FSBOs (Homes for sale by owner) aren’t just growing in popularity in the States. Turns out, giving power back to the buyer is becoming a global trend. Take a look at these recent articles, all showcasing dissatisfaction with the current real estate models:

NEW ZEALAND

“The real estate industry cannot afford to insist on the traditional model of selling property, an academic and former real estate agent says.

“”Participants in the market are largely caught within the system and … in many cases people cannot see value for money.””

(from The New Zealand Herald, 2/27/08)

THE U.K.

“[One particular] couple paid £398 in fees to have the flat listed online at Hatched.co.uk - a sum that covered photographs, floor plans and ’shuffling the paperwork’, but otherwise the couple handled the sale themselves. ‘We had three local estate agents around and, frankly, nothing convinced me that they were going to be worth us paying £4,000 commission,’ says Mat. ‘Anyway, it’s hardly rocket science. The property programmes tell you how to make your home presentable. We didn’t go as far as having bread baking in the oven or coffee brewing in the kitchen - we didn’t have to. We sold at the right price in two weeks.’”

(from The Observer, 2/24/08)

KENYA

“Selling on your own — while potentially a hassle — could save you roughly five per cent in broker fees. This varies, of course. For hard-to-sell properties, the savings could be as high as seven per cent, but in highly competitive markets (where brokers are cutting their commissions), the savings may be lower.”

The article goes on to suggest these tips for selling a property without an agent: Price properly, Cast a wide advertising net, and Do your research on making and closing the deal.

(from The Standard, 2/28/08)

BACK HERE IN THE U.S.

“When it takes more hours to become a cosmetologist than a real estate agent you know there is something seriously wrong with an industry,” says Stefan Swanepoel, author of the new 170-page real estate report. “It is unbelievable to think that the standard required to become a licensed real estate agent is between 30-120 hours whereas it takes about 1,200 hours to learn how to cut hair and do nails,” he says.

(from TransWorld News, 2/25/08)

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Tags: for sale by owner, FSBO, real estate, rel estate sales

Negotiating the terms of your loan can be as important as negotiating the sales price of your new investment property. Interest rates and closing cost a huge part of cash flow and return on investment, with the proper due diligent and negotiations, investors can be rewarded on every real estate transaction.

What can actually be negotiated?

Closing costs and interest rates are probably the first thing investors try to negotiate, but there are others like, time, appraisal and title, volume discounts and pre-payment penalties.

Some investors have lots of money, but very little time, ask about streamline refinance and purchase transactions. They may require more money down, but less documentation and are very quick loans to complete. In some instances it can take half the time as a normal loan.

Just about everyone in real estate is looking for business. Appraisers and Title Companies are no different. I personally have renegotiated my fees with all the vendors I utilize and in turn passed that saving to my investors. Rates have been so good the last few months I had to reduce the cost of refinancing so my investors can break even quicker on their refinance costs.

I am a firm believer in building your power team, remember a loan officer should be part of your team, and ask for discounts only if you can offset that with volume or multiple transactions. Most investors realize that a good relationship with their loan officer usually saves either time or money, sometimes both.

Those investors that are holding on to the property long term ask if there is a prepayment penalty that will help lower your interest rate. Three year prepayment penalties are common on the right loan and could reduce the interest rate .5%-.75%. This is a situation you should have a clear exit strategy. If you try to sell or refinance before the penalty is expired, it could cost you up to six months interest.

Remember, there more than one way to save money in real estate and there is no reason you should not use all of them.

Tags: closing, closing costs, escrow, Interest Rates, Investor Loans, loan, mortgage, real estate, title, troy schuricht

The following information is about what the U.S. Senate is up to. If any of this becomes law, it will have a direct and severe impact on my business.
There are very good and honest investors out there and BiggerPockets has been a great place for new & seasoned investors to get together and let others know how to do things the right and honest way.

