Urgent Politcal Action Needed By All Real Estate Entrepreneurs To Defend Private Property Rights! HR 1728

Thank you to Dyches Boddiford, Elmer Diaz and National REIA for sounding the alarm and organizing vitally-needed action on this issue . . .

Pete Fortunato recently brought this Bill to my attention.

It has already passed the House of Representations and has been sent to the Senate. If it passes in its current form, it will restrict owner financing to once every 36 months (HR 1728 Sec 101(3)(E)). While this may not be much of a problem when we get owner financing from sellers, it severely restricts our ability to sell with owner financing.

Though the bill mainly deals with amendments to Truth-in-Lending for mortgage brokers and banks, this one section could reap havoc. This could limit not only your sales where you take back a mortgage, but _your lease-options and land contracts as well_.

Here’s the latest version of the Bill: http://www.govtrack.us/congress/billtext.xpd?bill=h111-1728

All owner carryback financing should be exempted from this bill. As one commentator noted, if this is left as is, it is a taking of private property rights. We can wait for someone else to fight it, but as for me, I am contacting my Senators today to let him know what I think. I suggest you do the same.

You can find and contact your Senators here: http://www.senate.gov/general/contact_information/senators_cfm.cfm Keep it short and to the point, but let them know your thoughts! Pass this along to your investor friends.

Dyches Boddiford

Seller Concessions, can they be a deal killer?

Lee’s notes: I get several publications which have questions and answers regarding real estate transactions. So occasionally I will add them here so you folks can read them. The below is from advice expert Edith Lank. The publication doesnt give her qualifications, but her answers are generally pretty spot on.

The only thing I take issue with below is the familial status response she gives.. It is illegal to sell a home based off of a persons familial status(whether they have children or not).  I think Edith is saying the sellers like the idea that the “prefered” buyers have kids. Which while not a prejudice against people who have children, is a big no no for families without children..  If that makes sense…

Dear Mrs. Lank:
We just lost out on a house we really loved to another offer.
We offered $2,000 above the asking price and asked for 4 percent
concessions. The other people did not ask for concessions
in their offer. We don’t know how much they offered. Our
Realtor told us they preferred the other offer because no concessions
were asked for.
We asked for the concessions so the seller would help us
with closing costs. We offered something over the asking price
to hopefully offset that. We are very disappointed about the
way things turned out, and I was wondering if you could give
my husband and I any advice for future offers. Is it common for
concessions to be “deal breakers”? We could really use them to
help with closing costs, but we don’t want to repeat this same
scenario in the future, if possible. I know each situation is
unique, but, in your opinion, are we better off not asking for
the concessions?
– G.K.
The extra $2,000 you offered probably didn’t come close to
making up for the 4 percent of purchase price you asked the
seller to pay toward your closing costs. So yours wasn’t really a
full-price offer.
Nobody can predict what’s important to a particular seller. They
might have preferred the other buyers’ proposed closing date or a
higher purchase price. They might have run into owners who saw
the buyers’ children on the swings in the backyard and enjoyed
the idea of that particular family living in their beloved family
homestead. Until they’ve signed an acceptance, sellers are free to
deal with any offer they choose. The only limitation is that they
cannot base their decision on potential buyers’ race, religion,
handicap, children, or other class protected by fair housing laws.
If you’re short of cash and can’t buy without the sellers paying
some of your closing costs, you’ll have to continue making
offers on that basis. Some sellers do accept such offers, and

some mortgage plans allow them.

Feds back new lending limits, and how this affects you!

Lee’s Notes: With all the talk about what is and isn’t the gov’t doing for americans in regards to the mortgage market, I found this article and felt I would share… On a personal note, I don’t think making it easier to get loans is what we need at this juncture. I am all for hard working people being able to afford a home, but I dont like a lot of the fraud that has been encouraged by loosening up the belt, so to speak… I am undecided on whether this will be a good thing, or a bad thing…

In a move that will add $2 trillion to the reeling American mortgage market, the Office of Federal Housing Enterprise Oversight announced Wednesday that it was easing lending restrictions on government-sponsored mortgage buyers Fannie Mae and Freddie Mac.

