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HOME BUYER TAX CREDIT INFORMATION
Jul 26, 2010
Experience pays
What makes a great agent
Carol Thimesch got her real estate license in 1991; since then she has helped hundreds of people purchase wonderful deals in HUD, VA, bank foreclosures, and a considerable number of homes for sale by individual sellers. Working on the sellers' end, she's helped a significant number of homeowners sell their properties. She has a tremendous number of satisfied clients; we can be sure of that because a sizable percentage of her business comes from referrals.
The two deals she closed in the past few days are classic examples of an experienced agent providing sound advice to sellers in a listing situation, and buyers looking for an upscale home.
To the sellers she suggested a selling price—after doing a meticulous study of the market—that would provide a good number of showings from the very inception of the listing. She also indicated deficiencies in the property that could be remedied at minimal cost that would enhance the saleability of the property. The house went on contract at a price very close to listed price, and closed quickly.
She worked with the upscale buyers by showing them houses that were in excellent condition, priced correctly and offered by very motivated sellers. Her buyers bought a superb home for 85% of appraised value.
Working with an experienced agent pays handsomely. If you're in the market to buy or sell in the north Dallas area and northern suburbs, give Carol a call at (469) 774-9074. - ☺md
Mar 5, 2010
A fine home and a wreck
Why houses are like nice autos and jalopies
This isn't just for sellers; buyers pay close attention.
A seller called; she explained that she wanted to sell her house quickly, but that she had to have a certain price. She went on to give me a list of all the amenities, bells, whistles, superior design features and wonderful condition as a reason for her insistence on getting her price. I explained to her that the market sets the selling price, and that real estate brokers and professional appraisers could only approximate the ultimate value of a house to a buyer; I didn't mention that sellers can set an asking price, but not the final selling price. You’re right if you guessed that she wanted more than the house was worth.
I have a Property Sheet with a list of questions for sellers. Sometimes I pass over some of the questions; this time I carefully went over each one with the seller. It dawned on me that selling a used house is not much different than selling a used car. While this seller's home was in excellent condition, it turned out that the home had a lot of miles on it. The house was built in the early 1980s. The current owner was the original owner. The carpet was original; the roof had been replaced after a hail storm in the mid 90s at about the same time that the cooling unit had been upgraded. The water heater was about 12 years old. The doors and hardware, the windows, the kitchen and bath cabinets, the counter tops, and the light fixtures were all original. The most recent update was the interior and exterior paint that was less than two years old.
The house has about 2,000 square feet of living area; it has 3 bedrooms, 2 baths and a 2 car rear entry garage; it’s a good home, but the design is dated. There is no way to compare this house to a similar house that's one year old; no way. To do so would be like comparing a 1982 Honda Civic with 300,000 miles to a one-year-old Civic with few miles on the odometer; most 82 Civics are in the junk yard or have been crushed; most people would be appalled at how tiny, tinny, bouncy, primitive and worn out the old Civic would be. Such is the real fate of many older houses.
It's true that some older houses were better built than newer ones. For example, in the old days builders used real, solid boards for roof decking; later one half inch CDX plywood was substituted for the boards; finally Oriented Strand Board (OSB) was created as a “better” alternative to plywood. But it's not better; however, it does the job and I will take a one year old roof over OSB than a 15 year old roof over 60 year old solid board decking because in a short while I'll have to come up with a few thousand dollars to replace the 15 year old roof and the one year old roof should last a couple of decades.
Can you get a good deal buying an older house? Yes, if you keep the upgrading factor in mind. Make a list of all the items that are nearing the end of their useful life expectancy and figure out what it would take to have them replaced by a professional remodeler (remember that paint and carpet that are two years old can be used up if they have not been treated gently). Deduct a small amount of money for the value they might have to you until you replace them, and then deduct the grand total from the value of the house if it were in excellent condition; that's what the true value of the house might be to you. If you're handy, you can take care of most, if not all of the items for a fraction of the cost to have a professional do the work. You'll end up with a good deal. Naturally you'll need help from a knowledgeable real estate professional as to real values in the property's neighborhood.
Can you get top dollar when selling an older house? Yes, if you consider the paragraph above and look at it from the buyer's point of view. Replace everything in the house that's about worn out; that takes money, but it takes money to make money. If you don't have much money, then replace as much as you can that can give you the most bang for the buck. If the roof is 15 years old but still looks good, and the exterior paint is 10 years old and looks faded, buy some paint at your local paint store and paint it yourself; however, don't be upset if shrewd buyers discount for the old roof.
