It would be a severe understatement for me to say everyone has an opinion on this mega foreclosure problem happening today. However, it wouldn’t be an understatement to say Sheriff Thomas Dart of Illinois actually expressed his opinion.

If you haven’t heard of him, use your friendly search engine and you’ll see many interesting articles. He decided he wasn’t going to process foreclosure evictions because he didn’t believe some renters in apartment buildings were receiving enough notice of the foreclosure.

He is quoted as saying, “Innocent tenants [will no longer] be victimized by an uncaring, reckless system.” He went further and imposed the requirement that banks must prove they informed tenants of a 120-day grace period as required by state law. This grace period allows tenants to find new housing before moving out.

Simple Solution To Complicated Problem

This seems like a simple solution to a complicated problem. After all, the forecloser is required to provide mandated notice requirements in any type of court action but some don’t always provide that notice to tenants. If I am correct, Illinois does not provide any type of exceptions to the notice requirement. Apparently the sheriff wasn’t provided with his copy of the notices.

I actually applaud the sheriff for taking a stand he thought would help what he termed victims. However, one has to ask if the foreclosure process was followed to the letter of the statutes, can the sheriff make the determination, based on social consciousness, that he will not follow the law as written?

If he can, then other sheriffs would be able to say something like the problem is simply too big to let continue and, they too, have to stop conducting foreclosure sales because too many people will be on the streets.

You can probably construct the logic stream that would follow so I won’t continue along that line. Rather, I’ll pose a question or two.

First, if Dart’s action actually happened in every jurisdiction in the U.S., would we have put a crink in the political/financial free-for-all called bailout?

Second, would that be fair to those of us who pay our mortgages on time?

Third, do we want social conscience to be our determinant in what laws are, or are not, followed?

Since the question stream can continue for pages, I’ll simply stop with three. I wrote the above scenario because those of us in the trenches should be aware that any type of policy can come at us from any quarter involved in the process. When it does, we are the ones affected and that affection is usually monetary in nature.

Also, this problem has left the old school thought theology rocking and reeling. What was once a known system with known procedures has been altered to an identifiable situation with maybe procedures. I am finding I have to test as I go. What was a sure fire submit package is now sometimes merely a baby step into the process.

I’d appreciate hearing what others are finding as they find properties, make offers and attempt to close their deals. Maybe I am off base and need an attitude adjustment.

Photo Credit: prestoncovillaud

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Tags: evictions, Foreclosures, housing, sheriff foreclosure, tenant

1. You control the cash flow. Unlike other, passive, investments such as stocks and bonds, the owner of an apartment building is the CEO. If you need more cash flow and the local market will allow it, the owner can raise rents.
2. If you don’t want to manage the day to day operations of the apartment complex then you can delegate the management duties to a qualified and licensed real estate management company.
3. It is possible to get seller financing. Many apartment building owners are savvy investors and are more than willing to offer seller financing. This makes the purchase of an apartment building easier without having to qualify for a bank loan.
4. All of the units are under one roof. This fact makes management easier and more cost effective.
5. Forced Appreciation. Apartment buildings are valued according to the net operating income. This means that a motivated apartment building owner can directly increase the market value of his or her investment by cutting or reducing various maintenance costs. Value can also be increased by making strategic improvements to the property.
6. The stock market stinks. The stock market has been a roller coaster ride for most investors. Why trust your hard earned money to chance? Apartment buildings offer a relatively low risk investment with a high rate of return.
7. Your job stinks. If you are employed full time working for someone else you can never be sure how long you will have your job. The income from a well managed apartment building is relatively stable and secure. Most tenants will be on a year long lease.
8. Appreciation. During times of high inflation, such as now, apartment buildings tend to see their value increase. Historically, rents tend to rise along with the prices of other goods and services.
9. Lower cost per unit. Typically, apartment buildings have a lower cost per each unit then residential homes or triplexes and duplexes.
10. You control the quality and quantity of your income. As an apartment building owner you can control the quality of your income. This means that you determine who rents from your building and who doesn’t. The quality of income from a person employed as a school teacher for 15 years is different then the quality of income derived from a shiftless day laborer.
11. Maintenance on apartment building units can be a lot more affordable then maintenance on an equal number single family home units. Generally, contractors will be more competitive on their bids for large jobs, under one roof, then they would be for an equal number of small jobs spread across town.
12. Retirement money. An apartment building can be a steady source of income during your retirement years. An apartment building investment will allow you to work only part time while still receiving a full time income. If you need an affordable place to live you can live in one your units.
13. Pay half the taxes you now pay. Standard tax rates of 30-50% don’t apply. You will be able to pay the capital gains rate of 15% by buying and holding.
14. Pass on the wealth to your children or grand children. Have you thought about how you will pay for your children’s or grandchildren’s college education? Apartment buildings can be easily passed on to your heirs. If they lack the experience or desire to manage the building you can have management already in place for them.
15. Foreclosures. Millions of families are now facing foreclosure. These displaced people will need a place to live. They will most likely be renting because mortgages are harder to come by while home prices are still dropping in most areas of the country.

