Investors are waiting in line for the opportunity to buy REO packages they can fix up to sell or rent out…but…Fannie Mae says there are no plans to offer them to these investors.  Put in the hands of investors, to sell or rent out, leads to more jobs.  Isn’t that a good idea?  Homes priced where first time buyers can get in a home, not a worthwhile idea?

And BOFA, with Buffet’s $5 billion infusion, after the enormous bank bail out…what are they up to?  Oh, payback for all the help?  Cutting 30,000 jobs…that’s the pay back?  You OK with that?

And Barney and the boys want to make the banks more accountable, offering them more ‘Regs’ that slow the whole process down and increase the cost to do business, screwing up the economy more yet…what the hay?  Barney wanted to “roll the dice a little longer,” back in 2003.  Apparently, the Fed and other powers did too?  A 30 page paper written by analyst, Josh Rosner, after his research of nearly a decade and after he read the study by Graham Fisher & Co., pointed out that the reckless underwriting at that time, would lead to a catastrophe of enormous proportion in the years ahead.  He wrote that this would lead to run-away prices in the housing market that would then lead to negative equity, most folks would not be able to withstand.  Did Barney and his cohorts take heed?  How about Fannie Mae, did anyone there take this seriously?  Well, at least one person read it.  But, then, she made an angry call to Graham Fisher & Company, harping that they were messed up and that they should have called her at Fannie (she is Jayne Shontell, and was head of investor relations at Fannie), before it got around.  She’s probably since then, made an apology call to them and commended them on their insight?  Yeah, right!

Care to know more? Read pages 219 - 237 of “Reckless Endangerment,” in fact, read the whole book, you’ll be glad you did!  Get the names of many of the other “Playa’s,” Playa’s that played with our money, not theirs, Playa;s that made big time money in the game, and it was a game!

I just read in the WSJ, that 500,000 foreclosures are sitting on the bank’s books now…and…it’s estimated that 4 to 5 million home owners are now more than 90 days delinquent.  What’s your best guess…how many of these home owners will pull it out, survive this financial dilemma? My best guess is 5% to 10%.  Ask any bank auditor what they think.

Have they learned from past mistakes?  FHA will now go as high as 52% for the debt to income ratio, used to underwrite a mortgage, provided, the applicant has good credit. You OK with that?  Let’s look at a scenario.  Take a couple with two kids, making a combined income of $75k/yr.  52% of that = $39k/yr.  But that’s on gross wages.  If they pay just 10% for Fed and State income taxes, they have $5,625/mo, less $2,925/mo for their mortgage payment and all other debt = $2,700 left over for all other living costs.  If their health and life Ins. is no more than $1k/mo, utilities no more than $200/mo, food for four no more than $800/mo (USDA moderate budget), $125/mo for auto Ins., they still have $575/mo left for; auto and home upkeep, clothes, school supplies and or tuition, entertainment, savings, vacation, emergencies…get the picture?

So, the game is still on…what were they thinking then, what are they thinking now?

There is some good news though; if you can buy real estate now, there is a huge inventory of “Super Deals” out there today, and will be for years to come.

What do you think?  We’d love to hear from you.

Ed

Picture this…main watering hole for the agents of  a large Brokerage office…”Happy Hour!”   The agents are having a drink and sharing their weekly  war stories.  Let’s listen in:

“So Freddie, didn’t I hear you nailed a ‘hogger’ this week?”  “Yeah baby, you heard right…I’m at the house, a $475,000 listing, putting up a rider on the sign that says ‘Great N’Hood,’ and a couple drives up and wants to see it.  Ms. Homeowner was just leaving to get groceries and told me to go ahead and show it, so I did.  They liked it and said to write up an offer.  I showed the offer to the sellers and they went with it.  So…I didn’t have to split the commission with another agent…got the whole 6%, $28,500 for myself…hogged that one!”

See, in a normal situation, the listing agent lists the house at 6% and when a different agent brings a buyer, the selling agent gets 2.7% ($12,825) and the listing agent gets 3.3% ($15,675). The listing agent is the one that covers the marketing expense of the house.  Only makes sense the listing agent should get more…to offset expenses , right? 

 The listing agent probably took pictures (no cost?), made brochures ($15. ?), provided copies of the disclosure document ($5.?), had a yard sign installed ($40.?), spent a couple hours working with the home sellers, before the listing was secured, showed the home a few times (4 more hours?), took calls from other agents who showed the home (two more total hours?), wrote the offer (another hour and a half?), and will attend the closing (another 2 hours?).  So, a total of 11.5 hours.  But I usually find an agent will spend about 20 hours per deal.  So lets say the agent worked 20 man hours and had total expenses of $60.  Landing the hogger means he made $28,500 - $60 = $28,440 divided by 20 man hours = $1,422 per hour.  Yeah baby, hog it up!

