Interview With Damion Flynn Part II
Nov 3rd, 2007 @ 10:11 AM by Alden Smith
Sorry I didn’t get this posted as planned. It has been a crazy week here, with a major crash, waiting on a new box, and attempting to work from my wife’s laptop. This weekend things are getting a bit more back to normal, and today I am posting the rest of the interview with Damion Flynn, a realtor in Gulfport, MS. Thankfully, Damion still had the interview questions on his hard drive, and I am once more in his debt. Thanks, Damion!
AS: Do you have a recommendation for homeowners whose homes weren’t razed, but which were devastated? (Thinking short sale, gut and rebuild, etc.)
DF: This really depends on the homeowner. Many homeowners decided to rebuild their homes with their insurance money, many others are still fighting their insurance companies. Everyone’s situations are different so it is very hard to classify. That being said, I think some of the more frequent things I saw were a little mixed but included Short Sales, gut sales, and rehabs.
Short Sales occur when the bank agrees to take less than what is owed on a property. This can be a lifesaver in an instance where you were not able to get enough on the insurance, especially if you did not have the proper coverage. A real estate professional that is knowledgeable in short sales should be able to help you negotiate with the bank for a lower sales price – be sure the agent is working as your agent though and not trying to buy it. Many crooked agents will try to buy the house severely under valued by using a short sale approach. They may also make you think it will not hurt you, but in some cases it will! Some mortgage companies will 1099 the homeowner the difference between the loan amount and the “short” sale amount. Show this as income and then you owe a substancial amount of taxes. While the National Association of Realtors is currently backing a bill to eliminate this “phantom tax”, as of right now the property owner could be liable.
Gut sales are, in the simplest form, when someone guts the property and sells it to an investor or developer to fix and resell. In many of these cases, the owner has already received insurance money, or at least some, and agrees to sell it rather than rebuild. This can be a win-win situation because the investor can rebuild and profit while the owner can simply walk away from it. Investors actively seek the good deals on these but many homeowners also try to maximize their return and can ruin their possibility by crunching the investors bottom line. It is not uncommon for investors to look for a 20% return on cases like this. 20% is generally the higher end, when there is a lot of work to be done and potentially a risk of having to hold for too long.
Rehabs are probably the easiest to comprehend at first glance. These are simply when the owner decides to rehab their property so they can move back in. This is often very hard on the homeowner as they are trying to rebuild their home, and their memories, but many will go through whatever it takes to be back in their home.
AS: What are some of the things you’ve done to rebuild your business?
DF: I was very fortunate in my business. I had just got my broker’s license and opened up shop 4 days before hurricane Katrina hit. Since I had not officially leased space yet, I did not have to worry about it too much. I had all my files, computers, etc set up in my home office and started moving along.
In June I opened up in a commercial location with a few agents under me but the entire time, we were more consumed with helping people get into their homes, or new homes, that building up the business just came naturally. By helping others we received a reputation of being “good ol’ boys” and received several referrals which kept multiplying and basically built the entire business off word of mouth. We did not start doing any advertising until around June of 2007.
AS: Do you have opinions about what would have helped your area to recover? If so, will you share a few?
DF: I honestly believe that many of the federally regulated programs stayed too long. The consensus was that there were still people needing help, but I think this was more of a political move than anything considering there were so many issues with FEMA right off the front end of Katrina.
FEMA stayed in the area, continuing to give money and free rent to people while new developments and apartments sat empty. This became an economic drain on our real estate market. Rather than spending all the money on trailers, cottages, and other dwellings for people, I believe much of that money would have been better served into programs to help regulate insurance costs. Doing nothing about insurance costs has put us into more of a problem now. Insurance for a single family dwelling valued at $150,000 could run you $4,000 a year or more. Escrow this into your mortgage and it raises your monthly payment by over $300. With the insurance rates this high, and cost of housing rising, it puts the average family in a position where they cannot afford a home.
The government knew this would happen – everyone did. When all the funds were being appropriated, there should have been some kind of allowance to offset insurance instead of just giving money over freely to anyone who asked for it – although it was nice of Uncle Sam to pay me back for that generator and chainsaw I bought.
AS: From your point of view, how do you perceive the trouble in the sub prime market?
DF: The sub-prime market is probably a discussion in all its own right. I think this is another instance where government regulations came back to bite us in the rears. In our area, I honestly feel that insurance is a bigger factor than sub-prime regulations, however, it is a real concern. Probably the biggest shock was when American Home Mortgage (AHM) went bankrupt. While they tried for weeks to keep it from happening by lying to their investors (I was a victim of that losing too many thousands of dollars to mention), they still went under. This was probably the biggest hit – and AHM did not even deal in sub-prime loans, so they say.
Shortly after, when CountryWide took out over $11 Billion loan, I knew the market was going to crap. The biggest problem right now though seems to be market perception. Employment rates are up, interest rates are down, but the market is still falling. From what I have seen, it is more of a consumer’s perception of market than actual market conditions. You can still get good loans, just banks are being a little more cautious of what to write. Bank employees are dotting their “i’s” and crossing their “t’s” to make sure they are not the next to go.
I do think it is going to take some time for the market perception to straighten out, however, for those people who have good credit and a little money to put down – now is the PERFECT time to buy as their is much more supply than demand. Basic economics tells us that is when the deals are to be had!
AS: What do you feel is the best solution for this?
DF: Honestly, the best solution is one in which can’t be one overnight. Raising awareness, showing people that it really is not as bad as it looks, and try to show them that the general perception is where a lot of the issues lie. Slightly lower lending standards may be a way to get started, and possibly lowering the interest rates more to get people in a buying mood.
Unfortunately, things like this do take time to recover and our economy revolves around real estate, lending, and perception. Working on perception of the market by various quick fixes will generate economic revenue now, but senior economists need to come up with a good long term plan to help things stay more steady for the long run.
End of Interview
My thanks to Damion Flynn for his help and understanding in getting this interview live. I also wish to thank Lauren Blair, Content Director for Internet Brands, for her help and enthusiasm for this article, and for her patience while I waded through my computer problems.
Lauren has also approached me about another interview with a gentleman who specializes in “green” mortgages. Steps are in place to attempt to bring an interview to the blog. Stay tuned…
A~
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Sorry to hear about your computer problems! I can sympathize with all the technostress! Enjoyed your post; sadly, I know someone whose home is at risk of being sold off for a few cents on the dollar. Sometimes bad things happen to good people.
fabulous post if you like interviewing someone who steals others blog posts
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