Often, in today's real estate market, many homeowners who are in foreclosure or a position of needing to sell their property find out that they actually owe more to their lender(s) than what they can actually sell the home for. In this scenario, one of the more popular solutions is to conduct a short-sale. A short-sale is simply negotiating with the home owner's current lender(s) to accept an amount that is less than they are owed.
A properly structured short-sale transaction can be an attractive alternative and beneficial for all parties to the transaction. The homeowner is able to sell the property, get out from under the stress and strain of a foreclosure, and move on with their lives. The person buying the property, whether an investor or home buyer, is able to purchase the property, usually at a substantial discount, and the bank that is taking the short is able to avoid the high costs of the foreclosure and the risk of the property reverting back to them at auction, which results in additional costs to secure and upkeep the property.
It is said that every foreclosure property that ends up as an REO (Real Estate Owned by the bank) costs the lender approximately $50,000.
To many, that may sound simple enough. However, negotiating a successful short-sale is a complicated and time-consuming endeavor. While all banks and lenders require typically the same documentation on every short-sale package, each lender has their own specific requirements or procedures. When negotiating with lenders, it is critical to learn those procedures and follow them to the "T". Before an investor can even contact the bank to start the process, the investor must have certain required documentation from the seller of the property.
The first and most important document is the signed Letter of Authorization (LOA) from the seller authorizing their lender to discuss their loan with the investor or negotiator. Once in hand, the LOA must be faxed to the bank (sometimes several times) before the lender will discuss any aspect of their customer's loan.
In addition to a signed letter of authorization, the investor needs to compile many other documents to submit to the lender. Every bank mitigator will require the following:
A fully executed purchase and sale agreement contingent upon the lenders approval of the short sale. Note: Lenders want as clean an offer as possible. Therefore, do not add a lot of contingencies or other subject-to's.
An estimated HUD-1 settlement statement showing an accurate statement of costs and a net-payoff to the lender.
A hardship letter from the seller accurately describing the reasons why they are in foreclosure and why they are not able to make the mortgage payment in the future.
A financial declaration spreadsheet from the seller itemizing their monthly income and expenses.
3-6 months of seller bank statements.
Two years of seller's tax returns.
A property condition and repair estimate. (It is best to have a licensed contractor provide this estimate)
It is important to submit all the documents at one time. Do not piecemeal the paperwork to the mitigator. First, it can easily be misplaced by the lender and never find its way into the file and secondly, you need to make the mitigator's job as easy as possible. If he or she only has a partial package, he cannot go to management with your offer and it will just sit in purgatory.
Once the lender has a complete package submitted, they will request a Broker's Price Opinion (BPO) to be completed. It is critical that the investor be the point of contact with the person conducting the BPO. The investor should be prepared to give the lender's representative comps of similar homes in the area that support the value the investor is hoping to achieve as well as point out all of the defects or repairs that need to be done and give them copies of any repair estimates that you have.
By following the above steps, you should be able to navigate the realm of short sales successfully. While no one will have a 100% acceptance rate, you will certainly do much better than your competition, who are going through the process blind.
For bank owned listings, go to http://www.thenoteservice.com
Friday, October 3, 2008
Sunday, July 27, 2008
How to Buy A Foreclosure
The price may be right, but be prepared for the hassles.
Michael Lappano knows a home bargain when he sees one. Last year, the Bellevue, Wash., real estate agent purchased a condominium for only $255,000 (including an outstanding lien). That's $65,000 less than what comparable units were selling for, he says. To get the steep discount, he bid on the home at an auction for foreclosures. "The location was perfect, just two traffic lights from my office," says Lappano. He now lives in the sunny two-bedroom, two-bathroom condo with his new wife, Stephanie. And the property is still worth about $315,000, even in the face of a nationwide slump in home prices.
Just over a year after Lappano purchased his home, buyers looking for bargains are eyeing an unprecedented selection of foreclosed luxury houses and condos, in addition to more modest homes. Foreclosures were up 60% in February from a year earlier, according to RealtyTrac, an online listing service. Arizona, California, Florida and Nevada have been hit hardest, but foreclosures are on the increase just about everywhere.
Rick Sharga, marketing director for RealtyTrac, says he hears from brokers that many buyers now begin their home search with a request to look at foreclosures and bank-owned properties. But there's no guarantee that buying a foreclosure will save money compared with buying the traditional way. Discounts vary tremendously depending on where you live. In fact, many foreclosed homes are priced higher than their true value because sellers are trying to pay off the mortgage and cover taxes and transaction costs.
Plus, buying a foreclosure involves homework, patience and often a good measure of luck. If you're buying at auction, you usually need to pay cash. You may face long waiting periods to take possession of the property and move in, and the property could require extensive repairs. Sometimes the former occupants strip the house of all appliances and vandalize the property.
You may also have problems getting accurate information before you buy, says Seattle real estate attorney Richard Llewelyn Jones. "There could be judgments and liens attached to the property or more than one note or deed of trust being foreclosed." In the end, most buyers are turned off by the risks. "If you don't know what you're doing, you could lose your shirt," says Jones.
Getting a discount. If you're game, find an agent who deals with foreclosures. Your agent can locate properties and establish their market value -- which could be very different from the asking price. You will have to pay for any repairs, so build in a generous estimate of what they could cost. Also, you may need a lot of cash because traditional financing may not be an option.
Each state has its own rules governing foreclosures: whether the transaction goes through the court system, what taxes you pay and how much cash you need upfront. To get a summary of your state's law, visit the resource center at online listing service ForeclosurePoint.com.
Also, you generally cannot get title insurance until you take ownership, nor can you expect the title warranties that usually kick in during a traditional home purchase. You need to inspect the title thoroughly, which means paying several hundred dollars for a title search and combing through it to ferret out all outstanding debts. Even so, says Jones, there may be title problems that aren't of record or that appear on the record between the time of your title search and the public sale. Be prepared to pay off old tax liens attached to the home -- and to buy title insurance as soon as you take ownership.
Three ways to buy. Wherever you live, there are three ways to buy a foreclosure: in a presale (before the lender forecloses), at auction or directly from the bank. In a presale, you negotiate with homeowners directly, before their home goes into foreclosure. Although the discount can be as much as 20% to 40% off the property's value, a presale is the riskiest way to buy because deals frequently fall through and title problems are rife. And pre-foreclosure buyers have to add in the cost of an inspection and fork over real estate excise tax, as do those who buy bank-owned property. (Buyers at auction may avoid these costs in some states.)
Buying at a public auction is the most common type of foreclosure purchase. Buyers can expect a discount of 10% to 25% compared with buying a home through traditional channels, says Dean Street, an agent and 30-year veteran of foreclosure buying in the western U.S. But the road to auction can be bumpy, too. For starters, you often cannot inspect the interior of the home. Street says it's vital to see the property even if you can't gain entry. "If there is 300 pounds of garbage in the front yard, there is probably 600 pounds inside," he says. One way to research the interior is to check the local building department's permit records, or have your agent see if a recent listing has information on appearance, layout and previous remodelings.
Another hassle: Most foreclosures that go to auction get postponed, usually due to bankruptcy or loss mitigation (when the bank tries to compromise with the borrower), says Chris Matty, marketing director of ForeclosurePoint.com. He notes that opening bids also change frequently, especially as home values are marked down further.
The winning bidder will pay for the property and take ownership within a set period of time, which varies according to state law. But you're not out of the woods yet. Some states, such as North Carolina, give former homeowners a chance to buy the property back. Sometimes foreclosure buyers have to start eviction proceedings; once the house is vacant, you usually have to schedule repairs.
Work with the lender? If no one buys a property at the auction, it usually ends up back with the bank. Banks have a lot of these real estate owned, or REO, properties in their portfolios and are actively trying to sell them through agents. And unlike buying at auction, you can usually get a traditional mortgage for an REO. Unfortunately, lenders often list the property at or near market value to recover the outstanding loan amount along with legal fees, property taxes and maintenance costs.
But an experienced foreclosure broker can negotiate aggressively with a bank, especially when the property has been listed for a year or more. Plus, banks trying to sell foreclosures sometimes offer highly competitive financing packages to buyers, including low down payments and attractive rates. As home values decline, some lenders are willing to negotiate a "short sale," in which the property is sold for less than the debt owed on the house. That's one way foreclosure buyers can profit. In some markets, the discount is as much as 25%; but where there's less inventory, the discount can be smaller.
You can find REOs through real estate agents. Or approach local banks or mortgage brokers directly and let them know you are prepared to buy a property "as is" with cash and request a discount from the asking price. Banks sometimes pay to remodel properties to improve their value. But with so much inventory on their books right now, most lenders want to unload foreclosed homes quickly, without having to refurbish them.
Michael Lappano knows a home bargain when he sees one. Last year, the Bellevue, Wash., real estate agent purchased a condominium for only $255,000 (including an outstanding lien). That's $65,000 less than what comparable units were selling for, he says. To get the steep discount, he bid on the home at an auction for foreclosures. "The location was perfect, just two traffic lights from my office," says Lappano. He now lives in the sunny two-bedroom, two-bathroom condo with his new wife, Stephanie. And the property is still worth about $315,000, even in the face of a nationwide slump in home prices.
Just over a year after Lappano purchased his home, buyers looking for bargains are eyeing an unprecedented selection of foreclosed luxury houses and condos, in addition to more modest homes. Foreclosures were up 60% in February from a year earlier, according to RealtyTrac, an online listing service. Arizona, California, Florida and Nevada have been hit hardest, but foreclosures are on the increase just about everywhere.
Rick Sharga, marketing director for RealtyTrac, says he hears from brokers that many buyers now begin their home search with a request to look at foreclosures and bank-owned properties. But there's no guarantee that buying a foreclosure will save money compared with buying the traditional way. Discounts vary tremendously depending on where you live. In fact, many foreclosed homes are priced higher than their true value because sellers are trying to pay off the mortgage and cover taxes and transaction costs.
Plus, buying a foreclosure involves homework, patience and often a good measure of luck. If you're buying at auction, you usually need to pay cash. You may face long waiting periods to take possession of the property and move in, and the property could require extensive repairs. Sometimes the former occupants strip the house of all appliances and vandalize the property.
You may also have problems getting accurate information before you buy, says Seattle real estate attorney Richard Llewelyn Jones. "There could be judgments and liens attached to the property or more than one note or deed of trust being foreclosed." In the end, most buyers are turned off by the risks. "If you don't know what you're doing, you could lose your shirt," says Jones.
Getting a discount. If you're game, find an agent who deals with foreclosures. Your agent can locate properties and establish their market value -- which could be very different from the asking price. You will have to pay for any repairs, so build in a generous estimate of what they could cost. Also, you may need a lot of cash because traditional financing may not be an option.
Each state has its own rules governing foreclosures: whether the transaction goes through the court system, what taxes you pay and how much cash you need upfront. To get a summary of your state's law, visit the resource center at online listing service ForeclosurePoint.com.
Also, you generally cannot get title insurance until you take ownership, nor can you expect the title warranties that usually kick in during a traditional home purchase. You need to inspect the title thoroughly, which means paying several hundred dollars for a title search and combing through it to ferret out all outstanding debts. Even so, says Jones, there may be title problems that aren't of record or that appear on the record between the time of your title search and the public sale. Be prepared to pay off old tax liens attached to the home -- and to buy title insurance as soon as you take ownership.
Three ways to buy. Wherever you live, there are three ways to buy a foreclosure: in a presale (before the lender forecloses), at auction or directly from the bank. In a presale, you negotiate with homeowners directly, before their home goes into foreclosure. Although the discount can be as much as 20% to 40% off the property's value, a presale is the riskiest way to buy because deals frequently fall through and title problems are rife. And pre-foreclosure buyers have to add in the cost of an inspection and fork over real estate excise tax, as do those who buy bank-owned property. (Buyers at auction may avoid these costs in some states.)
Buying at a public auction is the most common type of foreclosure purchase. Buyers can expect a discount of 10% to 25% compared with buying a home through traditional channels, says Dean Street, an agent and 30-year veteran of foreclosure buying in the western U.S. But the road to auction can be bumpy, too. For starters, you often cannot inspect the interior of the home. Street says it's vital to see the property even if you can't gain entry. "If there is 300 pounds of garbage in the front yard, there is probably 600 pounds inside," he says. One way to research the interior is to check the local building department's permit records, or have your agent see if a recent listing has information on appearance, layout and previous remodelings.
Another hassle: Most foreclosures that go to auction get postponed, usually due to bankruptcy or loss mitigation (when the bank tries to compromise with the borrower), says Chris Matty, marketing director of ForeclosurePoint.com. He notes that opening bids also change frequently, especially as home values are marked down further.
The winning bidder will pay for the property and take ownership within a set period of time, which varies according to state law. But you're not out of the woods yet. Some states, such as North Carolina, give former homeowners a chance to buy the property back. Sometimes foreclosure buyers have to start eviction proceedings; once the house is vacant, you usually have to schedule repairs.
Work with the lender? If no one buys a property at the auction, it usually ends up back with the bank. Banks have a lot of these real estate owned, or REO, properties in their portfolios and are actively trying to sell them through agents. And unlike buying at auction, you can usually get a traditional mortgage for an REO. Unfortunately, lenders often list the property at or near market value to recover the outstanding loan amount along with legal fees, property taxes and maintenance costs.
But an experienced foreclosure broker can negotiate aggressively with a bank, especially when the property has been listed for a year or more. Plus, banks trying to sell foreclosures sometimes offer highly competitive financing packages to buyers, including low down payments and attractive rates. As home values decline, some lenders are willing to negotiate a "short sale," in which the property is sold for less than the debt owed on the house. That's one way foreclosure buyers can profit. In some markets, the discount is as much as 25%; but where there's less inventory, the discount can be smaller.
You can find REOs through real estate agents. Or approach local banks or mortgage brokers directly and let them know you are prepared to buy a property "as is" with cash and request a discount from the asking price. Banks sometimes pay to remodel properties to improve their value. But with so much inventory on their books right now, most lenders want to unload foreclosed homes quickly, without having to refurbish them.
