Minnesota Real Estate Investors Association, Inc.

Retail Sales rise unexpectedly in January. Really?


Here is an article from the Associated PressRetail Sales rise unexpectedly in January”. Really? Unexpectedly? Really? How can this be unexpected? Oh yeah, silly me, the Economic Recovery Bill hasn’t passed yet, so in theory, this cannot be possible. However, it is what it is and it has happened. So what is really going on here? Simple, the economy is beginning to recover on its own. Yes, I said “On its own.” I know for some people it is hard to believe, but it is true.

Let’s take a look at what has happened over the last year and put the pieces of the puzzle together. The two biggest factors were gas prices and house prices. These are the two biggest items that drives a person’s day to day life. When light crude oil prices reached record levels in 2008 at almost $150 a barrel, gas prices were around $4.00 a gallon or higher. At the same time, real estate values were plummeting at record levels and no one could sell or refinance without taking a hit.

Foreclosures reached historic levels in 2008 and prices started dropping fast as these properties either went through foreclosure or loan modifications. While everyone expects even more foreclosures over the next couple of years, that is to be expected as that always happens after a boom, which we went through one of the largest and fastest booms in history. Read More...

The Obama Administration Wants to Partner with the Private Sector


Geithner unveiled their plan to aggressively combat the so called worst crisis in seven decades. They are saying that their plan of over $1 trillion dollars is designed to get the frozen credit markets functioning again. See their full plan outlined at Yahoo News.

Let’s break this down using common sense. I know, for some people I will need to explain common sense. Common sense simple means that we look at the facts and come to a reasonable conclusion based on the most likely outcomes. There is also one other item that needs to be looked at if we are using common sense, and that is the desired goals of the planners and whether or not they have been disclosed. However, the advantage of common sense is that we can actually discover the desired goals of the planners if we properly apply common sense.

The Obama administration wants to push down our thoughts a $1 trillion dollar social engineering program and they are disguising it as an Economic Recovery Package. So let’s look at the facts. First of all, most of the spending in this pork package will not start until 2010 and the spending plan is designed to end in 2019. Does that sound like and emergency recovery package designed to free up our credit markets right now? Using common sense, the answer is no. How much of this plan is designed to help the credit markets, as far as we can tell, there is nothing in his plan that directly helps the credit markets. Read More...

Leave it to the Government to Create a Double Standard


Yet again, leave it up to the government to demonstrate their ability to legally create a double standard. In many if not most states, it is illegal for investors to buy a property from someone in Foreclosure and then rent it or sell it back to the homeowner. This type of transaction is called Equity Stripping when a nongovernmental investor does it, but according to Freddie Mac, it must be considered compassionate.

According to the Finance and Commerce legal paper in Minneapolis, MN, Freddie Mac announced a new policy that would allow some borrowers the ability to stay in their properties after the foreclosure process if they can demonstrate the financial ability to make a rental payment. Freddie Mac s reasoning is that it is better for overall property values and neighborhoods if the properties were occupied rather than vacant.

While that may seem like a worthy goal, it is simply illegal for the rest of us to do the exact same thing, so we now have a new competitor in the real estate market, Government. And besides, if they had a clue, they would realize that by keeping the previous homeowners in the property as renters, would result in a lower overall property value and it will take much longer for investors to purchase the property and do the necessary renovations on the property that would significantly increase property values and the overall neighborhood values. Read More...

Foreclosures and short sales are showing early signs of slowing


According to the Minneapolis Association of Realtors

“Foreclosures and short sales are showing early signs of slowing. During the fourth quarter of 2008, there were 4.3 percent fewer new lender-mediated listings than in the third quarter. That's the first quarter-to-quarter decrease since 2003.”