Want help getting the best deal when buying or selling? Call me; I'll be happy to answer your questions: (972) 814-7391. - ☺md
Dec 2, 2009
NAR says another big gain in home sales
But how many don’t sell?
On November 23 the National Association of Realtors (NAR) said, “Existing-Home Sales Record Another Big Gain, Inventories Continue to Shrink.” On December 1 they had another happy headline for sellers, “Nine Consecutive Gains for Pending Home Sales.” I’m a member of NAR so I don’t want to go against their happy news; and while I was NOT born in Missouri, I won’t say, “Show me.” So I decided to see whether the happy news was true here in the DFW area, or perhaps just in some other parts of the country.
The statistics are not officially out for sales in our Multiple Listing Service (MLS) for November; however, October single family sales were at 6,309 for an 11% increase compared to October, 2008; but average price was down 5%. The increase in sales was probably helped a lot by the $8,000 government subsidy to those who had not owned a house in 3 years; and the lower price average was probably due to the many foreclosure sales. If you lower prices, and give people free money for buying, you can expect an increase in sales.
I wanted to get a clearer picture, and one that’s current, for the entire month of November. I drew a 75 mile radius circle from 360 and I-30, which is about the middle of the Metroplex, and asked our wonderful computer system to tell me how many properties had closed in that area: The answer was 4,723. I then asked how many listings had expired: The answer was 2,473; that’s a lot. This quick-and-dirty study does not cover our entire listing area, but it covers much of it. Some of the expired listings might still close in December or January, but not many; and some of the expired listings might lease out, but also not many of them.
I dug further into the expired listings. Many were overpriced for the current market, especially considering their condition; many couldn’t be priced any lower because the loan balance was at or above listed price. There were a few that had been listed for extended terms and the agent hadn’t bothered to put even one picture of the house in the MLS system; not good.
What can truly motivated sellers do to succeed in this market without competing with banks that can sell at any price (since their losses have mostly been covered by free money from the Fed)? The best way is to get out of the normal real estate box; in other words, don’t get into a boxing contest with a polar bear. Call me for more information: (972) 814-7391. - ☺md
Oct 13, 2009
Buy a house with no money, no job, and no credit
Okay, you might need a little bit of money
The home buying paradigm has gone from the sensible to absolute nonsense in the time since I got into housing in the mid 1960s. It used to be that a local lender made a decision to lend based on common sense. The decision is now mostly made on a nonsense computer-based FICO scoring system that has been partially responsible for the foreclosure mess we currently see. Just because someone has several retail lines of credit that are paid on time does not mean that he or she will be able to make timely payments on a house, no matter what the payment ratios show.
Since the 1980s I’ve been involved in the sale of countless owner financed residential properties for numerous individual and investment entities. The houses were all sold to folks who had no credit, or completely destroyed credit ratings; few could prove their income; many had one or more liens or judgments. But they all had one thing in common: The ability and desire to make payments; and we rarely asked for proof of their ability to pay. The key was that a vast majority had a tidy sum of money for a down payment. Very, very few ever failed to make their payments; at some point they would pay off their loan in full; or they would sell their house; or they would refinance for a better loan.
John and Mary Smith (not, of course, their real names) called on one of our house ads one day in the late 1990s. We had a very nice 3-2-2 brick home for sale at $100,000. I showed them the house and they both loved it. They wanted to buy it and said they had $10,000 for a down payment, but that they had no credit, she didn’t work and he bought and sold cars for a living and could not prove his income. We spoke for another half hour, after which I determined they were good buyers. We signed the sales contract and closed the deal at our office a few days later after we did some due diligence on the buyers.
John and Mary’s monthly house payments were $890 per month; we would continue to manage the loan for the seller. The first month they paid $1,500; she explained that they wanted to pay off their house a lot sooner than the loan’s 30 year term. They continued to pay $1,500 for 12 months, and then Mary called and asked if they could make a larger payment on their loan principal; I told her she could. John came to the office and put an extra $10,000 towards principal; he explained that business had been good that year. From my initial conversation with him and his wife, I had determined that they were very frugal; they had no other debt, and stayed away from normal adult toys and impulse buys; I was not surprised they were so diligent on their house loan obligation.
The high monthly payments and extra money to principal were repeated during the second and third years. At the end of the fourth year John made an additional payment to principal of $30,000; his business had really been good that year. At this point the house was nearly paid off. A few months later Mary called and said that they were going to move to south Texas and buy a farm. She asked me to help them sell their home. They had the home in nice condition, so it sold quickly.
