Real Estate Investing

One of my favorite title companies closed its doors for good several months ago because of the real estate slowdown.  The owner was retirement age and she’d begun working part-time.  When we had a mini-surge in business, she found herself at the office full-time again and decided she much preferred her leisurely spend-the-day-in-the-sun lifestyle. She made the decision to permanently close and became another example of how the housing market has an across-the-board affect on other businesses.

However, at closings she’d clearly explain the 20-page form that reviewed the legalese that would lead to foreclosure.  She’d tidily sum it up by saying, “It took an entire tree to tell you ‘You don’t pay, you don’t stay.’”

I’ve seen people lose jobs and go into foreclosure.  I’ve seen foreclosures due to ARM interest loans where the home becomes unaffordable.  But perhaps the worst type of foreclosure I see are those due to medical reasons.  One of my best friends is a stay-at-home Mom.  She and her husband have two children: daughter is 7 and son is 1. Her husband had surgery and his anticipated 6-weeks off work dragged into 3-months.  I don’t know how they held on to their home, but they’ve somehow managed.  I know they’ve had to apply for food stamps and have gone into bankruptcy.  Because of surgery.

I read this morning that Johnny Carson’s former sidekick Ed McMahan is fighting foreclosure on his home at this time.  According to the article, after Mr. McMahan broke his neck 18-months ago he was unable to work as a commercial pitchman.  Perhaps like the rest of us, without regular paychecks, he couldn’t make regular mortgage payments.  He and his wife are now working with their lender to hold on to their home.  When the threat of foreclosure happens to prominent people (Michael Jackson, NBA Player Latrell Sprewell, Major League Player Jose Canseco), we’re reminded that managing our budgets is not something to take lightly.

As Douglas Glenn Clark said in an Ezine article about Canseco, “Money management matters.”  It matters to all of us.

Living large becomes a loser’s game when lack of cash flow results in too many scoreless innings. In a sense, the subprime loan crisis is the story of minor leagues players - all those good people who technically could not qualify for loans - suddenly being allowed to join The Big Game, the majors. No one seemed to care that they lacked the skills to hit one out of the park: i.e., their income was basically fixed and not substantial enough to cover all the bases.

I’m not a licensed financial advisor, but this advice should be common sense.  Here’s how I prioritize my bills:

1. When you get paid, pay your mortgage first.
2. Pay your utilities second.
3. Feed your children third (use coupons, eat beans, eat veggies if you must).
4. Make your car payment (you have to be able to get around unless you’re fortunate enough to have a good public transit system).
5. Pay your medical bills.  You don’t want your doctor’s office to cut you off if you have a serious health problem.
6. If you have credit card debt, pay a little more on the cards with higher interest so you can put those money-eating pieces of plastic to rest more quickly.
7. Go for your other bills.
8. STOP SPENDING MONEY.  Don’t eat out, put down that extra pair of shoes or purse you must have.  STOP SPENDING MONEY.

I know my “Stop spending money” message isn’t healthy for our economy, but you have to consider your financial well-being.  In this case, the needs of the individual (You) outweigh the needs of the many.  If you want to learn more about frugal living, visit my friends at Home Ec 101.

Photo from here.

While the real estate market in all parts of America isn’t necessarily as grim as many would have us believe, it is certainly a buyer’s market. However, there are many homeowners looking to sell their property who refuse to acknowledge this. If you do not price your property fairly (in accordance with the housing market, the area’s crime and poverty level, and the property values of surrounding homes), you can be in for grave disappointment.

You will get fewer looks. You will find that responses to your advertising will be fewer and farther between. This means your property could stay on the market longer, and property that has stalled on the market is a definite deterrent to buyers.

You will attract the wrong buyers. For a sale to proceed, the buyer’s wishes and the home’s features must agree. An overpriced home will entice buyers shopping in a certain price bracket, but with far higher expectations than your property can meet.

It’s not good starting ground for negotiations. Prospective buyers will be less enthused to negotiate because, by talking the buyer down on the price, they are not necessarily getting a deal. They are probably just getting a home at full market value. They expect a deal, especially with the current buyer’s market.

It could mess up your closing If your house is priced above the appraiser’s estimate, it could prevent the buyers from successfully getting the mortgage loan they need.

The comparison factor An overpriced home makes a great comparison for less expensive homes with more features. There’s plenty of great deals out there, so do your research before determining your price. It’s better for you, not your buyers, to be first to identify the great deals offered by the competition.

Looking for a new home? Gone are the days of driving around neighborhoods, scouting out For Sale signs. Newspapers are even irrelevant to the home search nowadays. And you can forget trucking it over to your local open house. Online MLS listings, online classified ads, online high-powered search maps and even online virtual tours have made it so that the first human contact may not come until the closing.

It’s shocking, but true - it’s a digital age. Some say it’s convenient, but others say it’s sad. At any rate, most people (particularly under age 35) could name at least three great web sites to aid the real estate search. However, in a recent column for USA Today, tech wiz and radio show host Kim Komando compiled a pretty comprehensive list:

-Realtor.com is the official site of the National Association of Realtors.

-RealtyTrac.com categorizes listings according to pre-foreclosure, bank-owned, government-owned, FSBO, auction, resale and new. It’s very comprehensive and user-friendly, but costs about $50 monthly after the seven-day free trial.

-Foreclosures.com has foreclosure listings with market value and the percentage of equity in the home. Again, a seven-day free trial followed by a $50 monthly fee.

-BargainNetwork.com advertises thousands of foreclosures and FSBOs nationwide, but will not allow you to browse the site without signing up for a free trial membership, to be followed by a $40 monthly fee. The catch on these seven-day trials is that you must enter your credit card information, which will be charged if you do not call the company and cancel. In some situations, there may even be a $40 or $50 hold placed on your card during the trial period, so be forewarned.

-HomeSales.gov lists federal government-owned properties to be sold at auction, many of which are HUD homes.

-Trulia.com allows searches to be saved and referenced later, and e-mail notices can be sent out whenever there are new listings matching your search criteria.

Kim Komando lists other resources, like the home value calculator and neighborhood property value “heat maps” on Zillow.com. Of course, we wouldn’t want to forget about sites like FSBO.com and ByOwner.com, and Komando also recommends searching official government web sites for foreclosure listings. And of course, there’s always our good friend Craig. Warning: searching for real estate online, regardless of whether you are serious about buying, is a very time-consuming and addicting process. Proceed carefully!