• Legislation Expected to be Introduced Soon.
• Measure Likely to be Modeled After Minnesota Law,
• But May Contain Additional Restrictions Harmful to Investors Nationwide

February 22, 2008 (U. S. Senate)

Wisconsin Senator Herb Kohl has announced plans to introduce legislation aimed at curbing the rise of ‘foreclosure rescue scams’ - using a model which may include restrictions that could be harmful to all real estate investors. The measure is likely to contain some or all of the following provisions:

• Ban on leasebacks-to-owners
• Ban on upfront foreclosure consultant fees
• Ban on all “subject to” transactions
• Limitations on an investor’s ability to purchase or take an equity interest in a home in default
• Ban on all advertising related to “Saving Homes from Foreclosure”
• Restrictions on real estate seminars, which could even apply to Real Estate Investor Association meetings

Also noteworthy - in the Minneapolis / HennepinCounty area alone, foreclosures have increased more than five-fold since the 2004 passage of the Minnesota statute.)

On behalf of real estate investors at the national level, the National Association of Responsible Home Rebuilders & Investors (NARHRI) is already tracking this legislation. NARHRI Executive Director John Grant says that NARHRI will offer alternative legislation from the Commonwealth of Virginia, which has the support of the local realtors, lenders, consumer groups, and which recently passed the House unanimously.

NARHRI expects to see intense political pressure for passage of the legislation before members of Congress leave in the fall. NARHRI indicates it will be providing updates on this effort as circumstances warrant.

This is a very serious in my opinion. It is very frustrating to know that there are legitimate, honest and good investors, mentors and teachers that will be affected in a harsh way.

Please, spread the word on this to everyone you know in the business. It is our job to protect our business. If we sit back and say nothing, there will be no voices to be heard and this could actually become law.

Thank you!

Tags: bailout, foreclosure, foreclosure rescue, foreclosure scam, herb kohl, housing, legislation, scams, senate

It is no secret that the business of buying real estate directly from the bank prior to it being foreclosed on is both in style and highly lucrative. The issue a lot of “Short Sale Specialists” have revolves around making the deal work on the front end. Time is our most valuable asset as Real Estate Investors; we can never get it back once it is lost. A lot of time is being wasted on the pursuit of hopeless short sale opportunities and I would like to take a few moments to share with you exactly how you can avoid wasting time.

In the business of Short Sales, your #1 enemy should be houses or condos that are pretty. I would consider a home to be pretty if the work needed does not exceed paint and carpet. Believe it! When I got started, I wasted several months of my time pursuing every single Short Sale opportunity without a screening process or a system in place for knowing my deal was going to work. Negotiating discounts on pretty houses is not recommended and it is not a viable business model. The lending institutions are stiff as nails on these types of properties and the best an investor would be able to do is 80%+ for the discount. Those numbers don’t work at all unless you’re looking for a personal portfolio of rentals and lease-option properties. The reality is that most investors are wholesaling. Even if you don’t consider yourself a wholesaler, you are still playing the middle man/woman somewhere in this business. A much stronger discount than 20% is needed to make room for your check to be cut. We want to be in the 35%+ discount range and in most cases that will not work with the pretty houses.

So what kinds of homes should you become best friends with?

• Ugly Homes
• Homes with large 2^nd mortgages
• Homes with a lot of equity

Sometimes there are areas that lenders do not discount and a little bit of research is required to determine what subdivisions to stay clear from and which ones to pursue.

We need to know:

1. How many homes are foreclosing?
2. How many homes are ending up at the sale?
3. How many homes have the opening bids at less than what is owed?
4. How many homes are going back to the bank?

With this kind of information about a particular market, you can do two things. You can take what the market will give you or you can move to another market. A big ship takes a long time to turn around, so unless you are going to jump, you are going to have to wait. You really don’t care how many go to the sale per se, but you really are concerned about what percentage of the homes that go to default actually go to the sale and how many of those go back. If see a trend of opening bids starting lower than the payoff on a home, those are super deals.

So it is very important to sift through the big questions. Another point you may want to clarify is the fuse on the properties – meaning the length of time between default and sale. Remember these: Is it really Ugly? Does it have a big second? Does it have a lot of equity? In some cases, you may not want to do a short sale because there is a lot of equity there.

**NEWSFLASH** If you do a forbearance agreement with the bank, they do not charge you interest. The definition of a workout is the ability to stretch out the payments on a home instead of paying the arrears in full.

The objective here is to create more time and resources to chase fewer deals that will actually give you a back end pay day. The key is staying away from the semi to fully blown pretty houses that are pretty much stuck at 80%+.

Blessings to your Real Estate Investment Successes,
Milton B. Yates

Tags: creative pre-foreclosure strategy, foreclosure, learn short sales in dc maryland virginia and dallas, preforeclosure, short sales, wholesaling

It is amazing, by any standards, just how bad things have gotten on the economic front because of what was, at first, a crisis in the subprime mortgage market.