Photo Credit: albany_tim

Tags: cash-flow, financing, Foreclosures, real estate, real estate investing, seller financing

As our great and venerable (throat clears) leaders continue to debate the bailout of banks and millions who cannot afford their homes, I thought that I’d share some quotes that might bring some perspective to the issue:

On the value of money nowadays:

And to think, $50 billion use to sound like an unimaginable amount of money. Now the way people throw around the world billion, $50 billion sounds like milk money.

I bet with the inflation our country is going to go through after this bailout, you will actually need close to that for milk. - Jason F.

On WaMu failure and Funding of the FDIC:

WOW! The FDIC prefers to move in and take over at 5pm on Fridays to give them the weekend to clear things up and so people can’t panic as much-that shows just how bad things were for WaMu if they couldn’t wait 24 hours.

On a WaMu side note-we just got a new client at my firm in the past month, her father passed away and surprisingly left her 2.5 million. 750k of that was in WaMu CD’s. I was trying to get my boss to really press them to get the money out asap, regardless of penalties, but they wanted to wait on the “death put” (in case of death a cd can be paid out without penalty) to avoid losing out on any money. Talk about Penny smart, Pound foolish! Please people, DO NOT keep more than the FDIC limits in your bank accounts. I know that may be hard for some business accounts but you never know who and when this is going to happen to next.

Next order of business for congress-bailing out the FDIC. With all the talk about ‘bailouts’, you’d think there was a sinking ship around here… - Bob H.

On the bailout stall in Congress:

Good. I am glad the House Republicans are stalling this. We need serious debate over this issue, before we hand over 700 billion dollars of our money. This reminds me of the Patriot Act. Legislation was rammed through Congress so fast that watchdog groups had little time to examine the bill.

Extraordinary legislation deserves extraordinary due diligence. - Matthew G.

On the Bailout:

An outright bailout of people and institutions reinforces bad patterns that emerge again down the road in a new set of clothes. I’m not sure if nothing can be done now, but it seems like there must be some sort of middle road where financial solutions can be reached while still keeping the people on the hook that made poor decisions. - Scott S.

On the Consequences of a Bailout:

Every action has an equal and opposite reaction. Unfortunately the reaction isn’t always obvious. This bailout will cause problems that can’t be foreseen now. How often has the government done something only to have it backfire? - Richard W.

On government intervention aka. Bailout:

I think it’s preposterous and tampering with the free market. I believe that one of the reasons we’re in this mess is because the Fed forced rates to stay low for so long after they were due to increase, which led to the buying spree, inflated prices, and further blowing the bubble. - Alan B.

Tags: bailout, congress, Foreclosures, housing, housing bailout, Mortgages, paulson

The BiggerPockets Real Estate Investing for Real News Blog is officially the first media outlet to announce the arrival of a new website dedicated to helping dogs and cats victimized by foreclosure.

Abandoned Animals of Foreclosure: Help Is On The Way

I have been working in the foreclosure market since I began investing in 1999 and I have run into animals affected by foreclosure. Some were going to be dropped off at shelters while others ended up being left behind in the house…Abandoned.

In fact, last year a homeowner told me they were planning to take their puppy to the pound after I left. Needless to say, I didn’t leave alone. I fostered that puppy for two months until I found it a new home. That’s just me. I have known that animals are abandoned at times but, I never thought I could do much to prevent it and certainly not enough to make a big difference.

In mid-August, I got an email from a woman I used to work with. It contained a link to an article published by the Dallas Morning News. It reported on the growing number of pets that are being abandoned by their owners as a result of losing their houses to foreclosure. It said the local animal shelters have seen an increase of foreclosure homeowners dropping their dogs and cats off with the hope that they will be adopted. An official with the Dallas area SPCA said it has been a growing problem and appears to be getting worse.

I read the article several times and I continued thinking about it for several days.

Two weeks ago… It hit me! I hope that I have come up with a way to make a BIG difference by saving thousands of animals. I have been hard at work transforming my idea into a reality. It is a work in progress and will likely be non-stop updating but, I am hoping that my idea will demonstrate how one person is capable of saving thousands of dogs, cats and other household pets that are or will be affected by foreclosure.

Introducing… HelpForeclosurePets.com

I have summarized how HelpForeclosurePets.com will be able to save thousands of foreclosure pets in Dallas – Fort Worth and maybe on a National level as well.

