Didn’t Someone Tell You We Are in a Recession?

We are all aware that the economy has taken a nosedive over the past couple of years. Businesses are closing their doors, employees are being downsized, and the current market value of houses has been consistently dropping. Although, the recession is damaging the current market, it does offer a plus side to the real estate investor.

Buying real estate during a recession allows buyers to thrive during a recession. They have the opportunity to make substantial financial growth. Falling prices and less activity in the current market can benefit the buyer in many ways. A recession typically lasts for about two years so investors should think about not just how low the prices will go, but also how much they can invest until it is over.

Upon deciding to invest, you should consider a variety of factors. Realize if each house in question is functional to your particular needs. Buying because you fear the recession will end is not wise. The current market should not sway your judgment in this way. But since prices are typically down by three to five percent, buying does offer many advantages. Buyers stand to pay less for homes, usually five percent of more, during time of distress. In addition, sellers are often more anxious and motivated to sell just for the shear fact that they do not want their houses on the market for too long.

Before investing in a down market, it is critical that you research the comparable housing prices in the area, remodeling records for the home, and any financial situations attached to the home. Websites such as zillow.com or trulia.com are excellent resources for gather such information. The general location and overall condition of the house should also be taken into account.

Timing is everything if you plan to capitalize on the falling prices of houses and property. If you are a seller and you wish to move to a more expensive home, now is the time to buy. The longer you wait, the lower the value of your currently owned home will go. Savings to you on a new house are also available as it is being sold for less. Interest rates are also much lower and are gradually increasing, which is another reason to buy now.

Borrowing cheap is another benefit. Interest rates are very low, and even though banks may not be lending to risky buyers, investors with good credit are welcomed. Foreclosures, Short Sales, and Real Estate Owned (REOs) properties are an excellent way to potentially profit from an investment during a distressed economy. When a notice of default has been filed in public records because the owner has stopped making payments on the mortgage, and a lender has given notice that the house will be sold at public auction if the payments are not made current, the house becomes foreclosed upon. If payments are not made and the house goes to public auction, a buyer can usually purchase the house for the amount of money remaining on the loan. There is substantial profit to be made by only paying the amount owed on the mortgage and the owner’s equity can be picked up for free. One thing to consider though, when going the foreclosure route is that a house being sold at auction is not just a steal. Due diligence and thorough inspection of the house should be done prior to any bidding on any home.

Short Sales or Pre-foreclosures are also an option. These are homes that are in foreclosure but before the property goes to public auction. The lender must agree to accept an offer less than the amount owed on the property. Since the lender agrees to take less money in order to avoid foreclosure, the transaction is better for the investor. REOs are similar to Short Sales, but the lender already owns the house due to foreclosure proceedings. The house has been auctioned publically and did not receive a bid. This offers a benefit to the investor because the lender will usually sell for less than what is owed on the mortgage.

This is the best way to buy because the seller is no longer involved in the transaction. The deal is made between the lender, the seller, and the agents that represent them. At times the agents are not even necessary.

Overpriced homes are another investment opportunity to consider. An inflated price is the number one reason a house does not sell. A home that has been previously overlooked because is has been overpriced, has been on the market for a long period of time, and has not sold because of its price, should be revisited. A motivated seller could lower the price in a hot seller’s market where there are many buyers and less inventory. Offering the seller a sizable earnest money deposit or “Good Faith Deposit,” which is a portion of the down payment attached to the purchase agreement, and a list of prices for other homes is the area could also encourage a price reduction. Offering a “Good Faith Deposit” can also offer less risk to the seller because most contain provisions that give this initial deposit to the seller if the buyer backs out of the deal without cause. The money is usually held in a trust until of the necessary negotiations have been made and contracts have been signed.

Finding real estate to invest in can be easier said than done. Don’t wait for these homes to show up in traditional real estate listing services. Look for information on bank websites and county loan offices that know of foreclosures. You can also ask local real estate agents that are familiar with the area. Realtors can also offer insight on overpriced homes.

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Overcoming Obstacles and Looking Towards a Brighter Tomorrow

Chances are that you have heard the phrase, “What doesn’t kill you, makes you stronger.” This statement holds values in all areas of life including business. Each and every an opportunity that may present itself, especially in areas that possess a high level of risk such as investing in real estate, has both the good and negative elements within it. It is very rare to find a situation that just so smoothly, without a hitch, completely one hundred percent.

