First Time Home Buyers-Your 1st REO Purchase!

If you are a 1st time home buyer looking for a deal, now is the time.  If you are at all handy even better, or in the trades, perfect! I started out as a Contractor and in 1998 bought my first fixer which was a bank-owned home (it was ugly!), for 3% down , or $7,000 total! My girlfriend bought one too for about the same. These two homes have financed our retirement plan which is based in real estate. We’ve since rehabbed , sold, kept, and rented out multiple properties, with the emphasis on buying discounted properties and putting in the sweat equity ourselves. All the costs associated with acquiring and fixing up have been paid by our properties. We’ve had alot of good experiences and bad of course, but the good far outweigh the bad. As 10 years have passed we have learned alot, and now are looking ourselves to start the cycle over again, since everything is on sale!!

Sooooooo… what are you waiting for? Let us help you find that perfect property for you! The Realtor expenses are paid by the seller, so it costs you nothing! Are you  thinking we will get all the good deals ourselves? There is so much available right now-more than there are buyers actually! Why re-invent the wheel? Learn from our mistakes and successes alike, and you will move forward faster. Check out our website! Click here

Blue Light Specials

Don’t want to repeat myself too much, but helloooooooooo! Is anyone out there? It is the time to buy!!!!!!!

Discount prices everywhere-it’s like being a kid in a candy store!

In many areas prices are 50% of what they were a couple of years ago, and in some areas multiple offers are becoming common (at least for bank-owned real estate). I know the nay-sayers are thinking (and the media) that prices are still on the way down, and to keep waiting, but I am seeing the smart money buying up homes that are 350K and under. Also wishing I had extra cash to dive in (or cash partner)!  In real estate a good deal is a good deal even in these uncertain times.

It’s a perfect time to find a foreclosure that needs work that’s at a discount price. Putting sweat equity into real estate is a great way to ensure that your great deal will make you money (now or later). You can fix it and flip or hold and rent it out-never thought prices would come down enough to cashflow in California again!

If you are a first-time home buyer, do an FHA loan (3% down-have seller pay closing costs and buy down your rate). If you are at all handy, you should buy a fixer and put your own sweat equity in it until you have enough to take money out and buy another. This is what we have done several times.

For those of you in the construction trades, this is a no-brainer! Did you know on average 60% of your net worth at retirement will be in your home?! (This is what the National Association of Realtors said just the other day).   That means just owning 1 home will provide as much savings as 60% of your working life.  If you work from age 20 to age 60, that is 40 years of work (60% of that is 24 years of work & savings labor!). I don’t know about you, but in my years of contracting I wasn’t able to create any sort of savings, let alone retirement. I paid bills and that was about it!  Everyone also knows that being in the trades is hard on your body. If you are self-employed (like we are), no-one is planning your retirement except you (hopefully!). As far as I am concerned there is no better way to do this. With construction knowledge, you have so much of an advantage over anyone else, as you can accumulate wealth through sweat equity for astonishly little cash.

Even if you are not in the trades, an average retirement is no picnic. Nobody wants to work their whole life and then retire in poverty that I know of.  These days everyone needs to take personal responsibility for their retirement-the days of secure jobs and great retirement are over unless you are a CEO and have a golden parachute or have an inheritance. Relying on somebody else to look out for your financial well-being for your ‘golden years’ involves a huge risk of ending up with potentially nothing.

Anyway…..Enough of the soapbox!!!!! I get frustrated when I see opportunity knocking and not enough people answering! This method of retirement only takes 3rd grade math! To be fair though, it takes alot of work, courage, and determination to do it, and many are not willing to think out of the ‘box’ and take the 1st step which is always the most important one!

It’s simple, and this could be why not so many will do it, because if it was so simple then why isn’t everyone doing it and retired already? It’s a natural tendency to make everything complicated-most of us do, me included! There are so many real estate gurus out there, and people like the idea that someone might have the secret answer to answer all their financial problems. Part of the problem is that you need to pay these people for their ’secrets’. I know . I’ve paid many of them and to be fair have got valuable information from them, but have always come to notice that there is no ’secret’ and that the actual actions needed are extremely simple and involve large amounts of common sense. Talking to people who are in the business and investing in real estate also, is one of the best ways (and cheapest).