The move calls for the companies to hold a 20% capital surplus, 10% lower than previous regulations. This adjustment promises to bolster lending markets where the availability of credit has become as much a concern as subprime loans and overbuilding.

What’s In It For Homebuyers?
A cash infusion advances the government sponsored enterprises’ (GSE) ability to securitize home loans, which makes it easier for people to get credit because lenders have a government sponsored guarantee should the loans falter.

Potential home buyers will find it easier to find a loan, which the Department of the Treasury and Office of Federal Housing Enterprise Oversight (OFHEO) see as a critical step to housing recovery.

Based on recent strategic initiatives by the GSEs, the boost was inevitable. The Economic Stimulus Act of 2008 increased loan limits to 125% of a city’s median home price, which increases the GSE’s loan limit from $417,000 to as much as $729,750 in some cities. In expensive markets such as San Diego, Calif., or Sacramento, Calif., this expands the loans the GSEs can go after by as much as 18%.

Related: Economic Stimulus’ Biggest Real Estate Winners
The boost makes loan rates significantly less expensive for home buyers in cities like these, because it’s safer for banks to extend credit. The expected result? Increased incentive to buy, and better refinancing options.

What’s In It For The Seller?
Freeing up cash also allows GSEs to invest more heavily in sinking markets like Detroit and Las Vegas, where subprime, Alt-A and other adjustable rate loans, mixed with economic downturn or overbuilding, has put markets into free fall.

The much-needed securitization process, outside of Freddie and Fannie, has virtually stopped in such cities, as the risks associated with falling home prices have driven non-GSEs out of the marketplace.

Related: America’s Free-Falling Housing Markets
From a seller’s perspective, the easing of restrictions on GSEs helps because it entices buyers into the market by giving them easier and cheaper access to loans.

This will no doubt benefit sellers in Miami, where there are 79,000 homes on the market, up 25% so far from last year, according to ZipRealty (nasdaq: ZIPR – news – people ), an Internet research company.

If transactions increase as a result, and the OFHEO plan is enough to tighten inventory, sellers could be looking at a situation in which there are more buyers and fewer homes available. That means higher prices, or at least a slowing of current price dips.

As always, if you like what I write, and you or someone you know is looking to buy, sell, and or invest using a great realtor in central Indiana, or anyplace else for that matter. Please feel free to send me the persons name, email, address, and or phone number and I will be happy to help them, or refer them to someone else who can… In the process, I may earn a referral fee, if i cant help them myself!

Indianapolis #9 best place to buy foreclosures(notice i didnt say # of foreclosures, I said BUY foreclosures)!

Lee’s notes: Forbes Magazine gave Indianapolis some love with rating us #9 in the country to BUY foreclosures… The deals are in distressed properties, cause a lot of people can get good prices on homes in good shape. I have seen a lot of vacant homes as of late though!

9. Indianapolis, Ind.
Median home price: $112,109
Foreclosure savings: $6,695
Foreclosure rate: 2.01%
Price change 2006-2007: -0.07%

A 2% foreclosure rate combined with a slow market has produced one of the nation’s highest vacancy rates. This market’s relatively low median home sale price means the market doesn’t have a long way to go before it bottoms out. Still, given the area’s inventory glut, sellers–especially those with distressed properties–will likely have to shave more than $6,695 off the price to make a sale.

To compile our list, we started with the country’s 100 largest metro areas and ranked them by annual foreclosure rate, based on data from RealtyTrac, a listing firm that tracks foreclosures. To give a sense of scale, hard-hit markets have foreclosure rates in the 3% or 4% range. Riverside, Calif., has a foreclosure rate of 3.8%, and Detroit has a foreclosure rate of 4.9%. By contrast, Seattle, has a foreclosure rate of 0.4%, and Austin, Texas, has a rate of 0.8%, two figures which are within a healthy range for foreclosures, as all markets, at all times, have them.

