Unrealistically Low Appraisal Values in Up Markets Are a Problem

Real estate agents continue to report that unrealistically low appraisal values continue to jeopardize sales. Appraisal values are in some cases affected by REOs which in some cases are reported as being used as comparable properties.

In other cases, appraisals are reported as not keeping up with the market. Also, there continue to be reports of appraisers having poor knowledge of local conditions as they come from outside areas (in some cases as far as 100 miles according to one agent.

• “Appraisals and BPO values are likely low because of the sort of comps that are available on the market. REO properties and lower value sales comprise the bulk of market activity which in turn leads to low appraisal and BPO values.”
• “Appraisals are definitely a problem. We are in a Vacation, second home area and we are getting appraisers from 100′s of miles away to appraise Lake Property. They don’t understand the values.”
• “Buyers are coming in with cash to close the gap between low appraisals and sellers sticking to their house price.”

How can one man lift a big rock?

How can one man lift a big rock?  Why does Donald Trump win so often in high-stakes negotiations?  How can you buy five income producing properties with very little of your own money?

You’ve heard me talk about it often.  It’s leverage.  Let’s take a quick look at why the concept of leverage is so crucial to growing wealthy. Leverage is the ability to use a small amount of your own money to control an asset of far greater value. For example, when you put down 20% on the purchase of a single family residential home, you are essentially using the bank’s money to extend your own buying power.

Assume that you have $100,000 cash to invest. You could find a $100,000 house and purchase it outright. A better idea would be to find five single family residential properties each costing $100,000. Rather than plow all your resources into one property, put down 20% on all five, let the bank loan you the rest, and suddenly you have a portfolio of five income producing properties.

If you’ve done your homework and chosen appropriate deals that provide positive cash flow immediately, you’re sitting in the proverbial catbird seat. Later, you’ll refinance all five loans in seven to twelve years and use the resulting proceeds to buy as many properties as you have the down payments to afford. You should NEVER pay off your loans, but rather frequently refinance into more and larger real estate deals.

Here’s the reality of this type of investing. You use other people’s money (OPM) to buy assets that you will eventually own. Along the way, you also use OPM to cover the monthly expense of your investment, which is the mortgage payment. How do you do this?

By renting the place out! Assuming the deal is right, which it should be when you do your homework, a tenant’s monthly rent payment should cover the mortgage, all associated expenses, and still leave you with a little cash in your pocket. This is called positive cash flow.

Here’s the bottom line. There is no other asset which allows you to rent it out! Don’t try this in the precious metals market or on Wall Street. They’ll laugh you out of the place.

Let’s grab a cup of coffee and discuss the how investing can help you with your wealth goals!  Call me anytime at 425-330-0663.

Market Update 2-10-2011

The median sales price for homes in Queen Anne (ZIP code 98119) in Seattle from Nov 11 to Jan 12 was $352,500 based on 54 sales. Compared to the same period one year ago, the median sales price decreased 22.9%, or $104,500, and the number of sales decreased 8.5%. Average price per square foot for homes in 98119 was $346, a decrease of 12% compared to the same period last year. There are as of this post date, 73 resale and new homes in ZIP code 98119, as well as 29 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The average listing price for homes for sale was $692,726 for the week ending Feb 01, which represents a decrease of 9.2%, or $70,487, compared to the prior week. Popular ZIP codes in Seattle include 98103 and 98115, with average listing prices of $419,755 and $400,276.

Got a Million?

In 2011 in King County, 735 houses sold for 1 million or more.  471 were on the Eastside.  The most expensive one sold for $14.75 million in Hunts point.  Snohomish County saw 18 homes sell for 1 million plus.

Insure The Value Of Your Home? Is This a Sign Of Things To Come?

Insure The Value Of Your Home? Is This a Sign Of Things To Come?

Hmmm . . . Are we begining to wise up?  Are we starting to think outside the box?  Take a look at what this company is doing in Ohio.  Could we see this elsewhere?

Property values have been hit big time in virtually everywhere in the United States.  Seattle real estate has not been spared.  But this is true especially in northeast Ohio. Thousands have moved out of the region, Cuyahoga County foreclosures continue at more than 900 per month and a growing number of vacant homes degradate dozens of neighborhoods.

Consumer confidence is key in getting people to buy homes in large numbers, and some say new financing options are one way to do it.

Equity Lock Solutions , a company based both in Ohio and Denver, has announced a new product called “Home Price Protection.”

The product allows a homeowner to “lock-in” a home value, based on the home price index, established by the  Federal Housing Finance Agency.

A homeowner that signs up for the service can make monthly payments and protect their homes value for up to 15 years.

An example, a homeowner who’s house is worth $200,000, who signs up for Home Price Protection, who then wants to sell three years later. However, the house is now worth just $180,000, according to “home price index.” After the sale of the house, the owner with Home Price Protection would be issued a $20,000 check to make up for the loss in value.

Homeowners buying the protection must pay a one-time contract fee of about 2 percent of their homes value, this fee can be spread out over 60 months, making the average payment about $75 per month for coverage on a $200,000 home.

“You want to protect the family home, you want to make sure the value will be there when you need to move for that next job,” said Equity Lock Solutions President Ted Rusinoff.