Most buyers don’t understand this whole process.  They’ll sometimes be working with their agent but attend an open house or call to see one from the info on a sign and the listing agent shows them the house, writes the deal and gets a “hogger” on it.  The agent the buyers has been working with, sometimes for months, gets absolutely nothing and the agent that wrote the deal…spent maybe, a couple hours with the buyers, gets the big reward.  Bad deal, this?

Agents are supposed to not only ask a potential buyer if they have an agent, they’re suipposed to defer to the other agent, if there is one.  Then, if there is no other agent, the listing agent is required to disclose to the potential buyers, on an “Agency” document, how the process works…and…have the buyers sign it.  But do they?  The Hoggers are in waiting…c’mon uninformed buyers…line up!

When you start working with an agent, if you’re happy with them, have them set up all showings and situations for you.  That’s the only way they can get paid.  Don’t hand over the pay to some agent you don’t even know, who hasn’t done a thing for you.  And, if you do look at a home while in the search process, if the showing agent does not ask you if you are represented by another agent, let your agent know about it…the showing agent is either derelict in their procedure or unethical or plain stupid?  Would you want to reward someone like that?

One more thing (I’ll bet many readers are wondering about this), If a listing agent was happy with the normal way home sales pay out…and…an unrepresented buyer comes along…and…the offer is less than the sellers want…why wouldn’t the listing agent offer up all or part of the 2.7% he wouldn’t have to pay out to another agent, to help his sellers?  We do here…we do even more…check us out?

Beware…the “Hogger” may come your way?

Next: How to get the best deal when qualifying for a mortgage!

Ed

You’re probably not old enough to have known a better time to be investing in Real Estate.? For Home Sellers, they’ve probably never seen a worse time to be for sale?   It’s not only a “buyer’s market,” its as hot as it can get for Investors!  You make money in Real Estate on the buy! Buy now, don’t wait, let’s look at why.

The bank bail-out deal did not work according to plan.  The banks got to borrow at 1/4% and lend out at 4.75%+.  Who wouldn’t jump on that arrangement!  Trouble is…few loans are being made, except to highly qualified buyers.  Not only are the Banks messing up the housing market, the PMI insurers are fighting with the Banks, refusing to pay according to their original agreements.   In some cases, the PMI Insurers don’t have the reserves they need to pay up. Case in point, a sad story…

I’m helping a young couple try to short-sell their home.  Both have been laid off, she has cancer and couldn’t return to work even if she wanted to.  They have a young son, have moved in to less than desirable quarters but it’s all they can afford,  they are both under 30 years old, they owe $270k on their mortgage and they’re 5 months behind on their payments.

So I get a ridiculous offer…$167k and the buyer wants $10k back for closing costs.  (I really don’t think the bank will get more than $185k for this house.) The bank does an appraisal and turns down the offer.  Not surprising?  Next, I get an offer for $190k and this buyer only wants $6k for closing costs.  The bank will look at it.  Weeks go by and no answer.  I have to work through a couple different Reps at this bank, to get the proposed deal looked at.  Meanwhile, the buyer wants an answer soon - they don’t want to miss out on the second choice.  We get an answer; the bank will go with the deal but the PMI Insurer wants the young couple to sign a $25k promissory note.  I’ve already sent the bank tax records, closed bank account records, a hardship letter, monthly budget and “comps.”  This young couple couldn’t sign a note for $25 bucks, let alone $25k?  The bank won’t allow me to negotiate with the Insurer.  When I informed the prospective buyer’s agent, she came back to us with a $200k offer and I informed the bank.  They said they would take another look.

Several days later, the agent withdrew the offer and I informed the bank that the deal was dead.  Several days  after that, the bank notified me they would accept the offer - they hadn’t even read my e-mail to them from days earlier.  Who’s in charge at this bank?

We now work with an attorney and a staff totally dedicated to doing short-sales.  This strengthens our marketing efforts and reduces the time necessary to get these done.