And now for my plug! If you are going to buy real estate and using a Realtor and Lender why not use someone  (us of course!) who invests themselves  in real estate for retirement, and who will gladly help you do the same for FREE!

Thanks for reading!

Shortsales, foreclosures…

These are trying times indeed! It seems like that this all we hear about. Many people have been caught up in this mess. There is plenty of blame to go around, but that won’t help anybody in trouble. What will is a little basic information so people know their options, before the bank decides for them! All too often, we are hesitant to call on someone to help, especially when it comes to financial matters. The consequences of not doing anything or waiting too long can be unpleasant, and unnecessarily so.

So here goes! Before you are late on your mortgage payment, call a real estate professional (get a referral ideally) and discuss your unique situation to come up with the best solution. There are 3 basic options, listed from best to worst:

• Loan modification
• Short Sale
• Foreclosure

A real estate professional with expertise in these areas will start ideally by negotiating with the bank to modify the loan in order for you to be to afford to keep making the payments and keep your home-this may consist of modifying the loan amount, interest rate, or stopping the payment from adjusting up. If the bank won’t do this and you can’t make the payments anyway, a short sale might be the answer, where the bank will accept less than what is owed on the loan. Your real estate professional will handle the sale much like a regular real estate listing, except this requires more expertise in negotiating with the bank as well as potential buyers. This can result in an adverse affect on your credit, although many times it is possible to get the bank to report a short sale as ‘paid as agreed’ to the credit bureaus, thus not affecting your credit rating much. Finally, if the bank won’t accept a short sale and chooses to move to foreclosure proceedings, it will stay on your credit report for up to 10 years, greatly affecting your ability to secure financing in general. After 2 years of clean credit history following a foreclosure, you will usually be able to get a mortgage again, although because of this mortgage mess lenders are understandably extra leery of the foreclosure word!!! Sometimes filing bankruptcy can make sense as part of getting through financial difficulties-Consult a reputable bankruptcy attorney on this.

A good real estate professional specializing in this area will outline to the bank their options in resolving the problem, in their perspective (how much will they recover with a shortsale versus a foreclosure, and also how by modifying the loan terms they could mitigate their loss even better). This is all displayed in a simple effective manner in their language (numbers, sales comparisons, net recoverable dollars) and followed through with tenacity!

Your real estate professional will have you sign a ‘do not contact by phone’ form so you won’t be bothered by the bank hounding you! You will be dealing with your agent only, not the bank. Your agent will be dealing with the bank! This way you can concentrate on moving onward and upward.

The silver lining? Real estate is cyclical-what goes up comes down and vice versa. If you can save your credit you will be able to participate in the next up cycle. In the last 40 years california real estate appreciation has averaged around 8% annually. Add to that the ability to leverage financing (20% down equals multiplying your money power by 5 times), you should average 40% return on your money! Hard to beat that!!!

If you are already late on payments, a short sale is still an option and you can stay in your home in the meantime also

Why should you use a buyers agent?

Some people trip over dollars to pick up pennies… Just wanted to address a misconception that some buyers have.  Calling a listing agent will save you money-in other words maybe you can make a better deal and get the agent to cut their commission. The opposite is true actually. This is like representing yourself in court-having a fool for a client! A buyers agent is simply any agent that looks for property for you and represents you.  A good agent knows the local values and neighborhoods, knows a good deal and a bad deal, and as an agent has access to a lot of other important information such as what the seller owes, and if they are motivated, etc. All of this knowledge can be useful in negotiating a great price. Also, when a great deal comes along you need to be ready, willing, and able to move quickly before somebody else snaps it up. This is true of any real estate market whether it is up or down, because the smart money is always fast!!!  A Realtor/Lender Team is a great way to pull this off. The great news is that a buyers agent does not cost you a penny, yet can save you thousands and also keep you from buying a ‘lemon’, or getting the wrong financing. In other words you get an expert (or two)  for nothing. With a team you are leveraging talents and brainpower, like successful people do!

Why you should buy a fixer-upper bank-owned home now!

