Foreclosure Information A must read

This is a must read for anyone going through the foreclosure or short sale process. Click on the title of this article and go to the link.

Is a foreclosure your best option?

You watch the news and see many companies downsizing and plants idling. Real Estate has all but been written off by the media. I even read in Newsweek that home builders have all but written off 2009. The word foreclosure is now the new marketing “Buzzword” for Realtors. You hear that word and you think, bargain. All around town I see real estate signs that actually say “Foreclosure” on it like it is a good thing. I had one realtor tell me he received a call on one of his listings from a sign and the first question out of the prospects mouth was “Is this a foreclosure, if it’s not I don’t want to see it?” The foreclosure has really come to the forefront of the current real estate cycle that we are in. The foreclosure market is also the media darling at this time, so is this the best opportunity for you?
Before you jump on the foreclosure band wagon you need to ask yourself a couple of questions. Is this worth the time investment that I will have, and is the money it take to complete the project worth it in the end? We will talk about exit strategies more in the next week. I am sure you have heard that just because something is cheap doesn’t make it a good deal. All over the media it is plastered that you can buy houses 60 cents on the dollar, and I had an investor tell me that he purchased a house for 25 cents on the dollar. So what does this actually mean when you are done. To give you some background on me, the last 6 months I have bought two foreclosed properties. I have a client who has bought 13 through me in the past 8 months, and have showed countless other foreclosed properties in the area. I am stating this because I want you to know that I have experience when dealing with these homes.
This first part I want to discuss is time. For every one of these homes that myself or my client has bought we probably looked at close to 20 in person and at least 50 on paper. I spend at least an hour a day reviewing houses and at least 3 hours a week going into and getting cost for repairs together. Next, it is usually a month to get these homes back to market or in rentable shape. So you need to make a real commitment if you are going to find a deal.
Next, cheap doesn’t necessarily mean a good deal. There are so many hidden costs in getting one of these homes back to market. You need to make sure that if you are doing the estimating you have a good handle on the costs, or you could hire an inspector, but that is going to run you about $300. This may be money well spent if you are going to be making a substantial investment in these homes. It should help speed your learning curve, and could save you thousands in mistakes further down the road. If you have a partner that has been remodeling for years, you will have an advantage here.
If you are looking at purchasing one as a home owner, you need to take extra care. Human instinct draws us towards advertisements like “Good Deal,” “Best Deal in Town,” “Discount,” and of course “Foreclosure.” What actually happens when you buy most of that cheap stuff. If breaks, it has some sort of defect that you may be able to live with but would be too costly to repair, in worst case scenarios, you could end up spending a lot more money to cover the mistake than it would of to put the extra money in up front. This can be a real issue in the foreclosure category.
I am going to give a real example of two houses located in the popular “Colonial Village” community. Both are +/- 1100 Sq. Ft. Cape Cods. One is a move in ready Cape Cod that sold for approx 83K and the other was government owned that sold for around 60K. These numbers I am giving are strictly my opinion, but I feel are an accurate representation of my point. The 83K house didn’t need anything, but lets say you didn’t like the color so you spent 2K to change it. Should be high, but it puts you into the house for 87K. You have the other cape cod that you just picked up for 60k. This home has been sitting with out any climate controls for months causing cracking of the plaster and leaving a lot of deferred maintenance. Here are the numbers off my bid sheet. For kitchen update we had $7500. Redo all floorings we had $2.5 per sq ft. This totals out to $2887. Bathroom we had $3100. Paint/drywall repair $3600. Landscape $1000. New Doors/trim $1900. This was because we needed to replace a slider and put trim through out the house. Mechanicals would have been $2200. The roof and fencing also needed maintenance at approximately $2000. This brings the total of repair to just under $23000. Let’s say it takes you two months to repair it. You will have at least a thousand dollars of holding costs or if you paid cash, lost opportunity cost.
If you add it all together it comes out to $84,000 that you would have effectively has into that home. So as a home owner you would have had two invest two extra months living somewhere else, and would have had close to the same money into your home. If you are really handy around a house (which is not me), this may be a great opportunity for sweat equity. If you haven’t done it before, think out your costs. My old football coach always said, “if it was easy everyone would be doing it.” Same scenario here.
This is not meant to scare you, but just to get you thinking. A foreclosed property may be your best bet. And when you look hard enough there are good deals that need minimal work. Be careful when you hear the word discount. Before you buy the “good deal” take time to assess your skills, and write down what your needs are before just finding a house. In other words, think about your lifestyle first, then find the property that suites that. If you have any questions, please feel free to email, or call me anytime. Good luck in your house hunting!

