Good news, bad news time for real estate and the general economy this week.

The bad is, I am afraid, very bad, indeed.

Prices for single-family homes took a nose dive in the first quarter of 2008…down an enormous 14.1 percent from the year before.

Standard & Poor’s/Case Shiller report, according to Reuters, says this is at “a pace five times faster than the last housing recession.”

The chairman of S&P’s index committee tells the wire service, “There are very few silver linings that one can see in the data.”

You think?

And now, says the New York Times, the housing mortgage mess has spilled over into the auto industry in a very big way. Mostly because many people can’t borrow against their mortgage now.

Want proof?

Shares of General Motors Tuesday slid to a 27 year low!

Okay, now some good news…for consumers but maybe not so good for bricks-and-mortar brokers.

The U.S. Justice Department has just reached a deal with the National Association of Realtors in an anti-trust case.

Says the New York Times on its website, “government officials said (the deal) should spur competition among brokers and ultimately bring down hefty sales commissions.”

Told you this may not be such good news for brokers…though it is for consumers and, in particular, for Internet real estate brokers.

Under the terms of this settlement–the case goes back to 2005–Internet brokers will be able to use the multiple listing services that are used by other brokers and which were sometimes denied them.

A judge still must approve all this, of course.

Here comes the good news, bad news thing again—one expert predicts this deal will eventually result in a reduction of sales commissions of as much as 50 percent! Good for consumers, bad for some brokers.

The Times quotes one business professor as saying, “It’s pretty clear that there was an enormous amount of discrimination against brokers who were trying to use innovative business models. There are lots of entrepreneurs who have been looking for a green light in the form of this order to begin offering discounted rates. It has the potential to be a big step forward for consumers.”

Could this be the spark needed to breathe new life into the real estate market? (yes, I know there are really several markets depending upon where you live, but, in general, the real estate market nationwide is not doing all that well!)

I doubt it. Too many other things need fixing, too.

Having said that, anything that means lower rates for home buyers is bound to, over time, help improve the dismal picture we now have, and that has to be good news no matter how you look at it!

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Tags: mortgage, mortgage broker, NAR, national association of realtors, real estate, real estate broker, realtor

I’d like to say that this is as bad as it gets. I’d like to say it, but I don’t think that is true.

In California alone, just released figures show that last month, 1,000 (that’s one THOUSAND) foreclosed homes were brought to auction each and every weekday–a 44 percent increase just from the month before.

Nationally, things aren’t all that much better, except for a few markets.

The National Association of Realtors surveyed the prices of existing single-family homes and found between January and March, median prices dropped in 100 of 149 metropolitan areas, according to the Associated Press.

Too bad that relief doesn’t really seem on the way.

Congress is still trying to come up with some sort of relief legislation that will please Democrats, Republicans and the White House, but credit remains tight and the victims (and yes, many are victims) of what began as a subprime mortgage mess, keep mounting with no end in sight.

Brokers will tell you that as prices keep going down–they are and they will–there will be bargins to be had and they are correct.

The only problem is that the credit crunch also shows no sign of going away any time soon, so that leaves a whole lot of potential bargin takers left in the cold.

What do you think? After all, your guess is as good as anyone else’s.

Tags: california, california foreclosures, default, Economy, foreclosure, Foreclosures, housing, NAR, realtor

Need an incentive to help move a home?

The answer is PITI Abatment. Do not let the financial jargon scare you. For years production builders have used this incentive to move inventory. Now every seller/investor has the opportunity to participate.

What is PITI Abatement?

• An incentive to the buyer to have the first 6 months of the mortgage paid by the seller/investor.
• PITI Abatement program is a product designed specifically for home-buyers. You can give a 6% Seller Contribution that can be used for Principle, Interest, Taxes and Insurance payments.

What are the General Guidelines?