Friday, July 11, 2008
Fannie Mae and Freddie Mac and Oil, not the perfect threesome
U.S. stocks tumbled Friday as fears about the stability of the top two home financing providers Freddie Mac and Fannie Mae, combined with oil at a record above $147, clouded the economic outlook.Fannie Mae fell 22.4 percent to $10.25, off a session low at $6.68, and topping the list of the New York Stock Exchange's biggest percentage losers. In contrast, Freddie Mac slipped 3.1 percent to $7.75, off a session low at $3.89. Earlier, Freddie Mac turned positive and hit an intraday high at $8.57 in volatile trading.Friday's slide capped a tumultous week, in which the S&P 500 joined the Nasdaq and the Dow in a bear market. It was the Nasdaq and the S&P 500's sixth straight weekly decline, their longest weekly losing streaks since 2004.The broad market ended Friday's session down 1 percent as investors worried that the two pillars of the U.S. housing market could run short of capital, placing the fragile U.S. economy at even greater risk.Fannie Mae and Freddie Mac traded erratically and ultimately ended lower. Pressure mounted for the U.S. government to act more swiftly to prevent the housing crisis from dragging down the nation's top mortgage finance agencies, as Treasury Secretary Henry Paulson indicated that a bailout was unlikely.A jump in U.S. crude oil prices to a record above $147 per barrel further soured investor sentiment on concerns about the impact of higher fuel costs on corporate profits and consumer spending."The bottom line is that we're in the middle of a financial tsunami. This is a storm the likes of which this country hasn't seen," said Peter Kenny, managing director at Knight Equity Markets in Jersey City.The Dow Jones industrial average fell 128.48 points, or 1.14 percent, to 11,100.54. For the week, the Dow dropped 1.7 percent, its fourth straight weekly decline.The Standard & Poor's 500 Index slid 13.90 points, or 1.11 percent, to 1,239.49. For the week, it fell 1.9 percent.The Nasdaq Composite Index dropped 18.77 points, or 0.83 percent, to 2,239.08. It shed 0.3 percent for the week.But all three indexes ended off their session lows. At one point, all three indexes were down more than 2 percent, with the Dow briefly dipping below the 11,000 level for the first time since July 2006. In a volatile session, major indexes also briefly turned positive in the late afternoon.U.S. crude for August delivery rose $3.43, or 2.4 percent, to settle at $145.08 a barrel on the New York Mercantile Exchange, after earlier hitting a record of $147.27.Senator Christopher Dodd, who chairs the Senate Banking Committee, said the U.S. Federal Reserve was considering allowing Fannie Mae and Freddie Mac to borrow directly from the central bank, spurring speculation that the Fed may take action as early as this weekend. That helped the two stocks come off their lows during afternoon trading, with Freddie Mac at one point fleetingly turning positive.Financial shares were among the biggest drags on the S&P 500 as new signs of distress in financial market spooked investors. An S&P financial index fell 2.6 percent.Shares of American International Group Inc fell 3.8 percent to $23.08 as investors worried the giant insurer, already beaten down by mortgage write-downs, could post more losses.Citigroup cut its estimates and price targets on several U.S. banks, including JPMorgan Chase & Co and Bank of America Corp, on higher assumed losses on credit card, home equity, residential construction, and a sustained weak capital markets environment. JPMorgan shares fell 3.9 percent to $33.16, while Bank of America shares slid 3.1 percent to $21.67.Lehman Brothers shares slid 16.6 percent to $14.43, a day after shedding 12 percent on discredited rumors of customers pulling back their exposure to the investment bank.Chevron Corp shares fell 4.2 percent to $92.25, ranking as the top drag on both the Dow and the S&P 500, after the second-largest U.S. oil company said it expects its refining and marketing operations to post a loss in the second quarter, somewhat restraining earnings that will be mostly driven by record oil and natural gas prices.Airlines' and retailers' stocks were among those most adversely affected by soaring oil prices. An airline index fell 5.6 percent, while an index of retailers shed 2.1 percent.General Electric was unable to hold on to gains amid the broad sell-off, ending up a mere 0.1 percent, or 2 cents, at $27.66, a day after it posted second-quarter profit in line with Wall Street expectations.Shares of Anheuser-Busch Cos Inc, an S&P 500 component, soared 8.6 percent to $66.50 after a source said the maker of Budweiser beer and Belgian-Brazilian rival InBev NV have begun negotiations for a friendly merger.On the economic front, the Reuters/University of Michigan Surveys of Consumers showed U.S. consumer confidence rose unexpectedly in June with the help of retail discounts.Trading was fairly active on the New York Stock Exchange, with about 1.73 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.38 billion shares traded, above last year's daily average of 2.17 billion.Declining stocks outnumbered advancing ones on the NYSE by 2 to 1 and by about 15 to 14 on the Nasdaq.
Sunday, July 6, 2008
Home Equity Late Payments Rise
Late payments on U.S. home equity lines of credit rose to a 21-year high in the first quarter of 2008, due to continued stress in the housing market and general weakness in the economy, the American Bankers Association said Wednesday.Home equity lines that were more than 30 days past due rose to 1.1 percent from 0.96 percent the prior quarter, the highest rate since the ABA began collecting data in 1987.ABA Chief Economist James Chessen said delinquencies are likely to remain elevated in the near term."The tax stimulus is helping to boost personal income, but persistently high gas and food prices will eat away at overall resources," Chessen said.
Friday, June 20, 2008
Pacman Jones, Home being foreclosed
Pacman is looking for money, and the mortgage company is the blue monsters. Can Pacman Jones get to the power pellet full of money before his home is sold on the auction block. A foreclosure sale has been published involving the home of former Tennessee Titan Adam “Pacman” Jones.
Jones has defaulted on the terms and conditions of a mortgage with U.S. Bank, according to a notice of foreclosure sale published Thursday in The Tennessean newspaper in Nashville.
The home and 30 acres, located in a Nashville suburb, will be sold June 27 on the steps of the old Williamson County Courthouse.
Jones, a cornerback, was traded to the Dallas Cowboys this year. He missed all of the 2007 season while serving an NFL suspension that hasn’t been completely lifted.
Tax records show he purchased the property in July 2006 for $1.5 million.
For foreclosure listings, go to http://www.thenoteservice.com
Jones has defaulted on the terms and conditions of a mortgage with U.S. Bank, according to a notice of foreclosure sale published Thursday in The Tennessean newspaper in Nashville.
The home and 30 acres, located in a Nashville suburb, will be sold June 27 on the steps of the old Williamson County Courthouse.
Jones, a cornerback, was traded to the Dallas Cowboys this year. He missed all of the 2007 season while serving an NFL suspension that hasn’t been completely lifted.
Tax records show he purchased the property in July 2006 for $1.5 million.
For foreclosure listings, go to http://www.thenoteservice.com
Sunday, May 11, 2008
HUD makes $1 billion available in grants through 35 programs
The U.S. Department of Housing and Urban Development today published its Fiscal Year 2008 "SuperNOFA," an annual funding notice that makes available more than $1 billion in grants through 35 programs (see attached list). HUD intends to offer an additional $1.5 billion in homeless grants later in the year through a new electronic application process that will significantly streamline funding of thousands of homeless assistance programs nationwide.
To make funding opportunities available to the public as soon as possible, HUD is posting its SuperNOFA electronically through www.grants.gov in advance of the Federal Register publication on May 12, 2008. Applicants are strongly encouraged to read funding notices thoroughly and to follow the registration information available in the General Section of the SuperNOFA published in the Federal Register on March 19, 2008.
"Each year we try to make the process of applying for grants as user-friendly as possible," said HUD Deputy Secretary Roy A. Bernardi. "HUD continues to be a leader in moving toward e-government and later this year, we'll take another giant step forward as we launch a new electronic application process for our homeless grant programs."
For the past four years, HUD has required nearly all grant applications to be submitted electronically through http://www.grants.gov/. This year, applicants for funding through HUD's Continuum of Care homeless assistance programs will submit their applications electronically through the HUD e-snaps system (electronic-special needs assistance programs system). A Notice explaining the e-snaps registration process for Continuums of Care was published in the Federal Register on April 30, 2008. HUD's Continuum of Care Notice of Funding Availability is expected to be published no earlier than July 1, 2008.
The electronic grant submission process is critical element of President Bush's management agenda to increase funding opportunities for states, local governments and nonprofit grassroots organizations that house and serve lower income families living in their communities. Last year, more than 4,600 applicants successfully submitted their applications electronically.
HUD is continuing to provide help so that every applicant can successfully meet this year's electronic submission requirements. HUD's Desktop User's Guide provides easy-to-follow instructions to guide applicants through the electronic submission process. In addition, HUD also offers training via webcast. For a list of training programs, visit HUD's website.
###
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at http://www.hud.gov/ and espanol.hud.gov.
To make funding opportunities available to the public as soon as possible, HUD is posting its SuperNOFA electronically through www.grants.gov in advance of the Federal Register publication on May 12, 2008. Applicants are strongly encouraged to read funding notices thoroughly and to follow the registration information available in the General Section of the SuperNOFA published in the Federal Register on March 19, 2008.
"Each year we try to make the process of applying for grants as user-friendly as possible," said HUD Deputy Secretary Roy A. Bernardi. "HUD continues to be a leader in moving toward e-government and later this year, we'll take another giant step forward as we launch a new electronic application process for our homeless grant programs."
For the past four years, HUD has required nearly all grant applications to be submitted electronically through http://www.grants.gov/. This year, applicants for funding through HUD's Continuum of Care homeless assistance programs will submit their applications electronically through the HUD e-snaps system (electronic-special needs assistance programs system). A Notice explaining the e-snaps registration process for Continuums of Care was published in the Federal Register on April 30, 2008. HUD's Continuum of Care Notice of Funding Availability is expected to be published no earlier than July 1, 2008.
The electronic grant submission process is critical element of President Bush's management agenda to increase funding opportunities for states, local governments and nonprofit grassroots organizations that house and serve lower income families living in their communities. Last year, more than 4,600 applicants successfully submitted their applications electronically.
HUD is continuing to provide help so that every applicant can successfully meet this year's electronic submission requirements. HUD's Desktop User's Guide provides easy-to-follow instructions to guide applicants through the electronic submission process. In addition, HUD also offers training via webcast. For a list of training programs, visit HUD's website.
###
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at http://www.hud.gov/ and espanol.hud.gov.
Sunday, March 16, 2008
Smart investors buy real estate during downturn
Smart investors buy real estate during downturn
By Eric Tyson
Great Q&A on Foreclosure Crisis
Q: On a financial news program recently, Sen. Bernie Sanders of Vermont said that tens of millions of American homeowners were soon to face foreclosure. I heard another report stating that home foreclosures are already at an all-time high. Since my home is by far my biggest asset, should I sell now to prevent further losses?
A: No. Would you return merchandise you bought at a store last month if it is now having a big sale and will give you far less money back if you return the item?
I don’t know where Sen. Sanders, who is a self-declared socialist (the only such senator with that distinction), gets his supposed data, but he is way, way off the mark. “There are typically about one-quarter of a million homes, which represents about 0.5 percent, in some stage of the foreclosure process at any given time in America,” says Jerry Bowyer, chief economist with Benchmark Financial.
While the foreclosure rate has been increasing of late and now stands at about 1 percent, it is still nowhere near the high levels last achieved in the early 1990s. Currently, about 1.3 million homes are in some stage of the foreclosure process — a far cry from the tens of millions Sanders inaccurately hypes.
In fact, according to recent data from the Mortgage Bankers Association, there are approximately 53 million homeowners with a mortgage (and another 25 million households own their home free of any mortgage debt). Just 6 percent of all households are subprime mortgage borrowers.
All the doom and gloom about real estate, which is being exacerbated by misinformed politicians like Sen. Sanders, tells me that now is not the time to sell real estate. Remember, unlike selling a stock or bond, selling a home includes major transaction costs.
Now is the time for smart investors to buy real estate while it’s on sale. Those who bought real estate back in the early 1990s, when prices were down and many were running from real estate, have profited handsomely. Similarly, those who buy real estate now and hold for the long run will surely be able to look back a decade from now and be very glad that they bought. It takes courage to buy when others don’t want to, but it’s the smart thing to do.
Write to Eric Tyson, author of “Mind Over Money,” “Investing for Dummies” and “Personal Finance for Dummies” at eric@erictyson.com.
By Eric Tyson
Great Q&A on Foreclosure Crisis
Q: On a financial news program recently, Sen. Bernie Sanders of Vermont said that tens of millions of American homeowners were soon to face foreclosure. I heard another report stating that home foreclosures are already at an all-time high. Since my home is by far my biggest asset, should I sell now to prevent further losses?
A: No. Would you return merchandise you bought at a store last month if it is now having a big sale and will give you far less money back if you return the item?
I don’t know where Sen. Sanders, who is a self-declared socialist (the only such senator with that distinction), gets his supposed data, but he is way, way off the mark. “There are typically about one-quarter of a million homes, which represents about 0.5 percent, in some stage of the foreclosure process at any given time in America,” says Jerry Bowyer, chief economist with Benchmark Financial.
While the foreclosure rate has been increasing of late and now stands at about 1 percent, it is still nowhere near the high levels last achieved in the early 1990s. Currently, about 1.3 million homes are in some stage of the foreclosure process — a far cry from the tens of millions Sanders inaccurately hypes.
In fact, according to recent data from the Mortgage Bankers Association, there are approximately 53 million homeowners with a mortgage (and another 25 million households own their home free of any mortgage debt). Just 6 percent of all households are subprime mortgage borrowers.
All the doom and gloom about real estate, which is being exacerbated by misinformed politicians like Sen. Sanders, tells me that now is not the time to sell real estate. Remember, unlike selling a stock or bond, selling a home includes major transaction costs.
