Okay…so what’s wrong with this picture? In communities all across America the value of homes has dropped faster than the New Year’s Eve ball in Times Square. Lower prices should mean bargin prices. Bargin prices should mean people jumping back into the housing market.
People jumping back into the housing market should help inflate the value of homes…..

But things aren’t working out that way and it is all because of the credit markets.

Most “experts”–and I do use that word with great caution when talking about the real estate mess–seem to agree that lenders are sitting on the fence because they still are not sure just when this mortgage crisis will hit rock bottom.

The banks and other financial institutions worry, and not without good cause, that if they do start freeing up credit and people buy up those cheaper homes, the homes will still continue to loose value leaving the lenders holding the bag.

What will turn this around?

For one thing, if the lending institutions get convinced that the U.S. government is as serious when it comes to helping out home owners as it was in helping out Bear Stearns, they may feel a bit more relaxed about freeing up some credit.

But it is hard to feel that way when Congress is still trying to come up with legislation that the president will not veto–though it appears more and more likely each day that Bush will not stand in the way of anything Congress will offer for fear of further damaging Republican party candidates in the fall.

Lending institutions must also take stock of their own practices and either self police or face regulatory action under a new administration, especially if it is a Democratic one. That means
putting a stop once and for all to those misleading radio ads that still pop up telling people who have credit scores that suck that they can still get a nice, big, fat mortgage with hardly any financial pain on their part. Yeah, right.

But buyers can also contribute to the solution to this problem by realizing that homes are places to live and raise a family and not either an ATM card with a front lawn or an investment to dump back on the market in a short amount of time hoping to strike it rich.

When all of the above things are in place, it is my best guess that lending institutions will free up credit, which will grease the way for more realistic mortgages, which will allow people to finally start taking advantage of all those bargin homes flooding the market.

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Tags: Credit, credit market, default, home value, house values, loans, Mortgages, Real Estate Market

In the 60s, Sonny & Cher (before Sonny crashed into a tree while skiing) had a big hit with the song “And The Beat Goes On”–or something like that. Now, in real estate, 2008, a good song title might be “And The Debate Goes On!”

The “debate” is whether or not this is or isn’t a good time to invest in real estate. There are those who argue that real estate is always a good investment (see “Gone With The Wind” Chapter 6, page 147, paragraph 4, sentence 7, Scarlett’s dad to Scarlett : “There is always the land, Scarlett.”) And, as we know, in the end, it was the land that Scarlett returned to after the South got the s–t kicked out of it by the North (okay, I’m from New York, so I am partial to this version of reality..which happens also to be …well…reality!)

Now, the cool thing about fictional characters is–they are fictional. They don’t really have to feed their families or save for retirement or worry about paying for their kids’ education. Heck, all Scarlett had to do was hope that Rhett would come back one day and wisk her away to an even better chunk of real estate.

Time To Get Real. This Ain’t No Novel

That’s right. This is the real world. No authors to help us along our way by dreaming up another chapter or another character to save the day.

In the real world, a bad investment–and, yes, there is a Santa and, yes, there are real bad real estate deals–can actually hurt you. The point being, if you are going to invest in real estate in the current climate, you had better do your homework and know what you are up against.

The economic picture is bleak and seemingly getting bleaker each day.

Just this week, The National Association of Realtors said sales of existing single-family homes tumbled last month by 2 percent,while the median price of a home declined 7.7 percent from a year before.

Yes, there are pockets in the country where this is not the case. But, that is the exception and most certainly not the rule.

What began as a subprime mortgage crisis has ignited an economic fire burning around the world and devastating all sorts of different businesses…from banks, to brokers, to airlines (three of the biggest U.S. airlines this week reported large quarterly losses pegged to soaring fuel costs), to automakers, to newspapers, to broadcasting, to resorts, to …..well, you get the idea.

No one…no one…really knows where this recessionary train is taking us and how many stops there might be till we get to the terminal?

Conventional wisdom…not so wise

The “conventional wisdom” is to buy real estate when there are bargins to be had. And, under normal times, this makes total sense. But, the point is—these are far from “normal” times.

When times are not “normal”–so-called conventional wisdom gets tossed out the window.

This is not to say that no one should invest in real estate at this time. Someone has to. But, as I said before, this is NOT the time to learn on the job.

