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Seller-funded DPA and FHA ... both praying for a miracle

National Mortgage Professional
Nov 18, 2007

Appraiser's Perspective: Sharpening your tools for the recoveryCharlie W. Elliott Jr., MAI, SRAMortgage appraisal recovery To say that we humans, as a whole, are creatures of habit would be an understatement. Many, if not most, of us find a comfortable routine and stick with it, come what may. We are this way to a fault, in some cases, where we just ride the horse we are on until it runs out of steam and collapses right under us. We very often do not pause to refresh or retool until we find ourselves lying flat on the ground. It is something like not changing the oil or tires in our automobile until we have driven it so far that we are down to its last mile before we pause to repair and refurbish. We don't pay enough attention to the conditions around us, whether we are on our horse or in our car. We drive directly into storms, hardly prepared to react to the harsh conditions that we encounter until it is too late. Although it can be, failing to attend to details on our automobile is usually not fatal, but it takes a toll on us that slows us down, and we get behind schedule. We can sometimes get behind schedule in ways that make it impossible for us to regain our previous position. Since this is a lending industry column, perhaps you are saying to yourself that it is time to get to the point, so here it goes. The point is that many in our industry are beginning to experience a slowdown in our business, much the same way that we envision our horse or car after heading full throttle down the road, only to find that we need to stop and regroup if we are to accomplish our professional objectives. Due to the cyclical nature of our business, we will always experience business cycles that necessitate our re-evaluation and redirection as to how we manage our businesses. Many of us are drawn into the business by the potential for making large amounts of money. Those of us who have been in the business for a few years realize that yes, there is big money in the lending business, but it is a business, not a job. For the same reason that we can make big money, we must constantly re-evaluate the market to maximize our potential. Unfortunately, some of us treat our business more like a nine-to-five job much of the time, expecting to make good money by simply showing up to work. Obviously, this is not the case in a profession dominated by the necessity to produce, control expenses and capitalize on the various forms of incentive compensation, which we are familiar with in our industry. In the past, much of this responsibility has been on the heads of companies or the managers of offices. As we all know, things are different today. Most of us run our own small corporations as CEOs, even if we have no employees (besides ourselves). We are responsible for our own bottom line, in many cases, which includes not only generating our own revenue, but also monitoring our own expenses. As a former university business school instructor, a 20-year-plus small-business owner and manager and one familiar with the lending industry, I have some observations on our industry's period of economic transition. We are not currently experiencing a depression, or even a severe recession, in my opinion, but a cyclical slowdown. We are experiencing a softening in many sub-segments of the lending business; however, many aspects of our business remain robust. I would prefer to call it, like I just said, a period of economic transition. Therefore, there are many opportunities for those who can see them and for those willing to adjust. I am not saying that it is a time when we should expect to become wealthy, but I do suggest that it is a time when we can experience economic success, which far exceeds that of most of our competitors. It is a time when we can expect not only to prosper, but to also be prepared to take full advantage of the next boom in our business after most of our competitors have fallen by the wayside. Given the current climate for our business, I offer the following suggestions to those who want to turn what could be a bad situation into a relatively good one. • Trade in your old budget for a new one. Due to the fact things are slower, we have more time to focus on the efficiency offered by the products and services that we purchase. We must look carefully at the returns we get on our business investments. I suggest we focus on items such as advertising, insurance, transportation, rent, supplies and technology, and fire those that are not producing. We are basically in the business of selling, and large budgets are oftentimes unnecessary. • Re-evaluate the use of your time. Steer clear of those projects and distractions that suck up a lot of time and produce less. Seek out high-quality clients and toss out the high-maintenance ones who produce small paychecks. Update your prospecting plan to include those methods that do not cost a lot and that show the most promise. • Update your product line. Kick to the curb those products that are in low demand, produce low margins, require a lot of your time or, in general, contribute less to the bottom line. • Check your energy level. If you are not already doing so, cut back on the sweets and the alcohol consumption and exercise at least a half an hour per day. Although it is OK if you have one, you don't need a gym. A good brisk walk for a couple miles early in the morning works best for me. I find that I can do some of my best reflecting early in the morning, while things are quiet and before my competitors are awake. • Spend the first 30 minutes of each day planning your strategy. Don't do it after you normally go to work, but before you go to work. You may need to go to bed a bit earlier to work it all in, but I find that that I am clearer of mind earlier in the morning. In conclusion, when business slows down, it is a good time to sharpen our tools and regroup. It can be, and is often, a blessing. When things are busy, we sometimes fail to monitor those assets, systems and theories that produce the most return for our investment. Charlie W. Elliott Jr., MAI, SRA is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889, [email protected] or through the company's Web site at www.appraisalsanywhere.com. Previous columns he has written for The Mortgage Press can be seen on the Elliott & Company Web site.
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