Now is the time for smart investors to buy real estate while it’s on sale. Those who bought real estate back in the early 1990s, when prices were down and many were running from real estate, have profited handsomely. Similarly, those who buy real estate now and hold for the long run will surely be able to look back a decade from now and be very glad that they bought. It takes courage to buy when others don’t want to, but it’s the smart thing to do.
Write to Eric Tyson, author of “Mind Over Money,” “Investing for Dummies” and “Personal Finance for Dummies” at eric@erictyson.com.
Tuesday, March 11, 2008
How Beginning Investory can make money on Foreclosures
No question, foreclosures are at a record number right now. After a period of aggressive lending, more and more people are finding it impossible to meet their mortgage repayments. The banks and other lenders, in turn, are foreclosing on more and more properties.
I think the banks committed "foreclosure suicide" when they issued some of these adjustable loans and creative loan programs to people who really shouldn't be getting those loans. They are now seeing the fruits of their labor.
Given the crash in property prices across the nation... this means huge opportunities for the savvy real estate investor. So in this article I'll outline the main ways you can make money from foreclosures.
Okay, so what is a foreclosure? Basically, a foreclosure arises where someone who has borrowed money from a bank or other lender to buy a property -- and has given the lender the property as security for the loan -- fails to meet their mortgage repayment obligations... and the lender decides to repossess and sell the property as a result.
There are three main foreclosure investment opportunities, depending on the status of the foreclosed home in the foreclosure process.
The first way to profit is if the property is in pre-foreclosure. At this point, the bank (or other lender) has sent the defaulting mortgagor a certified letter requiring them to make good all their outstanding repayments by a particular date.
If you were to then step in and offer to buy the home from the mortgagor, that would stop the foreclosure proceedings. Many homeowners would rather sell their home at a steep discount to an investor like you -- in the hope they could make a small profit or at least get rid of their debt -- than go through the stress and potentially greater financial loss associated with the foreclosure process. The bank, too, is likely to prefer this outcome.
Some tremendous opportunities are within this specific niche right here. You want to get to these deals as quickly as possible. Even if you don't get the deal right away, followup with the sellers through the foreclosure process--it's worth it!
The second way to make money from foreclosures is when the property is being sold via public auction (or trustee sale). During such an auction or trustee sale, the property must be sold to the highest bidder. Properties being sold at a foreclosure auction are often bought sight unseen, so there are some risks involved. However, if you take this into account when bidding on a particular property -- as well as the fact that the bank is eager to sell -- an auction may give you a terrific chance to pick up a home at a significant discount to its true market value.
Another way to make money from foreclosures is when you negotiate with the bank with a short sale. This is when the homeowner agrees to allow you to work directly with the bank and negotitate the loan balance down. In other words, you are making an offer to the bank for less than their mortgage payment with hopes that the bank will accept your offer and sell the house less than the loan balance.
Short sales are a powerful method to obtain equity on the property just by making an offer directly with the bank.
Finally, if the property is not sold at public auction, the bank must buy the property itself. If that occurs, the bank will usually be more motivated to get the property off its books. This gives you bargaining power!
These bargains are called REO's or Real Estate Owned properties.
So there you have the four of the main and most basic foreclosure investment opportunities in this foreclosure market. With the right strategy in place, and an eye for a good deal, there's no doubt that you can make huge money in this lucrative area of property investing. Now is the time to take action and http://www.thenoteservice.com/ can help you take a quantum leap into this lucrative niche.
I think the banks committed "foreclosure suicide" when they issued some of these adjustable loans and creative loan programs to people who really shouldn't be getting those loans. They are now seeing the fruits of their labor.
Given the crash in property prices across the nation... this means huge opportunities for the savvy real estate investor. So in this article I'll outline the main ways you can make money from foreclosures.
Okay, so what is a foreclosure? Basically, a foreclosure arises where someone who has borrowed money from a bank or other lender to buy a property -- and has given the lender the property as security for the loan -- fails to meet their mortgage repayment obligations... and the lender decides to repossess and sell the property as a result.
There are three main foreclosure investment opportunities, depending on the status of the foreclosed home in the foreclosure process.
The first way to profit is if the property is in pre-foreclosure. At this point, the bank (or other lender) has sent the defaulting mortgagor a certified letter requiring them to make good all their outstanding repayments by a particular date.
If you were to then step in and offer to buy the home from the mortgagor, that would stop the foreclosure proceedings. Many homeowners would rather sell their home at a steep discount to an investor like you -- in the hope they could make a small profit or at least get rid of their debt -- than go through the stress and potentially greater financial loss associated with the foreclosure process. The bank, too, is likely to prefer this outcome.
Some tremendous opportunities are within this specific niche right here. You want to get to these deals as quickly as possible. Even if you don't get the deal right away, followup with the sellers through the foreclosure process--it's worth it!
The second way to make money from foreclosures is when the property is being sold via public auction (or trustee sale). During such an auction or trustee sale, the property must be sold to the highest bidder. Properties being sold at a foreclosure auction are often bought sight unseen, so there are some risks involved. However, if you take this into account when bidding on a particular property -- as well as the fact that the bank is eager to sell -- an auction may give you a terrific chance to pick up a home at a significant discount to its true market value.
Another way to make money from foreclosures is when you negotiate with the bank with a short sale. This is when the homeowner agrees to allow you to work directly with the bank and negotitate the loan balance down. In other words, you are making an offer to the bank for less than their mortgage payment with hopes that the bank will accept your offer and sell the house less than the loan balance.
Short sales are a powerful method to obtain equity on the property just by making an offer directly with the bank.
Finally, if the property is not sold at public auction, the bank must buy the property itself. If that occurs, the bank will usually be more motivated to get the property off its books. This gives you bargaining power!
These bargains are called REO's or Real Estate Owned properties.
So there you have the four of the main and most basic foreclosure investment opportunities in this foreclosure market. With the right strategy in place, and an eye for a good deal, there's no doubt that you can make huge money in this lucrative area of property investing. Now is the time to take action and http://www.thenoteservice.com/ can help you take a quantum leap into this lucrative niche.
Friday, February 29, 2008
How to Buy a Bank Owned Home
How to buy bank owned properties (REO)
There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know "the secret formula". The fact is that there are no secrets, and to make money does require effort.
What's an REO?
REO stands for "Real Estate Owned". These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll receive the property 100% "as is". That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much "cleaner" and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REO's may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.
Is it a bargain?
It's commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Ready to make an offer?
Most banks have a REO department that you'll work with in buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know about the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties "as is", you'll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.
Monday, February 11, 2008
Hard Money Lending: A Valuable Financing Option
Hard Money Lending: A Valuable Financing Option
What is "Hard Money"? Most people have heard the term before and are not sure exactly what it means. Don't be confused by the term "Hard Money." The name doesn't mean that this money is difficult to obtain, because in reality hard money loans are some of the easiest funds to procure. Generally speaking, the industry defines "Hard Money" as unconventional asset based lending where the collateral of the loan is real estate. It is considered unconventional because these loans do not meet the traditional underwriting criteria of Institutional Lenders (ILs).
A Hard Money Lender (HML) is typically the ‘lender of last resort’ due to the loan’s unconventional characteristics; fast funding timeline, a borrower’s credit score, loan type, etc. Private--or "Hard Money"--lenders include real estate funds, pension funds, insurance companies and/or private individuals with money available for lending. Some have deep pockets while others have limited resources. Based upon their own criteria, HMLs lend money primarily on a short-term basis, to borrowers who use it for a variety of profitable purposes. These may include the following real estate loan types: bridge, refinance, development, acquisition, rehab, etc. Since Hard Money is more expensive than traditional sources (10%+ interest rate and 2 points+ in origination fees), borrowers should have a significant financial upside for using these sources. These benefits out way the loan cost.
Typical Terms for Hard Money Loans
Terms and requirements for these types of loans will vary from lender to lender. Lenders may charge an upfront application fee, due diligence fee and commitment fee. Make sure to understand these fees when selecting a Hard Money Lender because these fees maybe non-refundable. Generally, a HML will fund a loan for 50% LTV on raw land and up to 70% LTV on the finished product, at an interest rate of 10%+ and for a period of six months to three years. Lenders will also charge between 2 and 10 points as an origination fee, to be paid out of proceeds. Loans can be either interest only or amortized. Some lenders will fund interest, origination fees, rehab money, etc.; others will not. Ultimately, when selecting a HML, borrowers will need to understand how these options fit best into their plans.
Why Is Hard Money a Good Financing Option?
Institutional Lenders (ILs) (i.e. banks, credit unions, etc.) fill a need for cheap money. Everyone is glad they exist and fulfill their need. Borrowers would love to use them on all real estate deals. However, there is a market out there that ILs cannot fund. That is where Hard Money Lenders come in and why they exist. They fulfill a need that ILs cannot fill due to government regulations, stricter underwriting guidelines, lower risk profiles, longer funding timeline, etc.
When deciding whether to apply for a Hard Money loan, here are the top ten reasons to consider:
1. SPEED
Most Hard Money Lenders (HMLs) can fund in less than two weeks after receiving all the necessary documentation, while most Institutional Lenders (ILs) can take 60 days or greater, if at all.
2. LOW DOCUMENTATION REQUIREMENTS
HMLs documentation is often less than the paperwork required by ILs. HMLs still require some documentation but they fund based on the value of the property; it is the asset that is under consideration, not the borrower.
3. NO CREDIT ISSUE
HMLs typically do not require borrowers to have good credit. For example, one client was able to obtain funding even though the borrower had a recent bankruptcy, foreclosure and a FICO score under 500. ILs almost always require a decent credit history.
4. FLEXIBILITY
HMLs give maximum flexibility in structuring the loan (i.e. term, interest reserve, draw schedules, cash out, financing carry, etc.). ILs typically have much stricter terms.
5. GAP/BRIDGE FINANCING
HMLs are usually very experienced real estate lenders who understand that projects do not always follow the given plan. If a gap in funding exists and the loan and supporting documentation make sense, HMLs will typically fund. Whereas, IL’s guidelines are typically not flexible and they turn down gap loan requests if borrowers get off schedule.
6. LOANS TO FOREIGN NATIONALS
HMLs will loan to foreign nationals, as long as, they are secured in the property. Most ILs have difficulty lending to non-US citizens under the terms required.
7. HIGHER RISK PROFILE
HMLs will fund pre-development, church, non-profit and other riskier loans due totheir understanding of the process and value of the collateral. ILs typically will not fund predevelopment loans or make loans to institutions which impact their profile in the community. For example, no IL wants to foreclose on a church; the publicity is terrible.
8. NO PERSONAL GUARANTEE
HMLs do not always require personal guarantees since loans are made based on the value of the property. ILs almost always require personal guarantees.
9. FLEXIBLE LTVS
HMLs decide what Loan-to-Values (LTVs) they will accept based on their affinity for the project, cross collateralization, possible equity participation, etc. ILs have very strict underwriting criteria, which turn down loans from the beginning if the LTV is too high.
10. SUBORDINATE LIENS
HMLs will make loans in a first, second, third or lower position, as long as, the value of the property is there. ILs might do a second, and almost never a third. Typically, ILs want to be in a first position.
Hard Money Loan Expectations
So, you have a good deal with a great LTV and the loan can't go to an Institutional Lender because of bad credit, or need for funding in two weeks or faster. Armed with the knowledge of the value and concept of Hard Money lending, the loan is sent to a HML. The bottom line is that the finance cost will be more expensive than an IL, but the deal will close. Here is what to expect. Each deal is unique; deal terms vary and nothing is set in stone. Lender criteria adjust based on the specifics of each deal, so borrowers will need to be flexible. Here are a few of the expectations to keep in mind when applying for a Hard Money loan:
Title insurance is a must.
All delinquent taxes, judgments, etc. and other liens on the property will typically be taken out of the proceeds unless specifically excluded.
Insurance, typically, will add the lender as co-insured.
Fund control is always set up on construction, development and any loans which have budgets.
Borrower will pay all closing costs, fees, etc. out of proceeds.
Many lenders require the property be put into a single asset LLC, which the loan is made to.
Borrower should be prepared to assign rents.
Interest, in most cases, at least partly will be reserved or prepaid.
Some HMLs require an upfront application fee, due diligence fee and commitment fee. Make sure you understand these fees and how they will be used and if they are refundable.
Almost all lenders require borrowers to have money in the deal. Additional collateral may be required by cross collateralizing other properties to keep the LTV acceptable.
One final suggestion is to try every institutional and conventional lender--first. After understanding that the loan doesn’t fit into their underwriting criteria and the loan request keeps getting denied for various reasons, keep Hard Money Lenders in mind. HMLs are a valuable option for many types of real estate transactions.
Hard Money Lender Directory @ http://www.thenoteservice.com
What is "Hard Money"? Most people have heard the term before and are not sure exactly what it means. Don't be confused by the term "Hard Money." The name doesn't mean that this money is difficult to obtain, because in reality hard money loans are some of the easiest funds to procure. Generally speaking, the industry defines "Hard Money" as unconventional asset based lending where the collateral of the loan is real estate. It is considered unconventional because these loans do not meet the traditional underwriting criteria of Institutional Lenders (ILs).
A Hard Money Lender (HML) is typically the ‘lender of last resort’ due to the loan’s unconventional characteristics; fast funding timeline, a borrower’s credit score, loan type, etc. Private--or "Hard Money"--lenders include real estate funds, pension funds, insurance companies and/or private individuals with money available for lending. Some have deep pockets while others have limited resources. Based upon their own criteria, HMLs lend money primarily on a short-term basis, to borrowers who use it for a variety of profitable purposes. These may include the following real estate loan types: bridge, refinance, development, acquisition, rehab, etc. Since Hard Money is more expensive than traditional sources (10%+ interest rate and 2 points+ in origination fees), borrowers should have a significant financial upside for using these sources. These benefits out way the loan cost.