This deal was not a highly unusual situation among our owner financed selling experiences. In this case, neither buyers nor seller had any use for the silly FICO system, a lengthy and tedious loan application, verification of employment, verification of income, verification of deposit, and the myriad other requirements needed to qualify for a “normal” loan. The loan was made on my experience, the buyers’ strong down payment, and the law of the real estate jungle: If you don’t pay, you don’t stay. It’s safe to say that close to 99% of our borrowers never defaulted; and 100% had no credit, or a near-negative FICO score, and could not prove their income.
So here’s the deal; if you’ve come to this web site because you want to buy a house but cannot, due to one or all of these reasons:
- Your credit score is lousy at best
- You cannot prove your income (but you DO have real income that will continue because you’ll make sure it continues)
- You want to buy a house (but you don’t want to overpay for the house or the loan’s interest rate)
- You have some cash (at least $3,000; preferably more)
- You are willing to put some effort in getting the house
Then give me a call and I’ll explain how to buy a home with:
- No money (almost)
- No job, and
- No credit
Here’s the number: (972) 814-7391. - ☺md
Sep 2, 2009
A great investment or a nightmare liability?
Buying the perfect rental home
A rental house – or a number of rental houses – can go a long way to provide extra income, or even a great retirement for you. You can buy single family houses, town houses, condos and even apartment buildings; all can work well, depending on your location and your experience with each type of property. There are a few things to consider before you decide that rental property is the way to go for passive income. I’ll give you a few hints here, and if you feel rental property sounds like your type of investment, then educate yourself by reading as much as possible about owning and managing rental real estate.
The first and most important rule of real estate investing is that you MUST expect, plan for, and receive a HIGH CASH rate of return, or return on investment (ROI). I don’t care what any real estate professional or real estate book tells you to the contrary, if a property will not provide you with a high ROI, it’s not an investment, it is a liability and you might soon wish you’d never laid eyes on it. And income tax savings through depreciation should not be part of your ROI thinking.
The best investment property is the one that’s free of loans; yes, no mortgage. How do you do that if you don’t have a bank full of funds or drawers full of cash? For starters, you could take the money out of your retirement account to buy a rent house; if your 401k account has enough equity, sell the stocks, mutual funds, or pull the cash out to buy your rental house. Okay, this is not investment advice, just food for thought; but chew on it carefully. For the most part the stock market is a grand Ponzi scheme; you buy stock in companies that pay dismal dividends, if they pay any at all, so you buy stock only in the hope that a greater fool will pay you more for your shares in the future. And cash – simply colored trash – is an even greater Ponzi scheme; the government and the Fed get to create as much as possible by speeding up the printing presses and diminishing the value of your savings with every piece of green paper that flies out to pay for every large and small malinvestment that only governments can conjure up: Bailing out bankrupt banks, car companies, insurance companies, cash for clunkers, cash for washing machines.
What if you don’t have a retirement account, or you’re too young to have any value in your retirement account, or your financial planner put your funds in stocks that collapsed to nearly zero value? In that case you buy a modest house to live in. I would suggest a 3 bedroom, 2 bath, 2 car garage house in the best neighborhood convenient to your work; about 1,200-1,500 square feet, surrounded by houses that are preferably larger and more expensive than yours. Get a 15 year loan because you’re going to pay off your little abode in 5 years by doubling and tripling up on your payments; if we get the kind of inflation we will most certainly get in the not-too-distant future, you might even pay it off in a couple of years. In other words, your savings account will be your house; your retirement plan will be your house. Once it’s paid off, it will feed you for life; it will be the proverbial Golden Goose; it will lay Golden Eggs every month for the rest of your life. Once you do one you’ll do the second one much easier with help from the first one; and the third time will be a charm as you’ll have two others pulling real hard for you. Now look hard into the future and imagine how easy the tenth one will be.
If you have limited cash available, buy the most modest 3 bedroom, 2 bath house that you can buy in a decent neighborhood. Here’s an example, a house that just sold in Grand Prairie: 3 bedrooms, 2 baths, one car garage brick that needed paint and carpet; sale price $50,000; cost to make it sparkle was $3,000 with some owner sweat equity; the seller paid all the closing costs; total cost $53,000. Here is the owner’s position:
Is this a good deal? Well, ask yourself this question: If you have $53,000 in the bank, are you getting a check for $563.33 per month on your savings (12.75% interest rate)? And when we get major inflation (it’s baked in the cake), will that savings keep up with inflation, or will it go the way of the Zimbabwe dollar? If the stock market crashes, will there be any value to your retirement account that’s all in stocks? For the average person, this is a GREAT deal.
