May 6th, 2009
As a person that spent 10 years on his Psych education. I have had the pleasure over the past few weeks of gaining some interesting stories. So i have written 2 contract over the past 2 weeks that have fallen through due to sellers not wanting to sign the PSA. Normal right? of course. But these are PRe Foreclosure Short Sales. So in the State of Washington if your property is a Short Sale and subject to lender approval, and it is being advertised as such, the seller legally has no negotiating power in this situation. The reason for that is, the Seller actually can not guarantee the sale price of their home if the contracts needs lender approval. As we all now in a normal transaction the seller and the buyer negotiate, and we settle on a price, and that is what we close at minus any credits or debts. But if your property needs lender approval; the seller in not actually the seller; the lender is.
Recently I put an offer in on a property in a great neighborhood but the house was a dump. The owner wanted a certain price for his house even though that settling price was less than the outstanding debt, and the owner had yet to get that number approved. But the owner being a person of faith, argued that God told him through prey that this was the price his house was to sell for. And he had a social responsibility to not hurt that lender with our offering price. I explained that our offering price; one was logical due to the comps in the area; and do the the condition of his house it wasn’t worth what he thought. Of which I showed this with a packed of information about 50 pages deep. Then I told him that he can not negotiate on behalf of his lender, because he had no right too. But there was no getting him to follow the law much less the logic of the process. So we had to walk.
Next I put a contract in on a distressed property on the East side for another client, and we were getting the run around form the agent that the seller had signed it and it was off to the bank. I said if it is signed why don’t I have a copy? Then she said she would send it right over. A few minutes later I got a call from her saying the contract was not signed and the sellers would not sign it. I asked why, and she said the sellers wanted 15k more than we offered. Again I told her that since the deal is a short sale and it needs lender approval the sellers can’t guarantee that the bank will even settle at our agreed upon price. And further more if the bank ends up countering (which they will) this offer my clients and the sellers negotiated, the sellers have now committed fraud. Because, why? When you are in Default on your loan, you basically give up all rights to negotiate the sell price. Because the bank is now the bottom line, not the seller.
What this says to me is that; one their listing agent had not fully informed their client on what it means when they choose to sell their property as a ”Subject to lender approval” Short sale. Two, when you are going through mostly like one of the most difficult periods in your life, you still reach for anything that will let you feel like you are in control. Unfortunately the grief minds logic most of the time does not let you move forward, but it will keep you in your distressed and stressed partern. So listing agent please coach your clients on the reality of the situation. Instead of being tunneled visioned on just getting the listing. Not only does it put your client at more risk for trying to negotiate in a situation that they can’t, but it puts you at risk to.
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March 9th, 2009
So I was running correlates with the MLS sales stats in comparison of the Realtytrac.com’s foreclosure trends and data. As of January King county is down 35% YTD. In January 2008 there was 1037 residential sales in King County…January 2009 has had 674 sales. The average price of sale was $453,118 which is down 14% from last year which was $525,948. the thing that surprised me out of the 674 residential sales, 232 of them were distressed. Which says 34% of all residential property sales were distressed. So Realtors and Buyers, brush up on your knowledge of REO and Short Sale procedures. I believe it is the only way to purchase in this climate, and not be upside down in a market with falling market values.
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March 3rd, 2009
Notice how October is the Peak Filing Month for Washington State
I have been hearing from investors that they want to keep their powder dry to see where the market going before they start purchasing distressed property. They have also told me that they think the banks are going to become more negotiable in time. I am going to say in the nicest way possible, that you are wrong. Foreclosure prices are not getting cheaper. That is obviously a statement of ignorance to the foreclosure process. Foreclosure in the state of Washington works by a lien holder notifying the home owner that they have not made their payments by which breaks their contractual obligation to that lien holder. Because of that action, they have the right to auction that property starting at the Default Judgment amount. That when you go to auction to purchase that property the opening bid will be that default amount, plus any back taxes or public utility lien’s that are on record. That is only the opening bid; you still have to complete with the 12 other bidders you WILL be bidding against most likely.
When we buy in short sale we will be purchasing lower than the mortgage values, then things like back taxes, unpaid utility bill’s get paid at closing and it comes out of the seller’s side. A lot of Realtors will not want to deal with this negotiation with the lenders. The lenders will try to go after the agent’s commission as a way for them to lessen the loss. Agents need to have previous agreements with their clients about just this issue. From a buyer’s agent’s side, my clients make a lot of money in equity upside. It has yet to be an issue. It is easily earned when you purchase your client a house 30-45% below market value, and 30%+ below Mortgage value. Better than that is you as an investor can finance, have an inspection, and the seller pays the commissions. Where if someone purchased at auction that individual does not get the luxuries stated above. Yes, short sales take longer, your agent needs to do a lot of leg work, but you make the most money by doing the work other don’t want to.
Yes, the real estate prices are going down. But foreclosures cannot get cheaper with the way the State laws are set up. Not only that foreclosure filing is down 27%; from Washington States peak filing month in October.
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February 24th, 2009
Yes! YEs! YES!