Typical Terms for Hard Money Loans
Terms and requirements for these types of loans will vary from lender to lender. Lenders may charge an upfront application fee, due diligence fee and commitment fee. Make sure to understand these fees when selecting a Hard Money Lender because these fees maybe non-refundable. Generally, a HML will fund a loan for 50% LTV on raw land and up to 70% LTV on the finished product, at an interest rate of 10%+ and for a period of six months to three years. Lenders will also charge between 2 and 10 points as an origination fee, to be paid out of proceeds. Loans can be either interest only or amortized. Some lenders will fund interest, origination fees, rehab money, etc.; others will not. Ultimately, when selecting a HML, borrowers will need to understand how these options fit best into their plans.
Why Is Hard Money a Good Financing Option?
Institutional Lenders (ILs) (i.e. banks, credit unions, etc.) fill a need for cheap money. Everyone is glad they exist and fulfill their need. Borrowers would love to use them on all real estate deals. However, there is a market out there that ILs cannot fund. That is where Hard Money Lenders come in and why they exist. They fulfill a need that ILs cannot fill due to government regulations, stricter underwriting guidelines, lower risk profiles, longer funding timeline, etc.
When deciding whether to apply for a Hard Money loan, here are the top ten reasons to consider:
1. SPEED
Most Hard Money Lenders (HMLs) can fund in less than two weeks after receiving all the necessary documentation, while most Institutional Lenders (ILs) can take 60 days or greater, if at all.
2. LOW DOCUMENTATION REQUIREMENTS
HMLs documentation is often less than the paperwork required by ILs. HMLs still require some documentation but they fund based on the value of the property; it is the asset that is under consideration, not the borrower.
3. NO CREDIT ISSUE
HMLs typically do not require borrowers to have good credit. For example, one client was able to obtain funding even though the borrower had a recent bankruptcy, foreclosure and a FICO score under 500. ILs almost always require a decent credit history.
4. FLEXIBILITY
HMLs give maximum flexibility in structuring the loan (i.e. term, interest reserve, draw schedules, cash out, financing carry, etc.). ILs typically have much stricter terms.
5. GAP/BRIDGE FINANCING
HMLs are usually very experienced real estate lenders who understand that projects do not always follow the given plan. If a gap in funding exists and the loan and supporting documentation make sense, HMLs will typically fund. Whereas, IL’s guidelines are typically not flexible and they turn down gap loan requests if borrowers get off schedule.
6. LOANS TO FOREIGN NATIONALS
HMLs will loan to foreign nationals, as long as, they are secured in the property. Most ILs have difficulty lending to non-US citizens under the terms required.
7. HIGHER RISK PROFILE
HMLs will fund pre-development, church, non-profit and other riskier loans due totheir understanding of the process and value of the collateral. ILs typically will not fund predevelopment loans or make loans to institutions which impact their profile in the community. For example, no IL wants to foreclose on a church; the publicity is terrible.
8. NO PERSONAL GUARANTEE
HMLs do not always require personal guarantees since loans are made based on the value of the property. ILs almost always require personal guarantees.
9. FLEXIBLE LTVS
HMLs decide what Loan-to-Values (LTVs) they will accept based on their affinity for the project, cross collateralization, possible equity participation, etc. ILs have very strict underwriting criteria, which turn down loans from the beginning if the LTV is too high.
10. SUBORDINATE LIENS
HMLs will make loans in a first, second, third or lower position, as long as, the value of the property is there. ILs might do a second, and almost never a third. Typically, ILs want to be in a first position.
Hard Money Loan Expectations
So, you have a good deal with a great LTV and the loan can't go to an Institutional Lender because of bad credit, or need for funding in two weeks or faster. Armed with the knowledge of the value and concept of Hard Money lending, the loan is sent to a HML. The bottom line is that the finance cost will be more expensive than an IL, but the deal will close. Here is what to expect. Each deal is unique; deal terms vary and nothing is set in stone. Lender criteria adjust based on the specifics of each deal, so borrowers will need to be flexible. Here are a few of the expectations to keep in mind when applying for a Hard Money loan:
Title insurance is a must.
All delinquent taxes, judgments, etc. and other liens on the property will typically be taken out of the proceeds unless specifically excluded.
Insurance, typically, will add the lender as co-insured.
Fund control is always set up on construction, development and any loans which have budgets.
Borrower will pay all closing costs, fees, etc. out of proceeds.
Many lenders require the property be put into a single asset LLC, which the loan is made to.
Borrower should be prepared to assign rents.
Interest, in most cases, at least partly will be reserved or prepaid.
Some HMLs require an upfront application fee, due diligence fee and commitment fee. Make sure you understand these fees and how they will be used and if they are refundable.
Almost all lenders require borrowers to have money in the deal. Additional collateral may be required by cross collateralizing other properties to keep the LTV acceptable.
One final suggestion is to try every institutional and conventional lender--first. After understanding that the loan doesn’t fit into their underwriting criteria and the loan request keeps getting denied for various reasons, keep Hard Money Lenders in mind. HMLs are a valuable option for many types of real estate transactions.
Hard Money Lender Directory @ http://www.thenoteservice.com
Sunday, February 10, 2008
Guide to buying Foreclosure Auctions
Buying properties at foreclosure auctions can sometimes yield great buys, but you have to approach every auction with caution, because they can be disastrous if you don't do your homework well. Here are some tips for minimizing your chances of making a big mistake when looking at a property that's about to be auctioned off.
First, at least drive by the property to see what kind of condition the exterior of the house is in. Your chances of seeing the inside of the house are slim, unless it's vacant. The homeowners are going through a very trying time in their lives, so you can't expect them to be gracious if you ask to tour the home you are thinking of buying when they're forced to vacate. Assume that the house will need at least minimal maintenance, such as paint, carpet, and some upgrades, but know that they often need considerably more than that, because the owners have often been strapped for cash long enough to have put off maintenance for quite some time. If the house is vacant, don't be shy about peeking in the windows. You're a legitimate purchase prospect, and you're just doing a diligent inspection. Just remember: the less you get to see of the interior, the more careful you'll need to be when bidding at the auction.
Before you attend an auction, you'll need to be clear as to what you intend to do with the property if you're successful in winning it. Are you planning to live there yourself? Do you intend to fix it up and sell it retail or will you try to find another investor to buy it even before you've done any work to it? Will it become a rental property in your portfolio? Your ultimate goal for a property will be the sole factor in how much you'll be willing to bid for it. Regardless of your intention, you must exercise caution to make sure that you bid accordingly. If the price goes above what you think is a fair price, don't get caught up in the moment and bid higher. It's a mistake that can haunt you for a long time.
In most situations, you'll need to bring ten percent of the winning bid with you to the auction site. It can be cash or certified check, but most of the time you can't write a personal check for the down payment. You'll usually have thirty days to come up with the rest of the money, although some states require the entire amount to be paid on the day of the sale. Check with your local and state authorities to see what situation applies in your area.
Once you've decided to bid on a property, make sure you get to the auction site on time. Most auctions are over in an amazingly short time, often less than five minutes, so don't be late. If there are other people there, you'll find old-hands and you'll find folks who are only watching. This can be a great help to you if you're hoping to unload the property right away to another investor. Another investor may be willing to take over your interest on the spot, including a tidy profit, so don't be afraid to talk to other people at the auction.
Once the auction begins, keep your enthusiasm in check. If someone is bidding against you, bid up to the maximum amount you've determined ahead of time that you're willing to spend and then quit. If you don't, you could be making a big mistake, which could be devastating if you're a beginning investor. There'll be other auctions, and if you don't get the property this time, chalk it up to experience and begin your search for your next property.
First, at least drive by the property to see what kind of condition the exterior of the house is in. Your chances of seeing the inside of the house are slim, unless it's vacant. The homeowners are going through a very trying time in their lives, so you can't expect them to be gracious if you ask to tour the home you are thinking of buying when they're forced to vacate. Assume that the house will need at least minimal maintenance, such as paint, carpet, and some upgrades, but know that they often need considerably more than that, because the owners have often been strapped for cash long enough to have put off maintenance for quite some time. If the house is vacant, don't be shy about peeking in the windows. You're a legitimate purchase prospect, and you're just doing a diligent inspection. Just remember: the less you get to see of the interior, the more careful you'll need to be when bidding at the auction.
Before you attend an auction, you'll need to be clear as to what you intend to do with the property if you're successful in winning it. Are you planning to live there yourself? Do you intend to fix it up and sell it retail or will you try to find another investor to buy it even before you've done any work to it? Will it become a rental property in your portfolio? Your ultimate goal for a property will be the sole factor in how much you'll be willing to bid for it. Regardless of your intention, you must exercise caution to make sure that you bid accordingly. If the price goes above what you think is a fair price, don't get caught up in the moment and bid higher. It's a mistake that can haunt you for a long time.
In most situations, you'll need to bring ten percent of the winning bid with you to the auction site. It can be cash or certified check, but most of the time you can't write a personal check for the down payment. You'll usually have thirty days to come up with the rest of the money, although some states require the entire amount to be paid on the day of the sale. Check with your local and state authorities to see what situation applies in your area.
Once you've decided to bid on a property, make sure you get to the auction site on time. Most auctions are over in an amazingly short time, often less than five minutes, so don't be late. If there are other people there, you'll find old-hands and you'll find folks who are only watching. This can be a great help to you if you're hoping to unload the property right away to another investor. Another investor may be willing to take over your interest on the spot, including a tidy profit, so don't be afraid to talk to other people at the auction.
Once the auction begins, keep your enthusiasm in check. If someone is bidding against you, bid up to the maximum amount you've determined ahead of time that you're willing to spend and then quit. If you don't, you could be making a big mistake, which could be devastating if you're a beginning investor. There'll be other auctions, and if you don't get the property this time, chalk it up to experience and begin your search for your next property.
Friday, February 8, 2008
Congress Approves Economic Stimulus Package
Congress approves economic stimulus package
Washington (ABC News) _ Congress has approved the rebate checks meant to stimulate the economy and President Bush is on board.
Timely, targeted and temporary, the economic stimulus package has been approved and the checks will be in the mail for about 100-million Americans.
“We stand here at the precipice of a fairly severe economic turndown and we must do everything we can to make sure that the severe effects of that downturn are mitigated,” said Sen. Charles Schumer (D-NY).
Individuals earning up to $75,000 a year will get $600. Families making up to $150,000 a year will get $1,200 plus an additional $300 for each child under 17.
In addition, 21 million seniors will get checks for $300, as well as disabled veterans.
“I thank members of Congress for their efforts on this legislation. This bill reflects our principles. It is pro-growth. It is robust and it will get money into the hands of American consumers,” President Bush said.
The plan is intended to get people spending in an effort to rejuvenate the economy.
“We are making history. What has passed the Congress in record time is a gift to the middle class and it shows that the work of Congress understands the struggles they have,” said Nancy Pelosi (D-Speaker of the House).
The checks will start being sent out in May.
Washington (ABC News) _ Congress has approved the rebate checks meant to stimulate the economy and President Bush is on board.
Timely, targeted and temporary, the economic stimulus package has been approved and the checks will be in the mail for about 100-million Americans.
“We stand here at the precipice of a fairly severe economic turndown and we must do everything we can to make sure that the severe effects of that downturn are mitigated,” said Sen. Charles Schumer (D-NY).
Individuals earning up to $75,000 a year will get $600. Families making up to $150,000 a year will get $1,200 plus an additional $300 for each child under 17.
In addition, 21 million seniors will get checks for $300, as well as disabled veterans.
“I thank members of Congress for their efforts on this legislation. This bill reflects our principles. It is pro-growth. It is robust and it will get money into the hands of American consumers,” President Bush said.
The plan is intended to get people spending in an effort to rejuvenate the economy.
“We are making history. What has passed the Congress in record time is a gift to the middle class and it shows that the work of Congress understands the struggles they have,” said Nancy Pelosi (D-Speaker of the House).
The checks will start being sent out in May.
Wednesday, February 6, 2008
Real Estate Auctions Gain Popularity
Real Estate Auctions Gain Popularity
As many homes remain on the market for extended periods of time, many sellers are turning to the auction format to sell their properties. There are several reasons for this, especially in today’s market conditions.
Australia, New Zealand, the UK and other countries have used auctions to sell valuable assets such as real estate for many years and in the US auctions have long been used since the War of Independence and the Civil War. It was originally used after a battle to sell the spoils of war, thus the term Colonel. Years ago, some auctioneers referred to themselves as Colonels for this reason.
During the depression, the auction method was used to sell properties in foreclosure and still is today. When a property sells on the courthouse steps from the foreclosure process, the lender usually ends up buying the property back to eliminate any junior liens and the property becomes what is referred to as an REO (Real Estate Owned). Most lenders do not like this term however and may refer to the property as a Special Asset.
Buying a property at a true foreclosure sale can be complicated, risky and one is usually competing against the lender and possibly other professional investors. It is not recommended for the novice for several reasons.
It is understandable that auctions have been associated with distress and a means of last resort. For years, they have carried a negative connotation with them.
This is not the case any longer. When you consider that the high-end auction houses such as Sotheby’s, Christies and other auction companies that sell assets from fine art to collector cars for hundreds of thousands of dollars into the millions, it’s not a wonder that real estate was going to enter the fold of assets for sale using the auction method. It is no longer a last resort and since the 1990s to 2007, real estate at auction has tripled and is a multi-billion dollar industry.
Some reasons many sellers are using or considering the auction method for selling their properties are Time, Holding Costs, Stress, Relocation, Job Change and Better Exposure to the Market.
Savvy asset managers and business people have long known the Time Value of Money. They consider the use of the money (Equity) now may be better than the risk of waiting for a longer period of time.
Holding cost are associated with on-going mortgage payments, taxes, insurance, utilities, maintenance and repairs, and changing market conditions such as the mortgage money supply and/or declining values.
With more and more buyers looking to the Internet for their home searches and information, auctions make sense for buyers and sellers alike. Many real estate auctions are done on line or use a combination of live, on line and phone-in bids to approved, registered bidders.