Okay, I’ll give you a better one:
Does your bank pay 23.51% interest on savings? I didn’t think so. I could go on forever with examples; you’d love the one in Fort Worth back in the late 80s that was bought for $1,700 and fixed up for $2,800. You get the picture. Real estate is still a good investing medium if you pay attention to the figures.
Call me if you have questions or need help with real estate investing: (972) 814-7391. - ☺md
Jun 25, 2009
Sell a house with no equity – FAST!
Can it be done? No problem!
There’s a current paradigm in real estate: If you have a reasonably nice house that’s not in perfect shape, and you have no equity, you’re in trouble; you’re between a rock and a very hard place if you MUST sell. It also says that if you’re upside down on your loan, don’t try to sell it, you might as well throw your hands up and let the bank have the house.
While many would conclude that this paradigm is, in fact, pretty much inscribed in a marble tablet, there is another fork in the road that does not lead to the loss of property and credit record for the home seller; that other path is the non-traditional component of the home-buying and home-selling process. It involves dis-involving the normal troupe of folks reaching for a cut of the proverbial real estate sales pie: Title companies, attorneys, appraisers, couriers, lenders with their entourage of underwriters and processors, and (gasp!) even real estate agents and brokers to a certain extent.
Travel back a few centuries; perhaps just travel down to a good number of Latin American countries and you’ll find that if you wanted to sell property, that you traded something of value for said property; often that something of value was “real” money: Gold and Silver. Now, of course, we use paper printed by the carload by the folks at the Fed. Where there’s a loan involved in most places south of the border, there’s no FHA to allow the buyer the privilege of putting down a tiny fraction of the purchase price and borrowing most of the rest from a lender who will quickly pass it off to a secondary buyer who might ultimately eat the house through foreclosure and then sell it back to HUD for it’s foolish sale of mortgage insurance to someone who had little to lose by defaulting on the mortgage payments.
We can emulate our ancestors and the folks south of the border and sell houses without the complicated process of allowing the banks and everyone mentioned above to control the transfer of property from a willing seller to a willing buyer. I’ve been involved in selling property outside the mainstream real estate system for over a quarter of a century. It was very hard to accomplish during the inflation of the real estate bubble the past several years; but times have changed, and we’re back to a favorable climate for the buying and selling methods I perfected during all those years.
Sellers have to understand that it is a complete paradigm shift; you cannot put a property on the market and expect to find a buyer in shining armor who will pay cash for a house with no equity; too many foreclosed properties are available at sixty cents on the dollar to cash buyers.
I’m getting a large number of calls from buyers with damaged credit who are desperate to buy a house; they can’t get a loan; they can’t buy. Many of these buyers fit the following example: Joe and Mary make a combined take-home income of $6,000 per month. Their monthly payments were as follows: House loan of $1,500, two car loans totaling $1,000, credit card payments totaling $1,000, bad splurging habits of $500, utilities, kids’ braces, insurance, food, etcetera and etcetera, totaling another $2,500.
Oooooops! Looks like Uncle Sam’s finances; the budget was running on a deficit; but unlike Uncle Sam, the credit cards got maxed out, the house ATM refinances ended, and if they print money they will be prosecuted for counterfeiting. Not being big banks, car companies, or large insurance companies with connections to the highest in the land, they cannot tap into any of the bailout money being passed out by the good folks in D.C. Alas, Joe and Mary file for a Chapter 7 bankruptcy; and if they’re forced into a Chapter 13 by the new bank-certified bankruptcy laws, they soon discover that they’ll never get out of that mess and just quit paying the trustee, the mortgage, the cars, and the credit cards.
Joe and Mary rent a house better than the one they were indebted on for $1,000 per month; they borrow a couple of thousand dollars from their parents and buy two sturdy vehicles that are not concert halls, but turn out to be fine transportation; they get rid of their bad splurging habits but must continue with the $2,500 etcetera and etcetera expenses. Total monthly expenses are now $3,500, and there is a tidy sum of $2,500 left over that they wisely decide to sock away. Six month pass and they have $15,000 in the kitty; said kitty perhaps now being the underside of a mattress as they’re thoroughly disgusted with banks.
