Happy New Year everyone. I thought I’d start 2010 with some advice that should be extremely important throughout the coming year. There are very few newsletters that I subscribe to, but one I look forward to each month is “Kahr Notes,” the semi-regular newsletter published by Josh Kahr. It covers everything from excel tips and tricks to opinion on the capital markets to news on his company. If you don’t already, I recommend you subscribe to his newsletter and check out the archive of past articles (http://www.kahrrealestate.com/press.shtml).
In his latest edition Josh gives some great advice on dealing with banks. I’ve embedded the newsletter below, but here are the major points of his write-up:
1. Opportunistic investors continue to make banks lowball offers. If the banks accepted these offers, they would find themselves insolvent which is the main driver behind ‘extend and pretend’
2. When it comes to smaller banks, it’s all about relationships. If you have the reputation of a ‘vulture,’ banks will do everything in their power not to deal with you. Banks often do deals with lower priced bidders purely because they had developed a strong relationship. In workout situations where trust and confidentiality are important, relationships truly do matter.
3. The key to to negotiating the purchase of distressed assets is focus on deal structure.
In difficult markets, it’s those that are creative that get deals done. I’m currently reading Creating and Growing Real Estate Wealth (affiliate link) by Bill Poorvu, a book I highly recommend and will write review on in the next week or so. There’s an interesting quote from the book that I want to share.
“Be a scrambler – that is, someone who is flexible, adaptable, resilient, and (as Gerry Hines put it) blessed with the ability to take bad news really well. Such people often run a little bit scared, expect bad things to happen, and still have the ability to bounce back. They are the ones most likely to do crisis management, hedge their bets, and take advantage of whatever situation may arise.”
I think that’s always good advice, but particularly important to keep in mind during difficult times.
What do you think is most important when dealing with banks?
Similar Posts:
- S&L Redux: How Long Should we Expect to See Distressed Assets?
- Excel Formulas: How to use the”What if” Tools (Goal Seek/Datatable/Solver/Scenario Manager)
- Josh Kahr’s Columbia University Real Estate Finance Course Now Available on Vimeo
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Great post – we are seeing a lot of the same trends begin to surface. Only investors who have strong ties with banks are getting a peak at distressed loans or properties; particularly prior to any foreclosure actions. Many (if not all) banks view confidentiality as the top priority and prefer not to air out their dirty laundry with a more open approach. All Special Assets officers seem to have a horror story or two about an instance when information got leaked to the wrong person (usually the existing borrower).
In addition, banks are not in the mood to get low-ball offers, so prior relationships and a track history of consummated distressed deals help those special investors get a seat at the table.
Conversely, once the property is REO many banks and special servicers become more open to advertising those opportunities to the public. We have compiled a list of 30 or so commercial REO websites where investors can easily identify distressed investment opportunities. This list can be found at: http://www.creconsole.com/blog/2009/10/commerci....
Josh, thanks for your comment and thanks for providing the link. I completely agree with you. When it comes down do it, real estate remains a relationship-driven business where your reputation precedes everything else. Thanks for your input.
Josh, thanks for your comment and thanks for providing the link. I completely agree with you. When it comes down do it, real estate remains a relationship-driven business where your reputation precedes everything else. Thanks for your input.
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