• Loan amounts up to $417,000
• Up to 100% of the purchase price in some markets
• Minimum score of 575
• Fixed Rates and ARMs
• Interest Only is available
• Income limitations may apply
• Closing costs can be paid by seller too
• No prepay penalty

What is the Realtor or Investor marketing element?

• 6 MONTHS PAID!
• BUY THIS HOME AND I WILL PAY YOUR FIRST 6 PAYMENTS
• 6 MONTH PAID MORTGAGE INCENTIVE
• BUY MY HOME AND I PAY CLOSING COST AND 6 PAYMENTS

In today’s real estate market investors need all the help they can get. With increased inventory in just about every market place, realtors and investors need to use unconventional tools to create benefits for their potential buyers. I have seen cars, furniture, pools, and televisions given away. But those items can be difficult to include in the average investor transaction. Giving away 6 months of payments can create separation from the other sellers in your market place.

Tags: home for sale, home sale, investor, PITI Abatement, real estate, real estate investor, realtor, seller, selling home

I recently came across an article that put something so well and so clearly that I really don’t think I could improve upon it. Everyone interested in real estate investing would do well to check it out.

In “Why Do You Still Need an Agent to Sell Your Home?” author Douglas Gantenbein makes an excellent case for the thing I am most passionate about: homeowners getting the power back in their real estate transactions (i.e., selling their own homes).

Written all the way back in 2004, this article cited the then-statistic that “Americans will spend about $1.14 trillion buying 6 million homes this year-both [setting] records.” And of that $1.14 trillion, Gantenbein writes, an enormous chunk would go to realtors. Is this fair?

Here are some highlights from the article:

1. Realtor work doesn’t equate with realtor commission.

   “And what do Americans receive in exchange for that commission, which can total up to $24,000 on a $400,000 home? In many cases, not much. A realtor’s license can be had after as little as 50 or 60 hours of training (the person who cuts your hair probably has 1,000 hours or more).”

2. Realtors seldom work in your best interest.

I was flipping through Freakonomics recently and remembered this little anecdote from one of the authors’ real experience:

“K. wanted to buy a house that was listed at $469,000. He was prepared to offer $450,000 but he first called the seller’s agent and asked her to name the lowest price that she thought the homeowner might accept. The agent promptly scolded K. ‘You ought to be ashamed of yourself,’ she said. ‘That is clearly a violation of real-estate ethics.’

K. apologized. The conversation turned to other, more mundane things. After ten minutes, as the conversation was ending, the agent told K., ‘Let me say one last thing. My client is willing to sell the house for a lot less than you think.’

Based on this conversation, K. then offered $425,000 for the house instead of the $450,000 he had planned to offer. In the end, the seller accepted $430,000. Thanks to his own agent’s intervention, the seller lost at least $20,000. The agent, meanwhile, only lost $300-a small price to pay to ensure that she would quickly and easily lock up the sale, which netted her a commission of $6,450.

So a big part of the real-estate agent’s job, it would seem, is to persuade the homeowner to sell for less than he would like while at the same time letting the homeowner know that a house can be bought for less than its listing price.”

3. The NAR is an exclusive group that doesn’t want to give up dominance.

“Overall, the NAR has ensured that nearly all residential real-estate transactions still are conducted between two agents in cahoots. And they’re largely responsible for keeping commissions close to that 6 percent level when any normal law of competition would suggest they’d be lower.”

4. Therefore, FSBO has a lot to offer, in my opinion.

Using a quality FSBO company like Buy Owner puts the power back in the hands of the investor. It’s definitely a smart decision for savvy investors.

Tags: by owner, for sale by owner, FSBO, home, house, real estate, real estate agent, realtor, sell real estate

If you are averse to paper work, formal agreements and legalese, get over it. You can’t avoid it and it’s vitally important. Think of your contract as a big safe to protect your huge amount of valuables. The subject here will be the contract – I’ll circle back in later posts to cover the specific actions of due diligence leading up to the contract.

