Minnesota Real Estate Investors Association, Inc.

When it comes to making offers, most investors only know how to make one offer at a time.  They usually make an all cash offer, also known as the MAO (Maximum Allowable Offer) or they get a loan from a bank, hard money lender or a private investor.  This strategy has worked fine for investors and if you are only making offers on bank reos on through the MLS, then a cash/MAO offer is really all you will be able to make.

The average number offers to get one accepted with this approach is 20-40 offers to get one accepted in today’s market for most of the country.  Some more experienced investors have been able to reduce that number down to about 5-10 offers to one acceptance by being very selective on what properties to make offers on.  In other words, they know from experience that certain properties from certain banks or listing agents simply will not accept their offers so they don’t even make the offers. 

The secret to success in the real estate business is making offers.  The problem is that most investors use the same offer process when dealing with sellers directly and they are missing some huge opportunities if they just knew how to create alternative offers that don’t require cashing out the seller.

Ask yourself these two questions: ... Read More…

There is a lot of confusion out there with newbies and some seasoned investors as to what exactly Wholesaling means.  The easiest way to describe this is to look at the Minnesota State Statue: 82 REAL ESTATE SALES REGULATIONS Sub 55 Definitions. Condensed Version: You cannot sell a property for another for a fee without a real estate license.  So the question is, as a wholesaler, what are you selling?  If you have a property under contract, you can sell your rights to the contract, not the property.  This is done via an assignment agreement which allows the assignee to step into your place as the buyer.  That is the basics of wholesaling. 

Some states actively go after real estate investors for incorrectly wholesaling.  These investors get themselves into trouble because they can’t explain legally what they are doing and therefore say the wrong things, like I am trying to find a buyer for the seller.  That shows intent, and as the previous FBI Director James Comey famously explained, it comes down to intent.

The problem is that your true intentions may not reflect your stated intentions because you don’t understand the legality of what you are doing.  If you just change what you are saying, to reflect your true intentions, then you will avoid a lot of aggravation and harassment from the state. ... Read More…

Let me start out by saying that I generally try and stay away from political comments. I prefer to stay on topic and discuss the facts, but this time I have no choice but to comment on politics. This latest round of political games has my blood boiling and I can’t hold back any longer.

Congress just passed another $1 billion dollar emergency homeowners relief fund. You can read all about it on MarketWatch, here is the link: www.marketwatch.com.

Were shall I start?

I guess I will start out with the phrase “emergency homeowners relief”. Emergency, really??? The emergency was almost two years ago when they pasted the TARP funds to help, if you remember, homeowners and bail out the banks and financial institutions, but once the TARP funds were approved by congress, they decided it would be better to just buy stocks in the companies they chose to keep solvent. It didn’t seem to be that much of an emergency to congress in 2008, otherwise they would have spent that money on what they told us was the reason in the first place to pass the TARP funds. I think the only reason it is an emergency right now, is because the midterm elections are in 4 months.

So now that we understand the congressional definition of an “Emergency” we can then start to talk about the facts. They are as follows:   ... Read More…

Ok, ok, I know, flipping has never been illegal, but with recent changes in the mortgage industry, the lenders are coming back around and asking for our help again. Wells Fargo was actually the first major lender to change its stance on seasoning, but because FHA is a government program, this is huge. First, let me give you a little back ground so you understand what the hoopla is all about over FHA temporarily suspending its 90 day title seasoning rule.

Several years ago, when all was right with the world, some investors were taking advantage of a unique situation in the mortgage industry. The federal government wanted everyone to be able to take advantage of the America dream. So they lowered interest rates and loosened up the required mortgage qualification guidelines for Fannie Mae and Freddie Mac backed mortgages, including down payments. This actually made it cheaper and easier for people who normally would never have been able to qualify for a mortgage, get one with little or no money down.

These changes actually made it cheaper for a tenant to get a mortgage than it was to rent a property, because they could finance the entire purchase price, including their closing costs. If they were to rent a property, they would at least need the first month’s rent and a security deposit. But if they bought a house, they didn’t need any of their own money up front and their first payment wasn’t due until after they had lived in the property for one month. Plus, with a mortgage, the lender only pulled their credit report, and since most of these tenants never established credit, they didn’t have bad credit. Note that a credit report doesn’t show eviction notices or criminal history, which is where many of these tenants had records. ... Read More…

The tax credit has helped a lot of first time home buyers get into a new house with little or nothing down. This has spurred a lot sales that would not have otherwise occurred if there was no first time homebuyers tax credit. This has also helped the economy and the housing market stabilize.

