So much has been written about the housing market problem; who’s to blame, why’d it happen, on and on.  What we haven’t seen much of is the fact that during the “bubble,” mtge lenders were allowing a buyer to have a 61% debt to income ratio.  All their debts, added to the new mtge they were contemplating (mtge payment, interest, taxes and insurance), could be 61% of their gross income.

So, take a family of four, one spouse earning $15k and the other $45k, buying a home with a 61% ratio.

Total income is $60k, and with the new mtge, they have $36,600 of annual debt.  Well, they still have $23,400 left, right?  Oh no, the 61% is of gross income.  If they were lucky enough to have to pay only 10% of the gross income for Fed and State taxes ($6,000), that still leaves them with $17,400, or $1,450 per month, for everything else they need.

Let’s help them budget?  I mean, if the lender felt this approach was OK, who are we to question?

We need money for: utilities, trash service, hlth/life/auto insurance, food, clothes, school supplies, vacation and entertainment (?) and for emergencies.

Let’s use a conservative amount for all the insurance needed…say $650 per month, and use a utility number of $150 per month.  OK, we’ve still got $650 left for the rest of our budget.  Let ‘r snap, c’mon you financial guru’s out there, budget up now!

What you didn’t know is that the couple had a few grand in the bank, a little cushion, in case things got tight.  They have this money because they were provided with a “nothing down” mtge.  They were even allowed to roll the closing costs into the mtge.  No skin in the game here…just monthly mtge payments.

How’s the budget coming?  Did you have to pull out vacation and entertainment money?  Is there enough left after that?

Let’s take this family out a few years and see how they’re doing.  Whoops, the $15k earner lost their job.  Monthly income is now only $1,087 vs the $1,450 they had three yrs ago.  And geez, the savings are depleted as well.

So, the brain jobs that set this program up, the lenders, what did they do wrong?  I mean, let’s just go with basic math, let’s not bother the Actuaries, let’s go back to 6th grade math and try it again.

Today, as in the years before the “bubble,” the ratio used is 31% of gross income.  Whew, they’re on the right track now, ‘eh?  What a joke!  Unfortuneately, the joke is on “Joe the plumber.”  The lenders received bail out money for the errors they made.  Should they have? 

All these homes, homes that have 100% mortgages on them, homes that the buyers can’t pay for, or, realize their home is worth less than it was in 2000, all these (26%) of all US homes, what does it all mean…where and when will it all shake out?

Do you wonder how the banks represent these underwater monuments on their balance sheets?  Would their stock go right down the drain if they held them on their balance sheets at actual value?

I mean…if the bank holds a $600k mtge on a home that is now listed as a short sale, at $200k, is that what’s on the balance sheet?  Or, is it still there at $600k?  How about it bankers, send us the answer.

Well, there is some really good news to go with all this; if you can buy real estate now, you chance to be one of those people who can one day say: “I made my money in real estate!”  The bargains are super!  We’ve been putting our buyers into homes at huge savings.  Just got a single mom into a T/H that sold for over $200k a few yrs ago, for $105k.  A home that had  $925k against it just sold for $510k.  Another that has $4.5m against it, looks like it will get sold for $1.7m; the list goes on.

Today, as I write this post, in the four counties comprising the core Twin City area, there are 1,188 homes for sale for less than $100k, and 3,326 homes for sale in the $101k to $200k range.  If you can buy now, do it!  Rates are so low, we may not see anything like this again…ever.  Buy now and you’ll have bragging rights in 7 to 10 years.

And, if you’re one of the unfortunate home owners who have to sell, give us a call so we can tell you how a “Short Sale,” may help you…or…how to sell and get your equity out.

Do you have an opinion or story to share?  Please do, we love to hear from you even if your opinions differ from ours.

Ed

Tell me what you know about the housing market…are things getting better? Worse? The same?  If you don’t know, who does? 

We read about Fannie and Freddie coming to the rescue but we’re still rescuing both of them…with Freddie asking for another $10.6 billion the other day.  Sure Freddie, no problem, where should we send the check…and…let us know when you need some more.  We’ll be sending a check to Fannie too.

Perhaps you’ve read some of what I’ve been reading lately…that over 4.6 million homeowners are more than 60 days behind on their mtges.  Oh no, wait, another source says the number is over 6 million.  Maybe it’s worse than we’ve been told…think?  Most of these mortgages are backed by these two giant bunglers…what does that mean…we’ll need to write more checks?  But hey, I’m running short myself…are you?

And get this, in July, a new program will be kicked off by these two - to help homeowners who have to give up their homes in a short-sale, come back to the table in two years and buy again.  Huh…What?  Is anyone checking the checkbook?