I’ll assume you’ve started your due diligence pre-contract. You’ve estimated the value of the property you’ve chosen, you’ve done the groundwork for financing, schmoozing with a lender after the way was cleared through recommendations from connected friends and associates, you’ve settled on an area you’re comfortable with and an investment you can handle, you’ve sent the Letter of Intent to the owner and broad strokes are agreed to, and now you’re ready to put it all in a contract.

Don’t do this alone, especially not your first time. Use a real estate broker or an attorney. Contracts are fairly simple at first glance, but they can get complicated. You want to make sure you have everything covered and two minds are better than one, more so when one of the minds is experienced at this sort of thing.

The attorney or title company will ensure there are no title problems; however there may be hidden liens, so it’s always wise to speak with your attorney about insurance to cover the title. Most of the language will be built into a standard contract. You will have to decide things like time of closing, length of due diligence period, who pays for surveys, what type of financing, and such, and then there are special stipulations. Special stipulations are agreements between the parties not written into the body of the contract or language added to strengthen and clarify what’s in the contract or what’s been verbally agreed upon, such as what is excluded or included with the property. You might have met with the owner and talked about, say, certain equipment remaining with a building that will be used as a restaurant. Don’t rely on verbal agreements, make sure it’s written down and part of the contract.

When deciding on the due diligence period to be established in the contract, try to add time to your estimate to take delays into account, make sure you specify the days of the period are workdays and place a special stipulation that extensions are allowed if you can’t schedule all inspections within the period or if one inspection uncovers something that calls for a special inspection, such as signs of structural damage that would require a structural engineer to inspect an write a structural report.

Read the whole contract and understand it. Too many times people assume something is in the contract that upon further close inspection is not outlined clearly. Make sure if something important to you is not clearly stated in the contract that it’s spelled out clearly in special stipulations.

While most deals run smoothly, there are so many variables that it’s easy to find yourself in a misunderstanding that can kill a deal, waste your money or, worse, wind up in court. Take it from someone who knows, a tight, comprehensive contract is your best investment partner and guardian angel. You may have to amend the contract, so make sure you understand what the contract says about amendments and notices. They need to be in writing but how are they are delivered? By email? By phone? Fax? Hand delivered? By hoseback? Make sure you know what the contract says because you are agreeing to abide by it.

It’s also important to establish in the contract any representation. If you are being represented by an agent, make sure you have a representation agreement between you and the agent and that it’s clear in the contract. A listing agent you may have been dealing with represents the seller, even if they have been helpful to you and are really, really nice – unless you’ve signed a separate agreement where the agent is working as a dual agent (I don’t recommend this). This can get confusing if you’re not familiar with real estate agency representation, so I will explain this further in another post, but remember that the agent involved in the deal, if an agent is involved, is representing the interests of the seller if you have no agreement with the agent. If you are going to go through an agent it is best to have your own agent who is representing your interests.

Tags: agreement, contract, deal, due-diligence, escrow, real estate agent, real estate contract, real estate investing, realtor, title

I was reading a post by one of my favorite real estate bloggers, Pat Kitano, about how bloggers seem to be ignoring the foreclosure business, and I was a bit surprised. It seems that many of the other blogs out there have decided to play down the problem or feel that there isn’t a problem at all.

As a site that is foremost focused on investors, we see this from both sides. While it is very unfortunate that people are losing their homes in record numbers, the investment community is chomping at the bit, waiting for the record number of foreclosures to continue. This reality, where people can’t keep up with rising payments is taking a bite out of not only the US Economy, but also the global economy as well. As Russ Amy put it, we all need to “write about it” (the problem), because it isn’t going to just go away!

Homeowners & Investors
- Want to find out how foreclosures work? Read about The Foreclosure Process

Homeowners
- We set up a Foreclosure Help Forum for people to get advice when they find themselves behind payments or in other mortgage trouble. Some of the tips given to the folks who have already begun to participate on this forum have been fantastic and quite helpful!

