Wednesday, May 25, 2011

"Re-Listing" Issues with the MLS

Many real estate investors contractually arrange to be able to immediately list the property for sale (at a higher price). Legally, there is no problem with this (if done correctly). For example, I recommend stating that the seller is a "contract buyer". This removes the property from the stigma of being a short sale since the contract buyer is paying cash and re-selling as the "B" buyer in an A to B to C transaction.

This has served investors well. However, a problem has developed with the MLS. The MLS in some areas (and presumably more in the future) will not allow a new listing until the existing one is "closed". In some areas, this means withdrawn, temporarily withdrawn, or sold. This creates a problem for investor buyers because it inhibits their ability to re-sell. We all want and need investors since they are anywhere from 25-35% of transactions at the moment. It should also be noted that in many areas it is required that the agent upload property information directly from the tax records and this auto populates the fields. It also prevents multiple MLS entries for the same property because the APN will be duplicated and the second one will be removed from the system. Some agents have manually entered the information but this may violate MLS user guidelines and otherwise be actionable by the state against a licensee.

My suggestion is to place language in the purchase agreement that enables the investor buyer to re-list and add that the seller needs to do whatever necessary for the listing to be placed in the MLS. Listing agents may not like this, but we are all trying to complete transactions and it is better to be proactive in this regard.

one of the reasons that I suggest this, is that the investor buyer cannot control the actions of the listing agent. The only way to achieve the goal of being able to re-list the property in the MLS, is to contractually secure the right with the home owner. In this manner, the listing agent will have to comply with the request....

Monday, May 23, 2011

Agents, PLEASE only advertise Your Own Listings!!

I spent the day tracking down some listings in coastal South Carolina. I had a list of agents that I have been planning on contacting. Turns out that most were a waste of time. PLEASE do not list a property for sale that is not your listing UNLESS you CLEARLY indicate this in the ad!!

As a business man, I understand that you may be trying to build a buyer's list, but please do not do this at the expense of my time. It is a waste of my time to talk to me when you are not the listing agent. Many of the ads went to great length to indicate that they were the listing agent - to the point of posting the property on their websites!! Many agents have lost their license for abusing this!! Pay attention!! Just because it is not the MLS does not alleviate your from your ethical and professional duties and obligations!!

Sunday, May 22, 2011

The Paddy Deighan Real Estate and Legal Blog: Things a Listing Agent Should Never tell a Short S...

The Paddy Deighan Real Estate and Legal Blog: Things a Listing Agent Should Never tell a Short S...: "I know that this sounds like a question from the $25,000 Pyramid show, but....There is a disturbing trend in short investor puts..."

Things a Listing Agent Should Never tell a Short Sale Lender...

I know that this sounds like a question from the $25,000 Pyramid show, but....There is a disturbing trend in short investor puts a property under contract and begins to market the property for future sale. Listing agent discovers that there may be a higher offer. They then tell the short sale lender!

This is a mistake for valid legal reasons. The listing agent's duty is to the home owner. In telling the short sale lender that there "may" be a higher offer, you are breaching that duty to your client! If the short sale that you submitted is rejected, you are now liable to yoru client because you had no duty to disclose the higher offer and in doing so, the bank rejected the offer because they believed that a higher offer is coming in. Of course the higher offer does not come in because the contract with the investor is now terminated!!

There is some misguided notion that you have a duty to the bank. The only time that you do is when the property is a REO. In that situation, of course, you must advise them of the higher offer, BECAUSE THEY ARE YOUR CLIENT!

There is no duty to advise the bank of the higher offer. There IS liability to YOUR client if you DO! So, please do not do this. You will lose investor buyers, and subject your self to liability...and by the way, in all likelihood, your E&O policy will not cover this loss because you were not acting within the scope of your duty and license and your action caused the liability!!