Buyers can assume that the seller is realistic in their expectations while sellers have a better venue for exposing their property and closing in a more timely fashion. This allows the parties to avoid the sea of over-priced properties. Over-Priced properties are one of the reasons there is a 10.5-11 month supply of homes for sale in Charlotte County alone. A normal supply would be approximately a 3 month supply. This same factor holds true in Sarasota and Lee Counties as well, according to many analysts.
“When you consider the very definition of Current Market Value, auctions are a scientific approach to selling”, said Bill Hoyle of The According To Hoyle Group-Shells Realty with offices in Punta Gorda, Burnt Store, North Port and Sarasota.
Bill said “If a property is worth what a ready, willing and able buyer will pay, with the proper exposure to the market in a given time period; then an auction compliments and supports this very definition of Current Market Value”.
The According To Hoyle Group has been involved in selling real estate since 1986 and has sold over 2,500 properties. They originated from the OH/MI area when they arrived in Florida selling Special Assets at Absolute Auction one week out of every month. They have been involved in teaching, selling and consulting in several states and sold properties all over the state of Florida. They would fly from one sale to the next in a small Mooney Plane in the same day.
“We’ve sold every type of property from single family homes, multifamily residences, golf courses, marinas, businesses, land and lots, bars, restaurants, an island and even schools for municipalities” according to Terrie Hoyle. Terrie is a Licensed Broker-Associate, a Mortgage Broker and has been involved with high-end marketing and negotiations. She is Vice President of According To Hoyle, Inc.
According To Bill Hoyle, there are 3 commonly used types of auctions when selling real estate. They are Absolute, Public or Reserve Auctions and a third type, Minimum Bid where a reserve is publicized as a minimum and discloses the lowest dollar at which the seller will guarantee a sale or where the bidding becomes absolute. A Public or Reserve Auction does not disclose the reserve or minimum, while an Absolute Auction sells to the highest bidder, wherever the bidding stops.
Any seller wishing to explore the auction option should consult a professional and experienced auction group when considering a sale. There are several specifics determined in advance such as the deposit from the buyer, who pays for what closing costs, the best dates, the type of auction sale, the marketing budget-exposure campaign and if the sale should be held live on site and or on line along with other options.
“We’ve been involved in real estate and auctions as a group, including some family members like my daughter for years” Bill Hoyle stated. Heather Hoyle-Jones is a Mortgage Consultant and a Licensed Realtor.
Bill Hoyle possesses the AARE (Accredited Auctioneer Real Estate) and the CAI (Certified Auctioneers Institute) designations.
The designations are taught primarily at Indiana University and are considered the Doctorate Degree in Real Estate Auctions among the auction community.
“Auctions are somewhat different than conventional sales” according to Mr. Hoyle. “With an auction, the sellers control the days, dates and times for the sales” Hoyle went on to say. “Usually, the only thing that’s determined on sale day or in the case of an on-line sale, the ending date merely sets the price offered. The buyers need to pre-arrange their financing in advance since the sale is usually not subject to or contingent on financing and the ability for a buyer to get a loan. That’s one reason we offer financing options up front for the convenience of the buyer”, Bill Hoyle stated. “Most savvy buyers go through the pre-approval or pre-qualification process already.”
When asked How Much Does it Cost or what fees are involved? Terrie Hoyle said “The seller participates in the exposure and advertising budget and the buyer will most often be required to pay the selling fee in the form of a buyer’s premium.”
The buyer’s premium is usually a percentage that is added on to the final, high bid in order to determine the contract or sales agreement price. The fee, as it was explained pays for the auctioneers, staff and cooperating brokers. Brokers can register their buyers for the sales in most cases and may be compensated if they procure the buyer that closes on the property. Brokers can refer their sellers to an auction firm as well.
When asked how the property is advertised or exposed, Terrie Hoyle sad “The sales can be advertised based on what we call Buyer Profiling. It’s based on where the buyers are most likely to come from, where they live, what income bracket they’re in, recent migration patterns, age demographics and many variables for the best exposure.” Professional auction firms have access to in-house database lists, other list sources, newspapers and print media sources, websites and web- portals, MLS, IDX, Realtor.Com and also do direct mailings. The signs usually have the date, time and e-mail address for more information along with the phone numbers and Website Address.
Auctions gain attention in a market where the choices have been diluted and in some cases made buying complex and even overwhelming to some buyers.
Buyers are looking for good buys and have many choices currently. Auctions freeze the market around competing properties and give the buyers an answer much sooner than a long search and negotiation process.
“The buyers can have the property inspected and usually have a seller’s disclosure statement prior to the sale” Bill Hoyle affirmed. “Our sales offer clear, marketable title and customary closing procedures as with a conventional sale too Sellers are obligated to disclose any known defects to the buyers as well. So the myth that you may get burned is simply not true, at least at our sales.”
We learned that most sales begin with a consultation with the auctioneer, a marketing period of 6 to 8 weeks and then a contract which usually allows for a 30 day period to close. We also found out that the usual marketing fees or budgets vary from one auctioneer to another but run from 2% to 4% of the expected value of the property. Hoyle mentioned that one should be leery of a very low advertising budget since advertising and exposure are critically important in selling a property and can influence the results drastically.
Newspaper advertising can be expensive depending on which papers you use and how often it is run. For example, running one small ad in the New York Times is approximately $700 per run. Then consider Chicago Papers and of course Canadian Papers. When coupled with local print media exposure, the newspaper exposure can be costly. This does not take into account Websites, E-Mail Campaigns, Signs, Direct Mail, Portals and in some cases, TV and/or Radio. “Each sale is done on a case-by case basis” Terrie Hoyle said. “This is discussed in detail with each seller based on the project and is our forte. Keep in mind that there are no miracle cures for selling. When our market was very strong such as in 2004-2005, almost every sale resembled an auction. There were multiple offers on many properties and the bidding process was going on then. That was a good time to do an auction however now that the market has adjusted and slowed, the results will reflect that. I always look at the definition of Current Market Value. If you live and breathe the business daily like we do, you’ll see the appraisers have really pulled in the reins and tightened up. Some conventional sales are not appraising and the negotiation process resumes if the deal is to stay together. There is no such thing as a better time to do an auction but certainly now’s a good time. We had our own brokerage and were doing mostly auction sales until the market boom of 04-05. Then we associated with Robert Milligan, a bright ambitious broker out of Sarasota with Shells Realty. At the time there were only about 5 or 6 of us, all top producers and our only office was in Port Charlotte with the Corporate Office in Sarasota. Now Shells Realty has approximately 150 agents, multiple offices and our office is in Punta Gorda at 207 Cross St.”
So you decide; as Auctions Gain in Popularity, which option is for you. It appears to be a growing trend and not one likely to go away anytime soon.
As many homes remain on the market for extended periods of time, many sellers are turning to the auction format to sell their properties. There are several reasons for this, especially in today’s market conditions.
Australia, New Zealand, the UK and other countries have used auctions to sell valuable assets such as real estate for many years and in the US auctions have long been used since the War of Independence and the Civil War. It was originally used after a battle to sell the spoils of war, thus the term Colonel. Years ago, some auctioneers referred to themselves as Colonels for this reason.
During the depression, the auction method was used to sell properties in foreclosure and still is today. When a property sells on the courthouse steps from the foreclosure process, the lender usually ends up buying the property back to eliminate any junior liens and the property becomes what is referred to as an REO (Real Estate Owned). Most lenders do not like this term however and may refer to the property as a Special Asset.
Buying a property at a true foreclosure sale can be complicated, risky and one is usually competing against the lender and possibly other professional investors. It is not recommended for the novice for several reasons.
It is understandable that auctions have been associated with distress and a means of last resort. For years, they have carried a negative connotation with them.
This is not the case any longer. When you consider that the high-end auction houses such as Sotheby’s, Christies and other auction companies that sell assets from fine art to collector cars for hundreds of thousands of dollars into the millions, it’s not a wonder that real estate was going to enter the fold of assets for sale using the auction method. It is no longer a last resort and since the 1990s to 2007, real estate at auction has tripled and is a multi-billion dollar industry.
Some reasons many sellers are using or considering the auction method for selling their properties are Time, Holding Costs, Stress, Relocation, Job Change and Better Exposure to the Market.
Savvy asset managers and business people have long known the Time Value of Money. They consider the use of the money (Equity) now may be better than the risk of waiting for a longer period of time.
Holding cost are associated with on-going mortgage payments, taxes, insurance, utilities, maintenance and repairs, and changing market conditions such as the mortgage money supply and/or declining values.
With more and more buyers looking to the Internet for their home searches and information, auctions make sense for buyers and sellers alike. Many real estate auctions are done on line or use a combination of live, on line and phone-in bids to approved, registered bidders.
Buyers can assume that the seller is realistic in their expectations while sellers have a better venue for exposing their property and closing in a more timely fashion. This allows the parties to avoid the sea of over-priced properties. Over-Priced properties are one of the reasons there is a 10.5-11 month supply of homes for sale in Charlotte County alone. A normal supply would be approximately a 3 month supply. This same factor holds true in Sarasota and Lee Counties as well, according to many analysts.
“When you consider the very definition of Current Market Value, auctions are a scientific approach to selling”, said Bill Hoyle of The According To Hoyle Group-Shells Realty with offices in Punta Gorda, Burnt Store, North Port and Sarasota.
Bill said “If a property is worth what a ready, willing and able buyer will pay, with the proper exposure to the market in a given time period; then an auction compliments and supports this very definition of Current Market Value”.
The According To Hoyle Group has been involved in selling real estate since 1986 and has sold over 2,500 properties. They originated from the OH/MI area when they arrived in Florida selling Special Assets at Absolute Auction one week out of every month. They have been involved in teaching, selling and consulting in several states and sold properties all over the state of Florida. They would fly from one sale to the next in a small Mooney Plane in the same day.
“We’ve sold every type of property from single family homes, multifamily residences, golf courses, marinas, businesses, land and lots, bars, restaurants, an island and even schools for municipalities” according to Terrie Hoyle. Terrie is a Licensed Broker-Associate, a Mortgage Broker and has been involved with high-end marketing and negotiations. She is Vice President of According To Hoyle, Inc.
According To Bill Hoyle, there are 3 commonly used types of auctions when selling real estate. They are Absolute, Public or Reserve Auctions and a third type, Minimum Bid where a reserve is publicized as a minimum and discloses the lowest dollar at which the seller will guarantee a sale or where the bidding becomes absolute. A Public or Reserve Auction does not disclose the reserve or minimum, while an Absolute Auction sells to the highest bidder, wherever the bidding stops.
Any seller wishing to explore the auction option should consult a professional and experienced auction group when considering a sale. There are several specifics determined in advance such as the deposit from the buyer, who pays for what closing costs, the best dates, the type of auction sale, the marketing budget-exposure campaign and if the sale should be held live on site and or on line along with other options.
“We’ve been involved in real estate and auctions as a group, including some family members like my daughter for years” Bill Hoyle stated. Heather Hoyle-Jones is a Mortgage Consultant and a Licensed Realtor.
Bill Hoyle possesses the AARE (Accredited Auctioneer Real Estate) and the CAI (Certified Auctioneers Institute) designations.
The designations are taught primarily at Indiana University and are considered the Doctorate Degree in Real Estate Auctions among the auction community.
“Auctions are somewhat different than conventional sales” according to Mr. Hoyle. “With an auction, the sellers control the days, dates and times for the sales” Hoyle went on to say. “Usually, the only thing that’s determined on sale day or in the case of an on-line sale, the ending date merely sets the price offered. The buyers need to pre-arrange their financing in advance since the sale is usually not subject to or contingent on financing and the ability for a buyer to get a loan. That’s one reason we offer financing options up front for the convenience of the buyer”, Bill Hoyle stated. “Most savvy buyers go through the pre-approval or pre-qualification process already.”
When asked How Much Does it Cost or what fees are involved? Terrie Hoyle said “The seller participates in the exposure and advertising budget and the buyer will most often be required to pay the selling fee in the form of a buyer’s premium.”
The buyer’s premium is usually a percentage that is added on to the final, high bid in order to determine the contract or sales agreement price. The fee, as it was explained pays for the auctioneers, staff and cooperating brokers. Brokers can register their buyers for the sales in most cases and may be compensated if they procure the buyer that closes on the property. Brokers can refer their sellers to an auction firm as well.
When asked how the property is advertised or exposed, Terrie Hoyle sad “The sales can be advertised based on what we call Buyer Profiling. It’s based on where the buyers are most likely to come from, where they live, what income bracket they’re in, recent migration patterns, age demographics and many variables for the best exposure.” Professional auction firms have access to in-house database lists, other list sources, newspapers and print media sources, websites and web- portals, MLS, IDX, Realtor.Com and also do direct mailings. The signs usually have the date, time and e-mail address for more information along with the phone numbers and Website Address.
Auctions gain attention in a market where the choices have been diluted and in some cases made buying complex and even overwhelming to some buyers.
Buyers are looking for good buys and have many choices currently. Auctions freeze the market around competing properties and give the buyers an answer much sooner than a long search and negotiation process.
“The buyers can have the property inspected and usually have a seller’s disclosure statement prior to the sale” Bill Hoyle affirmed. “Our sales offer clear, marketable title and customary closing procedures as with a conventional sale too Sellers are obligated to disclose any known defects to the buyers as well. So the myth that you may get burned is simply not true, at least at our sales.”
We learned that most sales begin with a consultation with the auctioneer, a marketing period of 6 to 8 weeks and then a contract which usually allows for a 30 day period to close. We also found out that the usual marketing fees or budgets vary from one auctioneer to another but run from 2% to 4% of the expected value of the property. Hoyle mentioned that one should be leery of a very low advertising budget since advertising and exposure are critically important in selling a property and can influence the results drastically.