Voila! Joe and Mary are excellent home buyers even though most of the real estate community will avoid them like lepers. Here’s the key. To sell a house, you need buyers with a decent down payment, the ability to pay, and the desire to own a house that’s in relatively good shape. Can you see that these buyers can now pay at least as much on a mortgage as they did originally? Is it possible that they’re not extremely concerned about getting a steal on their next house purchase? Of course not, they just want their own home again, and now they are probably better money managers and a better credit risk than they were during their “great extravaganza” days. The banks don’t want them; but you, as a seller, most definitely do.
By the way, I am not talking about selling a house under a contract for deed, a lease purchase or lease option agreement; they’re called executory contracts, are highly regulated by the folks in Austin, and as one of my attorneys told me when I mentioned that we still had a number of those contracts under management from the 1990s, “Maurice, you don’t even want touch one of those things now.”
If you’re a seller wanting to sell, or “dispose” of a property that has no equity, or you have real equity and don’t want to lose all or most of it to the declining market and the modern house selling process, call me. There’s a very strong chance that you’ll be quite pleasantly surprised. And even if you’re completely upside down, I’ll show you how to make lemonade out of the lemon that’s dragging you down the path to economic ruin. Call anytime: (972) 814-7391. - ☺md
Jun 22, 2009
The housing market has hit bottom
Truth or another media fib?
The DFW sale statistics from the Texas Real Estate Information System (our big, very effective Multiple Listing Service—MLS) for May is about as gloomy for sellers and happy for buyers as it has been during the past few months. There were 5,971 single family and 367 condo/townhome sales during the month. We were down 24% from the same month last year; dollar volume was down 28% and average price down 5%.
The folks in the media are parroting the government lies about a real estate bubble that is re-inflating (“We’ve hit bottom.” Or, “The end of the housing bust.”). I’ll buy a hat and eat it if we see that happen during the next 10 years; however, I don’t own a crystal ball, so there’s a 10% chance that I could be wrong (you’ll notice my “weatherman’s technique” of using a simple percentage-back-door to exit a prediction that has a slim possibility of making a liar out of me).
I’m not saying that we might not have a huge increase in prices; after all, a rise in sale prices is simply a drop in the value of the medium of exchange: the once almighty dollar. I think increasing prices, at some point, is one of those baked-in-the-cake certainties; however, an extreme rise in sales volume is not baked into anything (you’ll notice the use of the word “probably” to give me another out in case my lack of a crystal ball proves me completely wrong on my volume prediction).
Anyone with a smattering of common sense—and if you’re reading this you obviously have a LOT of common sense—will understand that a government that lives beyond its means (multi trillion dollar deficits for the foreseeable future) is asking for an eventual demise of its currency; that spells inflation; and inflation spells higher prices of almost anything. So if you have extra cash parked in the bank right now please don’t leave it there for the government to inflate it into oblivion; it would be wise to move some of it where it will hold its value; that something is real estate. Yes, gold, silver and oil are also good, but they don’t pay dividends like a nice rental house can; or like a home of your own, instead of renting an apartment, can make life nicer and keep rents from increasing year after year.
We’ll be happy to help you find the best deal in this best of all buyer’s market. If you’re in the north part of the DFW Metroplex, call Carol at (469) 774-9074; on the south part call Maurice at (972) 814-7391, or Barbara at (972) 814-7462. - ☺md
May 15, 2009
Home sellers are getting killed
How to stop the bleeding
For over two decades I’ve helped buyers beat up sellers; I’ve done so because in modern real estate we have to choose sides: We either work for the benefit of sellers by listing their houses, or we work for buyers to get them the best deal. Yes, there is such a thing as an intermediary, who tries to make the process of buying and selling as simple and smooth as possible for buyers who have already connected with sellers; however, most buyers need help in finding the right house, so buyers’ agents have to put much time and effort in search of the right property.
Currently there are two types of sellers: Home owners and “banks” (to include HUD and VA who end up buying banks’ foreclosures because of their guarantees on loans). For the most part banks are the ones getting killed. Home owners who don’t understand this market are also getting killed, or they’re walking away if there’s no equity in their houses and letting the banks deal with the property. Very few banks are marketing their houses correctly; HUD probably does the best job, but even they are taking a solid beating.
How do the banks do such a bad job of selling? Here’s an example: A recent purchase from a bank by one of my savvy clients. He bought a modern brick home, about 8 years old, with 4 bedrooms, 2.5 baths and a 2 car garage; it has over 3300 square feet of living space. The bank made a loan of more than $152,000 on the house in 2003; it foreclosed on the lien in June, 2008. The house went on the market in August, 2008 and my client closed in April, 2009 (much too long on the market for the seller’s good); he bought the house for slightly more than $80,000 (the bank got killed). The house was rough and it did not smell like a bouquet of flowers. There; a lesson in how NOT to sell a house.