Our goal was to differentiate inexpensive foreclosure markets from those that are undervalued, as cheap foreclosures in flimsy markets don’t necessarily make strong investments. One can score a deal on a house in Detroit, for example, but there are long odds on recouping costs due to the area’s current economic environment and that housing market’s depression. If Detroit were adding jobs, or were a more hospitable location for business, it could be a good comeback play. But as it stands, it’s not a housing market where you want any amount of your money.

Only cities on Forbes’ best places list, which measures criteria such as quality of life and the local economy (labor and energy costs, the regulatory environment, taxes) to find markets, such as Raleigh, N.C., or Oklahoma City, where foreclosures aren’t symptomatic of local economic ruin, were measured.

Then, we looked at how real estate prices have moved since 2006, based on data from Moody’s Economy.com. No city has seen massive median price jumps, but making a foreclosure buy in San Antonio, where prices grew 8.24% between 2006 and 2007, carries far less risk than Sacramento, where prices dropped approximately 10% over that same time period.

What’s happening to home prices in your community? Weigh in. Add your thoughts in the Reader Comments section below.

Next, we looked at the spread between median prices and foreclosure prices, with data supplied by RealtyTrac, to determine where banks and sellers were offering the largest discounts on foreclosed properties. Stubborn sellers looking for full value aren’t as helpful to a bargain hunter as sellers willing to make a short sale–where the home is sold for under the outstanding loan value–in order to unload a property quickly.

By this measure, Charlotte, N.C., performs very well. Foreclosure prices are 28% below median prices, for an average savings of $56,874. Not bad in a market where the median sales price is $147,299. Foreclosures and real-estate-owned properties are available through local listing agents, though the most comprehensive databases are found in the online depositories of companies like RealtyTrac. As always, if you like what I write, and you or someone you know is looking to buy, sell, and or invest using a great realtor in central Indiana, or anyplace else for that matter. Please feel free to send me the persons name, email, address, and or phone number and I will be happy to help them, or refer them to someone else who can… In the process, I may earn a referral fee, if i cant help them myself!

How does foreclosure work or when are the times to buy a foreclosure?

I was at a seminar on Tuesday, and I saw a great flow diagram of how the foreclosure process works.. I’ll try and describe some of the process because it wouldn’t make sense if you just saw the diagram.

It’s important to realize that banks really don’t want properties. They want the money. It costs them a lot of time and money to foreclose on someone, and they really don’t want to do that. Also important to note that each bank has a loss mitigator(s) who generally is charged with handling about 300 short sales a month, and they pick and choose which ones they mitigate(because they get paid off those), so they narrow it down to about the 50 best, and only about 1 in 3 of those close each month. So you really need to have your package(offer, paperwork, etc) done right, or they just throw it away.

Here is the process as I understand it.

1) Seller can’t afford the payments on a home and become delinquent.

2) Bank starts foreclosure process.

3) Seller can catch up the payments, short sale the property, or be foreclosed upon. Note: Sometimes the bank will offer to create another loan(forebearance agreement), generally at a higher percentage rate and for a high origination fee, for the amount of delinquent payments plus other charges. So if you are 3k delinquent, they will create a new loan for 3k+(plus other delinquent fees, and want a high downpayment) and then have you start making payments on both the original loan and this new loan. Chances are if you couldn’t make the first payment, it won’t be long til you can’t make the two payments and are back to step one.

4) Buyers/Investors have a chance to get lender to agree to short sale, or can possibly buy the bank note(buy the loan in its’ current state). Important to note that PMI and FHA/VA Insured loans can be a major detractor in your ability to get a short sale closed. I heard an interview with a loss mitigator, where he stated that even if you are offering 100% of the homes value(not the original loan value, but the current value), the bank might have to decline your short sale, because PMI or FHA/VA has deemed that the appropriate action. Buying the note is an interesting idea, you buy the note at 50-80 cents on the dollar, maybe you can lower the interest rate and forgive some late fees, etc and keep the seller in the home making payments. you bought the loan for 50-80 cents on the dollar, and the seller is still paying on the loan at original value. After a year, if they have kept up on their payments you can sell the loan to another investor as a performing loan at closer to original value of loan or at a discount if you original loan purchase value was high enough.