Of course, conditions had to be right (or wrong, in this case) for the subprime match to ignite such an enormous world-wide blaze, but, it has, and the figures out just this week prove that to be the case.

Yes, there are areas of the U.S.–mostly smaller metro areas–where the real estate market is not that bleak—-yet! But, if you look hard at the facts and figures to follow, you will have no option but to come to the conclusion that even these areas will soon feel the fury of a global, U.S. caused, economic meltdown.

Ready?

Here goes.

From bad to real bad

A national home price index just released shows a record collapse in home prices for the last quarter of 2007–down 8.9 percent. This is the largest drop in the entire 20 year history, says Reuters, of the S&P/Case -Shiller U.S. National Home Price Index.

“The composite index of 10 of the largest metropolitan areas fell 2.3 percent in December versus November and tumbled 9.8 percent year-over-year, which set a new record.”

17 of the largest 20 metro areas posted annual declines–while the remaining three showed either flat or moderate growth.

In case you are wondering, Miami is the worst—home prices there crashing at an annual rate of 17.5 percent!

We’re not through, yet!

No wonder that Consumer confidence has gone down the toilet, too. (Presumably a toilet in a home whose value has dropped!)

The Conference Board in New York reports consumer confidence has gone down “significantly,” says an Associated Press dispatch.

The Board found the lowest reading on its index since 2003 and tells how consumers are feeling about the state of the American economy. No surprise that they don’t feel all that good right about now.

Now, ready for some REALLY bad news? Of course you are.

Inflation is back! Big time, too.

Inflation at the wholesale level climbed last month…and that means the annual inflation rate took its fastest leap in some 25 years!

Rising food, energy and medical costs mostly to blame here.

Last month, the Labor Department says, wholesale prices went up a full percentage point–twice what apparently had been anticipated. For the year, that brought the inflation level to 7.5 percent.

We’re not done just yet. Hang in there.

I did mention the increase in medical costs, right? Well, the cost of keeping you and your family healthy is expected to double by 2017 with the federal government expecting that one in every $5 spent by then will be for medical care! Nice if you happen to own a hospital.

Oh, and one more thing. In January, the number of homes that faced foreclosure skyrocketed 57 percent from the previous year. Let’s say that again: 57 percent!

So far, all the talk of helping those who are about to be booted from their homes seems to be just that, talk. What is needed is real action.

Other pressures

Of course, all of this was not caused solely by the subprime mortgage mess . . . China and India are flexing their economic muscles as never before and that is exerting an enormous pull on the world’s economy, changing the landscape even as you read this.

But, make no mistake about it, the subprime crisis is largely responsible. It exposed the greed and, perhaps, criminal actions of banks and other lending institutions throughout the U.S., Asia and Europe.

And now, the piper MUST be paid…with inflated Euros and devalued U.S. dollars no doubt!

Tags: consumer confidence, Economy, Foreclosures, inflation, money, subprime, subprime mortgage crisis

The Green revolution has arrived, and it wants you! In todays modern construction world, many builders are investing in Green construction and finding a whole new Market of eager buyers, and the cost depends on just how green you want to get. As for how much it costs, and how much it saves, well, that just depends on who you asks. The exact cost of going green is still being debated; most estimates come in at around 10% above traditional construction practices. Others feel the extra cost’s are offset by the money saved through energy efficient construction and reduced waste.

There are also loan programs designed for consumers through Fannie Mae that offer incentives to build green. Fannie Mae is the congressionally chartered private company that works with lenders to back mortgages for low, and moderate income Americans; they are the prime mover of Green mortgages throught their EEM program. To qualify for the program, homeowners must either buy a new energy efficient home, or commit to upgrading an existing building as recommended by an inspector certified through the Home Energy Rating System (HERS). While HERS inspections cost as much as $400, the projected savings from energy efficiency are considered part of the borrowers income, and can help them qualify for larger mortgages.

What is GREEN?

In building a house or office building, a great many materials and products will be used. Even in the greenest of projects it is likely that many products will be used that are not themselves green, but they are used in a manner that helps reduce the overall environmental impacts of the building. Take recycled plastic lumber, for example: it’s made from recycled waste, it’s highly durable, and it can preclude the need for pesticide treatments. Straw particleboard products are made from agricultural waste materials, and they are free from formaldehyde off-gassing.