• A flyer will be mailed to homeowner’s currently in foreclosure in the Dallas - Fort Worth area. It will contain information posted on the website Help Foreclosure Pets.com such as, where owners can turn to for help with their pets like City Shelters, “No-Kill” Shelters, Temporary Boarding, Fosters and Adoption options.
• The site’s main feature is the Pet Connection Board. It will connect pet owners with others who may be able to save their pet by fostering, boarding or adopting foreclosure pets in need.
• Pet owners needing help are encouraged to post information about their pet, what type of situation they feel would be best for their pet and their contact information.
• In order for this concept to work, people interested or able to foster, provide boarding or adopt need to post their contact information on the Pet Connection Board, along with how they are able to help.
• The website also includes rescue information for specific breeds and other organizations & clubs that may be able to help.
• The website will be continuously updated with links to other sites that offer a service to needy animals.
• Help Foreclosure Pets needs donations from individual and corporate sponsors, to help save these voiceless animals. Those sponsoring the mailings will be listed on the flyers, envelopes as well as receive free banner advertising on the web site.
• In order to send a flyer to over 3,000 homeowners in foreclosure every month, a complete list is needed and in Dallas the list must be purchased.

I am happy to announce that Help Foreclosure Pets has its first major sponsor! Foreclosure Listing Service of Addison, Texas, will generously donate monthly foreclosure lists covering four Counties in North Texas.

A big “Thank You” to George Roddy Senior, President and owner of Foreclosure Listing Service.

I hope that anyone interested in saving these animals will contact Help Foreclosure Pets or other organizations dedicated to the same.

One of my mottos with DFW Mentor has been, “Investors Helping Investors.”
Help Foreclosure Pets is “My” way of providing a voice for dogs, cats and other innocent family pets needing help.

The motto of Help Foreclosure Pets is… “People Helping…Foreclosure Pets.”

Tags: abandoned pets, foreclosure, foreclosure pets, foreclosure rescue, Foreclosures

Many people may remember reading the novel 1984 in high school or college. The novel, written by George Orwell, is famous for its depiction of a future dystopia where all modes of expression such as the news, language and art are controlled by an authoritarian government. Admittedly, I haven’t read the novel in years but I have been hauntingly reminded of many elements in the novel as I have listened to some of the rhetoric coming from the executives of major, publicly traded corporations such as Fannie Mae and Freddie Mac. The parallel I find most striking between the language used by financial executives and the language used by the fascists in 1984 are what Orwell referred to as “Newspeak”.

Wikipedia describes Newspeak as the following: “The basic idea behind Newspeak is to remove all shades of meaning from language, leaving simple dichotomies (pleasure and pain, happiness and sadness, goodthink and crimethink) which reinforce the total dominance of the State. Similarly, Newspeak root words served as both nouns and verbs, which allowed further reduction in the total number of words; for example, “think” served as both noun and verb, so the word “thought” was not required and could be abolished. A staccato rhythm of short syllables was also a goal, further reducing the need for deep thinking about language. Successful Newspeak meant that there would be fewer and fewer words – dictionaries would get thinner and thinner.”

Orwell would have to invent a new word to describe the language from top executives at financial institutions now facing ruin essentially because they wrote, bought or held poorly underwritten loans. You will never hear anyone in authority at these institutions express their dire situations quite so succinctly. Instead you will hear what I would call, in homage to Orwell, Bankspeak. Let’s take a look at some examples of Bankspeak used in real life. Below is an email sent to employees by the former C.E.O. of Freddie Mac, Dick Syron, before his departure. These emails appeared unedited in the Wall Street Journal Online:

“To the Employees of Freddie Mac:

As you have probably heard, the Treasury Department announced today that it has placed Freddie Mac and Fannie Mae under the conservatorship of our regulator, the Federal Housing Finance Agency.”

Orwell would be proud of the Bankspeak word “conservartorship”. It subtly obscures the potential negative connotations of the more accurate “take over”.

Mr Syron continues: “We have been through a lot together. Earlier this year we completed a multi-year accounting restatement, a massive and complex project. More recently, we have had to manage significant increases in delinquencies, foreclosures and loan modifications as a result of the sharp decline in house prices.”

The Bankspeak in the above statement should be readily apparent. “A multi-year accounting restatement” is a beautifully obscure phrase of Bankspeak grandiloquence for the more exact “digging ourselves out of our cooked books problem”. Too bad for Mr. Syron, that the housing market behaved so badly and the “ multi-year restatement” efforts were hampered by significant increases in delinquencies, foreclosures and loan modifications as a result of the sharp decline in house price.” As a whole, the above statement, translated from Bankspeak, should read like this: “It really is a shame that our un-cooking of the corporate books was stopped by the whole housing mess that we helped to create.”