Tags: and the beat goes on, gone with the wind, home prices, median home prices, national association of realtors, real estate investing, Real Estate Market, recession, sonny & cher, subprime mortgage crisis

• We can assume that a great place to cultivate a farm area is where we are getting the most responses from current marketing pieces. This requires a bit of performance tracking but I will save that for another post. If sellers in a specific area seem to be more receptive to the ad campaigns you are using than sellers in other areas; go for broke. There is no need to spend money and time on dreams when you have deals staring you in the face.
• Go to a great online source and purchase a state-wide foreclosure list. Look for the area with the highest concentration and target that part of town. This is a neat trick I learned when I first got started in the business.
• You can decide to target new subdivisions or new construction areas because you seek to provide sellers with instant debt relief. Warning: Buying in these areas requires a certain savvy on negotiating terms.
• Military Bases or neighboring developments to military bases are strong target areas for real estate investors. It isn’t a secret that America’s finest do quite a bit of moving and most of the time their mortgage products are in the form of VA loans. These types of properties are right on time for investors that are hip to buying with no equity or negotiating short sales.

One may ask, “Why a small target area?” My answer is, “why a large target area?”

For the sake of this write-up, I will use my favorite neighborhood in Washington, DC: Deanwood NE. Deanwood is full of 4 bedroom 2 bath raised ramblers with basements ranging in value from $279,000 to $324,000. I would consider myself an expert on Deanwood real estate. You could be an expert on properties in Deanwood as well if you pulled comps for the subdivision on a daily basis. This supports what I would consider to be the greatest benefit to a small farm area – being an area expert.

If you invest in a small area; by default, you become the go to guy or gal when it comes to investing in that particular subdivision. It is much easier to reach 1000 homes 5-7 times than to reach 5000 homes 1 time. Sellers will see you as the ONLY choice for their real estate needs and that is the notoriety that an expert should expect. When targeting a smaller area, you can easily oversee projects, manage properties, time-block efficiently, avoid new relationships, keep tabs on competition, and literally specialize in that area. Believe me, if you want to take over, this is how it’s done.

Blessings to Your Real Estate Investing Business,
Milton B. Yates

Tags: learn real estate investing, marketing tips, real estate farm, real estate investment, Real Estate Market, real estate marketing, real-estate-deals, short sale

I was thinking this past week: what is it that home buyers want? Of course, each individual is different and has specific needs. But overall: are there general themes that dictate what buyers are looking for right now?

If there are, think of the potential power in real estate investors’ hands: We’d know what we should buy, because we’d know what they’ll buy from us. We’d know what kind of improvements are worth investing in, because we’d know what adds value in a buyer’s mind. We’d know, essentially, what really matters.

So, what say you: Are there all-important aspects of a home that are definitely a worthwhile investment and a fool-proof key to adding value today? What convinced you to buy? What convinced a buyer to purchase your property?

Not sure? Maybe a look at some expert opinions will get the ideas flowing:

1. HGTV:

   ”10 Things That Make Buyers Bite”: Stainless steel appliances, hardwood floors, updated lighting, organized closets…

2. About.com:

   ”Trends for Home Buyers”: Pre-WWII, Mediterranean and Mid-Century styles, modern or mint-condition kitchens, fancy bathroom fixtures, earthy colors, open floor plans…

3. Chicago Tribune, citing Mark Nash (whose in-the-know list made it to over 500 publications and web sites):

   “What’s ‘in’ for Real Estate in 2008”: concealed kitchen appliances, bathroom televisions…

Your turn. Agree? Disagree?

(Image borrowed from The Barker Blog)

Tags: predictions, Real Estate Market, What buyers want

Blame it on my teaching job or my past in real estate or maybe just the fact that it’s the thing people ask me about most: I am obsessed with selling. And in today’s market, some might say that’s a problem.

Is there hope for today’s real estate market? Here’s what the experts say:

BANKRATE:
“…[T]here are also some encouraging signs. Lawrence Yun, chief economist for the National Association of Realtors, or NAR, believes home values may start recovering next year because significant demand has been accumulating. He says prices actually continue to trend upward in the Northeast, Midwest, throughout the condo sector and in areas that are not dependent on jumbo loans.” (from “A Little Good News about Real Estate”)

and

EARTHTIMES.ORG
“2007 will be the fifth best year for housing on record. Places like Houston, the Kansas City area, Indianapolis, and the vast middle section of the United States offer affordable prices and continued job growth. On either coast, Seattle and Raleigh, N.C., remain solid. And markets that experienced recent growth declines - like Boston, Denver, and Washington, D.C. - have already shown signs of recovery. In short, all real estate is local - conditions vary greatly from one city to the next.” (also quoting Lawrence Yun, interestingly, but this time here)

Here’s what I say:
The market is tougher, yes. There are more homes and fewer buyers, yes. There are foreclosures and economic problems…

BUT: there are still homes selling. That’s a fact we can’t ignore. Buyers somewhere are still buying, and sellers somewhere are still selling. A positive outcome of all this bad-market talk is that real estate selling/buying/investing is improving. When things bottom out and begin to return to their vibrant state, I suspect Big Players will have developed that no one expected.

