S.E.C. Real Estate Observer

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Now that cash is king again because there is only 20% of what earlier was available to do real estate transactions compared to 2006 as sources for a lot of the prior available cash have been cut off by the “crisis” (i.e., less equity = no equity loans, no buyers = no cash out = lowering prices = no speculation = major reduction in interest in real estate as “upside” isn’t assumed anymore). So, some owners have increased MOTIVATION to get a SOLUTION.

The big boys are syndicating the purchase of GIANT amounts of discounted notes that the banks can’t keep, and the developer’s inventory that has no market. As usual (remember RTC), the major transfer of wealth from the bad thrifts and banks insured by you and I went to the big guys who could muster cash to cut us off at the knees.

For true EXCHANGE COUNSELORS, the opportunity is legion to use “other than cash” exchange formulas to solve the objectives of properly counseled clients who become more willing for alternatives to “gitt-er done.”

If you don’t know how to use the old standard exchange formulas such as:

CREATION OF WEALTH
DE-FINANCE
BACKSIDE BENEFITS
OVERTRADE
BLUGEON THE LENDER
DISCOUNT SALE/BUYBACK
SYNDICATE THE EAT
PARTNER IN THE CASH
KEEP ONLY THE FUTURE
GIVE AWAY THE FUTURE

(and 742 other alternative ways to MAKE IT HAPPEN) then you better get to the courses presented by S.E.C. Education Foundation and get the expertise to do the counseling, use the formulas, and collect commissions (which might be equity).

If you have not represented a client in an exchange transaction (without a cash out on one end) for a commission in the last year or so, you are RUSTY on creative thinking, and you should either sharpen your skills as an exchange counselor or recruit some lusty young broker in S.E.C. to take your seat at the exchange.

RE-PREPARE CLIENT BEFORE OFFER PRESENTATION

Most exchange brokers whine and cry loudly that their colleagues haven’t properly COUNSELED their client before bringing their package to the marketplace. When I used to teach brokers how to exchange, I would explain that commissions are “pooled and shared equally” as a norm. There usually was then an extended conversation about one side doing all the work while the other side was un-counseled, did not put effort toward a deal, let the other side do all the work and they still got half the fee. If you have seen the movie of the ladies baseball league during WWII with Hank as the coach, you know that “THERE IS NO WHINING IN R.E.”

Regardless of how well counseled or “ready” a client is for what the market will likely do to his package, it is REQUIRED to RE-PREPARE a client before an offer presentation to increase the odds of performing the desired result, and to have the receiving mind open, flexible and creative toward solution, rather than niggling detail of minor issues = negotiation/defensive/conflict.

Exchangors of old developed a checklist to be sure they had best prepared before presenting “the prenuptial contract” as “romantically” as possible. It is a good habit to include a copy of the checklist along with your exchange offer document to other brokers:

EXCHANGE PRESENTATION CHECKLIST

(From “Modern Exchanger” 1977)

Before you present offer(s) (maybe days before), re-prepare your client for flexibility:

a. Re-identify his problem.
b. Re-confirm his objective.
c. Re-establish that all his objectives might not be solved in one transaction.
d. Get him involved in “solution” rather than negotiations.*

1st choice: Presentation of offer

a. Let him read and react without your comment.
b. Make sure he understands what benefits are offered. How much of his stated objective is being solved?
c. Go over each part of the offer to see how each part contributes to the end result.
d. Go for acceptance subject to validating the presumed benefits.

2nd choice: Counteroffer

a. Any taker of his situation should be dealt with seriously.
b. How can we accept most of the offer with a small change?
c. Sign what he will do — don’t dwell on “won’ts.”
d. Signed offer deserves signed response.

Last choice: “In lieu of” = (Recruit help and keep taker)

Accept offer “subject to finding something satisfactory in lieu of” part of what is offered.

Get commitment! “What set of circumstances (set of benefits) do we need to replace the unwanted part?”

This gives the offering broker a chance to re-cast his offer to comply, or

The offering broker and you can jointly go looking for the third leg to satisfy the objective by use of the unwanted portion offered.

Review with the client the additional assets, money, talent and credit he may be willing to add to the “mixture” to assist solution.

* Many folks find it easier to say no, especially to new concepts, out of lack of understanding or fear. If one could set up the client’s decision-making process to filter proposed solutions based on progress out of current situation into better circumstances, he will have confidence in his decisions.

As a pilot who almost made a “gear up landing” and a golfer who has suffered for lack of consistent pre-shot routine, I now rely on checklists to keep from creeping Quistheimers.