Funny story in MoneyNews.com…a big guy at JP Morgan Chase, David Lowman, when at a congressional hearing not long ago, says to the question - who could mortgage borrowers turn to if they felt his bank’s employees were not helping them hold on to their homes - “Come to me!”  Well, 50 borrowers came forward from the audience, at this invitation, presenting him with a document alleging his bank reneged on a pledge to help struggling homeowners.  So what did our hero do?  “He ran like a dog with its tail between its legs,” said Bruce Marks of the Neighborhood Assistance Corporation of America (NACA), which helps homeowners avoid foreclosure.  Didja know about this organization?  I didn’t.  If you know someone who should know about them, please pass this along!

Not all banks are equal though and some are loosening up on the lending side.  The majority are still pretty tight though.  The Fed Reserve’s senior loan officer survey recently showed most banks kept credit tight in the first quarter and residential mortgages saw continued tightening in terms.  This according to an article by Sudeep Reddy in the WSJ.

Now you need a minimum credit score of 640 and 5% down for conventional or 3.5% down for FHA mortgage qualification.  Terms are getting tougher so if you’re in the market to buy a home, get busy before terms get even tougher and rates (rates that are still terrific today) go up.  You do know that rates will definitely go up…?

Where the short-sales and foreclosures will take home prices is still a guess but if you’re putting money on it, I’d go with continued price drops and amazing deals for the next 18 months or so.  If you can buy…buy now!

If you need cash to fix up a short-sale or foreclosure purchase, we have sources and programs that you can use to get it done…roofing, siding, windows, floors, even new appliances!  So call us today and we’ll fill you in.  Take advantage of the greatest buyer’s market in the history of Real Estate!

The amount of inventory leading to outstanding deals is enormous. 

We’ll e-mail a list to you today.  Just tell us where and what you’re looking for.

If you need help selling or buying, call us for more info today!

Can’t hurt to talk ‘eh?

Ed

http://www.dailywealth.com/1338/Another-Way-to-Profit-from-the-Coming-Plague-of-Busted-Banks

Have you ever seen ads for pricing your home…”Free service, just sign up and receive your free home analysis.”  Did you wonder what the catch was…whether you’d really get the free analysis?

Well, most of these sites direct your inquiry to an agent who has purchased a zip code, city or county, as an ‘exclusive’ arrangement for obtaining leads.  That’s right - the e-mail or call you’ll get will be from the agent who made this deal with the site owner.  No problem…if you’re OK with that but if you thought you we’re not going to be on an agent’s radar, not so good?

Most any Broker will give you a “CMA,” (comparative market analysis) for your home.  Some will require you let them visit your home and they’ll come armed with their ’sign here’ listing agreement.  Others will e-mail it to you and follow up to try to get your listing.  Hardly ever will you get an e-mail with the info you requested and no strings attached.  Now the home visit is important as whatever amenities you might have could add to the value…things like granite counter tops, ceramic baths, new appliances, etc.

I remember years ago, working with one of these sites, and the surprise and alarm the homeowners displayed when I called. (A very watered-down description of their reaction.)  I cancelled the service as I felt it violated the homeowner’s goals.

Many of these sites host tutoring seminars aimed at teaching the agents how to sneak up on these unaware home owners.  Clever stuff, this?

Here’s what we do here but before I get to that, here’s what you should know about this game:  Realtors don’t get paid to do these evaluations…unless you’re willing to pay them?  Realtors often do a lot of work for nothing and they, much like yourself, don’t like to work for nothing…right?  Realtors are concerned that they’ll do this work for you and find you’re really not ready to sell but were just curious about what your home might sell for…if you were going to sell it.  Or, they’re concerned that they will give you the data you need and you’ll then call some other Realtor to sell your home.  Could happen, right?  So, what’s the answer, how do you get what you want without paying for it or being hassled to list your home with a Realtor you don’t even know?

Simple solution, call us…no obligation on your part…straight forward honest ‘CMA’ will be done for you.  And, when we visit your home, we do not have anything for you to sign.  You’ll get the info you asked for within 24 hours.  We feel that if we treat people with dignity and respect, providing this service without a ‘hitch,’ when they’re ready to sell they’ll get back to us.  So, fear not, no funny stuff, just good and accurate service you can depend on!

So if you’re considering the sale of your home, check it out ASAP…most industry sources feel that a lot more foreclosures will come in the next few months, putting  additional downward pressure on home prices.  Also, in this part of the country, home sales are the highest between now and July.  Again, check it out…can’t hurt to be informed?

Buyers have only two weeks to identify the home they want and get a purchase offer in place, in order to get the govt. tax break.  Why pass on a $6,500 (buyers who have not bought a home in the last five years) to $8,000 check or tax credit from the govt.?  This is big…get your share.  You have to have a signed deal before the end of this month and a close date by the end of June.  The clock is ticking and we know we can find the home you want within the next two weeks.  Give us a call and take advantage of our ‘cooperative search’ process, whereby you also get extra cash when you close on your new home.

Any stories you care to share with our readers?  We’d love to hear from you.  Just click on the title of this post and a comment box will open.

Ed (651-770-5000)

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