Are Investors Purchasing Foreclosures Hurting HUD Programs?

It’s a well-known axiom in the U.S. and across the capitalist economy worldwide that money talks.  But in some cases, what money says is hurting some aspects of the economy.

Because of the mortgage crisis of the last few years, many, many homeowners have been driven from their homes by mortgage rates that rose so high they were unsustainable by the people paying the mortgages.  As a result, there are thousands upon thousands of foreclosed homes on the market right now.

The presence of so many foreclosed homes serves the function of driving down home prices, so you’d think that this would put large numbers of homes within reach of qualified buyers.  However, nothing could be further from the truth.  Although many, many foreclosed and bank owned homes go up for sale in public auctions, members of the general public are having a hard time buying these homes because they are being edged out of the sales by real estate syndicates who step in and buy the homes for cash.

The problem is that regular purchasers who are trying to buy these homes as primary residences usually don’t have piles of cash laying around and must purchase a bank owned property using a mortgage, which is time-consuming.  The investment groups who typically obtains the winning bid at these auctions for foreclosed properties do have big piles of cash to draw upon and can usually outbid private individuals who are simply trying to buy a home for themselves and their families.

Even though HUD is spending millions to purchase and refurbish foreclosed homes in an attempt to make the these homes available to the general public as homes, the majority of them wind up in the clutches of real estate investors and their cronies and often stand empty for months on end at time when there is a real dearth of affordable housing.  This is not what the HUD program was intended to do.  So what can an ordinary citizen do to alleviate this problem?

Well, one good thing about HUD is that it is a government-run program, so if changes are necessary, it’s possible to exert pressure on one’s elected representatives to implement those changes.  If enough people speak up, then perhaps legislators will get out of their cushy office chairs and start pressuring banks to make more of the foreclosed homes they control available to the general public.  This approach could be the answer as some banks are already issuing new directives to realtors that tell them to give priority to any government agencies that are employing federal funds to purchase distressed properties.  In effect, the banks are telling real estate agents not to let private investors have access to these properties until the HUD-financed local governmental entities have made all the home purchases they can.  This action is more in keeping with the original intent of HUD’s home-buying plans than allowing private investors to snap up foreclosures for bargain prices, which benefits no one but the investors and their cronies.

In the city of Oakland, California alone, there are many investor-owned homes that are simply sitting there empty, doing no one any good.  If those homes had been available to private citizens, they’d probably all be occupied by individuals and families who didn’t want them simply as investments that might appreciate, but as their primary residences.  So instead to having programs that mostly benefit well-heeled investors and their real estate syndicates, everyone should continue to put pressure on legislators and banks to ensure that all of the bank owned homes being put up for auction will find their way into the hands of people who will actually live in them.

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The 7 Short Sale Myths

1)  Short sales rarely get approved.  FALSE

TRUTH:  Although short sales are difficult, acquiring or selling a home as a short sale is not impossible.  More and more short sales are being approved on a monthly basis and the new HAFA guidelines should help making short sales easier to facilitate.  Most importantly, it is essential to acquire the services of a short sale specialist who is experienced and knows the “ins and outs” of short sales along with systems used to make the sale a success.

2)  Banks are waiting for a bailout.  Thus, making it difficult to purchase a short sale or sell your home as a short sale.  FALSE

TRUTH:  Banks have already been bailed out and seem to be doing everything possible to avoid another foreclosure.  More and more banks are pursuing short sales and agents who understand how to process the transaction.  In most cases, it costs that bank 30% more to let the home go into foreclosure rather than approving a short sale.

3)  You must be behind on your mortgage in order to be eligible for a short sale.  FALSE

TRUTH:  In the past it was very difficult to obtain a short sale approval from the bank.  However, the financial institutions mindset has reversed.  Today lenders are looking for verifiable hardship, monthly cash flow shortfall or pending shortfall insolvency.  If you meet any of the mentioned requirements then you are eligible to sell your home as a short sale without being delinquent on your home loan.

4)  Buyer are not interested in short sales and tend to avoid them like the plague.  FALSE (for the most part)

TRUTH:  Some buyers are not interested in short sales due to the lengthy waiting periods–especially when there are time constraints associated with the purchase similar to the First Time Home Buyer Tax Credit or Move-Up Credit.  On the other hand, those that can be patient tend to obtain some very good buys–some which are sold for over 30% under current market values. 