Newspaper advertising can be expensive depending on which papers you use and how often it is run. For example, running one small ad in the New York Times is approximately $700 per run. Then consider Chicago Papers and of course Canadian Papers. When coupled with local print media exposure, the newspaper exposure can be costly. This does not take into account Websites, E-Mail Campaigns, Signs, Direct Mail, Portals and in some cases, TV and/or Radio. “Each sale is done on a case-by case basis” Terrie Hoyle said. “This is discussed in detail with each seller based on the project and is our forte. Keep in mind that there are no miracle cures for selling. When our market was very strong such as in 2004-2005, almost every sale resembled an auction. There were multiple offers on many properties and the bidding process was going on then. That was a good time to do an auction however now that the market has adjusted and slowed, the results will reflect that. I always look at the definition of Current Market Value. If you live and breathe the business daily like we do, you’ll see the appraisers have really pulled in the reins and tightened up. Some conventional sales are not appraising and the negotiation process resumes if the deal is to stay together. There is no such thing as a better time to do an auction but certainly now’s a good time. We had our own brokerage and were doing mostly auction sales until the market boom of 04-05. Then we associated with Robert Milligan, a bright ambitious broker out of Sarasota with Shells Realty. At the time there were only about 5 or 6 of us, all top producers and our only office was in Port Charlotte with the Corporate Office in Sarasota. Now Shells Realty has approximately 150 agents, multiple offices and our office is in Punta Gorda at 207 Cross St.”
So you decide; as Auctions Gain in Popularity, which option is for you. It appears to be a growing trend and not one likely to go away anytime soon.
Real Estate Investors Share Keys to Success
A team of real estate investors have shared their keys to success in this real estate market.
1. Awareness. They were aware of the market shifting right
under their feet. They didn't go "bubble" crazy and spread
the fever. They were aware, not afraid.
2. Adaptabilty. These savvy investors who are still profiting
(some even MORE now) realize they have to adapt and overcome.
When the market shifted, they shifted with it.
3. Speedy Implementation. They spent very little time researching
and more time taking action. They did not wait; they acted.
4. They Take Their Real Estate and Marketing Education Seriously.
Yes, this includes the "gurus". You need to be 100% committed to
your education to stay ahead of the market.
5. Never Hesitate to Invest In Their Education. Real millionaire
methods come from being taught by the best.
6. Real World Testing and Tracking. Truly savvy investors know
what works and what doesn't through testing and tracking. They
have hard data and make results driven decisions to move their
businesses forward.
7. Automation and Business Systems. If you are ever going to
build true wealth and avoid stress you are going to have to
learn how to automate tasks and put confusing processes into
a simple system.
Want a Free Bank Owned Property Directory, Click Here!!!!!!!
1. Awareness. They were aware of the market shifting right
under their feet. They didn't go "bubble" crazy and spread
the fever. They were aware, not afraid.
2. Adaptabilty. These savvy investors who are still profiting
(some even MORE now) realize they have to adapt and overcome.
When the market shifted, they shifted with it.
3. Speedy Implementation. They spent very little time researching
and more time taking action. They did not wait; they acted.
4. They Take Their Real Estate and Marketing Education Seriously.
Yes, this includes the "gurus". You need to be 100% committed to
your education to stay ahead of the market.
5. Never Hesitate to Invest In Their Education. Real millionaire
methods come from being taught by the best.
6. Real World Testing and Tracking. Truly savvy investors know
what works and what doesn't through testing and tracking. They
have hard data and make results driven decisions to move their
businesses forward.
7. Automation and Business Systems. If you are ever going to
build true wealth and avoid stress you are going to have to
learn how to automate tasks and put confusing processes into
a simple system.
Want a Free Bank Owned Property Directory, Click Here!!!!!!!
Tuesday, January 29, 2008
Buying A Foreclosure Auction
Buying Foreclosures At A Public Foreclosure Sale Auction
Buying foreclosures at the auction is a great way to purchase a property under market value. Most properties are auctioned at the property address, some at the courthouse. The location will be listed in the foreclosure auction listing. The property is auctioned off to the public and the highest bidder walks away with the property. This can be very rewarding to those who are in a position to buy the property within a short amount of time and can be devastating to those who bid without proper financing in place.
Most auctions require a small deposit down of the purchase price on the spot and the remaining balance usually within 1-30 days. So make sure you have you deposit ready and your financing is in order before you bid. If you are unable to get financing within the allotted time, you will most likely lose your down payment, and they will auction the property off again.
Buying foreclosures at the auction is also the riskiest place to pick up a foreclosure. You are buying the property in "As Is" condition so it's very important to do your homework before you just go to an auction and bid on a property.
When buying foreclosures at the auction, we recommend you:
- first visit a local auction to get a feel for the bidding procedure, find out how much is required as a down payment and when the rest is due
- get proper financing in order (speak with a lender)
- research properties and do your homework prior to the auction date (get a title search)
- calculate potential profits
- determine the most you will bid for the property
- follow the property to the auction and participate
Buying Foreclosures that are Real Estate Owned (REO)
How to add foreclosure auction listings to your real estate buying watchlist:
When foreclosure auction listings are posted, you have about a two week window before the auction. This is where you can get in contact with the owner or foreclosing mortgage holder to purchase the property before the auction.
Another way to use foreclosure auction listings to your advantage comes when no one purchases these properties at the auction. These properties will then go into the reo - bank owned property listings. At this step, you will be able to get into contact with the bank and work out a deal. The banks are not interested in selling real estate, they want to lend money. The Reo process is a great opportunity to purchase foreclosures at tremendous savings.
Buying foreclosures at the auction is a great way to purchase a property under market value. Most properties are auctioned at the property address, some at the courthouse. The location will be listed in the foreclosure auction listing. The property is auctioned off to the public and the highest bidder walks away with the property. This can be very rewarding to those who are in a position to buy the property within a short amount of time and can be devastating to those who bid without proper financing in place.
Most auctions require a small deposit down of the purchase price on the spot and the remaining balance usually within 1-30 days. So make sure you have you deposit ready and your financing is in order before you bid. If you are unable to get financing within the allotted time, you will most likely lose your down payment, and they will auction the property off again.
Buying foreclosures at the auction is also the riskiest place to pick up a foreclosure. You are buying the property in "As Is" condition so it's very important to do your homework before you just go to an auction and bid on a property.
When buying foreclosures at the auction, we recommend you:
- first visit a local auction to get a feel for the bidding procedure, find out how much is required as a down payment and when the rest is due
- get proper financing in order (speak with a lender)
- research properties and do your homework prior to the auction date (get a title search)
- calculate potential profits
- determine the most you will bid for the property
- follow the property to the auction and participate
Buying Foreclosures that are Real Estate Owned (REO)
How to add foreclosure auction listings to your real estate buying watchlist:
When foreclosure auction listings are posted, you have about a two week window before the auction. This is where you can get in contact with the owner or foreclosing mortgage holder to purchase the property before the auction.
Another way to use foreclosure auction listings to your advantage comes when no one purchases these properties at the auction. These properties will then go into the reo - bank owned property listings. At this step, you will be able to get into contact with the bank and work out a deal. The banks are not interested in selling real estate, they want to lend money. The Reo process is a great opportunity to purchase foreclosures at tremendous savings.
Monday, January 28, 2008
Purchase Real Estate for Investments
Purchasing real estate is a good way to invest your money and provide yourself some increased financial security. It's a good way to increase cash flow and offers many profitable investment options. But, if you're new to real estate investing, you may ask, "What is real estate investing all about? What are the benefits to me and how can I get started?" We'll answer all those questions and help you get on your way to investing in real estate now.
What is Real Estate Investing?
Real estate is a tangible, cash-generating asset, much like gold or silver, and appreciates in values just like these precious metals. Being a tangible asset, however, it does not function like a bond or stock that can quickly lose value; it remains an excellent, long-term way to invest.
Real estate investors benefit from financial leverage, using a mortgage to build wealth in a way that other forms of investments do not. Real estate investment has proven to be a powerful method of creating wealth over time and there are three main forms of return-on-investment (ROI): cash flow, return on taxes and appreciation.
Cash Flow
Cash flow represents the most direct type of return, since it is money you can "put in your pocket" right away. Investing in real estate is a way to increase your cash flow. That, in turn, can provide the working capital you need to further expand your investment opportunities and obtain greater financial security.
Return on Taxes
Many investors in higher tax brackets are less concerned with cash return and more focused on the tax advantages of real estate investment. A great tax benefit for the new investor is a first-year, 100% tax deduction for up to $100,000 of business equipment purchased. This would include appliances.
Then there's also the tax benefits of being able to deduct mortgage insurance as well as points paid on a home loan. Click here to read more about Homeowner Tax Deductions.
Appreciation
The largest ROI is typically from home appreciation. Properties can have significant increases in value over time and if you have long-term goals, one option is to buy land without a structure on the property. If you buy property in the path of development, you may be able to sell at a profit in the future, perhaps when you're ready to retire and need more income.
What Are the Benefits to Real Estate Investing?
Renting
Real estate is such a smart investment option because you can maximize your ROI by finding excellent properties that can be purchased at a great price. Some properties may need more work that others, but with a little TLC, it can be turned into a nice rental property. Renting property allows for a steady and reliable stream of cash flow from the rental payments since there is a high occupancy demand for a well-kept and reasonably priced rental property.
Flipping
If renting is not for you, you can also purchase, repair and resell for attractive profit. This is referred to as "flipping" a property and is a popular real estate investment option. If you're handy and ambitious, this option may be a better alternative to renting the property out.
Start Investing in Real Estate Now
Some basic strategies can be used successfully in all real estate market conditions and get you started on becoming a real estate investor:
Do your research: Educate yourself about the differences between renting and "flipping" properties and which markets offer the best opportunity.
Select an area of interest: Choose an area where you think you could get a satisfactory return on your properties. Assess the true value of these properties based on when you expect to rent or sell the property. Keep in mind, the value of a particular house is not solely what it appraises for, but also what someone is willing to pay to rent or buy.
Learn about your market: This will help save you time by avoiding homes that are not worth the investment.
Enlist the aid of a real estate professional: A real estate professional can help you gain a more concise picture of where your interests should lie.
Contact a reputable mortgage lender: A good mortgage banker can help you determine which mortgage options are best for your situation and answer any questions you may have. Whether you decide to rent or flip your investment property, there are some excellent financing options available. Talk with a Quicken Loans home loan expert to determine which financing options are best for your particular investment interests.
Investing in real estate is among the best ways to develop income streams and offers many profitable investment options. Knowing your market and having a plan before you begin to invest is key in your success as a real estate investor. Determine your best interest and take the plunge; your pockets will thank you for it later! If you'd like to know more about financing an investment property, call a Quicken Loans home loan expert today at 800-710-4755.
What is Real Estate Investing?
Real estate is a tangible, cash-generating asset, much like gold or silver, and appreciates in values just like these precious metals. Being a tangible asset, however, it does not function like a bond or stock that can quickly lose value; it remains an excellent, long-term way to invest.
Real estate investors benefit from financial leverage, using a mortgage to build wealth in a way that other forms of investments do not. Real estate investment has proven to be a powerful method of creating wealth over time and there are three main forms of return-on-investment (ROI): cash flow, return on taxes and appreciation.
Cash Flow
Cash flow represents the most direct type of return, since it is money you can "put in your pocket" right away. Investing in real estate is a way to increase your cash flow. That, in turn, can provide the working capital you need to further expand your investment opportunities and obtain greater financial security.
Return on Taxes
Many investors in higher tax brackets are less concerned with cash return and more focused on the tax advantages of real estate investment. A great tax benefit for the new investor is a first-year, 100% tax deduction for up to $100,000 of business equipment purchased. This would include appliances.
Then there's also the tax benefits of being able to deduct mortgage insurance as well as points paid on a home loan. Click here to read more about Homeowner Tax Deductions.
Appreciation
The largest ROI is typically from home appreciation. Properties can have significant increases in value over time and if you have long-term goals, one option is to buy land without a structure on the property. If you buy property in the path of development, you may be able to sell at a profit in the future, perhaps when you're ready to retire and need more income.
What Are the Benefits to Real Estate Investing?
Renting
Real estate is such a smart investment option because you can maximize your ROI by finding excellent properties that can be purchased at a great price. Some properties may need more work that others, but with a little TLC, it can be turned into a nice rental property. Renting property allows for a steady and reliable stream of cash flow from the rental payments since there is a high occupancy demand for a well-kept and reasonably priced rental property.
Flipping
If renting is not for you, you can also purchase, repair and resell for attractive profit. This is referred to as "flipping" a property and is a popular real estate investment option. If you're handy and ambitious, this option may be a better alternative to renting the property out.
Start Investing in Real Estate Now
Some basic strategies can be used successfully in all real estate market conditions and get you started on becoming a real estate investor:
Do your research: Educate yourself about the differences between renting and "flipping" properties and which markets offer the best opportunity.
Select an area of interest: Choose an area where you think you could get a satisfactory return on your properties. Assess the true value of these properties based on when you expect to rent or sell the property. Keep in mind, the value of a particular house is not solely what it appraises for, but also what someone is willing to pay to rent or buy.
Learn about your market: This will help save you time by avoiding homes that are not worth the investment.
Enlist the aid of a real estate professional: A real estate professional can help you gain a more concise picture of where your interests should lie.
Contact a reputable mortgage lender: A good mortgage banker can help you determine which mortgage options are best for your situation and answer any questions you may have. Whether you decide to rent or flip your investment property, there are some excellent financing options available. Talk with a Quicken Loans home loan expert to determine which financing options are best for your particular investment interests.
Investing in real estate is among the best ways to develop income streams and offers many profitable investment options. Knowing your market and having a plan before you begin to invest is key in your success as a real estate investor. Determine your best interest and take the plunge; your pockets will thank you for it later! If you'd like to know more about financing an investment property, call a Quicken Loans home loan expert today at 800-710-4755.
Sunday, January 27, 2008
House of Cards: The Mortgage Mess
For the full story of House of Cards: The Mortgage Mess as shown on 60 Minutes on CBS go to http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml
Here are a few key points:
It sounds complicated, but it's really fairly simple. Banks lent hundreds of billions of dollars to homebuyers who can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. It sounds like a shell game or Ponzi scheme; in some ways, it was a house of cards rife with corruption, greed, and negligence.....