Investors are around 30% of the buyers right now so it makes no business sense to alienate them!!! This is also a good reason for the listing agent to NOT negotiate the short are putting yourself in harm's way when you negotiate the short sale

Practical Advise for New Real Estate Investors

With the tremendous number of investment opportunities available today, many investors find themselves wondering where to begin. Some investors discover that it may not make sense to invest in their own market, so they investigate opportunities in other states. Other investors find that there are so many investment opportunities specific to their area, that they become overloaded with information and confusion sets in. Whatever the case, investors intuitively know that there are good investments to be made right now. What is really interesting, however, is the vast universe of information and opinions that exists concerning where and what kind of investment property is right.
I’m hesitant to say that there is a specific right or wrong answer to this question. It does seem to me, however, that many investors have formulated opinions based solely on surface level information and minimal experience. The “Go Zone” is a good example. There was a lot of appealing information back in 2006 being circulated about the tax benefits of investing in the “Go Zone” in Louisiana and Mississippi after hurricane Katrina. However, ask someone who invested in a new construction home how that investment turned out and you will likely get a story about entire neighborhoods that are vacant to this day. I know several investors personally that lost a LOT of money in the Go Zone.
There is some of the same mentality today in buying investment real estate. The thought is “How can I go wrong buying a renovated house for $35,000 that would cost over $100,000 to build new?” The truth is, if you aren’t careful with your buying decision, a lot could go wrong. While there are a number of locations around the U.S. where you can buy and renovate a house for $35,000, it is fairly certain that only a handful of those properties actually make stable investments.
One of the most overused and perhaps slightly misleading concepts that perpetuate poor investment decisions is advertised “cash flow.” There is certainly nothing wrong with buying a property with the objective of positive cash flow. Investors buy investment property for both short term income (cash flow) and long term growth. However, the term “cash flow” has been abused and is often misleading to new investors.
For example, buying a renovated home for $35,000 may seem like an easy decision, if you’ve been told that you can get a conventional loan and still generate $400/mo in “cash flow.” However, what happens when you can’t find a renter willing to live in your house or even your neighborhood? If the house sits vacant for any amount of time, what are the chances it would be vandalized? Perhaps you were able to place a tenant, but they end up causing more damage to the house than the security deposit will cover. At the end of the year, you may find that while your initial investment for this house was minimal, the ongoing expenses and/or vacancy cancelled out any “cash flow” you initially had expected.
Every market is different. Many markets with very inexpensive homes in stable rental markets and attractive neighborhoods are not so desirable. You might consider, however, that a more profitable investment for a particular market may be in an area with slightly higher prices, less (perceived) monthly “cash flow,” and more stability in terms of crime rates, renters, employment, etc.
New investors can often be enticed into bad investments because they simply haven’t done their homework, and they haven’t experienced all of the pitfalls associated with owning rental property. Understanding renters, vacancy rates and risks factors associated with an area is of utmost importance when determining where and what your investment should be. Regardless of the type of investment you select, keep in mind that when comparing different types of properties, metrics such as advertised “cash flow” may not be a true apples to apples comparison. You need to take the time to perform your own diligence, gather information, consider your options and, then make a calculated decision that makes good business sense.

Housing Prices Drop for the 57th Consecutive Month...

Zillow announced last week that home values have fallen for a 57th straight month. This is clearly not good news for anyone but, it has hit beneficiaries of the $8,000 tax credit for first-time home buyers particularly hard. The Wall Street Journal, announced that the first time home buyers (that purchased as a result of the Obama tax credits) have “lost twice as much to falling house prices as they gained from the incentive”. The initiative began as an incentive for first-time buyers, then was expanded to include a $6,500 credit for existing homeowners who made a new purchase. The program ran from January 2009 until September of 2010 and, arguably artificially and temporarily improved the housing market at the cost of a faster recovery. Typical homes bought during that period have lost about $20,000 in value since that time.
To make matters worse, the IRS recently reported that it paid $26 billion in home buyer credits during the running time of the program. However, it believes that “at least $513 million went to fraudulent claims. Common incidences of fraud included claimants that did not buy houses, claimants that filed twice and individuals who were underage or incarcerated