As everyone knows, there are alot of foreclosures on the market now! The smart (and big) money is snapping up the deals in large quantities often paying 55 cents on the dollar. I always think that it is good to study successful people who are doing what you would like to do, and learn from them instead of trying to reinvent the wheel! Although individuals by themselves can usually not duplicate these results on the same scale, they still may be able to gain great returns on their money, whether it is an investment property or their own home. For many reasons it is easier and cheaper to get into the real estate market right now by buying your own home this way, and also start creating a retirement at the same time (not the social security type which may or may not exist when you retire, and which may or may not be enough to live on!).  The reason for buying this type of  home now  is that it is a buyer’s market for one,  prices have come down (blue-light special, buy it when it goes on sale, buy low), and buy at a discount from the bank who does not want to be in the business of owning real estate. Banks are penalized for having properties on their books, and savvy investors know that they may sell for a 25% discount on an already discounted listing price. Now for the fixer-upper part, which is like turbo-charging the whole idea! Fixer-uppers are also another way of acquiring  a property at a discount and putting varying degrees of sweat equity in. For a first time home buyer who can get 100% financing, one of these properties can double as a home and an investment account with rewards far greater than any other investment vehicle available.  Starting with nothing, sweat equity (free), a few well-placed and frugal dollars, and some time, you can reap exponential returns!  This is not for the lazy or fearful. It requires hard work, faith, and determination, and almost always a willing partner! I know of no other way that you can start with nothing and end up in the millions of dollars, way ahead of where you would end up with a traditional financial planners recommendation. To retire these days just about everyone needs to turbo-charge their retirement plans,  unless you don’t mind the idea that you probably will outlive your money even on a just ‘getting by’ retirement plan! I don’t know anyone who wants to lower their standard of living when they retire!!! Nancy and I have personally followed this turbo-charged plan (minus the bank-owned part) for 9 years. As a Realtor and Lender, we can help turbo-charge your plans!  Shouldn’t your Realtor and Lender live their career? Do they do what they advise you to do?  We are here to help and guide (if needed or wanted). Fear is what stops most people (and our great media outlets who encourage us to think like ‘chicken little’). The unknown is what creates fear in people. For me personally the idea of a mediocre retirement is way scarier than the idea of thinking outside the box now and doing something about it. It’ never too late!!!

Foreclosures and Bank owned properties

Foreclosures and bank owned properties are a hot market these days for many reasons. Unless you’ve been hiding under a rock you probably know it’s a buyer’s market! Great deals are to be had! There are a great number of Placer County foreclosures available. The advantage of bank owned properties is that banks don’t want to own real estate, because they are penalized for having bad loans on the books, so they discount the property. Apart from this,  it’s also common to get accepted offers at another 25% discount off of this price. This results in bargain deals!!!  As savvy investors know, you want to buy when things are on sale, which is definitely now. Our last deal was appraised at $621,000,  our clients bought it at $535,000! This was a beautiful,   unique property with deferred maintenance, and a great deal! They are now looking for their next great deal.

And the Beat Goes on…

Yes… We are still here! The market turmoil has created some casualties in big lending institutions - we have lost a few on our list!!! Our business remains in good health as the market changes. Buyers and sellers have changed considerably in the last year. Sellers are becoming frustrated and a little fearful ( Thankyou media!!!) and sometimes are in denial. Since we had such a run-up in prices over the last few years, the resulting correction was inevitable. The correction in the market as well the re-assessment of risk in the mortgage market, will actually help the market in the long run. Unfortunately, there are many who have got caught in the middle who will suffer greatly in the short run!!! Buyers are having a harder time financing homes with some of the more aggressive programs, such as high-leverage loans, option ARMS, etc. Programs are still out there but take a little longer to find, and guidelines have tightened considerably. Spec builders have been hard hit in particular and profits have dried up or even disappeared. The good news is that there are still loans available if they are willing to move into their spec homes for awhile. One option is to refinance into an option ARM. Option ARMS allow a minimum payment option every month that is usually around half of a regular 30 year amortizing loan payment, thus allowing a builder  to have less cash going out each month. This way they are able to ‘weather’ the storm and not lose property and or their credit!!! The flip side of this is that these loans can negatively amortize (if you make minimum payments), so the loan balance can grow substantially.  These loans usually offer up to 4 different payment options on every mortgage statement: A) Minimum payment , B) Interest only payment, C) Fully amortizing 30 year (principle & interest), and D) a 15 year amortizing payment. There also is another choice of making one of these payments plus an additional amount that you choose in order to have complete control of your equity. They are adjustable loans and can adjust monthly or have different periods of time that are fixed such as 3yr, 5yr, 7yr, etc. They are generally not well understood, and require a more financial savvy borrower (or loan officer who will explain fully how they work).