Rusinoff pointed to Syracuse New York, a city that has offered a similar product for 10 years. Rusinoff reports home values in Syracuse have only dropped 2 to 3 percent, partly because of the consumer confidence fostered by home price protection products.

“That product lets all homeowners feel comfortable that the value of their home will be there,” Rusinoff said. “Homeowners then start upgrading their houses, and it allowed neighborhood values to maintain and grow.”

Ohio’s Department of Insurance is also examining other products that also essentially insure home values.

Insurance companies are looking to get state approval for products that will allow homeowners to buy insurance against drops in the real estate market.

We are going to watch this trend closely and keep you informed.  Just another way we are watching out for you!

Finance Multiple Properties!

Hey all my investor friends, do you know most lenders will not do any new loan for any borrower that owns multiple financed properties?  However, I know lenders that will finance all the way up to Ten Financed Properties with a Conventional Loan.   Not all lenders will do this.  In fact, most won’t touch it.

They have great terms including no point loans. Please call me or email me if you have any questions regarding Investor Loan products.  My team is closing most of our FHA loans now in less than 20 days and we are still offering same day approvals including evening and weekends.    Call me anytime for details!

Top 100 zip codes hit hardest by foreclosures

Is Seattle one of the worst hit neighborhoods?

You can escape all the news about homes going into foreclosure these days.  It’s not all doom and gloom.  But some areas are doing better than others.

According to a report by CNN Money, using RealtyTrac data, it is clear that some areas were harder hit by foreclosures in 2011 than others, with the brunt of the down economy felt on the West Coast, with literally zero zip codes in the Northeast appearing in the top 100 hardest hit zip codes.

Can you believe Las Vegas zip codes account for 60 percent of the top ten list, California for 30 percent and Atlanta for 10 percent, again showing the epidemic is concentrated more highly in specific areas. Sadly, Las Vegas also accounts for all five slots in the top five hardest hit zip codes.

1. 89031 – Las Vegas, NV
2. 89108 – Las Vegas, NV
3. 89121 – Las Vegas, NV
4. 89123 – Las Vegas, NV
5. 89129 – Las Vegas, NV
6. 93535 – Lancaster, CA
7. 92336 – Fontana, CA
8. 89110 – Las Vegas, NV
9. 93536 – Lancaster, CA
10. 30349 – Atlanta, GA

The overall landscape of foreclosures will change in 2012 as the backlog resulting from partial freezes by servicers under investigation for robo-signature fraud (wherein foreclosures were illegally processed without human review), some predicting as much as a 25 percent spike in foreclosure filings as the backlog clears. Recent reporting shows that mortgage delinquency levels in December were unchanged and the levels have been relatively stagnant of late, which again, will not likely be the case for the full year.

More Time Than Money? Measuring Your Motivation To Sell

Welcome to the Price VS Time dilemma that faces all homeowners. Pick a price, any price for your home. Now wait. Eventually, someday, someone will probably be willing to pay you that price. The question is – Do you have the time or the desire to wait for that to happen or would you rather sell your home now for a reduced amount of money?

The Price VS Time dilemma is the challenge of determining which is more important to you as a homeowner – selling quickly or selling for top dollar. Of course, it’s easy to bang the kitchen table with both fists and say I want both, but that’s unrealistic. In the real world every homeowner falls into one of two categories: the necessary seller or the optional seller. Let’s define these two vastly different types of sellers:

The Necessary Seller: Necessary sellers are homeowners who must sell their home and it’s not something they can avoid or put off. Perhaps they have a job transfer or job loss, a pending divorce, health condition, or a financial crisis that is causing them to sell. Regardless of the reason, they need to sell, and the faster the better.

The Optional Seller: Optional sellers are homeowners who have made the choice to sell. They aren’t forced to move, they simply would like to make a housing change. Perhaps they want to upgrade to a newer home, a larger property, or just as likely, maybe they are selling to travel or move closer to friends and family. The bottom line is it will be inconvenient if they don’t sell, but the world won’t end.

So which kind of seller are you – a necessary seller or an optional seller? The answer to this question is key to determining how you resolve the Price VS Time dilemma, but be careful as it’s not as easy it might sound. For instance there are tens of thousands of necessary sellers across the nation who desperately need to sell their homes quickly, yet they act as if they are optional sellers.
These sellers list their homes for inflated prices and then are shocked, frustrated, or even angry that their homes fail to sell within their pre-set timeframe. Another wrinkle facing both optional and necessary sellers today is the issue of rapidly declining prices in many areas of the country. While in a typical real estate market an optional seller might hold out for top dollar, this strategy can easily backfire in today’s market as their home may be worth significantly less the longer they hold out for a higher price. In addition while many optional sellers may not be forced to sell, they may want to sell quickly because of other motivating factors. If this is the case they will need to adjust their pricing strategy accordingly.

If you are having a challenge determining just where you fall on the motivation scale ask yourself this follow up question. If I listed my home for 90 days and it did not sell, what would be my next step – adjust the price or give it a little more time? If your answer is to adjust the price, this would seem to indicate that selling quickly is more important for you. On the other hand if you feel more inclined to give it a little more time, top dollar is more than likely your primary motivator.

