Archive for September, 2011
Instant Equity In Short Sales
I’m certain that you’ve heard the short sale horror stories from the past. Lenders that wouldn’t even discuss the possibility. Those that did made unreasonable demands and took forever and a month to approve or deny a short sale.
Those horror stories from the past are true. The good news is that for the most part, they are exactly that. Stories from the past. Finally, lenders have stepped up and are more responsive and even down right eager to complete a short sale rather than take on another foreclosure.
That’s not to say the short sale process has suddenly become easy to navigate. There are still plenty of complexities and the lenders still need time to complete their due diligence before approving a short sale. With that said, it’s becoming more common for lenders to get back to buyers and sellers with an answer in about two weeks.
A late August report issued by foreclosure specialist Realty Trac, found that the national average short sale is for 21% below market value. That means Instant Equity for investors buying short sales.
That number also means lenders are only collecting 79% of the current market value for the houses. You wouldn’t think that kind of discount would inspire lenders to approve short sales. It’s the foreclosure value that’s convincing them otherwise. Once a house is taken as REO, the average selling price drops to 60% of market value because of vandalism, deterioration, and lack of maintenance.
So, you might think it’s wiser for investors to work the REO market because prices are even lower. While that might be true, there are other considerations you need to account for. Mainly that you will be the one that has to invest money to bring the property back up to marketable standards. Not only is maintenance required on foreclosed properties but often the previous owners are angry with the lenders. They literally rip out the kitchen sink on their way out the door.
Were Your Investments Insured
While I’m using the twin natural disasters that recently impacted the east coast as a springboard, everyone should give some thought to their property insurance coverage. You’ve seen the pictures on television of the recent flooding caused by hurricane Irene and many of you felt the ground shake from the totally unexpected east coast earthquake.
I hope you your family and your real estate investments came through it unscathed. However, if the damage had been more wide spread, do you have enough insurance to repair your investment properties? Both flood and earthquake damage require policies separate from the basic hazard insurance.
Where both natural disasters occurred are rare occurrences for the people living there. Basic insurance would have covered the wind damage from the hurricane but no flood or earthquake damage.
If you don’t know how much coverage you have, now is the time to pull out your policies and read them. If you decide you need more coverage, now is also the time to put it in place. You won’t be getting any advance warning before the next earthquake. And once the national weather service announces a hurricane is forming, insurance companies stop writing new policies or increasing existing policies.
The cost of flood insurance depends if it is in a designated flood zone or not. A basic policy outside of a flood zone typically starts at about $200 a year. Most earthquake insurance for the east coast starts at around 50¢ per $1,000 of property value.
If you don’t want to take out earthquake insurance, you might want to study up a little on what you can do to minimize possible damage. On the more earthquake prone west coast, insurance companies require a few structural improvements be made before they will insure a house. One is strapping the hot water tank to a wall. Another is bolting chimneys to the house walls. Stick built structures can also have walls better secured to the foundation.
Old Technology Still Counts as Much as Ever
Over the past year, I’ve written several articles about technology that focused heavily on the internet. A couple of my technology suggestions have been creating email lists, having a Facebook page, and writing a blog about your community, among other ways of staying in touch with your potential customers. And I’ve touted the importance of creating videos that market your real estate.
While that is critically important to today’s real estate investor, it’s just as important that you don’t take your eye off the old fashion telephone. If you’re running your real estate business correctly, you’ve probably invested several thousand dollars and countless hours promoting and marketing your business.
The entire purpose of it all is keeping your business in the forefront of people’s mind so that when they have a need for a rental or they are looking to buy a property, your business is the first one they contact. Even with all the technology you are using, that first person-to-person contact is likely to be a telephone call.
I want you to take a moment right now to stop and think about how your business phone is answered. Too many of us don’t give this the attention it deserves.
Do you have a hired receptionist or someone other than yourself that answers your business phone most of the time? Do you know how they answer it?
You or they should be answering every call as is there is a $50,000 check at the other end because there may well be. Besides the tone of your voice and the greeting you use, are you making sure all incoming calls are answered promptly?
My point isn’t to give you a lesson in telephone etiquette. I think anyone that can become a real estate professional can easily figure that part out. What I want to do is make sure you are doing what you already know is the right thing to do.
It’s the Uncertainty Holding Our Industry Back
You may be wondering what affect the recent double whammy of the debt ceiling apocalypse and U.S. credit rating downgrade will have on the real estate market. The real estate industry is a microcosm of the general U.S. economy. We can already see the affect in the overall private sector.
We entered 2011 coming off a relatively strong performance in 2010 considering the foreclosure devastation the industry was and still is experiencing. Investors were optimistic and it was reflected in the positive New Year predictions for 2011. What became reality is the optimism has been replaced with uncertainty three quarters of the way through the year.
When optimism was the private sector’s sediment, we saw slow but steady growth of the economy and most importantly, we saw the unemployment rate begin to drop. Later in 2011, as the sediment changed to uncertainty, we see the fall out in a stalling economy and up ticks in the unemployment rate.
It’s not that small and big businesses don’t think the U.S. will once again come out of the recession. It’s the uncertainty that positive action will not be taken in a timely manner. Reinforcing the uncertainty factor can be seen in U.S. Treasury Bill yields immediately following the U.S. credit downgrade. Yields actually decreased 38 basis points. The opposite of raising interest rates to offset the higher risk anticipated by the downgrade. More money actually flowed into U.S. Treasury notes seeking security from the uncertainty.
Real Estate Investing Without Borders
Real estate investing has a long history of creating wealth for the common investor. Today, virtual investing exponentially compounds that possibility. With current technology, you are no longer bound to deals in your local community.
Let’s dispel the misnomer that you have to live in a community to know it well. With all the information available from realtor websites and other sources, it’s easier than ever to learn what you need to know about properties anywhere in the country. Or even internationally. You can just as easily perform your due diligence online as well.
Today, finding buyers online is easier than attracting them to a local office. Over 90% of buyers begin their search online.
The fact is that online real estate investing offers you the chance to maximize your profits. You do this by picking a prosperous market any where in the country and real estatebecoming a ‘local expert’ without ever leaving the comfort of your home.
Just like all real estate investors, online investors must specialize if they want to prosper. Before selecting a city or section of the country to invest in, you must decide what you want to invest in. Will it be commercial or residential? Will it be multifamily housing or a niche like student housing? Once you make that decision, you can begin narrowing your selection to locations offering the best opportunities.
Once you find distant locations offering you the best opportunities in your specialty, its’ time to become a local real estate expert. Beginning this is no more difficult than googling “real estate offices in [your favorite location]“. At the same time, pull up a good local map of the vicinity.