investors

The New Real Estate Feeding Frenzy – Are You A Shark or A Minnow?

The last investor-friendly house we looked at was a fixer in West Hills. Within a couple of days of it hitting the market, it had attracted 8 offers. I’m confident it will sell for well over asking price. No wonder that the San Fernando Valley Business Journal reported on May 11, 2009 that “first time homebuyers and investors are snatching up an increasing number of homes in the San Fernando Valley . . ..” It is well past the stage of a few isolated occurrences. When I recently looked at two months worth of closed transactions in Encino, the average sold to asking price was slightly over 100%. These are strange times indeed. When you figure that some of the inventory had to be “normal” – i.e., not distressed properties, that typically sell for some kind of a discount from asking, the fact that the average house sold for more than asking gives you an idea of the way that the REOs and short sales are affecting the market. How to play this game? You have to be aggressive, have all your financing together (or cash – best case scenario) and jump on a property before someone beats you to the punch. The days of waiting around to see if someone else bids are history — at least if the property is distressed.

investors

Don’t Be Surprised By a Bad Credit Report!

First things first – you need to know what your current credit report looks like. You have a legal right to a free credit report only once a year from the three credit reporting agencies. However, many smart people check just one of the three every four months (spaced out) to keep from being surprised at the end of the 12 month period by a bad credit report.

Here’s how to get your report (courtesy of the FTC)

How to Order Your Free Report

The three nationwide consumer reporting companies have set up one website, toll-free telephone number, and mailing address through which you can order your free annual report. To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form (PDF) and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can use the form in this brochure, or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order from only one or two. The law allows you to order one free copy from each of the nationwide consumer reporting companies every 12 months.

You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

investors

The Sky is Falling – Lock In Your Thirty Year Fixed Rate Financing Now!

Is the U.S. getting ready for a dose of “good, old-fashioned inflation?” It sure is starting to look that way. Bloomberg reports that billionaire investor Warren Buffet recently said: “A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, it’s going to inflate its way out of the burden of that debt.” Who was he talking about? Yep, it could only have been the U.S. of A., with its enormous national debt. How can we reduce the burden of that debt? Only through gradually increasing inflation and repaying our creditors with increasingly worthless dollars. That is why the same article discussed several prominent economists who are calling on the Fed to move to a monetary policy that will cause 6% annual inflation for the next few years. If this takes place (as appears quite likely), you’ll want to have your fixed rate financing locked in well in advance. For, as the old saying goes, the time to buy insurance is before you need it.

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investors

Bidding wars on foreclosures? What does the future hold? Investors want to know!

Yes, according to the Wall Street Journal and local brokers, bidding wars are breaking out over REO properties. Certainly there is a lot of money on the sidelines, and investors are getting ready to snatch up the best deals. Some investors are aggressively pursing deals right now. However, the New York Times reported on 4/22/09 that “Fannie Mae, like many banks, is inundated with foreclosed properties. In recent weeks, banks have begun accelerating foreclosures again, after having held off while waiting to find out which homeowners would be eligible for the Obama administration’s assistance program.” So, these multiple-offer situations may be a result of (1) banks deliberately underpricing properties (shades of the go-go days!) ; (2) the simple fact that a lot of distressed inventory has been kept from the market over the last few months; and/or (3) investors who write up dozens of offers on REOs, hoping that the bank will take the bait on at least one — thus inundating sellers with “multiple offers” — although few serious ones.

An observation: a few weeks ago, I found a very nice looking property in North Hollywood while I was working an open house on the same block. The property looked like it had been extensively rehabbed in the not-too-distant past. It may have been someone’s flip. To make a long story short, it was vacant, and had been broken into and vandalized on the inside. From what I could see, it was mostly cosmetic damage, so I thought it might make a good property for one of my investor clients. So, I jumped on my computer to see who owned it. The answer was: WaMu now known as Chase, and it was an expired listing. Since I have a personal relationship with Chase, I thought I’d have a go at trying to get the listing, or at least find out what they intended to do with the property. The result, after many phone calls and emails — I could not get anyone to give me an answer. So the property is still languishing there, waiting for some more vandalism, or perhaps some squatters to move in. What a shame!

On a similar note, I heard a story (about relatives of my friends) who stopped paying their mortgage last year. Figuring it was only a matter of time before foreclosure, they moved out into a rental. After a few months went by, one of their old neighbors told them that nothing had been going on at their “old” house. So, they promptly moved back in where they have been living mortgage- and rent-free since then.

What’s the lesson here? If these stories are evidence of a larger trend, we will see a lot more inventory and even better prices over the next year. You should get your ducks in a row now, and start investigating interesting markets so that you will know a great deal when you see it.

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