"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 In some areas, this means withdrawn, temporarily withdrawn, or sold.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....

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 sales....an 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 sale....you 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.

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.

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...

GREAT News for Short Sale Investors

As reported by the Los Angeles Times, and others, those servicers involved in the robo-signing settlement may now be forced to permit modifications, principle reduction settlements, and short sales. While the terms of this proposed settlement are still being negotiated, the impact of the settlement could have some positive effects for both short sale sellers and purchasers of short sales. As a result of the settlement, it would seem that banks would have to be significantly more flexible with respect to their determinations of value.
As it stands right now, it is often difficult to come to some sort of agreement with the short sale lender on the value of a subject property. Frequently, values need to be appealed using comps or a full appraisal conducted a certified or licensed appraiser. The Los Angeles Times compares distressed properties to “day old bagels”: the point being that banks need to reduce the price of their assets in order to unload their inventory. However, the additional costs associated with foreclosure don’t always make foreclosure the best option. So, even the most difficult lenders (if they are part of this proposed settlement) would now be compelled to consider short sale more seriously.
As an attorney and founder of a third-party short negotiating firm, I can tell you that at present the only party who thinks that a property should be given a distressed value is the buyer. Short sale lenders (particularly, short sales with Fannie Mae as the investor) are sometimes asking for above market value on their properties. Bank-owned homes are frequently listed with a sales price equivalent to market value—not the distressed value associated with vacant and abandoned homes.

THIS is Why We Need Real Estate Investors

While many families struggle to find the funds to purchase their own home in today’s market where the deals abound but credit is tight, real estate investors are making the market work by buying in bulk. According to the National Association of Realtors, real estate investors represented 17 percent of all home sales nationwide in 2010. And that number is likely to grow as conventional funding continues to be difficult to obtain and the ability to spot and make a creative deal becomes more and more valuable.

As foreclosures continue to drag home prices downward, more and more real estate investors who may have exited the market prior to or during the housing bust are now re-entering as home prices become too much of a bargain to resist. And while historically investors have been demonized for everything from driving prices up to keeping them down, today many markets are relying on them to keep the entire machine from grinding to a standstill. For example, in Florida 17 percent of all homes are currently vacant. Without investors buying up homes, rehabbing them and selling them – probably still at a steep discount – those properties will drag home prices down in their areas indefinitely. “If Florida is going to have a comeback anytime soon, investors are going to have to play a role,” explained RealtyTrac vice president Rick Sharga. “There are just too many properties for traditional homebuyers to absorb,” he said.

In fact, while Moody’s Investor Services predicts that nationwide, home prices will stabilize by the end of 2011, distressed areas of the country might not stabilize until 2012 or later. Without investors, this process could be literally interminable