As long as an individual views the whole situation as an opportunity, it will without a doubt prove to be a priceless. Whether it ends up being a trial and error learning experience or a successful venture, the one that grasps the opportunity is always the winner in the end. Adapting to and overcoming obstacles is what makes us stronger and wiser both in our personal lives and in business. How you choose to deal with your particular situation will ultimately dictate your particular outcome.

Have you ever asked yourself the question, “What if I had just only…?” Chances are you have. At times you may believe that your life, financial situation included, would be completely different…and you are probably right. But since we do not have a crystal ball or the ability to see our future, no one can truly say that his/her life would be better or worse had a different route been taken. But, with the real estate market as it is today, even if you did have a way of for seeing the future, there is a high probability that you would tell yourself that now is the best time to make a commitment and invest in a home or property.

Dwelling on the past can only hinder your growth in the future. The old cliché, “When one door closes, another opens,” offers a lot of insight. As far as real estate is concerned, as is much the case with most businesses, an aggressive investor would not wait for the next door to open; they would take the initiative and go through a window if they had to.

It is all about your perspective. First and foremost, you need to figure out exactly what you want before you can proceed to go after it. Establishing a timelines and setting realistic goals for your self will help to guide you in the right direction. Also, getting acquainted with someone who you look up to and admire because they are already doing what you wish to do, can a great source of knowledge. There is nothing wrong in taking advantage of learning from someone else’ mistakes and mishaps. The real estate market offers investors a plethora of ways to make a profit. Whether you choose to buy, fix, and sell a home or property or you decide to take the landlord route, the possibilities are endless. But in any case, you should always make sure that you have a good working knowledge of the most recent rules and legislation regulations of the state in which your real estate investing interest lies. Laws and rules are always changing, and being up to speed on the most current ones, gives a good foundation to build on.

After you have initially educated yourself, you can begin to set up a strategic plan of attack and take the real estate market by storm. Your success is in your hands. The question is are you ready and willing to take the chance. How much time and effort do you have and are you willing to invest in making a future for yourself in the real estate industry. If you expect abundance, you will attract it, and ultimately receive it.

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Profiting from Tax Deeds

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Risky foreclosures could help savvy sellers

Real Estate News & Commentary by Jeff Adams, May 19th, 2011.

The cloud over foreclosures comes with a silver lining for homeowners looking for an edge when they sell real estate in a strong buyer’s market.

The good news for sellers is that foreclosures look risky again. Savvy sellers — at least, those who have equity and are current on their house payments — might be able to turn the tables and use the robosigning follies to their advantage, experts say.

“I am not seeing buyers afraid (yet) to buy a foreclosure,” says Elizabeth Weintraub, a real estate broker in Sacramento, Calif. “They should be.”

The robosigning controversy has led to a slowdown in foreclosures. The lull is likely to be temporary and sellers’ advantage from a drop in foreclosures potentially fleeting, with many markets still flooded with distressed properties, according to Katie Curnutte, a spokeswoman for Zillow.com. There might even be a boomerang effect later in the year after banks get back up to full speed again with auctions, she says.

For home sellers, here are some tips on how to seize the initiative during a rare (relative) lull in the foreclosure crisis.

Sell sooner rather than later
If you absolutely, positively don’t have to sell in this market, then don’t. But if you must, whether now or five months from now, take the plunge now. Sure, the slowdown in foreclosure activity could mean somewhat less competition now.

But even more critically, there is the boomerang effect to take into account. The number of foreclosures is expected to skyrocket as we head deeper into 2011.

Get your story out

Foreclosure sales were once rare. But in some markets now, they make up 20 percent to more than half of all sales. If you are a long-term homeowner who has kept up on your mortgage payments, you need to get that message out. This is your key advantage over a much lower-priced foreclosure, especially in light of the robosigning mess.

The buyer knows who he or she is buying the home from — no title issues here. There are ways to tactfully get across this key point in your ads, with phrases like “long-term ownership” and “been in the family for decades,” Weintraub says.

Do your homework

You can bet savvy buyers these days are going to come in with a stack of comps, many of them rock-bottom foreclosures. Provide your own market analysis, one that can help highlight the challenges facing foreclosed properties.