Products Made with Salvaged, Recycled, or Agricultural Waste Content

The materials used to construct a building (and where those materials came from) are key to determining the greenness of a project. In certain situations, from a life-cycle perspective, recycling has downsides. For example, energy consumption or pollution may be a concern with some collection programs or recycling processes. Pre-consumer recycling refers to the use of industrial by-products, as distinguished from material that has been in consumer use. Iron-ore slag used to make mineral wool insulation, fly ash used to make concrete, and PVC scrap from pipe manufacture used to make shingles are examples of post-industrial recycled materials.

A number of products are derived from agricultural waste products. Most of these are made from straw, the stems left after harvesting cereal grains. Citrus oil, a waste product from orange and lemon juice extraction is also used in some green products. Aside from salvaged or recycled content, there are a number of other ways that products can contribute to the conservation of natural resources. These include products that serve a function using less material than the standard solution, products that are especially durable and therefore won’t need replacement as often, products made from FSC-certified wood, and products made from rapidly renewable resources.

Some of these products may not be distinctly green on their own but have resource efficiency benefits that they make it possible. For example, drywall clips allow the elimination of corner studs, engineered stair stringers reduce lumber waste, pier foundation systems minimize concrete use, and concrete pigments can turn concrete slabs into attractive finished floors, eliminating the need for conventional finish flooring. Certified wood products Third-party forest certification, based on standards developed by the Forest Stewardship Council (FSC), is the best way to ensure that wood products come from well-managed forests. Wood products must go through a chain-of-custody certification process to carry an FSC stamp.

A few manufactured wood products, including engineered lumber and particleboard or MDF, can be included if they have other environmental advantages, such as absence of formaldehyde binders. Rapidly renewable materials are distinguished from wood by the shorter harvest rotation—typically 10 years or less. They are biodegradable, often (but not always) low in VOC (Volatile Organic Compound) emissions, and generally produced from agricultural crops.

Products That Avoid Toxic or Other Emissions

Many of the adhesives on the market contain a high content of chlorinated solvents. These solvents smell bad, are unhealthy to breath, and create air pollution. Some building products are considered green because they have low manufacturing impacts, because they are alternatives to conventional products made from chemicals considered problematic, or because they facilitate a reduction in polluting emissions from building maintenance. Most of the products satisfying this criterion are in categories that are dominated by the more harmful products, such as foam insulation categories in which most products contain HCFCs.

Certain materials and products are green because they prevent the generation or introduction of pollutants (especially biological contaminants) into occupied space. Duct mastic, for example, can block the entry of mold-laden air or insulation fibers into a duct system. Track-off systems for entryways help to remove pollutants from the shoes of people entering. Coated duct board, compared with standard rigid fiberglass duct board prevents fiber shedding and helps control mold growth. Many of the conventional products used for repair and improvement projects around the house contain high levels of toxins. However, such chemicals can have many adverse affects on the health of you and your family. Children are particularly vulnerable to environmental toxins, thus it’s important to surround them with items made of non-toxic, natural, organic materials.

Although we can’t very well tear our homes down and rebuild them to be Green, there are many uncomplicated low cost changes we can make such as:

Solar Attic Fans, which are a simple and environmentally sensible solution that can save you money! Powered completely by free solar energy, with no electrical wiring, no expensive electrician and city permits. Place them wherever you need improved circulation; attics, lofts, workshops, storage sheds, garages, even barns.

Tunnel Sun Lights are a complete roof-to-ceiling skylight system that channels sunlight around attic obstructions to bring sunlight to hard-to-reach areas of your home.

Water Aerators help reduce the huge quantity of water which is wasted on a daily basis in the average home. For example, a normal sink’s faucet flow is 3 to 5 gallons of water per minute. There are other frequently ignored wastes as well, such as the fact that the average American uses over 100 rolls of toilet paper each year! Installing an after market bidet will reduce this consumption.

Fiberglass insulation contains glass fibers and some varieties are treated with formaldehyde. Cellulose insulation is an effective and safe alternative; it is made from recycled newspapers and some pre-consumer waste. Even when it comes to flooring there are many alternatives to synthetic flooring such as natural cork for a number of reasons, such as: 1) Its sustainable 2) Its beautiful3) Its lasting4) Its quiet5) Its helps allergy sufferers. Also, hardly any other product combines such extremely high comfort with natural properties.