The association has released a new interactive data tool that allows you to sort neighborhoods and cities within the Minneapolis/Saint Paul region. You can find it here: www.mplsrealtor.com/downloads/market/Lender-Mediated/Main.htm

Foreclosurea and Short Sales in the Twin Cities Housing Market

While the signs look like positive, don’t think we are out of the water just yet, many analyst are still saying that the next wave of foreclosures is coming between 2009-2011 with all the Conventional Option ARM loans that are set to start adjusting in right now.

If you are in the Short Sale Business, then you will be busy for a very long time and buyers will be getting some very good deals over the next few years. I was just thinking that when this next wave of foreclosures hits, the lenders will be more prepared to negotiate and accept short sales then they were when the first way of Subprime loans start to default because market values have already dropped considerably. Whereas when the Subprime mortgages started to go into default, the markets were just starting to slow down. Read More...

Why Everyone should be using Land Trusts


Just a couple of weeks ago, I did a class on Land Trusts. This is one of those subjects that everyone wants to learn about, but most people never get around to using. There are all kinds of excuses as to why they haven’t done a Land Trust yet, but I think the biggest reason is that most people just think that it is too much trouble and that nothing will happen to them. That is until something actually does happen to them.

For example, just the other day, one of those students called and need some help. He needed to put his multi-family rental property into a land trust. He was a little frantic and had a sense of urgency about it. When we asked him what was going on, he proceeded to tell us a story that I have heard many times before.

Just a couple of days after the Land Trust Class, a tenant fell on the sidewalk. Now she wasn’t hurt at the time, but over the last week, she has been calling the landlord and complaining about her neck, she thinks she has whiplash. Having that feeling in the bottom of his gut, he decided to call his insurance agent and report the incident, just in case the tenant got worse and decided to make a claim. That is when the insurance agent kindly informed the landlord that he did not have an active insurance policy on the property. The policy lapsed over the holidays and the landlord had not realized this at the time. Money was not the issue, the holidays where. He had the cancellation notice sitting in a stack of mail that he just handed gotten around to opening yet because of all the hustle and bustle of the holidays. He didn’t think much of it because he didn’t think the insurance policy was due for a few more months. Read More...

Subject-To’s are Coming Back


Since real estate values have plummeted, Subject-To deals have been harder to do because most of the time, the mortgage balance from the seller is higher than the property values creating a situation that if we took over the sellers property and started making payments on their existing mortgages, then we would end up with a property that we could not make cash flow or even resell without having to pay down the mortgages ourselves.

While some lenders were accepting short sales, most lenders were waiting for their bail out from the government. Since that never happened, some lenders have been more susceptible to short sales. While short sales have been our only way to deal with over leveraged properties, we were forced to resell the properties to pay off the short sale. Which meant that Sub2 deals were not taking place which is why according to the National Association of Realtors®, about 50% of all transactions in the 4th Quarter of 2008 were either Foreclosures or Short Sale.

According to BloombergCitigroup Inc.’s agreement to back legislation that lets bankruptcy judges cut mortgage rates for at-risk borrowers drew criticism from bank industry lobbyists who said the compromise with Senate Democrats was flawed. Citigroup endorsed the bill after Senate Banking Committee Chairman Christopher Dodd, and Senators Charles Schumer of New York and Richard Durbin of Illinois, said they will limit the legislation to existing mortgages, rather than future loans. Durbin, the Senate’s second-ranking Democrat, brokered the deal with Citigroup and sought similar agreements with other lenders.” Read More...

What is 'Subject To'?


This seems to be the toughest subject for investors to understand, especially new investors.

What is 'Subject To'? Here is a section from the Purchase Agreement I use that talks about encumbrances and marketable title:

DEED / MARKETABLE TITLE: Upon performance by Buyer, Seller shall deliver a Warranty Deed joined in by spouse, if any, conveying marketable title, subject to: (A) the existing mortgages. (B) Building and zoning laws, ordinances, state and federal regulations; (C) Restrictions relating to use or improvement of the property without effective forfeiture provisions; (D) Reservations of any mineral rights by the state of Minnesota; (E) Utility and drainage easements which do not interfere with existing improvements; (F) Exceptions to title which constitute encumbrances, restrictions, or easements, which have been disclosed to Buyer and accepted by Buyer in this Purchase Agreement; (Must be specified in writing) _______________________________________________________ (G) Others (Must be specified in writing) ____________________________

When you buy a property and take over the existing mortgages and start making the payments directly to the bank, you have bought the house 'Subject To' the existing mortgage.