This whole mess adds value for the Realty Investor. The stumbling and bumbling of these banks has put a huge number of homes in front of Investors that have good financing sources.  If you can close fast and have savvy lenders, you’re in the drivers seat!  What we’re finding though, is that too many Investors are sitting on the fence, hoping for even more price reductions, before they snap the trigger.  More and more realty tracking firms are projecting a slide in prices for up to another 18 months.  There’s more to consider though…an increase in rates is inevitable and those rate increases may eat up the dollars saved on the buy, within a few years.  The time to buy is right now, especially since the banks, Fannie and Freddie are going to make it harder for buyers to get financing.  Look at these guys…struggling with depleted reserves.  Last week, a WSJ article pointed out that these reserves were supposed to be at 2% but were only at less than .6%

Fan/Fred put the ‘touch’ on the FED to the tune of $111 billion so far.  FHA requires lenders to have cash reserves of $250,000.  But now they’re considering to raise this reserve amount to $2.5 million.  You can guess how many Lenders will no longer be offering their services for FHA deals if this goes through.  They’re in trouble folks - and the loan game is going to tighten up like nothing we’ve seen.  The time to buy…if you can…is now!  Rates will go up, they always have.  When this will start is hard to say but when it does, it will be swift and severe!  Don’t get trapped, buy now while there’s plenty of choices and some money still available!

Now, where to go for the deals? We always look at the areas that offer the best potential for rental and resale.  If you’re not working with a proactive, ambitious Realtor that’s taking their time to do previews for you and pulling ‘comps’ to find the very best deals for you, give us a call…we can find you what you want in less than 30 days.  And…December is one of the best months for an Investor to be busy in the market.

But wait, there’s more!  Sound familiar? There really is more though, here’s how we work with you:

We get together to set up a strategy to find you what you want.  We nail down the best areas to search in.  We set you up with a search program that gets all new listings to you, the same day all Realtors get them…you’ll be at the front of the line so you don’t miss anything.

If you’re too busy to see the homes you have the greatest interest in, we’ll preview these for you and give you a report on them.  That will save you time  - we’ll only set up showings for the homes at the top of your list.  Make sense?

Once we find what you want and close on it, you’ll get 25% of the commission paid by the sellers.  This is to compensate you for your work in the search process.

There are over 1,525 homes for sale at prices less than $150k right now, in just 4 counties! Many of these were purchased and renovated or updated within the last few years.  This means you may have only minor items to repair or just cosmetic work to do in order to rent them out or re-sell them.
Time is money…don’t get caught in a rate increase and lose out on some of the hottest deals ever!  We just put a deal together for an Investor at 5.25%.  If that same deal ($150k) was 7%, it would require an additional $170/month.  Get in while you can ‘cash flow!’

Ed

Years ago, the “open house” concept worked pretty well, quite a few homes sold as a result of an open house.  Not anymore though…national statistics show that less than 3% of homes sold are due to an open house.

Ever notice that most of the open houses are done by rookies in the business?  The big hitters should be the ones doing them, right?  I mean, after all, they have the best track record of sales…why aren’t they doing the opens?

The simple answer…because they don’t work, it’s boring and the big hitters have big data bases to prospect in.  What’s that got to do with it?

Most every large brokerage will have a posting place where various realtors offer any agent who’d like to,  do an “open” for them.  They know they probably won’t sell the home they’re sitting in…for about two to three hours…but, they may get some contacts who are looking for other homes, in different price ranges.  The rookies need leads…hence the open house game.  Do any of the big hitters do their own?  Sure, but few and far between. (See the article above from other realtor sources.)

Now, here’s why most people don’t want to do an open house: they clean it all up, vac, scrub, put on soft music and maybe get some bread or a pie going in the oven.  Then, they have to dissappear for about three to four hours…not fun for the average family.  When they come back to the house, they find out that some of the visitors were neighbors and others were just curious and not even qualified for the price on the house.  (That is if anyone did show up?)  Add-on…someone used the toilet and something is missing.  Security is another valid issue, where a home seller is doing their own open house.  And, how do you feel about the realtors being there to get leads for other properties?

Once you’re on the MLS, prospective buyers are going to find you, especially if the broker that listed it has “broker reciprosity,” like we do, a system where their listings go into all other broker’s web sites.

The yard sign in front of your home, purportedly, will be responsible for 17% of the success you have…get the sign up…skip the “open house.”

If you feel you want to pursue every possibility to sell your home and want a realtor to do “opens,” find out what that realtor is going to do with any traffic that does come through…what are they going to say and do…and…make sure they give you a sign-in-log, with names and phone #’s,  so you can follow up.  Make sense?

If you care to hear more about the process, give me a call and I’ll tell you much more.

We’ll be back on 9/3/2008 with a “marketing your home” message.

Ed Klein