Saturday, May 21, 2011

Interesting Statistics on Cash Buyers and Foriegn Investment in US Real Estate

The National Association of Realtors (NAR)reports that foreign clients and investors spent $41 billion in the United States last year, and that does not include the additional $41 billion that “individuals with visas to stay for more than 6 months” spent in the same period of time. To put that into perspective, these figures represent approximately 8 percent of the entire U.S. housing market in the one year period from March 2010 to March 2011.

There is an interesting twist to these figures. Historically, foreign investment in US real estate was in the higher end of the markets - by a huge $100,000 over the US average home prices. However, in the above one year period, a majority of the acquisitions were under the $200,000 mark. This represents an average decline in sales price to foreign investment of over $100,000.

Domestic and foreign investors with cash are also becoming more active in the market.Twenty Eight percent of all real estate transactions in 2010 were cash transactions. Many analysts predict that this number will rise in 2011.

Finally, another interesting trend is that 22 percent of all sales activity in March of 2011 was investor acquisitions. The market - short sale lenders in particular - have been unfriendly toward investors. Yet, it is impossible to ignore the impact of investors in the real estate market.

Wednesday, May 18, 2011

Some Helpful Suggestions When Purchasing a Real Estate Note

Many real estate investors are turning to purchasing a note as it becomes more and more difficult to purchase short sales. As in many aspects of life, there are advantages and disadvantages to this. One such example of a potential pitfall is RESPA. RESPA was enacted in 1974 as a means of proper disclosure to the consumer. It also eliminates kickbacks in real estate financing transactions. RESPA compliance alone, can determine the enforceability of your note. Here are a few key issues to consider:

1. RESPA requires a HUD disclosure booklet, so include one in every transaction in which you are buying or selling a real estate note.

2. RESPA requires that all real estate transactions include a HUD-1 statement. Many investors mistakenly believve that it is not necessary to have one when buying or selling the note. Include one for compliance.

3. Mortgage Servicing Disclosure Document. This document discloses the likelihood of assigning the note and also a statement of who will be servicing the loan/note.

4. Good Faith Estimate. RESPA requires this to and iut would be prusdent to include this in every note transaction. Just because you are buying or selling the note, you are not relieved from this compliance requirement.

5.Escow Account Reconcilaition Statement. If you are escrowing for taxes, etc., you are required to send a yearly statement of reconciliation for mney paid in and money paid out from teh escrow account!

Friday, May 13, 2011

Hypocrasy in the Obama Real Estate Positions

I have received many comments from real estate agents that lack of a tax credit is hurting the current real estate market. Said another way, the tax credits (artifically) stimulated the markets and now that tax credits are no longer available, the real estate markets are challenging at best.

Here is the hypocrasy in the the Obama administration policies on real estate: they induced tens of thousands of families to purchase real estate by incentivizing them with a federal tax credit. Now they want to eliminate the mortgage interest deduction on taxes. Lure them in with tax incentives and then take the incentives and much more away with significantly higher tax burdens if/when the mortgage interest deduction is eliminated. Why does no one seem to notice that this administration has no clue about business, real estate and pretty much anything?? They are completely detached from reality...

Thursday, May 5, 2011

Judicial Over Reaction to the Foreclosure Crisis

A judge in South Carolina has placed all foreclosures in that state on hold as of this week so homeowners could "mitigate their losses and perhaps modify their loans". Do you know who this really helps? JUDGES - all it does is reduce their case load. But it's their JOB to review these cases individually rather than to make blanket decisions, and this judge is simply lazy and derelict in her duty. This damages the real estate market by forcing lenders to have bad loans on their books for longer periods of time and thus makes new mortgage money less available for new buyers. Like many judges, this one is acting as if she is all powerful and has the authority to make law rather than merely interpret and apply it.