Goals, education, and a propserous 2009

Sorry it has been a little while since I have written. This year has really started out with both feet hitting the ground running. I am adding another link that is focused to new construction sales people. This site features podcasts from some of the top sales people and trainers in this field. There is still a lot of good material for salespeople in other fields. You can also search under Jerry Rouleau under I -tunes and subscribe for weekly updates.
Education and training are the keys to my success in real estate. If you look at the top people in just about every field in the world, almost all of them will tell you that they are constantly learning and practicing to continually get better. Setting goals is also a common theme that you will see attributed to success by every reputable coach and almost every self improvement book I have read. One of my goals for my education last year was to read fifteen books, three more than I read last year. I achieved it and have moved my goal to 17 this year. I will be posting my reading list in the next week. If you are interested in a quick worksheet on goal setting, check out my documents link on the side f this blog under 12 steps for setting goals. This is a summary form a talk given by Brian Tracy. I have a link to his homepage under motivation.
Despite what you hear in the media, I really feel that this is going to be a great year. The opportunities are just a little different, but by having clear goals and a plan to follow I am excited to watch this year unfold. If you have any great tips on goal setting please feel free to add them in the comments section.
One last piece of news, I am really excited to be heading to the International builders show on Jan 17th. If you would like more information on the largest trade show in the US for the building industry check out www.buildersshow.com. I hope this year brings you everything you ask for.

Real Estate, Investing, and "Bad Markets"

With all that has happened in the last month or so around the world with the credit crunch, banks failing, real estate prices still declining, and of course the great world of politics, I can’t help but think of lyrics from a song artist that escapes me at this time. “It’s the end of the world as we know it, and I feel fine.”
It is hard to keep a positive attitude on our countries financial future when we hear nothing but doom and gloom around us. One point of this whole mess that really struck home to me was CNN’s top ten most wanted for the cause of the financial crisis. One of the people named on the list was “you,” meaning each of us in the US. It really struck me with the fact that I do have some control with what is going on. I may not be able to bail out a bank, but I can start at home with bailing out my own finances. As with 99% of America I got caught up the notion that the ride we had from 2001 to 2006 was never going to end. Even though I saved what I thought was a good portion of my income, it was no were near the 10% that used to be our nation’s average. I also thought I played by the rules investing in real estate and putting money in mutual funds to help my money grow faster than it would in a savings account. Unfortunately, neither of the investments have shown the return that was expected, and unfortunately opening my IRA and 401K statements have been disappointing to say the least. So what next?
I haven’t written in a while because what’s next is to keep investing. I just finished up an investment home and sold it to a first time home buyer. I made more than I would have with just a regular commission, and still gave the client a great deal on a home. I am not saying that quick turning a home is the best way to make money in this market, but I found a great home that fit one of my clients needs and we took a foreclosed home and rebuilt it to his needs and helped out the neighborhood it was in. I wrote back in January that now is the time to keep moving forward with your real estate investing. People always look for the deal when they go retail shopping. Yet when it comes to purchasing a home or investments in the stock market, we shy away from the markets when they take a major drop. I do not know enough about stocks to know if buying now is a good idea, if that is the investment vehicle you want to use, consult a professional in that area. As far as real estate goes, even in Michigan, which is being written off by most of the country, there is still money to be made in this area.
Even if you are only looking to purchase a home to live in, buying when the market is near the bottom of the trough, (I say near the bottom because no one knows when we are going to see the bottom or when the turn around is going to happen), gives you the best chance of seeing the biggest gains when the market does rebound. This is one of the greatest opportunities that has been seen in twenty years to purchase. I have always been taught, when you don’t know what to do, look at the best people in the industry and follow what they do. Listening to Robert Kiyosaki in an interview on the “Real Estate Guys Radio,” he was talking about how exciting real estate investing is right now. Many of the big investors are currently out buying properties all over the US. These are the guys to follow and study if you want to be successful. I will be adding a few more books to the list I have read recently. These are an excellent source of education to understand how real estate, investing, and goal setting work.
Even with all of the bad news we are being bombarded with everyday, this is the opportunity that the big guys and sophisticated investors of the world have been waiting for. If it is the right time for them, why not have it be the right time for the rest of us?

