I will admit, I did it once but, learned very quickly that these lead generation sites are a sham! I said it....a sham!

I came across a fellow Realtor a couple of days ago, if you can call him a Realtor, who said something to the effect, he owns several lead generation sites. Well, as you can imagine, I immediately perked up and asked him how that worked. He said, he was racking in the money, hand over fist and even offered to set me up one. I started asking more questions and came to a realization that I want to share with you.

1. These sites are thrown up very quickly and many times are completely automated.
2. These sites have customer service agents however, they don't work for the company they portray. For example, you call customer service because you have a billing question with your recent contract with Lead Generations R Us. So, when you call the agent says, "Thank you for calling Lead Generations R Us, how can I help you". Ok, so the call goes well and you end it but, what you don't know is the next call that agent answers he says, "Thank you for calling, Realtor leads.com how can I help you. That's right, these agents are generic call center workers who do nothing but follow scripts and work through Q&A Trees. Don't be fooled, that agent doesn't work for either company, he works for Call Center Agents USA.
3. No guarantee of anything! In other words, if you start throwing the word "guarantee" around then all of a sudden you get, "we aren't guaranteeing anything other than you will get leads and they could end up in closing". A fellow Active Rain Blogger Bill Cherry replied to a blog once about this same topic by asking a very simple but very powerful question and I will close with it.

If the company isn't confident enough in their leads to take their compensation when they close, why are you confident that they will? (Not a direct quote of Bill Cherry's because, I can't find it anymore however, it gets across the idea, thanks Bill.)

If you haven't started moving your business plan towards working with Short Sales, what are you waiting on? If you don't do it now, you may be missing out.

It has been my experience and I am of the opinion that Short Sales are going to become the wave of the future, if they aren't already. In fact, I have seen many of my Asset Mangers becoming much more cooperative to them and in some cases, creating infrastructure to get them closed in 14 days or less.

To explain my point a bit further, look at the emerging success of companies like Titanium Inc and BSG3. Granted, Titanium's reputation is far superior in my opinion however, both companies are successful none the less. These companies basic business structure is to reduce their client's REO inventory by offering fast, accurate and complete Short Sales. They both go about the process a bit different however, it seems to work. The similarity is that the banks are sending their at risk clients to these 3^rd parties as a Loss Mitigation tool. Titanium partners with local Realtors and has a low one time fee as well as receives a referral fee upon closing, Titanium's focus is to keep the homeowner in the home and use the Short Sale option as a foreclosure avoidance tool of last resort. Where as BSG3 sells exclusive territories to Realtors for a monthly fee based on the number of leads you want to purchase and receives a referral fee upon closing. As a matter of disclosure, I have not signed up for BSG3's service so I do not have a direct experience as a paying Realtor with them however, I have watched their on-line promotions video, had 2 phone call interviews with their sales agents and read numerous blogs about their services. The biggest reason I don't sign up with them is due to some advice I heard Bill Cherry a successful Realtor in Dallas Texas and frequent Active Rainer once say something to the effect, "If the lead generation company isn't confident in the quality of their leads to only ask for a fee upon closing, then why should you be confident in their leads to pay up front for them". It just seemed to ring true to me. At the time this blog is posted, things may have changed with their fee structure so I leave it to you to learn more about either company if you are interested in them.

My point behind this blog is, Short Sales are coming and rather than complaining about how you don't like them, you might want to consider learning more because, REO's will always have their place in this industry however, I am of the opinion REO's will soon be at their pinnacle. Another point about how REO's seem to be tapping out is the lack of banks and lenders bringing on new Realtors. Once again, this market, from a Realtor's point of view, seems to be very closed, not that it was ever really open but, more so now. Tapped out I say. Short Sales, just starting to get warm....soon will be very HOT! If you haven't jumped on the Short Sale band wagon by now....this may be the last call!

Q: 1- What are the risks?

A: The risk when investing in Short Sales is no different than investing in any other section of the Real Estate Industry. The better question is how does one limit the amount of risk they take on when buying investment real estate? Buy low, sell high however, stay competitive and if necessary, cut your loss early and move on.

Q: Can I end up in the same boat as the sellers and lose all of my assets - i.e. condo, pension plan, bank account etc?

A: Sure you can. If you don't manage your investments wisely and end up over extending yourself, then you will most likely end up in the same boat as the seller's find themselves in now.

Q: - How do I actually get qualified to become a short sale investor?

A: No real universally accepted certification exist for becoming a Short Sale Investor however, I would strongly advice you first find someone who is doing it successfully and have a real heart to heart conversation with them. In a perfect world, I would suggest you "shadow" a Short Sale Investor for a couple deals then determine if it is something you really want to do.

Q: - If I need to qualify for a loan, what type of loan would I be looking at and where would be the best place to get one to enable me to do short sales?

A: If at all possible, don't get a loan when it comes to purchasing Short Sales. Truth is, too many stipulations are involved when getting a loan for investment purposes. Cash is always best when buying Short Sales. If, ultimately you do want to invest in Short Sales with money from a loan, you need to find a loan that acts as much like cash as possible. In other words, a HELOC (Home Equity Line of Credit) or something similar, anything with the least amount of rules, regulations, guidelines and stipulations the better. Basically the easier we can make it for the bank to sell the property without worrying that something from your lender is going to pop up last minute can kill the deal, the better.

Q: 4 - Would a down payment be necessary to qualify for a loan, if so, approximately what percentage would be needed?

A: This questions is best answered by a lending professional, of which I am not however, the answer to this question is most likely going to revolve around your credit score. FYI: with the continuing credit crisis the country is facing, even with a great credit score, you may be asked to put up some type of down payment...with investment properties, it could be at least 10% or more.

Q: 5 - To qualify for a loan, would the dollar amount of the loan (like most loans are) be calculated in conjunction with my annual salary and debt to ratio?

A: Most likely

Q: 6 - Apart from fix up costs on the property; can you give me some sort of break down as to what other outgoing costs I might occur as a short sales investor?

A: You need to make sure you get a Net Sheet or Estimated HUD-1 from your Realtor when you are prepared to sell. This is a estimated itemized break down of each and every fee you will pay to get out from under the home when you have a buyer. This is a great way to see in writing exactly what you will likely walk away with. Keep in mind, the HUD-1 involves all the Real Estate cost, not the cost you will have to fix up the property...that will be up to you to keep track of.

Q: 7 - If I wanted to sell a short sale property after any needed fix ups have been completed, what are the best ways to sell the property (flip it)?

A: Flipping is what you are going to be doing, no question about it, unless, you plan on holding onto the property for rental purposes. By the way, you will want to be prepared to do just that and that is, rent the property. In areas where we see prices dropping monthly....you could find yourself with a debt on the property greater than what you could make from the sale so, the only real choice you have is to rent it out and try to cover the cost of your mortgage, if you get one. This is just another reason to buy a Short Sale in cash if you can.

Q: 8 - Once you get a home via a short sale and it is still occupied (with the view that the seller will leave very soon), what's to stop the seller from doing major damage to the home once everyone has signed on the dotted line - hence making it too late to go back and the seller knows it? What can be done to make sure damage does not happen in anyway?

A: DO NOT DO THIS TYPE OF TRANSACTION!!! DO NOT DO THIS TYPE OF TRANSACTION!! IF THE HOME DOESN'T COME TO YOU ALREADY VACATED.....MOVE ON! Avoid buying a short sale with a resident in the property......or at the very least, write in your purchase agreement that the property is to be vacant on or before closing.