Investors
- Here are some advantages of buying bank owned properties aka. REOs
- Looking for pre-foreclosures? Here’s a great article detailing your 3 shots at getting them, and here’s another that talks about where to find foreclosures.

Think Foreclosures aren’t a Major Problem?

Lets look at some recent news to see if you’re right . . .

- According to Marketwatch, “Home prices are falling everywhere.”
For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index.
This can directly be attributed to the sub-prime blowout and resulting foreclosure massacre that has been taking place around the country. While real estate is a local issue, primarily, this and other signs prove that we are facing a national real estate situation here as well.

- Yahoo Finance has a piece that details how “Even average homeowners feel rising mortgage floodwaters”:
With property values dropping in many areas of the country, a growing number of homeowners — particularly those who bought their house in the last five years — are looking at the prospect of being “underwater” on the mortgage. That’s when the value of the home is less than the amount remaining on the loan used to buy it. So while the nation has been focused on a record-high rate of foreclosures, the tide has been rising on a lot of people who simply had bad timing.
Clearly, not just those who are being foreclosed on are feeling the heat. With lenders practically giving away loans to anyone with or without the ability to pay them off each month, we’ve slowly built our own grave. The government watched as this happened and encouraged it so the White House could tout a strong and growing economy - not so strong now, eh?

- Even the always positive National Association of Realtors (NAR) seems to finally be facing reality after releasing a new report that details how home sales declined in 46 states in the 3rd quarter.

Is there any good news in the Housing Market?

It looks like Mortgage rates have dropped to a 6 month low, and whispers of another drop in interest rates have boosted the stock market over 300 points today (pre-close).

Tags: bank-REO, default, Economy, foreclosure, Foreclosures, housing, NAR, realtor, REO

Your favorite farmer’s market. The blanket you bought at the craft show. The discount you found by going through the company directly. What do these things have in common? No middle men.

Today, middle men are everywhere. Some are good: the grocery store, the post office, the restaurant. But some are purely optional; in fact, I’d say they’re largely unnecessary. Consider these two examples of industries that make their money on connecting:

Middle Man #1: Travel Agent
I don’t know about you, but I have the ability to research online, call hotels, ask around for discounts, etc. Last month, I visited a friend on the East Coast and booked my plane ticket and accommodations through an online provider—I think it was Travelocity or Expedia. This allowed me to save the most money, at the most benefit to myself. Imagine if I’d used a travel agent: less control, more money lost.

Middle Man #2: Staffing Agency
How did you find your current job? Did you go through a head-hunting firm? You might’ve, and that’s fine. But you also might’ve been like thousands of other job-hunters who didn’t want to get paid less than the company could afford by inserting a middle man. You might’ve looked online at places like Careerbuilder and Monster and Craigslist and applied, interviewed and landed your position.

What each of these agencies has in common with a real estate agent is this: they are middle men. They find hotels, and they find travelers; they find jobs, and they find job-seekers. Or, in real estate, they find sellers, and they find buyers (imagine if the travel agency or the staffing firm similarly took a solid 6% of the sale, too!!). In return, they take a BIG chunk of the deal home with them. No tangible product provided—just their “connections.”

For a long time, real estate companies have been telling us that we need them, that we have to have a real estate agent in order to find the home or to sell the home. In reality though, all you need is a buyer and a seller. An agent is ONE way to find a buyer, not the only way and, in my opinion, certainly not the best. Using an agent means less money for you, and that’s never a good alternative.

If I take the analogy one step further, it’s a perfect illustration of why companies like Buy Owner are so helpful. They’re the Travelocity or the Careerbuilder of real estate. Much less cost and much more control for you.

Before hiring a realtor to list your home, consider trying your hand at finding buyers on your own, eliminating the middle man. You are fully qualified.

Tags: FSBO, real estate agent, realtor