Archive for the 'Uncategorized' Category

Real Estate Investors are the Catalyst in the Real Estate Market

Published on July 14, 2008 in Uncategorized. 0 Comments

The moment you have a slow down in the real estate market you begin to realize the vital role played by real estate investors. As the name suggests real estate investors are there to invest in the market which means they go to great lengths to do their research and they take greater risks than ordinary buyers and sellers precisely because they are creative in the way they buy and sell property and are able to find both buyers and sellers in the most unlikely areas.

When the market is gridlocked due to either overheating (which causes many problems in its own right) or a real estate slump (when prices begin to fall and house buyers are cautious) real estate investors provide a much needed catalyst. They are willing to do the work necessary to find properties which are locked into the market through foreclosures and release them creating an upward and onwards movement within it which benefits everyone involved in real estate.

The assumption is that usually only realtors and lenders can benefit from real estate. In fact there is an entire peripheral industry depending on it and the services within it range from DIY stores to home furnishings and furniture stores.

In truth, real estate, drives a huge chunk of our economy and the recent global crunch in credit and the rockiness we witnessed in the markets was a direct result of  lack of faith in the value of existing mortgages which led to a withdrawal of available credit between banks which in turn reduced the amount of money that was available to be loaned to borrowers and that, caused a tremendous upheaval in the market and a wave of foreclosures which, quite frankly, should never have seen the light of day.

Throughout all this real estate investors managed to find houses, find buyers, find finance and close deals. Admittedly the work was harder and the margins slimmer than ever but they did it and it kept the real estate market afloat long enough for banks to rally and come up with a global finance rescue plan for the lending institutions which were facing difficulties and that led to a revitalizing of the real estate market.

The temptation here is strong to think that we are now out of the woods. With more money than before available for them to borrow banks should be able to loan money but now that the question of liquidity is solved the question of solvency is beginning to raise its head.

Solvency is a much more serious issue than liquidity and if it proves to be a problem it will put the real estate market back to the doldrums it was in for much of 2007.

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Foreclosures Will Start to Ease Off as Credit Crunch Dissipates

Published on July 11, 2008 in Uncategorized. 0 Comments

It’s true what they say. Money really does make the world go round and the lack of it can threaten to bring the world to a standstill. In recent months the global credit crunch has made banks unwilling to lend to each other which means that they have been even less willing to lend to consumers and this has led to a tightening up of the money available to do anything.

This kind of situation is exactly what can potentially bring about a recession, a shrinkage of global markets and a reversal of the progress we have made through globalization. Because the potential risk has been so great it goes without saying that the world’s greatest banks would do something about it.

Sure enough The Fed, the Bank of England, the European Central Bank and the national banks of Canada and Switzerland have banded together to put in more than $100 billion into the world monetary system.

The result of such action is a speeding up of the sluggish world economy which means that in terms of real estate the green light is back on. Real estate is a funny business because in order to work right it requires two things: new home buyers and foreclosures. New home buyers are required because they are the lifeblood of the system. Foreclosures are needed because they help keep things in control.

Foreclosures are a balancing mechanism that unlocks ‘dead money’ and puts it back in circulation, revitalizes the market and helps to create fresh supply and demand where before you had a deadlocked situation between a borrower and a lender with the only potential outcome the lender taking control of a property and spending a lot of money trying to sell it at a loss.

The credit crunch that we were experiencing was affecting man lenders and lending institutions and, in its international outlook, was stopping overseas investors from pouring in money that could jumpstart the sluggish U.S. housing market.

All this is now set to change. While it may be a brief while before we experience a really positive outlook in real estate again, 2008 looks set to be a seminal year in terms of the real estate market and foreclosures in particular.

The tightening of credit we experienced has led to a pruning of bad practices and bad lending accounts and the fall out has actually benefited the market as a whole. This means that we are now ready to turn a new leaf having learnt from the mistakes of the past and foreclosures can once again become to golden wedge helping to open up new areas of real estate and attract new home buyers into the market.

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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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