With a 19% reduction in Foreclosure filings in January compared to our peak in August and a 28% increase in foreclosure purchases. The market is indicating the damage for undervalued properties. Through out all of time when land has had potential to turn a profit, nations have gone to war over such matters. We are in a perfect storm to start collecting a commodity that there is not being anymore made of. When real estate is 30-40% below what its comparable are selling for, it is best not to sit on your hands. Because that are large cooperation with Hundreds of millions of dollars collecting these investment because they know the future value. As individual we are more scared than an entity with vast resource. But this is why you hire someone like me. Because I crunch numbers with more levels of scrutiny then the competition. I run a algorithm with 46 point of analytion. Most software and analyst run 7 to 12. Lets not mess around, with would of, could of’s, and should of’s. The time to invest in now.
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February 20th, 2009
This is a bar chart showing the Sold real estate in King County for 2008.
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February 20th, 2009
In the State of Washington in 2008 there were 19,437 foreclosure Filings. Washington is ranked 24th out of 47 states, 3 states do not allow foreclosure. The Average sale price for a foreclosed property in the state of Washington was $248,803.00. The peak filings in the state happened in August, currently we are 27% lower then the peak filings. Who knows what this 75 billion in foreclosure bailout will bring? I doubt it will yield any real support. Since there has been and will continue to be large amounts of layoffs, more and more people will not be able to afford their mortgages they once could support with their income. This stimulous has come to late, the dominoes have already started the chain effects. The compiled data shows another 12% drop in real estate values before, I believe a bottom will be called. Yes, there will be more foreclosures, but they will come at a slower rate and over a longer period of time. Good luck, and remember now is a great time to start investing in distressed real estate.
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February 3rd, 2009
With dividend cutting in the stock market, where does it really pay off to create residual income? The short answer that come jumping out at me is Multifamily real estate; not commercial; not all residential properties; and most definitely not condo’s. Why not commercial? Well as you see all over the news every day, retailers are hurting bad, so unless you can afford to buy a strip center in a great location and sit on it for the next 2-4 years before you start to see a return…Good Luck. Most retail prices for residential real estate here in the Seattle area is valued to high to give you a 1:1 rent to mortgage payment ratio. In most cases my client that purchases distressed properties we can get a 1:1 ratio and more than sometimes a small net income from that property that will only grow with long term ownership. The reason for not purchasing condo’s for investment is very simple; no matter how you cut it you still have a HOA payment; which will put you upside down every month.
People are losing their homes, having to down grade further in their present rental, or they are not in a position to buy a house. So they still need to live somewhere; and living with your parents until your 30 or 40 might be great for some; but not for most of us. Where are these people going to go? Apartments! Duplexes! MIL! Anywhere cheaper than what those people had. So we are seeing an increasing in demand for multifamily housing which will only grow as the economy get worse. What does multifamily give you…Lot’s of rent. Not only lots of rent, but you have other people paying your mortgage. You also get to raise rent which intern increases your capitalization rate; which increases your properties value! So if you have been thinking about a good safe place to put your money, that actual makes you money. Not only does it make you money, but you start a process of creating Generational Wealth by purchasing multifamily real estate.
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November 20th, 2008
Fear is ruling the day. Paranoia is being pumped by every media outlet. With terrifying speak happing at many tables and coffee shops around the world. There is the biggest silver lining if you have the fortitude to step away from the crowd. That silver lining is there is 4+ trillion dollars sitting in bank accounts around the US alone collection dust. WHY IS THIS MONEY COLLECTION DUST? FEAR! Why was that money in the stock market in the beginning? Because stocks make money through dividend payments and inclines in the price of that share. What commodity do we have in real estate that does the same thing? MULTIFAMILY BIULDINGS! People go after that cash! Tell your clients that the cash they have sitting in the bank doing nothing, can be working for them. How is it going to work, by buying multifamily housing? Rent is the Dividend and as that cap rate goes up, so does the property’s value. Here in Seattle we still have a massive Rental deficit. Please save your business by getting out of the fear and adapting to the market.
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September 30th, 2008
I just wanted to give everyone a heads up when dealing with a lien holder when negotiating a short sale. Most of the time we call the lien holder to talk to their Lost Mitigation’s Department and you just get a automated answering service tell you to send communications through fax. It is frustrating and time consuming. Stay on hold with the system and eventually you will get to speak with a person. Have all the property information at your finger tips, tax id number, property address, letter from seller say you can talk on their behalf, outstanding debt, and loan account numbers. When you get to that person ask for an advocate. This is a person that has the job of being the liaison between you and the bank negotiator. This is the person you sent all you contracts to and communication from the buyers agent to the bank. You don’t constantly have to be faxing to negotiate. This saves a lot of time, and makes it easier to solve conflicts.
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September 30th, 2008
Two days ago I spent some time with Danny Westneat a columnist with the Seattle Times. He wanted to find out what kind of properties were in distressed and who the people were associated with the properties. So he and I jumped into my truck and we went on a tour around North Seattle. I explained to him the in and outs of the distressed real estate market and what I have seen go into foreclosure. He wrote a great article and I wanted to share it with everyone.
http://seattletimes.nwsource.com/html/dannywestneat/2008199154_danny24.html
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