5) Home is foreclosed upon and goes to Sheriffs Auction. Note: If bank buys the property back, they are basically paying themselves(minus sheriffs’ fees). This is where 2nd, 3rd, or other loans can get the shaft(in most cases). 1st mortgage gets paid first, etc. Important to note: Sheriff’s Auction is not the best place to buy homes. A) you are bidding against banks who are paying themselves off, and B)you are buying “As Is”, with no ability to say yes or no AFTER an inspection(you can usually get an inspection on pre and or post foreclosure. They may not repair anything, but you get an idea if you are getting in over your head, or not)..

6) If bank buys property back, they can sell home via REO(Real Estate Owned) Realtor, sell the home via their own in-house REO Realtor(rare), or if the home was insured for enough money, then they can just turn the home over to the PMI company/HUD/VA.

Side Note: For people who don’t think percentage rate on a loan drastically affects your monthly payment…

150k loan at 7% = $997 p/month payment
150k loan at 8% = $1100 p/month payment
150k loan at 9% = $1207 p/month payment

So if you get an ARM and it adjusts 1-2% a year you can see how quickly you can get in trouble. Google for a mortgage calculator if you want to plug in your own numbers.

As always, if you like what I write, and you or someone you know is looking to buy, sell, and or invest using a great realtor in central Indiana, or anyplace else for that matter. Please feel free to send me the persons name, email, address, and or phone number and I will be happy to help them, or refer them to someone else who can… In the process, I may earn a referral fee, if i cant help them myself!

What kind of deal can i get on a short sale?

Lee’s Notes: I have been doing some further research on the whole short sale thing, and found this article and thought I would share…

Q: What makes a bank decide whether to take a discount on a defaulted mortgage or not? And what formula do they use to decide how much to take? Some banks I’ve talked to have just said no to a discount right away, and others seem perfectly happy to negotiate any offer, even if it’s a fraction of the loan amount. What gives?—D.D., Houston

            There are a number of factors that go into a lender’s decision about whether (and by how much) to discount a loan gone bad. Some are obvious; some involve the vagaries of the lending market.

            The first step in getting a particular lender to consider YOUR short sale offer is to have your own ducks in a row. Before the lender will even discuss an offer with you, you’ll need a signed purchase contract and a letter of permission from the seller allowing the bank to discuss his loan with you) You’ll also need to make sure that you’re talking to the right person at the right bank—sometimes the place that the seller is sending his payments is not the lender at all, but just a loan servicer. And there’s usually only one person within a given institution who’s empowered to take offers to the board, so discussing your offer with anyone else is a dead end. And don’t even bother to call the attorney who’s handling the foreclosure—there’s absolutely nothing he can do for you.

Assuming you’ve done your homework and are talking to the right paper-pusher, there are a number of other factors that could affect how open the lender is to your offer. One is where the loan is in the foreclosure process. If the borrower is just a few months behind—or if the auction is happening in 3 days—the bank might not be terribly motivated to take a major discount. In the first case, they may assume that they can work out a payoff with the owner: in the second, they’ve already invested a great deal of money in legal fees, and may feel that it’s better to take their chances on getting the property back and reselling it on the open market.

Another issue is the condition of the property. Most lenders are hesitant to take back a property that needs major work, or that has building orders, or that could become an “attractive nuisance.” In other words, the nastier the house, the better the chance that the lender will deal.

Of course, the lender’s position as creditor is another big factor: 2nd and 3rd mortgagors are usually much more willing to discount—and discount BIG—than a 1st mortgagor. Think about it: the seller may have no equity thanks to a 75% 1st mortgage and a 30% 2nd, but the 1st mortgagor has 25% equity if he has to take the property back.