What does this mean right now?
Successful sellers are motivated sellers. There’s just a little something different in a successful seller. This little something is hard to notice without practice, but it’s there—even in the beginning. When you’re selling a property, are you a motivated seller? Do you showcase the early signs of seller success? You tell me:

*Well-priced property (for the area, comparable homes, in the given market)
*Repairs completed (a savvy seller won’t showcase broken anything)
*Strong curb appeal (wow the buyer right away; stand out from the pack)
*Solid marketing strategy (I’ve discussed this before—think virtual tours, exposure)
*Aggressive campaign (utilizing more than one approach—not just a newspaper ad, for example)
*Willingness to negotiate
*Self-educated (the Internet is a wealth of knowledge!)

Tags: home selling, Real Estate Market

Nine Ways to Turn a Solid Walkthrough to a Solid Negotiation

If you’re new to real estate investing, trying to determine how/when you should buy a place you plan to resell, rent, or rehab, these tips will guide you through the rough spots of deal-making:

1. Do your homework
If you know the specific location where you want to buy, compare listing prices of similar homes in the area. In this buyers’ market, you can afford to make a lower offer than the listing price. Yet keep in mind that insultingly low offers will only make for bitter sellers, so plan to make as fair a judgment as you can, keeping in mind that, right now, the ball is in your court.

2. Know what cards you hold
Talk to mortgage institutions before you start negotiating. Knowing exactly what you can afford will guide you to properties within your budget, meaning you won’t waste your or the seller’s time. Also, being prequalified immediately makes you a more serious buyer and thus more attractive to sellers.

3. Ask questions
Bring a standard list of questions to ask for every home walkthrough, but do your research and ask very specific questions on the nuances of each home. What are the maintenance costs like? What appliances need to be updated? This can all affect your offer, if you decide to make one.

4. Engage the seller
“Oh, I love these window treatments and that refrigerator. Can these stay with the home?”
You may have already known that the treatments and appliances stay with the home, but if you are visiting with a home seller, asking “dumb” questions will engage the seller to talk in greater detail about the extras and amenities offered with the home. The more you know, the more negotiating power you will have.

5. Use “positive manipulation”
Manipulation isn’t always bad–you know that the seller wants to sell the home. Understand the selling motives, and let them work in your favor. If you know the sellers are moving because of a job, they will want to sell as soon as they can. When time is of the essence, offer them expedience and you might be able to make an offer in your favor.

6. Call their bluff
Take a closer look at the home. Notice wear and tear, scuffing, and the overall condition of the home. If the seller claims “new” carpeting and you can see that it clearly isn’t, they could also be bending the truth about much larger issues. Don’t buy Funny Farm when there are countless new and impeccably maintained homes on the market.

7. Always be willing to walk
While you may not literally be “walking away” from the home, many sellers are certainly eager to grab your attention if you express a mild interest in the property. If they know that you are interested, but more than willing to look elsewhere, they will use what they can to grab your attention. Lowered prices, add-ons, and included amenities can sweeten any deal.

8. Act fast
While it’s comforting to know that you’re buying in a buyers’ market, your ideal property is still liable to be taken by someone else. If you find the home that you really want, don’t hesitate to make the offer. While the odds may favor you, don’t forget that there still are other buyers to compete with.

9. Know that your best ally is yourself
After you’ve gained all the knowledge you can about the home, the seller, and your own finances, trust yourself to make the best decision. Knowing that you have a multitude of choices means that you deserve to find your dream home! Playing “dirty” really means that you should be a savvy buyer, with lots of knowledge (and the favorable market) on your side.

Tags: buyer, home buyer, housing, real estate, Real Estate Market

For years now, we’ve been hearing about how hot the housing market is. We’ve all seen it. During the great housing bubble of the past few years, economists have been throwing out a whole lot of bull. First, you need to know that existing homes fell 2% during 2006. Here’s a guy who actually gets it, and can explain things in a way that makes sense to the average guy/gal:

Ian Morris, chief economist at HSBC Securities in New York, believes housing sales fell because homes became unaffordable.

SHOCKER!!!
You’re damn right houses became unaffordable! Just look at housing prices across the country for the past few years! Its not too hard to see that teachers, cops, and most other middle class folks can’t buy houses in most major US big cities.

“What worries me is that valuations still look very excessive. You know, prices are too high relative to income, relative to rents, relative to interest rates,” he said. “Even though mortgage rates are still pretty low — around six percent for a 30 year fixed rate — that’s not bad at all. But house prices are still so high that it is stretching affordability even with such low rates.” (VOA)

I’m at least glad that Mr. Morris, unlike many of his peers, actually gets it!

Tags: Housing, housing-starts, Real Estate Market, real-estate-bubble, unaffordable, VOA