Archive for July, 2008

Foreclosures Offer Opportunities as Real Estate Market Picks Up Steam

Published on July 10, 2008 in Uncategorized. 0 Comments

The engine of the real estate market is new home buyers. It is this which drives new homes, the sale of existing ones and enables the entire chain of supply and demand to move on as existing property owners upgrade their homes and move to new ones.

New home buyers however rely on credit and the global credit crunch was threatening to slow down their lifeline and turn a vibrant real estate scene into a stagnant pond with no new home buyers entering the scene and little real movement in real estate.

Thankfully none of this is now going to happen. The US Federal Reserve has made $20 billion available through auction to a large number of commercial banks. In London the Bank of England is about to put in another $20 billion plus in a money market rescue plan aimed at easing the global credit crunch we are experiencing.

As well as the Bank of England and Fed, the European Central Bank and the national banks of Canada and Switzerland are also involved in the plan. What this means for the foreclosure market is two possible things and we will examine each in turn:

First, we will see an easing of credit restrictions and a relaxation of lenders’ fears about defaulting home owners which means that the crackdown we have seen on those who are late in paying their mortgage and the excessive number of foreclosures that are being triggered as a result will start to ease off. This will also ease the pressure on the real estate market which is in danger of becoming imbalanced by the excessive number of foreclosures happening at the moment. This is good news because it means foreclosures that do happen will act as the balancing mechanism for our economy that they are meant to be.

The second thing that will happen with the easing of the global credit crunch is that borrowers will, again, have easier access to credit which is one of the main things driving the housing market.

The net result of this that the real estate market is going to start picking up steam again, house prices which have either dropped or are in stagnation will again register a move and foreclosures, which have been vehicles of opportunity and a means to release pent up cash, will, once again, begin to offer that promise.

I grant that at the moment we are not seeing a lot of hope in that direction but it is early days yet. Money markets have a tremendous amount of inertia and it takes time to see the positive effects take hold. They will though and we will see the results we expect before too long.

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Foreclosures Produce a Win-Win Situation

Published on July 9, 2008 in Uncategorized. 0 Comments

Foreclosures have been getting so much bad publicity in the press lately that to say they are a good thing and produce a win-win scenario for real estate investors, lenders and even homeowners is to fly in the face of reason but let’s examine things for a moment through a scenario that actually happened to me.

I once bought a house for just $3,000. The couple who owned it had to move due to work commitments. House prices in their area had shifted little since they had bought the house and they were ready to default on their mortgage and allow the home they owned go to foreclosure rather than wait months and months to sell the house and then struggle to get the asking price which, at any rate, would have left them little room to manoeuvre in terms of relocation costs.

I stepped in, arranged to take over their mortgage payments, gave them relocation money and found a buyer who wanted to step in and pay the asking price because of family pressures. I made some money so I was happy. The couple received more from me than they would had they tried to sell the house themselves and move, so they were happy. The lender had got their money back and had not lost anything. So they were happy. This was a foreclosure that produced a win-win scenario all the way and it was only made possible because of the way our economy is structured and the real estate model in a free market works.

Of course there are scenarios where the homeowners have to move for far more serious reasons. Maybe they really are in trouble with money or maybe there is a death in the family and they can no longer make payments. But even in those cases a true real estate investor delivers a win-win scenario. Homeowners, many times, fail to find any solution to their money problems and get caught in a downward spiral with the only outcome the loss of their home and the irreparable damage of their credit history. A real estate investor is an expert who supplies solutions that can work.

Through the process of foreclosure (or even before it) a real estate investor can take over a property, allow the trapped homeowner the ability to move on without the burden of the house any more and can then work to get the property back in the market where it can start delivering value for all concerned.

Foreclosures can deliver a win-win scenario almost every time provided the foreclosure is a real result of the way our economic model works rather than a case of misrepresentation or misselling or predatory lending by a mortgage lender. In that case the equation is imbalanced (or stacked if you like) to favour the mortgage lender and potentially unfair to the homeowner and that is never a good thing. 

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Selling your real estate investment with seller finance

Published on July 8, 2008 in Uncategorized. 0 Comments

One known method to maximize your profits when selling your home is to offer finance to buyers yourself. This form of financing offered by sellers, better known as seller financing, is a mutually beneficial financial option to both the parties. For sellers, it provides a regular source of monthly income and lower taxes, while buyers benefit from this form of financing if they are not eligible for other forms of conventional loan options.Seller financing can be an excellent method to sell a house without seriously reducing your expected sale price. We are aware that many people are unable to get traditional financing and resourceful property sellers and their real estate agents can minimize their efforts in getting a property sold. Further, sellers who offer financing can usually demand a higher price for their property, even in recessionary markets.

