Sunday, December 30, 2012

Distressed property review 2012

Wow, what a year this has been! We have seen a tremendous increase in activity for people looking to get in on the flipping market. That is where you buy a distressed property and fix it up to resell it for a profit. The competition is tough out there!

This is not a game for the mild. It takes guts,cash, and the ability to do the work yourself, so you can make a profit. The most important ingredient I believe, is a good Real Estate professional that you can trust! (ME) You need to know what is the highest amount you will be able to resell it for and what the costs of that sale will be. If you work with a Realtor who is out to make a fast deal it can cost you all your profit!

You need to find someone (ME) who will give you the truth and is in it for the long run.

Recently, I know a guy who is looking to do this. He knows me casually. I found out he is using a real estate agent that has been licensed 1 year! Probably a friend. I don't care how honest or hard working a person you are. 1 year compared to 28 years experience is a big deal! I am sure somewhere along the line he will realize that experience might just make or break his deal. I will keep you posted.

The biggest challenge in buying a bank owned home is money. Either you have cash or you will have to find financing and this is very tricky. The process to get a loan on a bank owned or distressed property can push you over the edge on your purchase. There are so many rules, and different options to navigate.

A couple things to look out for.... Most of these properties come with long addendums. These addendums tend to tell the buyer if they use the recommended title company of the seller, the seller will pay for title charges. I have a title company that will ony charge an extra $300.00 on your purchase if you want to make sure the title work is done correctly. Title work is insurance and it is all covered under the rules of the government so as long as you have title insurance you should be fine. But watch out if you are buying a VA property. They do not offer or pay for title insurance. I would highly recommend you paying the money to have coverage. These properties are in such a mess when it comes to clear title. The insurance is worth every penny.

Another item to watch out for is transfer tax. Traditionally this has been paid by the seller. We are seeing language that is confusing on this causing the buyer to get stuck with the cost. You have to watch every little item on the Good Faith estimate. (which most buyer can't read or understand)Some banks will outright charge the buyer the transfer tax. These addendums are starting to dig into the buyers pockets more and more. The Fannie Mae addendum just changed so if you read it two weeks ago it is not the same. Always read it to know what your charges will be so you can make an educated decision on your purchase.

The other problem, and I don't understand the thinking on this, is the governments repossessed homes tend to have a time period in which they will only accept owner occupant buyers. DON'T LIE ABOUT THIS! The repercussions are not worth it. Huge fines and sometimes the loss of license for the agent. The problem that I see here is sometimes the guys that know how to rehab a home would be the better buyers. They would in fact help bring the market back by reselling these homes at a higher improved price! I just don't get the government. If it was up to me HUD would have a loan product for rehabbers that have shown the ability to fix up homes and re sell them. In fact I would give them first right on the properties.

A lot of buyers are concerned that they are not going to get a fair shake on an offer if they don't work with the listing agent. One of my good friends in the business who has been a major bank owned lister will tell you his entire office only sells 7% of their own listings! In fact if the asset manager sees a listing agent selling most of his inventory and not co broking that listing agent could lose the business. NO major listing agent is going to take the chance to double side a deal to make maybe an extra $1000.00 and lose their supply of business. I am not saying everything is always fair but for the most part these guys are so swamped by their inventory and endless paperwork that they don't have time to screw around.

I had a bank owned property that had multiple offers. The highest offer was way over what the asset manager took. The reason why is the particular property was limited to a renovation loan or cash. This was listed in the MLS. Do you know how many agents wrote FHA offers on it? It was astounding because the house would never fly FHA!

If you want to play in the resale game get a good Realtor with experience, someone who wants to sell you more and more properties and be a partner in your success! They need to understand the different types of financing and what will fly. They also need to give you input on what to do, to best sell the property. It is a partnership. If you are out there just calling listing agents all I have to say is Caveat Emptor.