Here are some additional ideas from banks on how NOT to sell a house:
- Hire a listing agent whose office is 30 miles away and offer a puny commission. You get what you pay for; an agent in Southlake lists a bank house in Seagoville for a 1% commission; the agent runs to the house, takes one picture of the outside and puts the listing in the MLS; the listing is full of mistakes or lacks details; it’s obvious the agent never went inside the house.
- Do a trash-out and leave the graffiti on the walls. Kids break into some houses and leave large, nasty graffiti on the walls; homeowners getting foreclosed sometimes do so as well. Even if the house is not in bad shape, most buyers become suspicious of the neighborhood when they see grafitti on the walls of a house.
- Don’t bother doing minimal fixing on houses in the $271,050 and under range so they can’t qualify for an FHA loan. FHA loans require the least down payment. FHA won’t allow some items to be missing or in disrepair; a minor amount of rotted wood on the outside will disqualify the house.
- Lower the commission paid to the buyer’s agent. HUD pays the buyers’ agents up to 5% commission; HUD is the most successful at selling its houses for top dollar (considering condition); some agents only work the HUD program. Many banks pay a 3% commission to buyers’ agents; however, a few banks are offering 2.5% and even 2.25% commission. That’s an interesting concept: Offer buyers’ agents less money to sell foul-smelling properties in poor condition.
You get the point; some don’ts are so obvious. Here’s what smart sellers are doing to move their property and not get killed:
- Remove everything in the house that makes it look cluttered; clean out the garage; remove all pictures from walls.
- Touch up all walls and trim.
- Clean up the yard; trim all trees and bushes.
- Remove pets from the house.
- Clean the carpets; clean the whole house and keep it clean.
Okay, these five items are pretty obvious. Now here are ideas for those who want to sell their property fast at maximum price:
- Move out of the house.
- Have the house inspected by a professional inspector.
- Fix everything that’s a problem on the professional inspection.
- Paint all walls and trim a light, neutral color, including garage walls; varnish all stained woodwork; paint exterior woodwork as needed.
- Replace the carpets with a light neutral color.
- Clean the yard; trim all trees and bushes; plant some nice flowers and shrubs in front if the yard is bare.
- Clean the house till it shines; keep the house and yard clean and neat while the house is on the market.
- Find an EXPERIENCED Realtor; have her/him do a thorough market analysis; price the house according to what the market says, not what you need or want to get for the property; list the property. It does not matter if the Realtor works for an independent office or an office that has bought a franchise name; the right price, perfect condition, and listing in the Multiple Listing Service (MLS) will sell your house.
- Request an open house ONLY if you want your carpets trampled by the few people who show up who WON’T buy your house. I’ll repeat, the MLS will sell your house; your experienced Realtor will know how to market it correctly to the thousands of agents in the MLS system.
Voila! Happy seller (that’s you); minimal bleeding (even in this market); and most interestingly, happy buyer (who didn’t get a steal, but got a nice home).
Want to know more? Call me: (972) 814-7391. - ☺md
Apr 1, 2009
Increasing the population
To re-inflate house prices
A March 17 article in the Wall Street Journal by Richard LeFrak and Gary Shilling proposes “seriously considering granting resident status to foreigners who buy surplus houses in this country. They “estimate that 2.4 million houses over and above normal working inventories are left over from the 1996-2005 housing bubble. That's a lot, considering the long-term average annual construction of 1.5 million single- and multi-family units.”
They continue, “Excess inventory is the mortal enemy of house prices, which have already fallen 27% since the peak in early 2006. We predict another 14% drop through the end of 2010 if nothing is done to eliminate the surplus.”
They go on to give a number of reasons why it would be good for the country to allow well-off and well-educated individuals permanent entry as long as they buy (for cash) houses of minimal value (not shacks). I’ve seen several writers take up the banner for this proposal, but it’s interesting to note that Mr. LeFrak is chairman and CEO of LeFrak Organization, a real estate builder and developer, and Mr. Shilling is an economic consultant and investment adviser and president of A. Gary Shilling & Co.; there’s just a slight chance that a re-inflation of the housing bubble could be good for their business.
There are many flaws with this idea, which we no doubt could see more people, including some in government, find appealing; a major flaw is the re-inflation of the housing bubble, which caused much of the current bank troubles. But the biggest flaw is to look at housing only from a seller’s perspective, and many a seller today is a bank that loaned money to individuals with an extremely suspect ability to service the loan.