Jim Grant calls it an invitation to fraud. "You apply to a bank, or a mortgage broker for a loan. And you would fill out a form. And you would say, 'I have an income of, oh, $400,000 a year.' They say, 'You do? Fine. Just sign right there.' And they would nod, and because they were being paid, not by the veracity of the information, but by the consummation of the deal. The lending office would say, 'Ah. You have verified this?' 'Why, yes, we have.' And the lending officer would say, 'Great. So do I,'" Grant says.
"And he got a cut, too?" Kroft asks.
"Yes, oh, yes. Everyone gets a cut," Grant says.
Almost all of the people involved in the transactions made huge amounts of money, then passed the risk onto someone else. Instead of keeping the dicey loans in their own portfolios, the big banks and giant mortgage companies that originally underwrote them, resold the mortgages to big New York investment houses....
But Matt and Stephanie Valdez say they knew exactly what they were doing when they bought a small two-bedroom for $355,000. They could afford the initial payments and planned to refinance the mortgage before the interest rate jumped to 11 percent. But they couldn't do it because the value of the house had fallen below what they owed on the mortgage. They say they can afford the higher payments, but see no point in making them.
"The house keeps going down, payments keep going up. Where's the logic in that? And how can we fix it? I mean, that's what this whole thing's about for us is how can we fix this? And if we can't fix it, then what do we do?" Matt Valdez asks.
"Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense," Stephanie Valdez adds.
"That's what you agreed to do when you bought the house," Kroft points out.
"Fine. If the value is going up. But we're not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There's no way," Stephanie Valdez replies.
"You're saying, essentially, that you're going to stop making payments on it? You're just gonna let it go into foreclosure?" Kroft asks.
"You know, that's the only advice we've gotten so far is walk away from the home. We don't want to do that to our credit. Why can't our mortgage company work with us?" she says.
There is a certain cold logic to just walking away.
Friday, January 18, 2008
Real Estate Short Sale Strategy
Increase Your Income With Short Sale Strategy By Donna Robinson, TREA Director
In todays market, with foreclosures reaching record highs, and many sellers owing more money than their property is even worth, it is time for a strategic change in business strategy.
With a fundamental situation that presents us with literally thousands of properties being "dumped" on the market with each passing month, and most of those properties having little or no equity, it is getting more difficult to sell any properties for full value.
Listings are sitting on the market for months, and many of those listings on which we have spent valuable time and effort are going into foreclosure, leaving many agents with less income and no way to sell their listings for what the seller actually owes.
Anyone may negotiate a short sale. You do not have to be licensed to negotiate with a lender or bank. You merely need to follow the specific procedures necessary to complete a successful short sale.
But this situation is creating a need more than ever for agents and brokers to understand how to use short sales to help their sellers sell and their buyers buy. If you are an agent you can use short sale strategy to save your listing commissions and help homeowners avoid foreclosure.
Short Sale means getting the lender to sell a property for a discount below the amount the owner owes for the property. With the growing number of foreclosures, more and more lenders are having to resort to short sales in order to move inventory that cannot be sold for enough to cover the payoff.
We are seeing more short sales and hearing incredible stories from around the US about short sales in some areas where the lenders are discounting properties by as much as 30 to 70 percent! This results in a very profitable deal when done correctly.
Whether you have overpriced listings that aren't selling, investor clients who want the best possible deals, or you are representing aspiring home buyers who want a good buy in a personal residence, short sales could be your ticket to more production in a slowing market that still has a long way to fall before things start to improve.
But short sales require a certain amount of expertise, not to mention specific forms, letters and procedures. You have to know what you are doing. But if you do, you can create opportunities for your clients by getting discounts amounting to tens of thousands of dollars, that can turn "no sale" into a great opportunity for your clients.
If you are also an investor you need to know how to use short sales strategy to add bigger equity spreads to your own investments. Buying at a discount will help insure strong positive cash flow on rentals, with higher equity spreads. It's the "safe" way to go in an eroding market.
But the trick is, how to get this crucial information without spending $1000 or more on a seminar or course? They are out there - anywhere from $500 to more than $1500 for information on what will surely be the hottest buying / selling strategy of 2007-2008
But we at TREA have been working on a very cost effective solution for you. If you are serious about making money in real estate in 2007, you absolutely must know how to execute short sales in a professional manner.
I am currently using this same short sales process to help increase my personal production as an agent to help sell overpriced listings, as well as help my investor buyers find better deals and I am confident short sales can do the same for you too.
There is no need to languish in this market - you must adapt to the changing market conditions with strategies that take the fundamental market conditions into account.
I predict that this market will continue to worsen for months to come, making short sales even more necessary than they are now. By 2008 the banks may be desperate for any way out possible.
Because of the obvious need for this strategy, I am very happy to announce that The Real Estate Arena is recommending a new and timely course called "Short Sales Short & Sweet", written by Real Estate Broker, Marie Whitton. Marie is my personal real estate broker. Together we use short sales to increase production for both sellers and buyer clients.
The course is easy to read, and designed to help you get up and running with short sales as quickly as possible. And frankly the price is so low that it's a "no brainer" for those of us who want to adjust our strategy to take advantage of the market conditions.
If you are looking for ways to make more money in a tough real estate market, this could be your ticket.
Short sales help homeowners avoid foreclosure, and it may be the only way to make a particular deal work for an investor or home buyer. In todays market short sales are a timely and important strategy to have in your toolbox.
Advertisement: Football fans, get your Super Bowl Memorabilia @ http://www.sportstrail.com
In todays market, with foreclosures reaching record highs, and many sellers owing more money than their property is even worth, it is time for a strategic change in business strategy.
With a fundamental situation that presents us with literally thousands of properties being "dumped" on the market with each passing month, and most of those properties having little or no equity, it is getting more difficult to sell any properties for full value.
Listings are sitting on the market for months, and many of those listings on which we have spent valuable time and effort are going into foreclosure, leaving many agents with less income and no way to sell their listings for what the seller actually owes.
Anyone may negotiate a short sale. You do not have to be licensed to negotiate with a lender or bank. You merely need to follow the specific procedures necessary to complete a successful short sale.
But this situation is creating a need more than ever for agents and brokers to understand how to use short sales to help their sellers sell and their buyers buy. If you are an agent you can use short sale strategy to save your listing commissions and help homeowners avoid foreclosure.
Short Sale means getting the lender to sell a property for a discount below the amount the owner owes for the property. With the growing number of foreclosures, more and more lenders are having to resort to short sales in order to move inventory that cannot be sold for enough to cover the payoff.
We are seeing more short sales and hearing incredible stories from around the US about short sales in some areas where the lenders are discounting properties by as much as 30 to 70 percent! This results in a very profitable deal when done correctly.
Whether you have overpriced listings that aren't selling, investor clients who want the best possible deals, or you are representing aspiring home buyers who want a good buy in a personal residence, short sales could be your ticket to more production in a slowing market that still has a long way to fall before things start to improve.
But short sales require a certain amount of expertise, not to mention specific forms, letters and procedures. You have to know what you are doing. But if you do, you can create opportunities for your clients by getting discounts amounting to tens of thousands of dollars, that can turn "no sale" into a great opportunity for your clients.
If you are also an investor you need to know how to use short sales strategy to add bigger equity spreads to your own investments. Buying at a discount will help insure strong positive cash flow on rentals, with higher equity spreads. It's the "safe" way to go in an eroding market.
But the trick is, how to get this crucial information without spending $1000 or more on a seminar or course? They are out there - anywhere from $500 to more than $1500 for information on what will surely be the hottest buying / selling strategy of 2007-2008
But we at TREA have been working on a very cost effective solution for you. If you are serious about making money in real estate in 2007, you absolutely must know how to execute short sales in a professional manner.
I am currently using this same short sales process to help increase my personal production as an agent to help sell overpriced listings, as well as help my investor buyers find better deals and I am confident short sales can do the same for you too.
There is no need to languish in this market - you must adapt to the changing market conditions with strategies that take the fundamental market conditions into account.
I predict that this market will continue to worsen for months to come, making short sales even more necessary than they are now. By 2008 the banks may be desperate for any way out possible.
Because of the obvious need for this strategy, I am very happy to announce that The Real Estate Arena is recommending a new and timely course called "Short Sales Short & Sweet", written by Real Estate Broker, Marie Whitton. Marie is my personal real estate broker. Together we use short sales to increase production for both sellers and buyer clients.
The course is easy to read, and designed to help you get up and running with short sales as quickly as possible. And frankly the price is so low that it's a "no brainer" for those of us who want to adjust our strategy to take advantage of the market conditions.
If you are looking for ways to make more money in a tough real estate market, this could be your ticket.
Short sales help homeowners avoid foreclosure, and it may be the only way to make a particular deal work for an investor or home buyer. In todays market short sales are a timely and important strategy to have in your toolbox.
Advertisement: Football fans, get your Super Bowl Memorabilia @ http://www.sportstrail.com
Thursday, January 10, 2008
Recession aka Foreclosures Rising
More than two years into the housing downturn, unpleasant surprises and market rumors are continuing to wreak havoc in an industry that may be leading the economy into a recession.
The market received its first jolt yesterday from KB Home, a leading home builder that investors have viewed as well-positioned to ride out the downturn. KB posted a net loss of $772.7 million, or $9.99 a share, for its fourth quarter ended Nov. 30, more than nine times wider than the loss that analysts expected.
Much of the loss stemmed from a $514 million noncash charge due to changed accounting for tax purposes. Nonetheless, investors took flight, driving KB's shares down 9.2%.
Getting Worse
• The News: KB Home, which was seen as well-positioned for the housing downturn, reported a wider-than-expected loss.
• What it Means: The report signals housing remains in free fall with no bottom in sight.
• In Other News: Countrywide shares fell 28% amid investor anxiety.
The other home-related stock taking a battering yesterday was Countrywide Financial Corp., a leading provider of mortgages. Its shares dropped 28% amid growing anxiety among investors about falling house prices and the surge in foreclosures.
The housing news and worries about weaker consumer spending helped drive down the broader market. The Dow Jones Industrial Average fell 238.42, or 1.9%, to 12589.07. Banking stocks were broadly lower, with Citigroup Inc. off nearly 4%. The Dow has fallen 11% from its early-October high, a decline that fits the traditional definition of a correction.
"The state of American business this year will depend, I believe, on how we get through the toughest housing correction in our lifetimes," Daniel Mudd, chief executive officer of Fannie Mae, the government-sponsored mortgage investor, said in a speech to the U.S. Chamber of Commerce in Washington yesterday.
Rumors that Countrywide might be preparing a bankruptcy-court filing fueled its decline. The company vehemently denied such plans. "There is no substance to the rumor that Countrywide is planning to file for bankruptcy," a Countrywide spokesman said.
The weak earnings report by Los Angeles-based KB Home was a signal that housing remains in free fall with no bottom yet in sight. "As we enter 2008, we see no indication that markets are stabilizing," KB's chief executive, Jeff Mezger, told investors during a conference call yesterday.
Builders and mortgage companies have been grappling for months with falling home prices and the meltdown in the market for subprime mortgages to people with weak credit. In recent weeks, the outlook has darkened further for housing as unemployment rises and the broader economy treads closer to recession. Last week, the Labor Department reported the U.S. unemployment rate rose sharply in December to its highest level in more than two years.
"Job losses are the final piece," says Paul Puryear, a real-estate analyst at Raymond James & Associates. "If we are in a recession -- and we may well be there right now -- it's going to be hard to sell a house."
Driving KB's quarterly loss was a $514 million charge related to its deferred tax assets. The ability to save on future or past taxes can be entered on a company's balance sheet as an asset. But some auditors say it isn't clear when the home builders will be able to realize these tax savings because of their losses in recent years. So they are requiring some companies to effectively write down much of their deferred tax assets.
Analysts say other builders may face similar write-downs because of the industry's uncertain outlook, and that builders may not be profitable until 2009 or 2010. The deferred tax assets, although written down for now, will eventually produce a gain.
KB has been cutting prices to move homes. Its average selling price dropped 12% to $247,800 in the fourth quarter from a year earlier. But the supply of homes remains stubbornly high. Also, more of KB's buyers are canceling contracts for homes than some analysts had expected.
The write-downs are spooking investors and forcing some builders, including KB, to renegotiate the terms of their revolving credit lines with lenders. That's because the tax-asset charges, coupled with continued write down of land and home values, could cause many builders to fall below a minimum tangible net worth level required by their lenders.
KB said it expects to strike a new agreement with its banks by the end of its first quarter. Red Bank, N.J., builder Hovnanian Enterprises Inc., which reported a $216 million tax-asset-related charge last month, said it has received the necessary waivers from its lenders.
"It's a total headache for the builders,'' says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm. "I don't think it's going to push any of them into bankruptcy. But it's another poker chip that the banks have in their favor."
Many analysts took comfort in KB's ability to generate cash and reduce its debt. The company increased its cash balance by $625 million from a year earlier, while its ratio of debt to total capital improved to 31% from 43% a year earlier.
As for Countrywide, investors are worried not only about its subprime exposure but also about its holdings of other types of risky loans including option adjustable-rate mortgages. Option ARMs allow borrowers to choose smaller monthly payments that increase their loan balance. If borrowers aren't careful, they can end up over their heads in debt.
Kenneth Posner, an analyst at Morgan Stanley, said he believes a bankruptcy filing by Countrywide is unlikely, at least in the short run. Mr. Posner said the company appears to have enough cash to meet its debt obligations in 2008, though there is a "thin margin for error."
The company plans to release fourth-quarter results Jan. 29. After reporting a loss of $1.2 billion for the third quarter, Countrywide forecast that it would return to profitability in the fourth quarter. Now, though, "very few people I talk to believe that's realistic," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco.