Monday, September 17, 2012

2012 Real Estate in Cleveland Ohio market update

This has been a fabulous year so far. The market is moving. Buyers are buying and listings are selling. BUT we have not been able to see increases in values yet. Whenever I try to push the value on a listing the market responds with low activity. Buyers are still a little shy and want to know that they are getting "a deal" before they make a purchase. The consensus is no one knows for sure what the future holds for real estate. The general belief is that we have bottomed out and are starting to recover. I hope this is true. There are still some really good deals to be had. If you have the ability to do repairs the market is ripe for opportunities in purchasing postive cash flow rental property. The rental market is very strong. One apartment owner told me he is 100% occupied and he has been able to raise his rents for the first time in 6 years! Buying investment property is still a little tough when looking for a good loan product. Most commercial loans are ARM's (adjustable rate mortgages) with a 5 year balloon. There are a few local banks that will lend money if you have 25% down and good cash flow. Credit unions are also great for commercial purchases. First time buyers have OFHA which will give you 2.5% toward your closing costs.This is an FHA product with 3.5% down. There are some pre payment penalities. Chase bank is offering Mortgage protection to all AFL-CIO members. That means if they lose their job or die the mortgage gets paid. Plus they give $500.00 off on closing costs. Chicago Title is offering AFL-CIO members discounts on title costs. If you have a house that is at a higher rate and have been unable to refinance because the value is less than you owe or you have less income than you did when you purchased you can apply for a HARP loan. Your present loan must be a Fannie Mae or Freddie Mac loan, To find out if your loan is one of these go to to see if your loan applies. Call me if you have questions about real estate and real estate finance. Let me put my 27 years of experience to work for you.

Monday, May 14, 2012

Spring Market 2012

I am very glad to report the market is looking like it might be stablizing. There are more buyers out there looking to purchase homes than I have seen in the past few years. There are still a lot of properties for sale. There seems to be a gap in the $200k to %350k market. Move up buyers are looking to snatch a good deal while the interest rates are low. This has not yet driven up pricing. Buyers a more savvy than I have seen in the past. They will walk away from a house if the price doesn't line up with past sales. If you are trying to sell a home and it isn't moving it is either price or condition. Condos are still a tough sale. I think people have become wary of getting involved with condominiums because of the assesments and uncontrollable HOA fees. This is a shame because there are some super properties out there with some pretty stable HOA fees. When you own a home you get hit with replacing a roof,furnace,central air. Well if you own a condo you get hit with assesments to fix issues as well. Just because you pay a monthly fee doesn't mean you won't have to come up with additional funds for repairs. One of my pet peeves is when people reference Zillow as a price parameter. Zillow doesn't do anything but merge all the values in a neighborhood and gives you a median value. Median values do not take into view what improvements or repair issues are present for that particular property. Another one is when a buyer references the tax value. First of all the county doesn't send an appraiser into every home. They don't even hire real appraisers to put the value on your home. Again the county uses the median approach to put a value on your home. The banks for years have tried to to automate appraisals and have found they can not do this. You need a real person trained in real estate valuation to take an actual look at your property and compare it to other properties that are similar to yours. We look at active properties which would be your competition and comparable sold properties. There is no black and white here. It ends up a caluculated judgment call on where we think the price will be. I have a great track record here and 27 years of experience is something that certainly comes in handy when valuing property. Financing is still available but you need a job or some kind of income and a good track record for paying your bills (credit score). Commercial finanicing is not so great. All I have found is ARM (adjustable rate mortgages) with a short term and balloon payment which means they will finance you for say 3 or 5 years with a rate that can change on a pre determined timetable and at the end of 3 to 5 years they want the full balance of what is owed. This doesn't seem like a good business move to me unless you know you have a windfall coming. SBA (Small Business loan) is a good loan for someone looking to purchase a property they plan to use for their business. It is expenseive and comes with lots of government imposed rules(red tape).The best bet for commercial financing is credit unions. They use a different set of rules than banks do to amke loans. So far they have been the more stable loan product. Let just keep our fingers crossed that this recovery continues! Real Estate sales lead to other related commerce so hopefully we can get back to some level economic recovery.

Friday, February 3, 2012

Outlook for 2012, in my opinion.

Happy New Year! I really think we are starting to see a turn around in the real estate market. If you are on the fence about buying my recommendation is to buy now while prices are still low and the interest rates are at the lowest they have ever been!
The deals are still out there. You have to be patient and keep an eye on the market. I have been in many multiple offers in the past few months.
My biggest advice is don't look a gift horse in the mouth. Half the time I am showing a really great value and the buyer wants to get a even better deal and ends up losing out to a multiple offer. If you are working with me and I say this is a good deal BELIEVE ME!
If you are selling your home it is still brutal out there. You have to be the best condition on the market at the best price. If you are not willing to paint a little here and there or replace old dated carpet the market is going to make you pay anyway. The buyers won't pay top price for a house that needs work, even if it is a little work.
Recently I was just< on a listing appointment and the potential seller asked me if I could sell the home without having to put them through the displeasure of showing it. Boy do I understand where they were coming from! Showing your house is no fun. It is a neccesary evil. Just like going to the dentist, you don't want to go and get drilled but you have to for the long term benefit. Selling of the internet is more likely to happen in a resort market where people may actually buy houses off the internet without seeing it in person.
So here's to 2012. It looks like it is going to be a good one!