Typical market conditions in this country during the past several decades, partly as a result of a corrupt fiat money system, caused house prices to increase when mortgage interest rates declined, and pushed prices lower when interest rates increased. During the better part of this decade the Fed has pushed interest rates down in a successful effort to inflate a housing bubble; having succeeded and then found that a huge hole appeared in the bubble through malinvestment caused by the bubble itself, the Fed, the Federal Government, Keynesian economists, and various writers want to patch the bubble because for the first time in eons, both house prices and interest rates are simply too affordable for buyers, to the detriment of sellers, especially sellers who do a lousy job of presenting their product to buyers (such as banks, HUD and VA).
But it seems that few at the Fed, in government and economics or in the mainstream press take up the banner for buyers. The talk on TV, the articles in magazines and newspapers, come down to, “Housing has crashed,” or “The house market is terrible!”
But if you’re a buyer, I can only say, “Rejoice!” It’s a great time to buy; it’s the best time to buy. Housing prices have crashed and the market is great! If you’re a first time home buyer, the government (through it’s miraculous creation of money out of thin air) will send you up to $8,000 for buying this year. A good thing for you, as a buyer, is that lots of builders have been forced to hang up their hammers and the supply of houses is not increasing at the crazy pace of past years; at some point supply will no longer exceed demand, and prices will begin to move up. Of course, the government’s creation of trillions of dollars will cause massive inflation, which could put house prices on a moon shot, and you’ll get to pay off your mortgage with cheap dollars, and sell at gargantuan prices (though the gain in buying power of your sale proceeds won’t be as gargantuan).
If you’re a seller, don’t despair; those who sell right are not faring so poorly. I’ll have more to say about that another day. Meanwhile, for lots of experience behind your buying endeavors, give me a call and I’ll be glad to help: (972) 814-7391. - ☺md
Mar 12, 2009
Beautiful house at 66 cents on the dollar
$4,000 invested, a fabulous home, and an $8,000 check from the government
If you’re waiting to get the very best deal on a home, you might find it tomorrow, or the next day; but it’s hard to see how it can get much better than right now for buyers. A young couple we just closed are first time buyers. They bought a wonderful home, and a great bargain. It’s in a neighborhood of newer homes. The house was built in 2006; it has 4 bedrooms, 2 baths, a 3 car garage, 2 living areas and 2 dining areas, with almost 2200 square feet of living space; it is an upscale home among other upscale homes, and is in great condition. It was a foreclosed property; the seller is a bank. It was bought in December, 2006 by the previous owners; they got an original loan that was over $193,500. Our clients just bought the home for $128,000; about 66 cents on the dollar.
Our buyers had a total move-in cost of under $4,000; and to add icing to an already icing-laden cake, the government is sending them a check (because they’re first time home buyers) for $8,000 for their effort; also, their loan has a fixed rate just over 5% (way less than the REAL rate of inflation). Could it get much better than that? Well, James Bond would say, “Never say never.” But if you knew the house, and the neighborhood, you might be tempted to say never; on the other hand, YOU might find a better deal, or at least as good a deal, if you pick up your phone and call me so that I can walk you through the steps necessary to find your dream home; at a bargain price.
And it’s sooooo easy—because I’ve perfected a method over more than a quarter century of selling foreclosed properties—that places a massive advantage on the buyer’s side. Couple that with the desperate need that banks, HUD and VA have of unloading their REOs, and you can see that getting a great home at a remarkable discount is tantamount to taking candy from a baby.
How are great deals possible? The Dallas/Fort Worth MLS statistics tell the story. In February, sales of single family homes were down 28% from a year ago; condos were down 31%. Single family average prices declined 4%, and condos declined 12%. I don’t know if it’s a trend, but single family home listings were down 12% and condos 2%; if that trend continues we could see prices firming as we get into summer. So now is as good a time as any to go find your deal.
If you’re not quite ready to buy, don’t despair. I don’t see the light at the end of the “bad news for sellers” tunnel yet; it could take years to appear.
And if you’re a seller, you can take affirmative steps to make sure you don’t get your teeth kicked in by this buyers’ market. Believe it or not, some sellers are getting top price for their homes relative to what others are getting. Whether you’re a buyer or a seller, call me with questions about your specific situation; the advice is free and it could be worth thousands to you: (972) 814-7391. - ☺md
Feb 13, 2009
Great news for Home Buyers
A full glass of wine
A half glass of wine can be half full, or half empty, depending on which side of the table you view it from. Buyers are looking at it with a bright light and calling it half full; many sellers, on the other hand, are looking at it in a dim light after being blindsided by the force of the decline in sales: they see a glass that’s half empty. But from a buyer’s standpoint, the glass is really full at the moment: interest rates are radically low, and prices are very affordable.