Example:

Largest House Price Decline since the Great Depression


With the melt down of the economy and the stock market crashing, buyers are sitting on the fence waiting to see what will happen next before they pull the trigger and buy a house. This is causing problems for anyone who needs to sell and it is creating huge potential for buyers. We are in one of the greatest buyers markets on the last 30 years and maybe even since the Great Depression.

According to the National Association of Realtors ® , housing sales have dropped 8.6% in November nationally, -12.0% in the Northeast, -7.4% in the Midwest, -10.9% in the South and -4.3%in the West. The national median home sales price for November was $181,300. That’s a decline of 13.2% from the previous year.

Actions by the government to stimulate the economy will be a big factor in stabilizing housing prices. Mortgage Interest rates are still very low and credit is starting to free up again. Yes there has been a large scale price adjustment across the country and that is reflected in the housing prices. With these low prices and low interest rates, investors will be able to start buying again and once investors start buying, the general home buyers will follow. That is the way it has always worked in a recession, even during the great depression. The great depression created some of the wealthiest people in America today and most of them came from real estate. While our current financial crisis is no were near the level of the great depression, there will be millionaires made through real estate over the next decade.

Ready to Join me for a GREAT 2009?


It’s that time of year again, when we sit down and reflect on the previous year and look forward to the year ahead of us. This past year has been filled with extreme swings in the economy and our emotions. For some people 2008 was a great year and for others it was a nightmare. I have been caught right in the middle of both, so I guess for me, everything evened out and it was a year that makes me look back and ask, what the heck happened. I had some winners and some losers. The losers of course came in the last quarter of the year and I did pretty well during the first 3 quarters of the year. Some might look back with discouragement and frustration. I however am looking ahead with a clear determination to make 2009 the best year ever.

With the shake up in the credit markets and the stock markets, I see huge potential for 2009 in real estate. I believe we have hit the bottom, for the most part. A new president and administration will take office on January 20, 2009 and they have made it clear that they are focused on stimulating the economy. Again, for some this will be good and for others it will be bad. For real estate investors, this will be very good. Just like when the real estate market was hot, the economy seemed unstoppable and real estate prices climbed to artificially high prices, the collapse of the credit and financial markets has artificially lowered real estate prices below the point of where they normally would have settled at. Read More...

Curb Appeal at Christmas Time


Every real estate professional knows that the first impression a buy gets of a property is when they first drive up to the house. It is called “Curb Appeal” and if you don’t have it, you risk losing the buyers interest in the property before they even get out of their car. Most real estate professionals know the importance of curb appeal. Real estate investors will spend a lot of time and money creating a good curb appeal for the property before they ever put the for sale sign in the yard.

Buy what do you do in the winter to create the kind of curb appeal that will not turn buyers away before they even get out of their cars? This is a big challenge in the middle of the winter, but there are a few things to concentrate on and we will cover a few of them. I did however find one thing that a few people have done, even though they might not have their house up for sale, it gave me ideas on how to create that curb appeal that buyers like. Watch the following video and you can find many more examples just like this one from Youtube.com.

The most important item to concentrate on in the winter, if you have snow is to make sure that the driveways and sidewalks are clean and clear. The best thing is to use a snow blower rather than a plow or a shovel. Reason being if you are trying to attract a first time home buyer and they see a huge pile of snow from a plow, they will wonder if they will be able to move that much snow on their own without a plow. If they see the snow banks and the markings of a shovel, they will think about their backs. However, if they see a nice clean edge on the driveway without any banks or piles, they will think that this looks nice and clean. Read More...