5)  Selling your home as a short sale is an embarrassment.  FALSE

TRUST:  Most sellers would prefer that the community wasn’t aware of the financial hardships at hand.  However, 1 in 5 homeowners within the United States owe more on their home then what it can be sold for.  Even wealthy owners must stop the bleeding at some point.  Those who sell their home as a short sale rather then letting it go into foreclosure should be congratulated.  Check out my recent post which discusses this by clicking here.

6) The bank would much rather foreclose than bother with a short sale.  FALSE!!!

TRUTH:  The myth began in part to collection representatives working for the lender which would often state this myth in an attempt to collect the debt.  The realty is that banks do not want to foreclose on homes–it costs way too much.  An average foreclosure costs the bank 30% more to foreclose than to facilitate a short sale due to the holding costs, insurance, realtor fees and other miscelaneus fees needed to care for and sell the home.

7) There is not enough time to negotiate a short sale before the home is foreclosed upon.  FALSE

TRUTH:  This myth hurts homeowners the most.  The foreclosure process is lengthy.  It can take up to a year (or more) for the home to be foreclosed upon by the bank.  Nearly all banks will postpone a foreclosure with a legitimate contract for a short sale.  A postponement can be obtained within days of foreclosure.

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To obtain a free market evaluation for your home Click Here
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Is Buying the Worst House on the Best Street Good Advice?

Thomas Stanley, Ph. D. is back at it again with his newly released book “Stop Acting Rich.” His name should be familiar to you because he is the author of “The Millionaire Next Door” and “The Millionaire Mind.”

I loved his first two books and when I saw his new book, I couldn’t resist buying it. The message that permeates each book listed above is that most people look rich because they live in big homes or drive expensive cars, but when examined closely, they have accumulated very low levels of wealth. In other words, they wear big hats but have no cattle.

For some reason, we seem to measure our success in life by how we compare to others. Is our house bigger than theirs? Is my car nicer than Jim’s down the street? To feel successful, many people fall into the trap of buying things simply to impress others.

One of the main lessons Mr. Stanley makes throughout this book is that the amount of wealth you accumulate in your life correlates directly to the size and value of your home. Here’s a very telling quote from the book:

“If you examine homes by value from the lowest to the highest, you would find that as the value of the homes increases, so does the proportion of people who are living well above their means.”

The more expensive your home, the more you’ll be forced to spend on home repairs, maintenance and upkeep. This is hard enough, before you factor in what you’ll have to spend to keep up with your neighbors. If you buy a high-end home, you’ll end up sending your kids to expensive private schools and you’ll be forced to buy them all of the expensive clothes and gadgets the other kids have in the neighborhood.

The reason this happens is because it’s hard to avoid copying what you see every day. You won’t want to look like some schmuck who drives a rusty old car and sends his kids to the public schools in out-of-style clothes from Kmart.

The trick is to live in a nice home in a nice neighborhood that allows you to live below your means. It’s better to be a high earner in an average neighborhood than it is to be a low earner in a high-end neighborhood. Remember the old saying about “buying the worst house on the best street?” Well, as it turns out, this “best street” might actually lead you to the poor house.

Most of the millionaires profiled by Mr. Stanley live on less than 80 percent of their income. They are frugal and focus their attention on investment rather than consumption. Their goal is to convert income into wealth, which is significantly different than people who act rich.

A psychology study by Ryan Howell, which was written about in the book, found that having “things” isn’t what usually makes us happy. If “things” do, it’s short-lived happiness.

Instead, what makes us happy are life experiences. The good news is that life experiences are free.

**brought to you by Rob Minton

Report shows home buyers’ negotiating power gains

Home buyers in much of the United States paid thousands of dollars below asking prices in December and for the first time in 11 months gained negotiating power, real estate website Zillow.com said.
According to December Zillow Real Estate Market Reports, buyers paid 2.7 percent less, or a median of $5,618 below the listing price on homes bought in December, up from $5,538, or 2.6 percent, for homes bought in November.