To unravel the Price VS Time mystery further sit down with me or Dave and give us an honest assessment of the reasons why you are selling. By reviewing what homes similar to yours have sold for in recent months and the time frame it took those sellers to sell, we can help you to set a pricing strategy that meets all of your needs.

The Murky Waters of Short Selling a Home

With residential real estate prices still depressed, sellers and buyers continue to find themselves navigating the murky waters of a short sale.

A short sale is a sale of property for less than the amount of the debt against it, and where the mortgage lender must agree to release its lien for less than what it is owed.

So why would a lender agree to such a sale? Because this is as good as it’s going to get. If the lender forecloses, it will incur additional costs and delays, and might have to evict its borrower.

In the end, the lender will receive less than what the short sale would produce. Thus, from the lender’s point of view, it’s better to have more money now than less money later.

For sellers, it’s important to understand that a lender’s agreement to release its lien for less than what it is owed does not mean the lender has agreed to forgive the remaining portion of the debt.

To the contrary, the lender may require that the seller sign a new note or an agreement modifying the repayment terms of the original note.

Or, the lender could file a lawsuit against the seller seeking a judgment for the unpaid balance of the original note. With a judgment in hand, the lender is then in a position to garnishee wages and bank accounts; have the sheriff sell the debtor’s possessions; and take other collection action.

If the lender does agree to forgive the balance of the debt — and this sometimes happens — the seller has another worry. Will the amount of debt being forgiven be treated as taxable income by the IRS?

In keeping with the tradition of the Internal Revenue Code, the rules here are technical and seem to change from time to time, so a property owner considering a short sale needs to check with a tax professional to determine the latest position the IRS has taken on this issue.

Because short sales are fraught with legal baggage of this nature, the Real Estate Division of the Washington State Department of Licensing and the Department of Financial Institutions have issued two bulletins about short sales. The DOL Short Sale Advisory is for home sellers but really should be for both sellers AND their Realtors/real estate brokers. DFI’s companion advisory is titled “Short Sale Guidance for Licensees” and contains many Q&As for both loan modification and short sale negotiation services.

Remember, Time is Not Your Friend when it comes to Short Selling your property. Call me today for solid answers to this very complex issue.

Should I stay or should I go?

I met with a couple the other night and they were facing some tough choices

Question: Should We Walk Away From Our Home?

They bought a home at the height of the market and now it is worth less than they paid for it. Not only has their value dropped, but they owe more to the mortgage company than the home is presently worth.

They both have good jobs and are not behind in our mortgage payments. But some family members are saying they should walk away. That it’s not a big deal, and they could start over. Is it really that easy? Should they walk away from their home?

Answer: You need a place to live. There are plenty of good reasons to own a home. For another, you made a promise to repay a loan, and most people feel an ethical, if not legal, obligation to follow through on their word. It’s a matter of personal integrity.

And yet another reason is markets move in cycles. You can’t time the real estate market. Eventually, what goes down comes back up. Historically, real estate values appreciate over time.

You have better alternatives to Buy and Bail.

Internet Sites for Walking Away From Your Home

For some people, walking away is the only solution because they can no longer afford to make an increased mortgage payment due to an adjustable-rate mortgage loan. So, they look online for a solution.

There are no honest solutions online from these walkaway profiteers. These are companies that prey on troubled borrowers’ misfortune and perpetrate the myth that walking away and going into foreclosure is a logical, foregone alternative.

You don’t need the help of an online company to help you do what you can do for yourself. Don’t line the pockets of opportunists. There are plenty of nonprofit organizations that can help you negotiate with your lender or offer up other viable options, and they don’t charge you:

You don’t need the help of an online company to help you do what you can do for yourself. Don’t line the pockets of opportunists. There are plenty of nonprofit organizations that can help you negotiate with your lender or offer up other viable options, and they don’t charge you:

• National Credit Foundation for Credit Counseling
• Hope Now
• HUD Approved Counseling Agencies

You can also find local nonprofit agencies that will give you free advice regarding foreclosure. Call your local council member’s office to get this information.

Foreclosure Scammers – If you fall behind on your payments, suddenly, plenty of foreclosure scams will find you. These companies will strip title from you faster than you can say, “What’s a quitclaim deed?” Don’t do business with them. Call a trusted friend or a real estate lawyer before agreeing to accept “help” from a company who wants to steal your home by making promises it can’t fulfill.

Stopping Foreclosure – If you’ve reached the point where a Notice of Default has been filed and you are headed into foreclosure, there are ways to stop foreclosure. Again, deal with reputable companies that don’t have a dog in race. Ask yourself, if the company stands to profit from helping me, how much help is it likely to offer?

Bottom Line on Foreclosures – Foreclosures will ruin your credit. That derogatory credit will stay on your credit report for 10 years. Short sales affect credit in an identical manner. Doing a short sale won’t save your credit report.

You may qualify to buy another home in two to three years, but the interest rate offered to you will be higher. If you are facing a situation like this and have questions, don’t hesitate to call me. We have been helping people in this area for many years and we can help you too.