The market received its first jolt yesterday from KB Home, a leading home builder that investors have viewed as well-positioned to ride out the downturn. KB posted a net loss of $772.7 million, or $9.99 a share, for its fourth quarter ended Nov. 30, more than nine times wider than the loss that analysts expected.
Much of the loss stemmed from a $514 million noncash charge due to changed accounting for tax purposes. Nonetheless, investors took flight, driving KB's shares down 9.2%.
Getting Worse
• The News: KB Home, which was seen as well-positioned for the housing downturn, reported a wider-than-expected loss.
• What it Means: The report signals housing remains in free fall with no bottom in sight.
• In Other News: Countrywide shares fell 28% amid investor anxiety.
The other home-related stock taking a battering yesterday was Countrywide Financial Corp., a leading provider of mortgages. Its shares dropped 28% amid growing anxiety among investors about falling house prices and the surge in foreclosures.
The housing news and worries about weaker consumer spending helped drive down the broader market. The Dow Jones Industrial Average fell 238.42, or 1.9%, to 12589.07. Banking stocks were broadly lower, with Citigroup Inc. off nearly 4%. The Dow has fallen 11% from its early-October high, a decline that fits the traditional definition of a correction.
"The state of American business this year will depend, I believe, on how we get through the toughest housing correction in our lifetimes," Daniel Mudd, chief executive officer of Fannie Mae, the government-sponsored mortgage investor, said in a speech to the U.S. Chamber of Commerce in Washington yesterday.
Rumors that Countrywide might be preparing a bankruptcy-court filing fueled its decline. The company vehemently denied such plans. "There is no substance to the rumor that Countrywide is planning to file for bankruptcy," a Countrywide spokesman said.
The weak earnings report by Los Angeles-based KB Home was a signal that housing remains in free fall with no bottom yet in sight. "As we enter 2008, we see no indication that markets are stabilizing," KB's chief executive, Jeff Mezger, told investors during a conference call yesterday.
Builders and mortgage companies have been grappling for months with falling home prices and the meltdown in the market for subprime mortgages to people with weak credit. In recent weeks, the outlook has darkened further for housing as unemployment rises and the broader economy treads closer to recession. Last week, the Labor Department reported the U.S. unemployment rate rose sharply in December to its highest level in more than two years.
"Job losses are the final piece," says Paul Puryear, a real-estate analyst at Raymond James & Associates. "If we are in a recession -- and we may well be there right now -- it's going to be hard to sell a house."
Driving KB's quarterly loss was a $514 million charge related to its deferred tax assets. The ability to save on future or past taxes can be entered on a company's balance sheet as an asset. But some auditors say it isn't clear when the home builders will be able to realize these tax savings because of their losses in recent years. So they are requiring some companies to effectively write down much of their deferred tax assets.
Analysts say other builders may face similar write-downs because of the industry's uncertain outlook, and that builders may not be profitable until 2009 or 2010. The deferred tax assets, although written down for now, will eventually produce a gain.
KB has been cutting prices to move homes. Its average selling price dropped 12% to $247,800 in the fourth quarter from a year earlier. But the supply of homes remains stubbornly high. Also, more of KB's buyers are canceling contracts for homes than some analysts had expected.
The write-downs are spooking investors and forcing some builders, including KB, to renegotiate the terms of their revolving credit lines with lenders. That's because the tax-asset charges, coupled with continued write down of land and home values, could cause many builders to fall below a minimum tangible net worth level required by their lenders.
KB said it expects to strike a new agreement with its banks by the end of its first quarter. Red Bank, N.J., builder Hovnanian Enterprises Inc., which reported a $216 million tax-asset-related charge last month, said it has received the necessary waivers from its lenders.
"It's a total headache for the builders,'' says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm. "I don't think it's going to push any of them into bankruptcy. But it's another poker chip that the banks have in their favor."
Many analysts took comfort in KB's ability to generate cash and reduce its debt. The company increased its cash balance by $625 million from a year earlier, while its ratio of debt to total capital improved to 31% from 43% a year earlier.
As for Countrywide, investors are worried not only about its subprime exposure but also about its holdings of other types of risky loans including option adjustable-rate mortgages. Option ARMs allow borrowers to choose smaller monthly payments that increase their loan balance. If borrowers aren't careful, they can end up over their heads in debt.
Kenneth Posner, an analyst at Morgan Stanley, said he believes a bankruptcy filing by Countrywide is unlikely, at least in the short run. Mr. Posner said the company appears to have enough cash to meet its debt obligations in 2008, though there is a "thin margin for error."
The company plans to release fourth-quarter results Jan. 29. After reporting a loss of $1.2 billion for the third quarter, Countrywide forecast that it would return to profitability in the fourth quarter. Now, though, "very few people I talk to believe that's realistic," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco.
Wednesday, January 9, 2008
Isn't there an easier way to do a property title search?
Isn't there an easier way to do a property title search?
In the modern environment of the internet, and "everything online", it is common to wonder why the process of running a title search is so complex. Property title records are recorded and stored as hard-copy paper documents. Information that is contained on hard-copy documents cannot be stored easily in an online database, as can most other types of records. Because of this, title searching involves searching through all of the recorded documents for a property. Property records are recorded the individual county, each of which has different procedures for the records office.
For example, to search for mortgages, the title examiner must first locate the copies of mortgage documents signed by the property owner. All of the papers for a property are not kept together in a group. These copies are kept in books, with each volume corresponding to a particular day and year. In order to locate all the open mortgages, the examiner must go through all the books over time, and find the documents that pertain to the subject property. The county normally keeps an index, which helps the examiner know which books to look in. The examiner must then look for documents that release any of these mortgages that were refinanced, or paid off. The same process is repeated for liens.
In some counties, there are multiple records rooms to go through. All of the information about the liens, and mortgages is contained in the wording of the documents, which must be retrieved and read individually. From this process, the title search abstract is created for a property.
For more info on how to do a title search or helpful title search links,
http://www.thenoteservice.com/title-search.html
In the modern environment of the internet, and "everything online", it is common to wonder why the process of running a title search is so complex. Property title records are recorded and stored as hard-copy paper documents. Information that is contained on hard-copy documents cannot be stored easily in an online database, as can most other types of records. Because of this, title searching involves searching through all of the recorded documents for a property. Property records are recorded the individual county, each of which has different procedures for the records office.
For example, to search for mortgages, the title examiner must first locate the copies of mortgage documents signed by the property owner. All of the papers for a property are not kept together in a group. These copies are kept in books, with each volume corresponding to a particular day and year. In order to locate all the open mortgages, the examiner must go through all the books over time, and find the documents that pertain to the subject property. The county normally keeps an index, which helps the examiner know which books to look in. The examiner must then look for documents that release any of these mortgages that were refinanced, or paid off. The same process is repeated for liens.
In some counties, there are multiple records rooms to go through. All of the information about the liens, and mortgages is contained in the wording of the documents, which must be retrieved and read individually. From this process, the title search abstract is created for a property.
For more info on how to do a title search or helpful title search links,
http://www.thenoteservice.com/title-search.html
Sunday, January 6, 2008
Buying A Bank Owned Home (REO)
Is Buying A Bank Owned Home (REO) Property a good move?
The real estate market is in its second year of decline and there are many buyers who are looking at buying a foreclosed or bank owned home. In fact, there are many bank owned properties on the market right now and it is projected that the number will increase through the summer of 2008.
For a free list of banks offering bank owned properties, also known as reo properties, go to http://www.thenoteservice.com/free-bank-owned-listings.html
Buying a foreclosed home is not right for everyone and it does not mean that you are going to get a home at a low price. It takes a lot of effort and time to find the right property. I know many investors who pursue properties in the bank owned market who claim they may have to look at 30 homes before finding one worth purchasing.
So this is not an approach that one should take on lightly. Great deals do not come in the bank owned market and it is one can end up with a property that requires a lot of repair and could cost more in the end. But there are some good buys on the market if you spend the time to find them.
There are two main ways of purchasing bank owned homes. The first is in the normal real estate market where properties are offered through real estate agents. The second is through the auction market where the home is sold to the highest bidder.
Auctions
The auction process is the riskier approach to buying a property I recommend that you only pursue auctions if:
1) You know how to properly research a property
2) You know about the building or remodeling trades so that you can assess the condition of a home
3) You have a lot of time to do proper investigation and you are not in a hurry to move
4) You can afford a potential loss of your deposit-sometimes you will win a bid only to later find out the property is not right for you
Why is the auction process riskier? When a property is purchased at auction the buyer does not have a traditional due diligence period to investigate the property. So before you go to the auction you need to so some research on the property. What you are looking for is:
• how much is owed on the mortgages
• if there are liens against the property
• if there are taxes due to the municipalities
An auctioned property is not going to deliver the title to you free and clear of encumbrances. So it is up to you to pay off any liens on the property. This, of course, adds to the total cost of the home.
You also may not have much time to inspect the property. In fact, you may not get to see the inside of it at all. So before the auction try to look at it if you can. Looking at the outside is usually easy, just drive or walk by the property, if it is vacant you may be able to peer in the windows. (I urge you to get permission before going on the property.) What you want to do is get an idea of the condition of the property so you can determine how much it will cost to repair, if repairs are needed. Some things to look at:
• the condition of the roof
• the condition of the exterior- does it need paint or repairs
• the condition of the interior -does it need kitchen or bath updating?
• the condition of the heating systems
• the condition of the plumbing
These are the major cost items with one exception. If the house is not on a public sewer system then it may have a private septic system.
Septic systems can be very expensive to replace and there is no easy way to determine the condition short of having an inspector check it out. It is unlikely that you will have the access or time to perform such an inspection.
Real Estate Markets
Banks often attempt to market properties in the normal real estate markets using real estate agents. To find these homes contact a local real estate agent or search through the local Multiple listing services at your favorite real estate web site.
Why is this a better way to shop for a bank owned home? First, there will often be more information about the home available. Real estate agents will often do some preliminary information gathering and will make it available to you. Second, you will have the opportunity to look at the house, both inside and out, to check its condition. Third, yo will be able to make an offer that has a due diligence period so that you can do proper inspections of the home to uncover defects. This way you know exactly what you are buying. In the event you find a major defect in the home during inspections you have the opportunity to back out of the purchase and get your deposit money back (make sure this contingency is included in your offer to purchase)
Buyers who want a bank owned property but may not have the skill to properly investigate on their own, this is a great approach. If you do find a bank owned home you love and decide to make an offer be prepared to wait for a response to your offer. Banks are not very responsive. It could take 1 week or more for a decision on your offer and 4 weeks is not uncommon.
The real estate market is in its second year of decline and there are many buyers who are looking at buying a foreclosed or bank owned home. In fact, there are many bank owned properties on the market right now and it is projected that the number will increase through the summer of 2008.
For a free list of banks offering bank owned properties, also known as reo properties, go to http://www.thenoteservice.com/free-bank-owned-listings.html
Buying a foreclosed home is not right for everyone and it does not mean that you are going to get a home at a low price. It takes a lot of effort and time to find the right property. I know many investors who pursue properties in the bank owned market who claim they may have to look at 30 homes before finding one worth purchasing.
So this is not an approach that one should take on lightly. Great deals do not come in the bank owned market and it is one can end up with a property that requires a lot of repair and could cost more in the end. But there are some good buys on the market if you spend the time to find them.
There are two main ways of purchasing bank owned homes. The first is in the normal real estate market where properties are offered through real estate agents. The second is through the auction market where the home is sold to the highest bidder.
Auctions
The auction process is the riskier approach to buying a property I recommend that you only pursue auctions if:
1) You know how to properly research a property
2) You know about the building or remodeling trades so that you can assess the condition of a home
3) You have a lot of time to do proper investigation and you are not in a hurry to move
4) You can afford a potential loss of your deposit-sometimes you will win a bid only to later find out the property is not right for you
Why is the auction process riskier? When a property is purchased at auction the buyer does not have a traditional due diligence period to investigate the property. So before you go to the auction you need to so some research on the property. What you are looking for is:
• how much is owed on the mortgages
• if there are liens against the property
• if there are taxes due to the municipalities
An auctioned property is not going to deliver the title to you free and clear of encumbrances. So it is up to you to pay off any liens on the property. This, of course, adds to the total cost of the home.
You also may not have much time to inspect the property. In fact, you may not get to see the inside of it at all. So before the auction try to look at it if you can. Looking at the outside is usually easy, just drive or walk by the property, if it is vacant you may be able to peer in the windows. (I urge you to get permission before going on the property.) What you want to do is get an idea of the condition of the property so you can determine how much it will cost to repair, if repairs are needed. Some things to look at:
• the condition of the roof
• the condition of the exterior- does it need paint or repairs
• the condition of the interior -does it need kitchen or bath updating?
• the condition of the heating systems
• the condition of the plumbing
These are the major cost items with one exception. If the house is not on a public sewer system then it may have a private septic system.
Septic systems can be very expensive to replace and there is no easy way to determine the condition short of having an inspector check it out. It is unlikely that you will have the access or time to perform such an inspection.
Real Estate Markets
Banks often attempt to market properties in the normal real estate markets using real estate agents. To find these homes contact a local real estate agent or search through the local Multiple listing services at your favorite real estate web site.
Why is this a better way to shop for a bank owned home? First, there will often be more information about the home available. Real estate agents will often do some preliminary information gathering and will make it available to you. Second, you will have the opportunity to look at the house, both inside and out, to check its condition. Third, yo will be able to make an offer that has a due diligence period so that you can do proper inspections of the home to uncover defects. This way you know exactly what you are buying. In the event you find a major defect in the home during inspections you have the opportunity to back out of the purchase and get your deposit money back (make sure this contingency is included in your offer to purchase)
Buyers who want a bank owned property but may not have the skill to properly investigate on their own, this is a great approach. If you do find a bank owned home you love and decide to make an offer be prepared to wait for a response to your offer. Banks are not very responsive. It could take 1 week or more for a decision on your offer and 4 weeks is not uncommon.
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