Most home sellers never think of the option of financing the buyer directly simply because they are not aware of the benefits nor understand how creating a note works. There are several advantages selling house with owner finance. Seller finance is convenient and offers the much-needed flexibility in terms of time and repayment plans. You, as a seller, also act as the moneylender and the buyer will pay in the form of monthly payments that include interest. When you fail to get the payments regularly, you have the right to get your property back in foreclosure.

Seller financing is a powerful way of selling a house when the market is slow or when there is stiff competition with many similar houses for sale in the market. Just listing the house as OWC (Owner Will Carry) will make the house temptingly stand out and attract more buyers. Because many individuals are finding it difficult to obtain funding from a bank, offering financing will open the doors to these prospective customers as well. This will significantly increase the pool of potential buyers.

Seller financing has yet another key benefit- the possibility of selling for a higher price than the originally envisaged price. Offering to carry back a note will not only greatly increase the number of potential buyers, but also bring a unique list of buyers who are ready to pay a higher price than the general population.

When the house seller finances the prospective buyer, they can also act as the lender. That means they could structure the deal to collect interest. Over time, if the seller holds on to their note, this can add up thousands of dollars as additional revenue. In short, there are multiple advantages to sell your real estate with seller financing – quicker sale, higher price, lower loan costs for the buyer etc.

Please remember that before you offer owner financing, you need to own the property without any encumbrances and clear of mortgages. If you do not own the property free and clear you can use a form of seller financing known as a lease option. This enables you to get someone into the house quickly but you still hold title. Avoid people buying your property subject to the existing mortgage. This may be risky because they are not guaranteeing that they will make the payments and if they default, you will be in dire straits.

Make sure that you run a quick credit check on all your prospective buyers and also obtain information about their repayment capabilities. You might demand ten percent of the total costs as down payment before offering seller finance. You can then opt for collecting monthly payments directly or hire a professional servicing agency to maintain all transaction records.

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Why the Wrong Type of Foreclosure Can Hurt the Economy

Published on July 8, 2008 in Uncategorized. 0 Comments

The entire structure of our U.S. economy is based upon the principle of free market conditions. This means that markets are pretty much left to regulate themselves and create built-in balancing mechanisms that ensure that the market is not overheating and it is not stagnating.

In the real estate market the balancing mechanism is provided by foreclosures which basically take properties which are gridlocked into a non-payment situation that only damages the market, the lender and the economy and, through the process of foreclosure, auction and sale, process them into properties that generate liquidity for almost everyone concerned and which free the house owner from a situation that was only getting worse and worse.

Now suppose, within this mechanism you throw in a disregard for the self-regulating tendency of the market and allow lenders to pretty much do as they please. You then create conditions which are not countenanced by the set up of the market which is geared to the creation of win-win scenarios.

An imbalance in the way money is lent and properties are acquired leads to those same properties being lost which means that the win-win scenario that normally leads to a balance in the real estate system now becomes a win-lose situation with the lender making more and more profit and borrowers constantly losing out.

Such one-sided equations lead to exactly the wrong types of foreclosures, properties which could have been saved or maybe never bought by their original owners in the first place. The wrong type of anything is damaging to the market because it flies against the conventions that were set up originally and, as a result, damages both our economic model and the trust which the mortgage lending market requires in order to function properly.

With all this of course comes the $1 billion question of what should be done? Some advocates for legislative intervention have voiced the opinion that the Federal Government needs to step in. Others have voiced the opinion that the market should be left alone to reform itself, stating that the reason it got into this mess in the first place is because of overly complicated legislature governing the accessibility of mortgage loans to minorities and disadvantaged groups.

Whichever way we decide to go the fact remains we need to do it fast. I see far too many foreclosures coming into the market that are decidedly of the wrong type which means that the news for the economy is not that great. It is important we address that fast and worry about the niceties later on otherwise we will risk losing so many of the gains we have made as a nation in the 21st century.

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Foreclosures Signal a Need for Change in the Real Estate Market

Published on July 7, 2008 in Uncategorized. 0 Comments

There are currently $8.5 trillion in outstanding debt a quarter of which is owed by adjustable rate mortgages (ARMs). Adjustable rate mortgages are at the heart of a huge national debate revolving around predatory lending practices and they are exactly what the problem is.

