Real Estate Investing

In the best case scenario when the housing market and home values are down, a seller may still have equity in his/her home.  Let’s say they owe $125,000 on a house that could’ve sold three years ago for $165,000 (a $40,000 gross profit).  Today, the same home is worth $145,000.  (And let’s just forget about fees, commissions, etc. for now).  To many sellers, this could feel like a $20,000 LOSS on the home - though they’ll still walk away with money.

The other very important consideration is what you would’ve paid in RENT on a comparable property… because rent or own you would’ve paid something either way.  Let’s say Mr. Seller has lived there for seven years (just a random number) and it would’ve cost $1000 p/month to rent.  That’s $84,000 that would be straight up gone without even $20,000 in capital gains to trumpet.

Finally, you’re selling in order to move up, down, or sideways.  The potential savings on the next home purchased is where the seller will make up the $20,000 difference he could’ve earned by selling three years ago.  Mr. & Mrs. Seller could possibly now get into a $210,000 home for $180,000, for example.

CNN Money.com illustrates what I’m saying with some tips for people looking to find a new crib.

Galdes, 43, may have to sell her condo — bought in 2003 for $287,000 — for less than she’d hoped. But the discount on a better place will more than offset the reduction on hers. And she’ll net $86,000 after closing even if she breaks even.

If you plan to sell but not to make another purchase, I’d advise to hold on for several more years until prices come back (if you can).  If you plan to change homes, however, the time could be right for you!

Blissfully, I was out showing houses again today to a buyer ready, willing, and able!  You always see odd things when you go to the homes of other people and today was no exception.  We saw a home where the sellers had attempted to panel their walls with the leftover laminate flooring.

Perhaps the thing that tickled me the most was how the seller used the cord-around as wall trim.  Also, if you look closely, you’ll see the rope design element AND the wall outlet inside the fireplace.

Paul Campbell, an agent in my old hometown of Lexington, Kentucky, wrote a warning to people flipping homes,

It is so easy to walk into a vacant house and spot a home that someone has bought and is trying to flip.  Especially if it is someone who is not a professional remodeler.  Typically these homes are in need of repair to the repair.  Recently I showed a home to a client where the attempted updates to the kitchen included a two piece granite top that was at least half an inch off at the seam.  They had also attempted to update the kitchen without installing a dishwasher.

Often these “get rich quick flippers” also will not bother getting a home inspection.  So when they try to sell the home things such as electrical problems or even worse mold problems raise their ugly head and the “flipper” ends up losing money.

I’ll have to agree with Paul.  It’s quite obvious when some people flip a home.  You can see the shoddy work sometimes or smell the leftover dog and cat odors where subfloors weren’t replaced as the new carpet went down.  May the buyer beware!

An agent in my office told me a couple of months ago that about a week before a closing was scheduled, the buyer learned there was an FHA Case Number assigned to him on a home sale that fizzled (for whatever reason).

Now I’m facing the exact same scenario.  Different buyer, different house, different circumstances, yet still stuck.  The problem is that Countrywide had requested a case number on a loan that wasn’t - in the end - disbursed.  Then Bank of America took over Countrywide and they’re playing dumb on being able to handle the release of the number because somewhere in the takeover, the waters got muddy.

The buyer’s processor is now in contact directly with FHA to get the case number released.  Fortunately, FHA is usually pretty responsive as indicated time and again online.  For example, the Zillow forum answers the case number held hostage question from a buyer:

QUESTION:  After getting the estimate from the first mortgage broker, we got two other quotes and went with one of the new quotes.  We sign paperwork with our selected broker and she finds out that the first mortgage broker has taken the FHA case number out and had the appraisal done.  Again, we never signed paperwork for a loan with this first guy.  I called the first mortgage broker and he tells me that he has done 90% of the work and I have to pay him for all the work he’s done or he won’t release the case number.

ANSWER (of many):  It is very easy to assign FHA case numbers.  That broker is just a tad on the unprofessional side.  I think this link below will help with the transfer. Good luck. (Linked to Lender Transfers of Case Numbers)

I’m still waiting for our case number issue to be resolved. Cross your fingers for good luck.

Meanwhile, I can’t end the week without remembering September 11, 2001.  Like other pivotal moments of history, people old enough to remember will always recall where they were that day.  I was at a treasurers’ conference in Santa Fe, New Mexico.  Attendees included a lot of Wall Street officials and state treasurers, including the public official from New York state who lost 32 employees that day.  It was horrible being away from my family, 1400 miles from home, and watching the people around me react as they heard about their friends.  My deepest sympathy still goes to them, as well as the thousands of others directly affected by the loss of a loved one.  I also salute our public service community - the firefighters, police officers, and other officials - who step up every day to preserve our safety and well-being.  Also my admiration and prayers to our troops and the elected officials who are in positions to make the difficult decisions.

I will always remember.