LEED®

The U.S Building Council has created a ranking system for scoring the greenness of a project known as LEED®. It is the nationally accepted benchmark for the design, construction and operation of high performance green buildings. It gives building owners and operators the tools they need to have an immediate and measurable impact on their buildings’ performance. It also promotes a whole-building approach to sustainability by recognizing performance in five key areas of human and environmental health: * Sustainable site development * Water savings* Energy efficiency* Materials selection * Indoor environmental quality.

Who Uses LEED®?

Architects, real estate professionals, facility managers, engineers, interior designers, landscape architects, construction managers, lenders and government officials all use LEED to help transform the built environment to sustainability. State and local governments across the country are adopting LEED for public-owned and public-funded buildings; there are LEED initiatives in federal agencies, including the Departments of Defense, Agriculture, Energy, and State; and LEED projects are in progress in 41 different countries, including Canada, Brazil, Mexico and India.

So as you can see, Green is here to stay, and in time it will likely become “The Way” to build homes and buildings. For many builders and realty investors, it will take time to adapt, and adopt the mindset of the revolution; but as with all revolutions, change is inevitable. So to those of you that are embracing the Green movement, I say, Viva La’ Revolution!

Anyone interested in learning more about building green can purchase a copy of GreenSpec, a builder’s guide to going green. GreenSpec Directory, Fourth Edition (Paperback) by Editors of Environmental Building News (Author)

Tags: building green, energy savings, going green, green, green construction, green real estate, recycle

As promised, I’m going to circle back and cover a few pre-contract concerns that have to do with due diligence and determining value. I also want to address the importance of not falling into the trap of what I will Anti-Real Estate Agentism - AREA for short. Not only do first time investors benefit from an extra mind that’s experienced, it’s a benefit to all investors except the ones who have mastered all aspects of investing. I’m not saying this because I’m an agent, but because it’s true. And if you absolutely insist on AREA, then rely on SOMEONE who has the necessary experience to be a guide, a mentor, a sounding board, an extra set of eyes and a mind trained to spot advantages and traps, someone who knows the process in and out. Unless you’re into saving nickels to lose dollars, get help.

When I first got involved with real estate investment, I had only a cursory understanding of how local, state and federal government affect the values of real estate, how it’s important to understand how their actions can determine your best course of action when investing.

Let’s say you’ve eyed a property in what seems an up and coming area in your town, a building that would be perfect for a restaurant. Renovation is happening in this area; you can see a building across the street that’s being rebuilt and you hear it’ll be a coffee shop and the building next to it will be an upscale antique shop. It’s on the periphery of downtown and it seems logical that growth is going that way. All this you can see and discern, so you estimate a price on the property you like and come to find out the owner is asking way more than you estimated, so you pass on it because your friend who has an uncle who invests gave you a formula to estimate fair market value. Perhaps your friend failed to mention something that when you are on the streets, so to speak, actually investing, is vitally important.

Let’s say you’ve done partial due diligence and are pretty sure you have a good idea of the property’s value, however you haven’t gone the extra mile and become involved with community planning, nor or you up on zoning in surrounding areas, and you don’t really have an understanding of transportation plans. The owner knew of land use changes in the neighboring area, therefore priced accordingly; however, the owner didn’t know about recent transportation plans to open a route to the new area because plans were in the works to build a mall. The new route and the upcoming development would put this property in a prime spot for future traffic. Actually the property is worth more than the owner is asking, speculatively speaking.

The point is to think large even if your investment strategy is to start small and focused. And the point is to know what’s going on with community planning, zoning and transportation in the surrounding areas. It’s one thing to calculate value with a formula working with limited information, it’s another to project value based on full context.

The investor, if all turned out as planned, and therein lies the risk of investing, could have bought the property, rented it out for one purpose for two years or so, basically breaking even, then could have sold once the development was complete at a much higher price, making a nice profit. He could have if he had had the information.

Information is valuable. Information is what it’s all about. Hmmm, information, that sounds like a good topic for next week. Later.

Oh, I forgot, AREA. A good, informed agent might have helped this beginner. Something to think about.

Tags: Lands use, property, property values, real estate, real estate investing, real estate investor, transportation, zoning