The requirements of the lender’s private mortgage insurance company or of FHA and VA insurance also influence its decision about how much to discount, as does the housing market, difficulty of foreclosure in a particular state, number of bad loans the bank is dealing with, likelihood that the owner will declare bankruptcy, and many, many more variables. So the short answer is, there’s no short answer.  Make your best offer, keep following up, and don’t get discouraged!

Reprinted from the Real Deal, a monthly newsletter for Real Life Real Estate Investors with permission of Vena Jones-Cox. Get a free 3-month trial subscription by logging onto http://www.regoddess.com. One per household, please.

As always, if you like what I write, and you or someone you know is looking to buy, sell, and or invest using a great realtor in central Indiana, or anyplace else for that matter. Please feel free to send me the persons name, email, address, and or phone number and I will be happy to help them, or refer them to someone else who can… In the process, I may earn a referral fee, if i cant help them myself!

Stats on short sales in Indianapolis MIBOR..

Heard an interesting statistic today.. Another agent who is a numbers guy like me called me and told me that he had done some research and found a scary statistic.

8000 homes were listed last year in our BLC/MLS(Multiple listing service) as Short Sales/Pre-foreclosure. Do you know how many actually sold? 300…..

This Realtor completes between 70-90 transactions per year, and generally has 20-25 houses listed at any given time. He told me that after hearing the number above, it makes a lot of sense. Of the listings he had last year that expired, 80% of them were short sales.

I have an article somewhere on here where I talk about homes that go to auction. The stats are generally that 800 may show up at an auction, but only about 7-14 actually sell at auction. The rest either are withdrawn by the bank, or the bank buys back..

In the real estate industry, a lot of people are preaching that a great future niche is going to be in selling short sales, REO(real estate owned), etc.. I think you will need to know the language of Short Sales, REO, etc, but the numbers currently out there are not looking good for that being a growing niche market.

Your thoughts? 

 As always, if you like what I write, and know someone who is looking to buy, sell, or invest in real estate, give me  a call or shoot me an email with their name, phone, address, and or email. Even if they are in another city/state than Central Indiana, i can prolly find someone to recommend them to, and if I am really lucky, i will get a referral fee and get to feed my son!

Home Inspections, the second negotiation phase?!?

Been pretty busy since I got back from atlanta last week. Have a property that is supposed to close this coming friday, but we are having some problems with the inspection. It’s a 40+ year old house, and the buyer thinks it should be brand new.  I dont fault the buyer for being a first time buyer, and scared of everything. I fault the inspector who feels it’s his personal goal to destroy a deal for very minor things.

I have been flipping homes for 15+ years, and I learned early to get an inspection.  I also learned that there is no such thing as a perfect house.  You pay an inspector to find major things wrong with a house, but that doesn’t mean everything needs to be fixed.

Plus lets look at financing, you can’t give credits for repairs if you are doing 100% financing. When people had to put down 5-10%, you could give credits to someone and they could use the credit towards an upgrade at a later date. With 100% financing, you have to get whatever fixed, and no real room for upgrades at a later date. Everything that needs to be repaired has to be put into escrow until closing and or the contractors can get to the work.  No money to buyers is allowed on 100% financing. And before you ask, Yes 100% financing deals are still going on…

Im a bit frustrated right now. I have a seller who has been bending over backwards to close on this deal. He is losing money on the transaction, and is trying to keep costs down so is completing a lot of the work himself, and the inspector can’t make up his mind on what he finds acceptable.  One second he is worried about moisture buildup in the crawl space, and then the next second he wants hot water heater relief lines draining out into the crawl space.

We’ll get there.. That’s why I get paid the small bucks.. I keep an even temperment and try to hold deals together.

Been a bit negligent in posting lately!