So why wouldn’t congress extend the $8,000 First Time Homebuyers Tax Credit? There are many reasons for and against it. I don’t really care which way they go, I just need to know, so that I know how to plan ahead. And today they just announced that ... Read More…

Real estate is changing at an ever increasing pace.  A few years ago, you were hard pressed to find an abundant supply of bank reo’s on the market.  Short sales were the rave and houses were still selling so most potential foreclosures were either going through a short sale or were sold before the banks got possession through foreclosure.

Then last year the banks all but stopped accepting short sales and the number of new foreclosure filings started to increase at record paces.  This caused a flood of foreclosures reaching the banks REO department and our focus shifted to finding good, no great deals by searching the MLS for bank reo’s.  We were able to acquire great deals on foreclosures and rehab them for resale.

Then last fall there were so many foreclosures that we were no longer able to resell the properties retail so the new focus became acquiring these bank reo’s for rentals.  This was a good strategy for many because we could buy the properties cheap and rents remained high.  This gave investors good cash flow.  And that is something we haven’t seen in many years.

Recently though we have been experiencing something quite different.  With all the foreclosures on the market, everyone wants in on the good deals.  That includes first time home buyers who have a huge advantage over investors.  Their 1st advantage is that they can get an FHA loan which only requires a 3% down payment compared to the 30% investors must put down. Their 2nd advantage is that they get an $8,000 tax credit just for buying.  Their 3rd advantage is that they qualify for the numerous first time home buyer rehab loans available through most cities and charitable organizations. ... Read More…

In the news lately the headlines are all about the higher than expected home sales. June saw an 11% increase in the number of homes sold compared to this time last year. However, if you listen to the reports or read the articles, buried somewhere in the story will be the caveat that while the number of home sales is up and that prices in some areas are stabilizing or in some places actually decreasing, is that the available homes for sale is at the lowest levels in a decade.

So why have home sales increased? There are a few reasons to explain the home sales increase as of late and the increase in sales prices as well.

• The $8,000 first time home buyers tax credit expires on December 1, 2009. So anyone who can take advantage of this has to do so now, because no one knows for sure whether or not congress will extend the tax credit.
   
• Because of all the foreclosures, many investors are buying up REO’s as quickly as they can.
   
• Fannie Mae and Freddie Mac had a moratorium on foreclosures from November thru March. They started filing foreclosures again in April, so those properties will not start hitting the market until later this year.
   
• A lot of homeowners who normally would be selling simply can’t sell their houses right now because they owe more than the properties would sell for, so they are staying put for now.
   
• Some homeowners, who could actually sell right now, know that they couldn’t qualify for a new mortgage. ... Read More…

According to the Star Tribune the Twin Cities area and rural Minnesota will be capitalized with twin $5 million loans from the McKnight Foundation for Foreclosure areas.

These are the type of stimulus incentives that the economy needs to recover and it couldn’t have come at a better time. All indications in the Twin Cities are that we are seeing the bottom of the market in many area’s for. We have been making many offers on bank reo’s at full price in multiple offer situations and we have not been winning. The cost of poker is going up…

Some might blame the banks for the prices of houses declining, and I would agree to a point. While the banks are not the only problem, or even the major problem, they are a contributing factor in today’s market. The entire problem is too complicated to explain in a single article or blog post, but I will do my best to spell out the banks part in this mess.

Last week I was contacted by Rick Kupchella from Kare 11 News about the relationship between Short Sales and foreclosures and how this is affecting the market. Here is the video that aired on Kare 11 Extra on 3/29/2009.

Extra: Banks moving slow on home sales

I spent several hours with Rick talking about the challenges the everyone faces with Short Sales and why so many of them never get accepted and why the properties eventually make it back to the banks as an REO (Real Estate Owned – This is the name of the division within banks that owns the properties from foreclosure) and eventually sell for as much as half of what the bank could have received if they accepted the Short Sale offer several months ago.

The first thing that you have to realize is that when the housing markets first started to decline, most people never heard the term Short Sale. I have talked to many Realtors and Mortgage Brokers who have been in the business for several years that have just recently heard the term Short Sale. So two years ago, only the realtors and investors who spec ... Read More…

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…