The flip side of the pain that some sellers are going through is the buying opportunities that abound now. There are so many great deals out there for a buyer who understands the market. Many buyers have been sitting on the fence for awhile, wary of falling prices and everything else the media shoves in our face! For the savvy buyer this is a fantastic time for deals, because they understand the real estate market has cycles, and buying after the market corrections leads to great profits. Real estate is and always has been a long-term investment. It may be a few years before we have another surge in prices but it’s coming, and there are some gems to be had right now.

Low Rates & Lower Prices

                    Since the real estate frenzy has settled down and prices are at more normal levels, it’s a great time to pick up bargains! Rates are still at historic lows, despite what the media would have you believe. There has been a lot of noise about adjustable rate mortgages, and how people are getting caught in these mortgages that all of a sudden have a substantial monthly payment increase. The hit to the sub-prime market was a direct result of lax lending guidelines for people with challenged credit, and allowed un-qualified people to get loans for which they were not capable of repayment. These loans were typically programs such as a 3/1, 5/1, etc. which are fixed for the first number of years and then adjust after that, enabling people to get into a home with a lower monthly payment at first, the idea being that they are expecting to increase their income or pay it off before it adjusts. Other programs with an even lower payment start are called Option ARMS and can adjust monthly or have a certain period at a fixed minimum payment (less than an interest-only payment) and/or accrual rate (fixed interest rate). All of these programs have distinct advantages and disadvantages and are not for everyone. One must have a plan! As there are many homes on the market these days, there is a lot of competition for able buyers, and smart sellers are offering incentives such as buying down the interest rate, paying closing costs, or of course lowering their asking price. Buyers are getting more for their money than a year ago, and with interest rates at about the same level more buying power also. 100% financing is still available, as are many, many other programs for people with good credit. For lower credit scores however there has been a significant tightening of guidelines, and some people will have to wait to buy. 

Financing Incentives

One often overlooked method of attracting buyers is to have the seller pay points-buy down the buyers rate. For the seller it is usually cheaper than lowering their asking price, and obviously lowering the price is not popular with sellers. For the buyer this is a huge incentive as getting a lower rate affects their payment for as long as they hold the loan. Buyers are also very rate conscious, and consider purchases relative to monthly payments (can I afford this payment). By buying down the rate, a seller can make the difference in affordability. Over the long term this can actually be more valuable than getting the property for a little less money. Also, in a psychological way, it is better for a seller to offer value to the buyer than to cut percieved property value. It is a gift to the potential buyer and sets the seller’s property apart from the competition, and as we all know there is alot of that! It’s a win win situation!!! Sellers can also offer incentives such as  free cars, or anything else of value to attract attention to their property. In this market it’s important  to cover all the bases and be creative.

The Advantages of a Real Estate Team

Most everyone would agree that teamwork leads to a better result, no matter what the objective is. Many real estate professionals promote their teams as they should.  Each member  brings their own expertise and personality into the mix, and as time goes by develop a rapport and knowledge on how best to serve their client. A Realtor/Lender partnership results in a smoother transaction, and a better understanding of their client’s and wants. The truth is that homes and loans go together like peanut butter and jelly, unless your fortunate enough to be able to write a check for your new home! Other members of a great team include loan processors, appraisers, title & escrow officers, home inspectors, and pest control companies. Great teams also consist of referral partners such as tax accountants, 1031 exchange companies, insurance agents, architects, contractors and other tradesmen. Everyone loves a referral instead of calling out of the yellow pages! Teams are especially great for out of town buyers who are unfamiliar with their new surroundings. A good knowledge of specific areas and neighborhoods (i.e. which side of the tracks do you want to be on) help with ensuring that clients are investing in value (location, location, location) and getting referred to ethical expert professionals. Even knowing great restaurants, clubs, events, etc. are invaluable to your clients. It all adds up to make the difference that counts!