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4 Signs of a Depressed Housing Market
Wednesday, August 17th, 2011 | Foreclosures, Pre-foreclosure, Real Estate Investing | No Comments
For the second year in a row, residential housing construction failed to contribute to growth in the US. The demand for building permits fell, new home construction starts are down, and the foreclosure pipeline is as full as ever. As a result, banks are keeping a tight fist on mortgage lending standards. There are four main indicators that we can look to and determine that we’re still in a pretty significant housing slump:
- Fewer New Home Permits – Last month, there number of new homes under construction was at the lowest rate since 1970. Single-family home construction fell by nearly 5%, whereas apartments and townhouses rose by nearly 8%.
- Falling Demand – Increasing foreclosures are keeping real estate values down. As a result, builders have little incentive to put up more houses in an already flooded market.
- Strict Credit Standards – Getting a mortgage for the average homeowner remains tough. One of the reasons, according to the banks themselves, is there is “reduced or unchanged demand from creditworthy borrowers.”
- Weak Stock Futures – Uncertainty in overseas markets have economists nervous, especially following the recent S&P credit downgrade. The Treasury’s 10-year note fell to 2.27%, from 2.31%. The import index was down .3% in June.
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Nearly 27% of Mortgages Rejected Nationwide
Sunday, July 3rd, 2011 | Foreclosures, Pre-foreclosure, Real Estate Investing | No Comments
Across the country, banks are hindering the housing market recovery due to their cautious lending practices. This has resulted in an increase in the amount of mortgage loans being rejected by these largest banks. The 10 largest lenders together have denied nearly 27% of all mortgage applications. Where they once were free and loose with their lending standards (which got us into the dire situation we’re in now), many agree that things have swung too far in the other direction – now being too stringent in their lending standards. The popular sentiment is that the lending standards need to be easier for mortgage borrowers in order to help the US economy on the road to recovery.
Check out this graphic below, and you’ll see how the denial rates (the darker the red, the higher the percentage) are concentrated in the south and the so-called “Rust Belt.”
For the informed real estate investor, there are many avenues available to successfully invest and grow their business. To find out how, check this out.
Note Buying Mastery
Friday, June 24th, 2011 | Bank owned, Foreclosures, Real Estate Investing, Uncategorized | No Comments
Hey, Josh Here,
Did you miss my friend Chris Gleize’s “Be the Bank” webinar last night? If you did, you’re in luck, because you can check it out here… it’s really some awesome stuff, so sit back, grab a pen and get ready to take on a new opportunity in real estate investing! You can also learn more at www.noteswithjosh.com.
Learn More at www.noteswithjosh.com
Top 5 Keys to Understanding Private Lending
Friday, June 3rd, 2011 | Bank owned, Foreclosures, Pre-foreclosure, Real Estate Investing, Real estate short sales, Short Sales | 1 Comment
Private lending is the absolute key to unlocking the door to successfully completing real estate deals. Why would you want to use a private lender? You are able to get money from individuals more easily, more cheaply and on better terms than you can from institutions. In real estate, where you may only need short-term money, the door to borrowing from institutions may be locked. What do we mean by private lending? Private lenders are individuals who will loan money on a one-to-one basis, often from their retirement accounts, for various types of investments. Borrowers sometimes secure more than one loan for their projects if the first private lender is willing to make the loan but doesn‘t have enough liquid cash to provide the entire amount needed. The demand for private money outweighs the availability, unless you know how to look for it. However, you have to make sure that you are careful in how you work with private lending. If you do it wrong, you are going to screw things up and will have a host of problems and chaos.
1. Know the Lender’s Concerns – There are three main things that are important for lenders in a private lending scenario:
- They want a smooth, simple transaction – be sure you can easily and clearly explain the purpose of the loan.
- They want to make sure the principle, the amount of money they are loaning, is going to be adequately protected.
- They want to know their rate of return – a function of both points and time; their overall return after legal fees, title work and lost opportunities.