Tuesday, May 3, 2011

Have to Get This of of My Chest too About Bin Laden

OK, I will go on record as saying that I believe that Bin Laden is dead.....BUT (and you heard it first here)...there is a massive amount of bullshit surrounding his "death" and we are not being told the truth. A lot hapopened in a twelve hour period - they killed him, ran DNA to confirm death, took NO PICTURES of the dead him to the USS Vinson thousands of miles away and performed a Muslim burial at sea...ALL WITHIN TWELVE HOURS???? C'mon. First of all, they did not run DNA in twelve hours.....and where did they get a sample of his DNA to run against??

This reminds me of a story of my beloved day she returned home with a dead squirrel in her mouth...joyously proclaiming that she was responsible for the rodent's demise...upon brief inspection, I noted that the aforementioned squirrel had tire tracks over its body...I told the dog that it was already dead when she captured it no victory here.

The analogy?? Bin laden is dead...the US is taking credit but there is a lot more to this story.....we are being deceived for a little change of pace...

Sunday, May 1, 2011

The highest Short Sale Offer may not be the Best Offer

While it has always been true that cash is king, in the distressed property market it is vital for listing agents (and selling agents and buyers and sellers) to consider the fact that the highest offer isn’t always the best one and cash may not be king.
The Highest Offer May Not Be the Best One

In simple terms, when evaluating offers on a short sale, the highest offer may seem great, but there may be terms and conditions that are not in the best interest of the seller. For example, will the buyer with the highest offer agree to all of the necessary terms and conditions that may come from the bank? Will this buyer agree to pay for pest control if the bank refuses to do so? Will this buyer agree to wait three months for a short sale approval letter?

Now, with regard to short sales, the offer that is the best is clearly from a buyer who is serious, who is willing to stick around, and who is willing to accept any changes to the terms and conditions that have been dictated by the bank.
Finding the Buyer to Stick through the Short Sale Process

A buyer that is willing to stick around for the long haul is probably the best buyer of a short sale. Bank employees do not care a lick that the cash buyer can close in two weeks; they still take their sweet time to process the short sale despite the fact that this inefficiency is causing them to bleed money right and left. Keep in mind that buyers that are willing to agree to terms and conditions that may change at the eleventh hour are better, stronger buyers than those who will march when the bank refuses to pay closing costs or termite repairs.

The cash buyer is great for the short sale because he or she does not need to worry about lender approval of the HOA or an appraisal that comes in sub par. But, will this buyer be willing to come up to the purchase price that the bank is looking for on their short sale? Aaah. That’s a good question. Lately it seems that the bank thinks all short sales are mansions made of

Some FHA Flipping Guidelines

Lending institutions such as Bank of America, Wells Fargo and Chase, along with the government entities that insure their home loans (i.e. Fannie Mae, Freddie Mac, FHA), have their own set of guidelines for flipping properties.

The FHA wants two appraisals (the 2nd must be paid for by the seller) as well as a detailed list of improvements made to the home. Of course, this only applies if you’re selling the house for more than 20% of what you paid for it.

Next, you have to repair EVERYTHING the FHA home inspector says needs to be fixed, regardless of whether or not the buyer asks for these repairs. If you don’t fix them then the FHA will not insure the loan.

Among some of the more ridiculous items you may have to fix:

- Install anti-tipping device on kitchen range

- Replace cracked roof tile

- Caulk bottom of toilet fixtures

But what can you do? It’s the FHA’s way or the highway. They make the rules. They can change them whenever it suits their needs.

It’s universally known that banks don’t fix anything. Since the bank and the FHA are essentially business partners some guidelines such as seller repairs, are not enforced. Together they make up the rules and enforce them subjectively.

It’s estimated that about 20% of all loans originated in 2010 were FHA insured. If you’re fixing and flipping on a regular basis you’ll eventually have to sell to an FHA buyer.