In a nutshell there are a lot of people with ARMs who had not had the mortgage terms explained to them adequately and, as a result, find themselves suddenly unable to keep up with repayments and unable to keep the house which they had bought which are then put up for foreclosure. In my view these are just the wrong type of properties to foreclose on and I will explain why.

Foreclosures are an integral balancing mechanism of our financial system and, as a regrettable but necessary percentage, are always there. The more house sales and growth the system experiences the more foreclosures you will get. As a percentage these are steady, even if in terms of numbers they go up, because that’s how balance is maintained in the system.

Adjustable rate mortgages completely change the picture. Because many were sold in ways that did not make it clear to home owners what the payments would go up to they have become a ticking timebomb about to explode in the face of people who are not adequately prepared to deal with it and who should not have been sold these mortgages in the first place.

This amounts to mis-selling and as such needs to be addressed in ways beyond those currently available, which means that legislature is required, because it otherwise leads to foreclosures at a rate that generates an imbalance in our economic system and short-circuits the ability of the foreclosure mechanism to create stability in our economy.

As a real estate foreclosure expert I know for a fact that anything which pushes foreclosures into a zone that significantly increases the percentage they reflect of the house buying market is a bad thing. It leads to a depression of the market, dropping prices, tighter credit, less available money and this also leads to fewer house sales, fewer new houses being built, fewer jobs in the economy and generally a bad time for all concerned.

All this has come about because, unfortunately, there are unscrupulous lenders who are interested more in how many mortgages they sell than who they sell them to and how they do it. Such short-term profiteering is damaging to the economy and hurts the reputation of real estate investors as well as foreclosure experts and mortgage lenders. Legislation has the power to force mortgage lenders to be a lot more transparent in the way they lend money to prospective house owners and that cannot come a moment too soon.

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Ways to effectively sell your home

Published on July 5, 2008 in Uncategorized. 0 Comments

Every home owner preparing to sell their property will need to consider whether it is wiser to sell their home FSBO, (For Sale by Owner), or to use a real estate agent. The most obvious advantage of selling your home FSBO is to avoid paying the real estate agent’s commission of 6% allowing both the seller and buyer to save money. But while most of us may be excited at the opportunity to save that kind of money when selling our home, there are other considerations that may outweigh the potential savings. Selling your home FSBO will require a considerable amount of stress, and as the buyer, you will also need to painstakingly go through every detail throughout the entire sales process. To market your property to potential buyers is not as hard as you think it might be. Today, there are lots of effective channels which you can use to market your property. Other than attempting to sell your property to an individual, you should also try selling to companies. Nowadays, there are companies who like to invest in houses privately with vendors. These companies will usually pay cash for your home and ensure a quick transaction.

But if you lack the experience and the required skills to follow through with the sales process, you will probably be more comfortable working with a qualified real estate agent than going the FSBO route. Select the right estate agent who has the potential to sell your type of property - not the one who offers the highest valuation of your home. Look at their books to check if they have sold properties similar to yours in the area.

Signage encourages home shoppers to immediately call you or your agent. If your home is a corner plot, put up two signs. Talk to your neighbor whose home is located at the corner of a busy street, asking for permission to put a sign in that yard with an arrow pointing toward yours. The signs should include you phone number and the phone number of the agent’s office and the agent’s cell or voice mail number. Print advertising reaches buyers who read newspapers and internet ads reach the computer users. Insert ads in major newspapers on a Sunday but some newspapers also publish “picture classifieds” on other days. Advertise in local newspapers where you can possibly run a larger ad for less money and that will more closely target those searching homes in your area. Advertising in Real estate publications will also be useful.

If you are a direct seller, you can buy mailing lists from list brokers for a small fee. If you are represented by an estate agent, talk to him about a direct mail program. You should direct mail to your neighbors as they may have friends and relatives who might want to buy homes nearer to them. You must send mailers to agents who represent buyers in your neighborhood and to those who live in neighboring areas who may wish to relocate to your neighborhood. However, since most buyers are represented by an agent, it is a good idea to invite as many agents and brokers as possible to view your home. Local agents who linger around your home will better remember details to later describe to buyers. The best way to entice an agent to hang around is food and it does not cost much as sandwiches and tea will suffice.

One important thing to remember when negotiating your offer with the potential buyer is to take your time and not appear impatient. Do not make the buyer feel that you are in desperately wanting to close the sale as this will usually result in a low offer.

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