ForeclosuresMass - ForeclosuresMass Monthly - Interview with the Expert - Look at Deals with an Appraiser's Perspective (August 2007)

A real estate investor with a portfolio of $24 million, Mark Jackson credits his success to the fact that he's also an appraiser. This background allows him to look at deals differently; he knows his markets and understands value. Recently, he took some time from his travels to discuss with us the details of being an appraiser and how the insight provided can help real estate how real estate investors make better deals.

Mark Jackson: Like most people in real estate, I come from a corporate background. I wasn't unhappy with my job but I had to get out. This was the early 1990s. I attended my first closing and had no idea what an appraisal was but thought, "Heck, I can do this."

A few years passed, and then I decided to go back to school - meaning, I attended one of those six-week appraisal training classes. You can find them at community colleges or through real estate companies.

I quit the corporate job, opened my own business, and got really good at marketing. Within three years I had 28 contractors and was doing over 2,000 appraisals a year with business revenue of $1.2 million.

* Next 37 17 investors only!

MJ: This is the funny part. You know the standard appraisal fee is only $300 - so you can see I was doing quite a number of them. I was going to loan officers to get the appraisal business and learned they were making a few thousand dollars on the closed loans - while I was making $300 per appraisal. I thought, "Did I miss something here?"

Then I started doing appraisals for several of my clients who were investors. They would pay me $400 - $500 but would make $20K, $30K, up to $100K+ on each closing. That's when I said, "You know, I'm really missing out on the riches of real estate. Without my work neither the loan officers nor the investors can close their deals, but they're earning far more income."

FMM: So when did you finally get into investing and what was your first property?

MJ: Back in 2002. I bought my first property - a 1920 bungalow in Atlanta, Georgia - for $119K and sold it for $275K. I was able to do this because I knew the market and knew what improvements to make (only $20K) to bring the property to its full market potential.

MJ: Great question. Specifically, within each market, geographical areas or neighborhoods experience re-gentrification. Certain streets within the area will be impacted more than others. Appraisers who also invest see these areas, understand the market and how each street is affected, and can precisely key in to where to get the best properties in terms of value. They have a definite advantage over the regular investor who doesn't have this ability to "recognize" these important characteristics.

Using another example, a couple of years ago I began acquiring HUD foreclosures. I trained a real estate agent to understand the locations in which I wanted to acquire properties and how to identify properties with the right market value spread. We started closing on 2 - 3 properties per month every month because she now understood value from an investing appraiser's perspective.

MJ: By value, I mean understanding the characteristics of a property. A typical investor may not see any difference between a 3 & 2 and 4 &1 - that is, three bedrooms, two baths versus four bedrooms and one bath. He sees only that each can earn $25K and $30K respectively in net profit, but because I'm an appraiser, I know the 4 &1 has functional obsolescence - it's not as marketable as the 3 & 2. Why? Not enough bathrooms for the number of bedrooms.

The numbers on the deal may look great on the 4 & 1, but I know I can easily get stuck with the sucker - it can take months to move it out of my portfolio and eat up the profit I might have gained at closing. So I don't buy it; the value isn't truly there.

Value also includes knowing the environmental or governmental characteristics. For example, the 3 & 2 property may be too close to areas of radon gas, which creates sink holes, or service stations, which have underground storage tanks whose contents have leached into the groundwater. Again, I don't buy it, because the value isn't there.

FMM: But don't appraisers tell you these things when they appraise the property?

MJ: All appraisers are trained in the proper theory, but they may not apply it. Unlike myself, you really only have two kinds of appraisers: the pretty good ones who know their craft but don't know how to market their businesses and starve, and those who market really well but do poor appraisals. Neither type offers true help to real estate investors.

FMM: What are some other things you want to consider when evaluating a property?

MJ: You want much more than the typical MLS listing or the free sites like Zillow provide. You want the legal description, prior transfer history, who owns the property now, was it ever in foreclosure, the mortgage data, any seconds or equity lines, is the mortgage fixed or adjustable, and the interest rate. You want to know the sales that have taken place around the property. On top of all of this, you want flood info, EPA definitions, and population trends for the future - in short, complete market demographics.

Mark Jackson is the founder of InvestorCompsOnline.com (ICO), a national database for real estate investors that provides comprehensive data, including mortgage information, prior transfers, sales history, and EPA definitions, for properties across the U.S. ICO also offers 24/7 online consultations and direct 1:1 assistance to help investors determine real estate value. Mark can be reached by email at mark.jackson@investorcompsonline.com or through his website at www.investorcompsonline.com.