How will the principal be protected? How will the principal be paid back? What is the anticipated profit? When will that be paid? Is there enough profit to make it worthwhile for both the lender and the borrower? The lender‘s job is to ask those questions.
The lender needs to vet the borrower and make sure this deal will happen. If you as a borrower can address those concerns up front and outline the deal in detail, before the private lender even has to ask, you take a load off his or her shoulders. Prove on paper that the deal makes sense, that it will perform and that it will close.
2. Know the Title Company’s Concerns – Whether you are the borrower or the lender in any private lending transaction, think carefully about the terms and respect the people that are instituting those terms. The title company is responsible for coordinating the transfer of property and the exchange of funds, and will want:
- Money to be wired to them or brought by way of a cashier‘s check, bank check or certified funds.
- Closing instructions from the private lender.
- Escrow instructions signed by all the parties involved (how they need to execute their tasks, handle the money and what their duties and responsibilities are for each party to the transaction.) The closing instructions will come from the lender, who is indicating under what terms they‘ll release their funds so that the transaction can go forward.
3. Knowing the Attorney’s Concerns – Most of the time, the responsibility of getting the correct paperwork in place for a privately funded transaction is going to fall upon the private lender and the private lender‘s attorney. Private lenders need to make sure that they have an attorney who understands these types of transactions; they are different. Anything and everything can be negotiated, and the attorney needs to understand what was worked out between the borrower and the lender.
- Loan and Real Estate Documents – Promissory note, mortgage, deed.
- Payment Documents – Closing instructions, projected payment history, accurate payment schedule and loan history.
- Business Documents – Personal guarantee, business-to-business agreements.
5. Knowing the Private Borrower’s Concerns – All private lenders should understand the issues that borrowers have to consider. They need access to the money. They wouldn‘t be looking to borrow money if they didn‘t need it, and they generally need it relatively quickly and easily. So access to money is their first concern. Are they getting access to someone with money to loan, and is that access something that can be responsive to their needs?
- Borrowers want a smooth, simple transaction.
- The money is there and can easily be applied to the task at hand.
- Borrower’s need to understand the private lender’s terms.
- Set up a win-win situation.
6. Putting Private Money into Motion – “He who has the gold makes the rules.” Private lenders make an important contribution to real estate investing. They make it possible. If you want to make a lot of money, you need to know how a private lender fits into the mechanics of your deal.
- Understanding do’s and don’ts of advertising for private money.
- Long-term or rehab deals.
- Quick turn or “flip” deals.
Here I’ve really just touched on what is involved in private lending for real estate investing. It is an integral part of successful investing, and if you know how to navigate the world of private lending, you’ll have access to a wider range of investing opportunities.
To learn more about private lending, or to kick your own real estate investing efforts into high gear, click here .
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Sign of the Times? Strategic Default More “Acceptable”
Wednesday, September 22nd, 2010 | Bank owned, Foreclosures | No Comments
It’s really a sign of the times – we’re so embedded in this housing crisis, and it’s becoming such a part of our culture that it’s actually losing some of its stigma. Get this – 36% of Americans now view strategic default – simply walking away from a mortgage – is acceptable, at least under certain circumstances. A recent survey conducted by the Pew Research Center found that while 59% found the practice of walking away to be wrong, 36% either said it was acceptable, but might depend on the circumstances. It’s important to note that 21% of the survey participants are currently underwater on their own mortgages. It’s also commonly believed that the more someone is behind on their mortgage, the more likely they are to just give up. Strategic defaults have become so prevalent that Fannie Mae recently reported that they are going to start going after strategic defaulters and sue them for the deficiencies.