The gain, however, was still far less than December 2008 when buyers bargained a median 4.5 percent, or $10,018, off the last listing price, Zillow said.The data is calculated by comparing the last listing price of individual homes and the final sale price.November had marked the 10th consecutive month discounts shrunk, meaning buyers were negotiating less and less off the final asking price each month.

More buyer negotiating power tends to put downward pressure on overall home prices and may push more mortgages “underwater.” This negative equity has been one of the biggest banes of homeowners, making many unqualified for home loan refinancing and preventing some from selling.

Idaho ranks sixth in 2009 per-property foreclosures

The year-end totals are in, and Idaho ranks No. 6 for most per-property foreclosures in the nation.

A grand total of 17,161 properties were foreclosed on in 2009, or one in every 37 houses. That number is double what it was in 2008 and almost four times what it was in 2007, according to RealtyTrac.com.

Nevada fared the worst in the country, with one in every 10 properties entering foreclosure. Only 0.05 properties in Vermont, on the other end of the spectrum, went through foreclosure in 2009.

The national average was one in every 45 properties.

“As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans,” RealtyTrac CEO James Saccacio said in a press release. “After peaking in July with over 361,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline.

“Despite all the delays, foreclosure activity still hit a record high for our report in 2009, capped off by a substantial increase in December. In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog.”

Good news, eh? Foreigners return to real estate

For several weeks now, I’ve been preaching about the real estate industry saying if you got the money, patience and time, now is a great time buy.

Now, in a one-day conference in Alberta’s Edmonton, Canadians are being told to fly south, and flock to areas like Montana, Idaho, Utah, Nevada and Arizona.

Terry Ritchie, a financial adviser who has co-authored, “The Canadian Snowbird in America: Professional Tax and Financial Insights into a Temporary Lifestyle in the U.S.” writes that there are incredible buys in the U.S. because of the strong dollar, combined with low U.S. home prices.

“There’s a lot of misinformation about how a property (in the U.S.) should be titled and owned,” Ritchie told the Edmonton Journal. “I have a checklist that I will raise at the conference that people need to answer because one size does not fit all.”

Meanwhile, Trish Gannon, owner and publisher of The River Journal, writes that North Idaho is open for (real estate) business, and extols the secrets that are to be found in economy near the Canadian border. North Idaho and western Montana didn’t contribute much to the issues that created problems nationally, she writes.

Tom Renk, owner/broker of CM Brewster Real Estate in downtown Sandpoint, is quoted as saying there are 3,000 active listings in the Multiple Listing Service in North Idaho region.

“For example, there’s a property on ten acres with a 3,200 sq ft home and a shop, selling for $219,000. That’s an incredible price. You can’t build a 3,200 sq ft house for that.”

From January 1 to March 15, average sales price on a residential property in 2008 was $315,590 compared to this 2009’s price of $259,659. 

For several weeks now, I’ve been preaching about the real estate industry saying if you got the money, patience and time, now is a great time buy.

Now, in a one-day conference in Alberta’s Edmonton, Canadians are being told to fly south, and flock to areas like Montana, Idaho, Utah, Nevada and Arizona.

Terry Ritchie, a financial adviser who has co-authored, “The Canadian Snowbird in America: Professional Tax and Financial Insights into a Temporary Lifestyle in the U.S.” writes that there are incredible buys in the U.S. because of the strong dollar, combined with low U.S. home prices.

“There’s a lot of misinformation about how a property (in the U.S.) should be titled and owned,” Ritchie told the Edmonton Journal. “I have a checklist that I will raise at the conference that people need to answer because one size does not fit all.”

Meanwhile, Trish Gannon, owner and publisher of The River Journal, writes that North Idaho is open for (real estate) business, and extols the secrets that are to be found in economy near the Canadian border. North Idaho and western Montana didn’t contribute much to the issues that created problems nationally, she writes.

Tom Renk, owner/broker of CM Brewster Real Estate in downtown Sandpoint, is quoted as saying there are 3,000 active listings in the Multiple Listing Service in North Idaho region.

“For example, there’s a property on ten acres with a 3,200 sq ft home and a shop, selling for $219,000. That’s an incredible price. You can’t build a 3,200 sq ft house for that.”

From January 1 to March 15, average sales price on a residential property in 2008 was $315,590 compared to this 2009’s price of $259,659.

 

 

 

IBR Real Estate