I have been in Atlanta, GA for the past week. Went for a Keller Williams Real Estate Convention. Was a great time, made a lot of friends and contacts. DEFINITELY if you like what I write, and have a friend or family member looking to buy, sell, or invest, send me an email with their name, phone, address, and email(or any of the above). I will do my best to find someone to refer them to, and maybe I will get a referral fee so I can feed my rugrat!!! hehe

What did I learn? A great many things.  I had dinner with one of the top agents in the city, and I showed him my marketing strategy for homes that I list. He told me “WOW, do you need to do that much marketing for a house? It’s like killing a mouse with a canon!” We all had a good laugh, and I informed him I would start to use that in my marketing! hehe

I went to quite a few investing seminars. I have a lot to offer investors, and plan to market to them a bit over the next year. Most of the other Realtors I met who deal with investors were in awe of my reports I create for investors showing the top 10-15 homes in an area that would make great rental properties along with basic ROI numbers. Takes me about an hour to complete the list per a clients requirements, and then 15-30 minutes from their out to rerun the report. Great value added incentive for investors.

I’ll update some more Ah-Ha’s from my trip as the week progresses. Send me an email if you have a topic you would like me to cover. I get about 50-100 hits per day, so you folks are interested.

Thinking about flipping a house? Food for thought!

Yes, even in this market you can still flip houses… Let me give you a hint that the pro’s use when flipping houses.

(HINT)Make sure the price you buy the home at allows you to price the home to sell(after all your costs) at 85-90% of market value… e.g.- home that should fetch 100k in great shape, put it on the market at 85-90k…(/HINT) You’ll sell much quicker, and if you plan appropriately you will get the profit you need out of a deal.. Make sure you get a good realtor that can give you GOOD numbers on what a home is worth!

What does that entail? RESEARCH!!!!

1) BEFORE you buy a house make an extensive list of all the repairs and how much they are going to cost. Let me reiterate that.. MAKE A LIST of everything you need to repair, and price out said repair…. Don’t go by memory, you will forget costly things…

2) Figure out your quiet costs(neighborhood dues, interest/mortgage payments you will make while fixing, property taxes you will have to pay, closing costs, etc).

3) Plan for Realtor fees(if you plan to use a Realtor). If you don’t plan to use a realtor, then it’s extra profit for you.. I’ll just caveat that with a good Realtor can do the selling process for you so you have more time to look for more deals…

4) Lastly, figure out how much profit you need to make.

5) Subtract steps 1-4 from the 85% price. You might put it on the market at 90%, and sell it at 90%, but try to plan for the 85% price… I dont recommend you go for over 90%, because you want the house to sell quick so you dont keep incurring more quiet costs.

Example of a house i did this with a month ago:
235k Market value

200k 85% planned sale price
– 60k repairs
– 7131 quiet costs(this number could be a lot different depending on time for repairs, etc)
– 17k in realtor fees(figure 7% @ 85% sale price)
-32k profit(put in whatever number you need to have)
-=-=-=-=-=-=-=-=-=-
$83868.00 is what we offered… Well, actually we offered 83k, but you get the picture.

The best investers and flippers are going to walk if they don’t get their price..

You can get some great deals right now, because the media has everyone convinced the market is terrible… Some people are working deals!! Some people arent working deals, hence you walk away if they don’t want to accept your price….

Share the report you created with the seller or your realtor so they can show the seller or his/her realtor… Profit isn’t a dirty word! You NEED to make 32k on this deal. Heck if you need to make 100k on the deal, you NEED TO MAKE 100K… Them’s the breaks!

A lot of Realtors either dont want to tell their sellers that they are priced to high, or just don’t know any better… So you show them your spreadsheet, and you give that realtor/seller a reality check! “He’s right, I do need to replace all the appliances, and the countertops, and blah blah blah… His prices are a lot cheaper than what it would cost me!”

Even if you dont get the house, you prolly put the thought in their head they are too high, and maybe they will come back to you later and ask you to remake the offer….

Hope some of this helps. Ill try and add some spreadsheets/checklists etc later to help people who are considering flipping homes. As always, if you like what I write, then refer a friend or relative to me.. Even if they aren’t in the Fishers, IN area. I have strict standards on what I accept from a realtor, and i will be happy to find a realtor in another city/state and refer you to them. I might even get a referral fee!