Bill Would Force Lenders to Decide on Short Sale in 45 Days
Monday, September 20th, 2010 | Bank owned, Pre-foreclosure, Real Estate Investing, Real estate short sales, Short Sales | 1 Comment
There’s some encouraging news on the horizon for homeowners hoping to sell their homes via a short sale – in the form of a new bill being introduced into the U.S. House. The bipartisan Prompt Decision for Qualification of Short Sale Act of 2010 would impose a deadline on lenders to respond to short sale requests with an answer within 45 days. The bill is sponsored by Reps. Robert Andrews (D – New Jersey) and Tom Rooney (R – Florida). This bill is in reaction to the flack lenders are receiving for dragging out short sale timelines. In many cases, home sales have fallen through because lenders were too slow to respond to short sale offers – neither getting a yes or a no. This bill would help short sales close much more quickly. With the number of potential short sale properties rising across the country, Congress is being urged to pass the bill quickly. In many cases now, it can take 90 days or more to receive a decision on a short sale request from a lender, and in some cases, the answer never comes! For millions hoping to avoid foreclosure, a short sale can help relieve them of the overwhelming stress of their mortgage.
Home Appraisals Receiving Tighter Scrutiny
Wednesday, September 15th, 2010 | Bank owned, Foreclosures, Real Estate Investing | No Comments
The days of quick home appraisals seem to be coming to an end, even at times being problematic. Lenders are becoming more demanding, and often calling for second appraisals on a home before giving the green light. Where does this stem from? Of course, from the problematic home loans of the past that got us into this housing crisis in the first place. Lenders and buyers are being more cautious. For example, a lender may scrutinize an appraisal if a borrower has a marginal credit score or high debt level relative to income, or if the property was in foreclosure and was fixed and flipped by an investor. Appraisals are based on historic data, and therefore often lag behind home values. Inadequate comps might present a problem – if the comps are deemed too far away from the subject house, or the sale happened too long ago. A second appraisal starts from scratch, and involves a whole second set of costs, traditionally paid by the buyer. Finally, lenders might order a second appraisal if the first one is based on factual errors or the appraiser wasn’t competent in the area.
Colleges Go on Real Estate Buying Spree
Friday, September 10th, 2010 | Real Estate Investing | No Comments
Colleges are starting to get into the real estate game now more than ever. Like private investors, they are taking advantage of low, sometimes fire-sale prices to gobble up real estate surrounding their existing campuses. It’s a way for the schools to plan for their long-term futures, and take advantage of some great deals. Even if the real estate is not used immediately, it’s either being incorporated into long-term planning or being leased to outside businesses as an extra source of revenue. It’s happening all over the country, in big cities like New York (Columbia University amassed 17 acres of Manhattan’s Upper West Side from 2002-2009) and small towns like Dayton, OH (snapping up the former MCR world headquarters for $18 million). The schools are counting on future growth to make sure their purchases are good investments. In many cases, taking over existing, empty real estate and commercial space is cheaper than building from scratch.
Banks Give Local Groups First Shot at Foreclosures
Thursday, September 9th, 2010 | Bank owned, Foreclosures, Real Estate Investing | No Comments
Major banks, including Bank of America and Wells Fargo, are agreeing to give local governments and nonprofit groups the ability to buy foreclosed homes before they are sold to private investors. The Obama administration says local officials could benefit from acquiring these properties and using the land for redevelopment projects. Congress has provided $7 billion in money to buy the homes. These groups have been outbid by speculators who are snapping up foreclosures. The administration says the largest ortgage lenders in the country have agreed to let the groups purchase the properties ahead of private speculators.
Superman to the Rescue, Again!
Wednesday, September 1st, 2010 | Bank owned, Foreclosures | No Comments
It seems Superman’s powers just can’t be stopped.
In his latest rescue, a family on the brink of foreclosure saved their home when they found a rare copy of Superman’s debut comic, Action Comics #1, in their basement. The family was packing up their home when they came across a stash of old magazines and comic books. They contacted a local comic book dealer to see what they could pawn. The dealer was hesitant at first, but saw it was the real deal after the family sent him a photo. The dealer then took the issue to Comic Con to be valued. It is expected to fetch upwards of $250,000 at auction at the end of August. So how does this help the family now? The co-owner of the comic book store presented the bank with information on previous rare edition auctions and proof of what this issue could bring – telling them, they’d have their money soon. Once again, Superman saves the day.
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