Did you like this article? You May Also Like:

	Professional Profile: Using ForeclosuresMass.com Can Ease Mortgage Woes for Investors says one Mortgage Company President Gary Yi, Secure Mortgage Corp. Gary Yi, President of Secure Mortgage Corporation is a very busy man these days. Lower interest rates have caused a boom in purchases and refinancing. There are some tricks to buying foreclosed property that could make the process easier if you are looking for financing...
	*Interview with the Expert: Don't Let Mold Become Your* Problem** Steve Goselin, EnviroTech Clean Air, Inc. Finding mold in a building can literally bring a real estate deal to a crashing halt. No matter how much or how little mold there is, as the seller you’re responsible for clean up – or selling the property “as is” with full disclosure. In his article, mold remediation expert Steve Goselin explains why mold is causing problems in the real estate industry and what you can do to ensure it doesn’t become your problem.
	Feature Article: Letters to Homeowner Prospects: 6 Rules Will Get Them Read... and Answered! Ken Lizotte, CMC Of all forms of writing, letter-writing may be the toughest. After all, who reads letters anymore, let alone writes them? Most of us frantically clip thru our snail mail as quickly as possible, casting 90% of it unopened into the trash. Thus, any letter you send to a foreclosed homeowner must grab your recipient's attention at once, hold his or her interest and (best case scenario) motivate your reader to action...
	Legal Corner: Banks are willing to work with investors to find equitable solution Bob Tenney, Cunningham Machanic Bob Tenney, attorney at Cunningham Machanic in Natick, is on the frontline of the foreclosure process. Tenney and his firm review claims by lenders to review properties for foreclosure. If proper conditions are not met...
	Legal Corner: Banks are willing to work with investors to find equitable solution Bob Tenney, Cunningham Machanic Bob Tenney, attorney at Cunningham Machanic in Natick, is on the frontline of the foreclosure process. Tenney and his firm review claims by lenders to review properties for foreclosure. If proper conditions are not met, they are also the folks who send out demand lettersâ€”the step that begins the foreclosure process for the homeowner. "We send the demand letter and give the homeowner time to reinstate their loans. If that doesn't happen we proceed with the foreclosure," says Tenney...
	Interview with the Expert: Helping Families Get Back on Track Financially After Foreclosure Jennifer Matthews, Founder, Creating Financial Literacy, LLC You can play a key role in helping clients get back on their feet both financially and emotionally by understanding the challenges they face. According to Jennifer Matthews, an advocate for those who have been through foreclosure, often times people lack basic financial literacy and management skills - the lack of which contributed to their financial woes. In this livley article, Jennifer Matthews provides the essential tools consumers need to increase their financial literacy, repair their credit, and recover from foreclosure.
	Feature Article: Five Strategies for Successfully Negotiating Short Sales Elizabeth Weintraub As any seasoned investor can attest, dealing with banks on short sales requires a large bottle of aspirin and the wisdom of Solomon. Real estate broker-associate Elizabeth Weintraub gives you the low-down on how to successfully deal with banks - everything from dealing with confrontational bank agents and writing contracts to proving to the bank why you're the best buyer.
	Feature Article: Three Steps to Rebuilding Your Credit After Foreclosure Stephen R. Elias, Attorney Gone are the days when rebuilding one's credit history after going through bankruptcy or foreclosure was straightforward. With the crash of the sub-prime lending market, consumers are under intense scrutiny when applying for mortgages and credit cards, which means rebuilding credit can now take three to five years - or longer!. In his article, bankruptcy attorney and author Stephen R. Elias provides three key steps that you can pass on to your clients who need advice on how to recover from foreclosure.
	Success Story: Husband and Wife Team Know it Pays to be Sincere when Making Deals Jeremy Cyrier, The Cyrier Sales Team As a real estate broker and investor, Jeremy is always on the lookout for good investments for both himself and his customers. Through weekly emails from ForeclosuresMass, Jeremy is notified of foreclosed properties listing up-to-date, accurate data. Not too long ago, Jeremy was notified of a foreclosed apartment complex that peaked his interest. This is what transpired...
	Legal Corner: Do your Homework before Investing Suzanne Brunelle, Portnoy and Greene, PC So, you heard you could make a financial killing or find your dream home buying property at foreclosure? That may be possible, but first you need to beware the pitfalls of the novice and, as my father always said, "Do your homework"...