Foreclosure relief Home buying Counseling for Mid-Michigan

As I walked into Lance Queen’s office he is just hanging up the phone and states that for the last few weeks he has been swamped with phone calls like that one. It was a person whose home was going into foreclosure. Unfortunately for that couple the sheriff sale has already taken place so there was nothing that the Center for Financial Health could do to help the situation.
“Helping working families and individuals build assets through home ownership” is the Mission statement of this non-profit organization, and when it comes to helping people you rarely find a person as passionate as credit counselor Lance Queen. Lance is a certified counselor for HUD (Housing and Urban Development) and MSHDA(Michigan State Housing and Development Authority). The Center for Financial Health where Lance is employed provides five main services for people; pre-homeownership counseling, post homeownership counseling, money management skills, a home education workshop, and foreclosure prevention. The last one is where he has been the busiest with phone calls in the current market.
His goal in foreclosure prevention is to look the whole picture with the individual through a sit down meeting, try to negotiate with lenders, or in the right circumstances use government programs to help families stay in their home. “The key is people have to call me when they are starting to get in trouble, if they wait until a week or two before Sheriff sale there is really nothing I can do.” This is the message Lance really wants to get out.
Besides the foreclosure work, there are many more programs for people to take advantage of. If someone is considering buying a home the education courses can be invaluable. There are credit management programs to learn how to budget, a four class seminar on the entire home purchasing process, if you have bad credit you can learn how to become mortgage ready again in the future. The skills taught here are what everyone in the future will have to become very adept at. As gas and food increase our Mid-Michigan families purchasing power is eroding fast. These classes can help those who are already well into the crunch, and also help others who want to get a jump on the cycle and start planning now. The best part is, these services are free to Michigan Residents. This is a government sponsored program. You are already paying for it, you might as well use it.
I asked Lance what the advantage was of coming here, instead of going directly to a lender. “The center has no interest in it when you get a mortgage. That allows me to pull credit, assess the situation, and find the best deal for someone. It takes the pressure away from the individual wondering if the lender is really looking out for their best interest. Not all banks have all programs, so we can tell them the right questions to ask when they start interviewing banks for a loan. We may even find money through financial aid and grants in the right situation.”
Lance is very knowledgeable in the banking industry having spent 10 years doing mortgages. I met him when he worked for a bank and knew that he did things right when he worked with people, and him and I know all to well, that there are some companies out there who try to push people into the product that makes them the most money. This has caused part of the problem that the housing industry is currently in. This is really a good fit for him, in the fact that it really allows him to help people with no strings attached. If you need to get a hold of Lance his number is 517-319-1309 and his email is lanceq@centerforfinancialhealth.org.

Market hangover brings valuable lessons

Last night I was at a Christmas party at Dublin Square. I think out of the two hundred or so people there, 199 asked me, “so how’s the market right now? “ I respond with the same generic answer “slow in some segments, but steady in others.” Lately in Lakeside, I have been able to say we have three homes under construction for new neighbors out there. This really seems to open eyes when people hear that comment. They think housing is at a complete stop. The truth is, this market is not dead. We are seeing people still buying nice homes, the difference is, they are getting more value for the dollar. The party of the housing boom is over, and the United States housing market has finally awoken with a huge hangover. Unfortunately, some people got hurt when they fell victim to predatory lending. Others really thought the housing market would never crash and bought more than they could afford because they felt that the appreciation would bring them riches in the future. This is going to hurt for a little while nationally, but hopefully we can take a few lessons from this situation. I know I will be more careful on how little equity I leave in one of my properties so should I need to sell it fast I won’t be in a position to bring money to close. As goods become more expensive and gas prices raise again, this is a good time for all of us to readjust our budgets, and put together a program for a rainy day. A home is still a good investment if you need a place to live, but listening to a Rich Dad tape, Robert explains how a house is really a liability as a personal investment for our future. I did not understand this at first, especially being in the real estate profession. We are taught to show the tax advantages, appreciation values, and all of the other benefits that come on paper from owning a home. These are all true, but after watching the foreclosure rate, it all comes down to the simple fact of how much money is coming in the door versus what is going out. It is unfortunate that so many people are learning this at the expense of their homes.