The first report should be comparable homes sold in the last few months, with foreclosures broken out separately if mentioned at all, says Jim Kimmons, broker owner of Gallery Realty of Taos, N.M. The second should detail homes currently on the market. That will help you frame the decision on favorable terms: Buyers should consider homes like yours instead of foreclosures.

Price aggressively without undercutting foreclosures
The aim is to sell your home and maybe come away with a small gain. Forget about making a killing. Few homeowners who are current on their mortgage can match a foreclosure price.

But buyers are still looking for low prices. Take a look at what other nondistressed properties are selling for in your neighborhood and then price below them. And drive home the point that the price is the price — with foreclosures the bank can take a better offer right up to the day of the closing, Weintraub says.

Burst those foreclosure fantasies
Many buyers haven’t a clue about what it takes to buy a foreclosed home. In many cases, individual buyers don’t stand a chance as they end up competing with investors ready to pay cash, Kimmons says.

If a buyer or agent doesn’t know this, enlighten him or her. “There is a significant percentage of buyers (that) could not buy a foreclosure if they wanted to,” Kimmons says.

 

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To your success!

Jeff Adams

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Buying Beats Renting in 80 Percent of U.S. Cities

Thanks to falling home prices and rising rents, would-be home buyers have the upper hand this house-hunting season. In nearly 4 out of 5 major U.S. cities, it’s now cheaper to buy a home than to rent. That’s up from 72 percent of cities last quarter, based on the Rent vs. Buy Index released by online real estate resource Trulia.

“With home prices nearing a double-dip and more foreclosures expected to flood the housing market over the next two years, the decision between renting and buying a home across most of the country has clearly moved in favor of buying,” said Ken Shuman, head of communications at Trulia, in a press release. “As we head into the summer buying season, those looking to buy a home should be encouraged by improvements in the market and feel optimistic about their chances of finding an affordable home, much more so than in previous years.”

Areas with the most affordable housing market conditions tend to be cities hardest hit by the foreclosure crisis, including Las Vegas, Phoenix, and Miami. Meanwhile, those with more affordable rental markets included New York City, Los Angeles, and Seattle. Omaha, San Jose, and Detroit had some of the largest quarter-over-quarter jumps in favor of homeownership.

Despite the overwhelming data supporting home buying this season, experts emphasize that above all, the real estate market is local. “This metric is a good baseline for the rent versus buy decision, but it doesn’t capture everything,” says Jonathan Miller, president of New York City-based Miller Samuel Real Estate Appraisers. “Locally, it may be cheaper to buy then rent, but that doesn’t speak to your investment. In other words, how many years before I can ‘get above water,’ or see a return?”

The time factor is one of many stumbling blocks preventing house hunters from making the jump from window shoppers to homeowners, Miller says. During the housing boom, homeowners were virtually guaranteed to make money or at least break even on their home sales, regardless of the period they owned the home. In today’s market, experts see home prices appreciating much slower, therefore home owners will have to make a longer commitment to their housing investments than in previous years. “The future upside is much farther down the road,” he says. “You’re looking at five, maybe 10 years out of this sort of rocky bottom.”

Until consumers regain confidence in the housing market and economy, Miller and others expect the rental market will continue to benefit from apprehensive house hunters. “There’s been some erosion in attitudes toward homeownership,” says Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University. “There’s two parts to the home buying decision: the will and the way.”

Belsky says the spike in home prices and increased housing market activity following the first-time home buyer tax credit in 2010 demonstrates pent-up demand, but that the market isn’t currently providing enough incentive for house hunters to make a move. “The ‘way’ right now is really being blocked by the underwriting standards being applied to loans,” he says. Even if some of the slack in the market tightens, the rebound won’t be as strong as it would otherwise have been, Belsky says, primarily because many would-be home buyers won’t be able to qualify for a loan with favorable terms.

Despite the numerous obstacles for prospective home buyers, experts remain confident that improving employment and economic data will breathe life into the housing market this spring and summer. More Americans signed contracts to buy homes in March, according to the National Association of Realtors’ pending homes sales index–up 5.1 percent–a signal that could mean more house hunters are snapping up bargains. “We’re sort of in that in-between phase,” says Heather Fernandez, vice president of marketing at Trulia. “People aren’t running out to buy that dream house yet because they’re not that confident. But we’re starting to see consumer confidence shift, people are more interested in home buying, rental rates are still high, and therefore, just based on the numbers, increasingly homeownership is becoming more affordable across the U.S.”

- Meg Handley

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