Thankfully for Mr. Syron, his mastery of  Bankspeak has served him well and his future looks brighter then ever. In the New York Times he is quoted bidding his final farewell, “I’ve had four other jobs as C.E.O. and I came out of them all pretty well,” Mr. Syron said. “What I’m working for right now is to save my reputation.” A perfect Bankspeak adieu.

Tags: Dick Syron, fannie mae, Foreclosures, freddie mac, Real Estate Market

A few years ago I was in the office, when the receptionist said a gentleman was on the phone and had a question about the house he bought at the auction that day, and asked if I would talk to him.
I picked up the phone and asked what I could help him with.

Finding Great Deals at Foreclosure Auctions

The man said he bought a house that day and wanted to know when he would be able to go into the house and start working on it. I verified which auction he bought it at (Foreclosure or Sheriff sale) and told him that as long as the house is not occupied, he can enter the house right away but, it would be a good idea to wait a few days. This was to make sure the previous owner didn’t file a last minute bankruptcy — the Trustee would inform him if that happened.

The man got excited and went on to tell me that he got a “sweet deal.” I asked him what the numbers were and he told me that he bought a house that was worth $450,000 for $67,000.

My eyes grew very wide and I quickly asked him if he had done research on the title before he bought it? His response was that it was his understanding that the auction wipes out all junior liens so he didn’t see why he needed to research the title.

I remember shaking my head in feeling sorry for him and said, “I’m sorry Sir. I’m pretty sure you just lost $67,000.”

Be Sure You Know What You’re Bidding on at Foreclosure Auctions!

The man shot back in a loud voice, “What!? How do you assume that with what I have told you?” I replied by saying, “You bought a property in what I am assuming is a nice part of town for fifteen cents on the dollar or 85% equity, right?” He said that was correct. I continued by saying, “Can I assume that you were the only person who bid on the property?”

He paused a few seconds and cautiously said, “Yeah. How did you know that?”

I answered by saying, “There are a lot of investors down at the Dallas auction that aggressively bid up to seventy five cents on the dollar all the time but, not a single one of them bid against you on a house that had a huge equity spread. The reason they all passed on it which allowed you to buy it uncontested is because it’s a second lien. You are now responsible for the first lien which is likely close to 80% of $450,000.”

There was a silence on the phone for several seconds until the man responded by simply saying, “S*%#.”

I told him to call the trustee right away and pray that the previous owner filed bankruptcy and if they didn’t beg the trustee for mercy, ask if he will refund your money and explain that you made the bid without knowing you would be responsible for the first lien.

He said he would call right away and said he wished he would have talked to me before he went to the auction.

The man called me the next day and unfortunately, he said the trustee said he was sorry but, he couldn’t deem the sale invalid at that point and suggested he call the 1st lien holder and find out if they will do a short sale.

The man told me that he couldn’t come up with the amount of money it would take to satisfy the first lien and his credit wasn’t strong enough to get a loan for it.

Surely, that was the most expensive mistake that he had ever made but, entirely avoidable.

Tags: 2nd mortgage, foreclosure-auction, Foreclosures, lien, mortgage

The media reports of late are all “doom and gloom” focusing on foreclosure numbers, price declines, and inventory levels. One might start believing real estate as an investment class is a bad pick and could stay that way for a long time.

Don’t believe it for a second…but before I make my case, let’s start with a Warren Buffet quote,

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Everyone is “fearful” of real estate investing right now. Buffet is saying, “Now’s the time to get greedy…and buy.” So the more reports the media prints about the “worst real estate market since the Great Depression” the better it is for real estate investors.

The time to be afraid was back when every idiot with a Charlton Sheets DVD under his arm could get a a stated income loan to buy his first investment home with nothing down. Without fear and overflowing with greed, they plunged into the real estate investment world driving up prices due to the irrational belief the real estate market was bullet-proof.

Today even with the negative media reports, one can find data to support a return to real estate as an investment:

The foreclosure crisis has been contained now to about 4 states, California, Nevada, Arizona and Florida. We couldn’t say that a year ago.

The Case-Shiller housing price index is showing month over month price growth in about half of the 20 cities it covers.

The rental prices in most cities (the underlying real value of a real estate investment) is climbing.

Inflation in our future is about the only thing economists can agree on right now and we all know what happens to rents and home value during an inflationary economy.

So, get out there and buy…get greedy while everyone else sits in the corner scared to death.

You’d better hurry or I’ll beat you to it!

Tags: bubble, Foreclosures, Housing, mortgage crisis