Sellers Market Unhealthy, Unprecedented time for buyers

We saw more bad news in the papers last week with foreclosures rising 54% in Ingham County. New homes being started in the area through the third quarter are also down over 40%. Currently in Lansing as of today there are 5117 houses available for sale according to the MLS. Using the average of 366.5 sales per month year to date, this would mean we have almost 14 months of inventory currently on the market in the Greater Lansing area. It is no secret that the market has switched from a sellers to a buyers market.
Believe it or not this is one of the best times in the history of real estate for a buyer to purchase. The last time Lansing’s building permit numbers dropped this low was in 1982. Interest rates were through the roof and it was extremely difficult compared to today to get a mortgage. Even with the tightening of the market, there is a program for just about any one looking for a loan. I have seen some unbelievable deals on homes that have sold in the last few months. There are many different incentives and just regular price reductions that are going to allow many people who purchase right now a chance to have large equity positions in property in the future. We just came off of the longest run in housing growth in US history. Metaphorically, the new years party ended and it is currently mid morning Jan. 1st and the hangover is really setting in. Some people really tried to play the market, especially in some parts of the country were there was 15%-30% gains per year in housing value. They jumped in at the end and are currently getting burned. Michigan’s real estate market isn’t healthy if you are a seller, but in very few instances are the consequences of purchasing a home in our hottest markets of 2004 and 2005 going to have as much of an impact dollar wise as someone who purchased in Florida or California. One thing I will guarantee you, in the future, real estate will be more valuable than it is currently. I don’t have a crystal ball to tell you how to time the market and I don’t think that we are going to see the type of market we saw a few years ago for quite some time. Our area was overbuilt, financing got a little aggressive, and it is going to be hard for a while for some people to be able to get their money back out of there homes. However, we are seeing signs of the market stabilizing.
I have accumulated the building permit data for the area for the last 30+ years. It is easy to see to see the trend of the growth and then a sharp drop off for a few years. This would coincide with the existing home real estate market as well, since new homes are primarily needed when there is growth in an area. The easiest way to track new home growth is by looking at the employment growth in an area. The more job growth the more new construction that can be absorbed in a market area. Looking at jobs in the Greater Lansing area from 2000 to 2007, there were 10,000 jobs cut out of our market. This data was not seasonally adjusted, but it still shows a downward trend which would create a situation where existing housing stock would be in over supply, let alone adding new homes. New construction permits pulled were at record highs in 04-05 which has now caught up with us. The good news, we have seen employment numbers stabilize over the last year. This is a good sign for the market, because we should start to see our local market stabilize over time. For buyers right now, if you need a home there has never been a better time to find a good deal on a piece of property. When the market does stabilize and we start to see growth, people who purchase now are going to have the best chance of being in a great equity position in a few years. If you are thinking about real estate investing, now is the time to start researching properties and neighborhoods to learn values. With foreclosures at an all time high, interest rates at an all time low, and the new job announcements in Lansing and the surrounding area this market is showing signs of being healthy again faster than many of the other areas in Michigan. If you are interested in seeing what properties are available right how, please visit my website www.lansingrealestate.com, click on listings and MLS. You can either search properties my company currently has listed, or search all listings in the MLS by clicking on the MLS button in the upper right corner. If you are interested in government foreclosure homes, check out www.homesales.gov. This will give you the list of all the government foreclosed properties in the US. For strictly HUD homes in Michigan here is the link to Michigan broken down by cities. http://sales.clfres.com/SelectCities.aspx?State=MI&DollarExclusive=Y
If you are interested in viewing any of these homes, or have any questions regarding real estate investing or purchasing, please post a comment, or email me at brent@lansingrealestate.com. I will also be posting some of the podcasts that I listen to regarding real estate investing and real estate in general, as well as links to other sites I find useful.
Please let me know what other good sites are out there, I am always looking for more information. I am working on setting up to interviews regarding real estate investing. One from an investor that just purchased and flipped his first piece of property, and one from a gentleman who has been buying flipping and renting properties for quite some time. I hope to have these within a week.