The statistics from the DFW multiple listing service (North Texas Real Estate Information System, our MLS) confirmed that January was a very tough month for anyone trying to sell a house; only 3,399 single family houses sold, and a mere 162 condos and town homes changed hands. That was a 27% decline for single family and a 46% decline for attached house sales compared to January of 2008. There were 5,350 single family houses sold in Jan 07, and 4,670 in Jan 08; January is typically the lowest month in sales. Compare that to 9,163 sales in Jun 07 and you can see what I see: tremendous opportunities for home buyers. Median price has gone from $139,940 in Jan 07 to $137,500 in Jan 08, to $129,000 in Jan 09.
What’s most interesting are the Sold to List Price figures. In Jan 07 houses sold for 97% of listed price; in Jan 08 it was 96%, and last month it was again 96%. That means that sellers are accepting the decline in prices and setting their sale price according to market conditions.
As a buyer you might be wondering where the deals are; without question, the answer is in foreclosed properties. Banks and secondary lenders (Fanny and Freddie, etc.) place their properties directly with brokers and list them in the MLS system. The Department of Housing and Urban Development (HUD) buys houses from banks that have foreclosed on FHA loans; they then place them with a management company which, with the help of regional brokers, places the properties in the MLS where they are offered on a very well run electronic bidding system. The Department of Veterans Affairs buys houses from banks that have foreclosed on VA loans; they hand their houses to Ocwen Bank which in turn lists the houses with brokers; the houses are sold on a rather limp bidding system.
All of these properties come to market as a result of a foreclosure; they are put on the market by sellers that will sell them marked-to-market. Most of the properties are simply cleaned up and put in the MLS; they are a handyman’s delight. Often just some paint touch up and a few repairs will make a property very habitable; some properties require new paint and carpet along with some minor repairs to bring them to almost new condition. The payoff is a house that is very affordable, and at a 20%-40% discount to a “perfect” house, even in this market.
Many people think that the Federal Reserve controls mortgage rates, but it only influences them, and their influence will at some point wane to oblivion when the huge piles of money created in D.C. for the many programs and pork finally hits the streets and interest rates skyrocket as a result of inflationary pressures. This means that we have a window of opportunity right now: low house prices coupled with artificially low interest rates. What a gift to buyers. If you’re looking to buy a home or an investment property, give me a call. I’ve bought a few hundred investment properties myself in over four decades in the business, and I’ve helped thousands find their dream home or rental property. Here’s my direct line: (972-814-7391). - ☺md
Jan 26, 2009
Picking the very best time to buy a home
Could it be now?
In housing, prices and interest rates generally work in opposite directions; when rates come down, prices rise, and when rates rise, prices come down. Back in the early 80s, when interest rates shot up as a result of Paul Volker's raising of interest rates to strengthen the dollar and lower inflation, builders got hammered; they could not sell their homes. I remember U S Home built a good number of modest homes without garages in an effort to cut selling price and keep payments somewhat affordable with rates at 16%.
Things had completely turned around by 2006 when rates were low from Greenspan's loose money policy; prices in some areas of the country were going up at double digit rates as a result. In 2008 the housing bubble popped and the economy came tumbling down; that caused sales to go off a cliff; prices stayed low because home demand crashed. So in an effort to re-inflate the real estate bubble (and other bubbles), the new Fed chairman cut rates to almost zero. Now home buyers have the wonderful condition of low home prices, coupled with an abundant inventory, and extremely low mortgage rates.
Here's an example of today's really good deals: A house that sold new in 2005 for about $200,000 is on the market by the bank that foreclosed in the low $130s; our buyers will get a fixed rate loan at 4.75% interest to buy it; the house is in excellent condition. Is this everybody's idea of a good deal? Pretty close to it, if not right on the money. The principal and interest payment on that loan (let's assume there's no down payment for the sake of simplicity) will be $688.57 per month. Compare that to where we should be: A $200,000 loan at 9% for a principal and interest payment of $1,609.25 per month. That's not all; our buyers won't be paying full asking price; plus, they can go to the appraisal district and get their property taxes lowered.
You’re probably wondering, is it that simple? It is...almost. There are a few banana peels that can slip up the buyer on the path to a great deal. When you’re ready to buy, call me and I’ll be happy to walk you through the best path for your individual needs and particular areas of interest. - ☺md
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