Real Estate Investing

Last week, I took a photo of a family who had been evicted after their home foreclosed.  The sheriff car had pulled up to the driveway and the deputy calmly handed them the notice that they had to vacate immediately.  The family was, of course, upset.  The piled all their belongings on the front lawn and made a sign that said, “Please help.”

Later that night, my friend who lives behind the house saw another family stuffed into a van at our local gas station. Also in the van was  furniture, boxes, clothes, and a couch strapped to the roof.  The driver asked my friend to help him - I suppose they wanted money to find a motel room for the night.

Foreclosures are on the rise - up 53 percent this June compared to this time last year.  Bloomberg is reporting that one in every 501 homes entered into a stage of foreclosure marking the worst time in history since the Great Depression that this has happened.

“We’ll have 1 million bank-owned properties by the end of the year,” [Rick] Sharga, [RealtyTrac’s vice president of marketing] said in an interview. “That will represent between one-fourth and one-third of all home sales.”

This means that one out of every three or four houses being sold today is being sold by a bank - home owners will have some stiff competition when it comes to pricing and selling as most buyers will be looking for a “deal.”

Meanwhile, there are at least one million displaced homeowners who’ve lost their houses.  Another one of my former clients called me today wanting to short-sale their home and they had the mortgage holder’s permission.  They haven’t made a mortgage payment in months and months and months because the bread-winner had bone cancer and ultimately lost his job while battling the disease.  She asked, “Do you think we should go ahead and try to find a place to rent?”

The image of the evicted family came immediately to mind.  I told her it would be a really good idea to find another place to live, especially since their lender has said they could try the short sale, but foreclosure may be imminent. 

The former buyer said she heard that landlords now check credit reports and she was very worried about this.  Indeed they do.  Both a foreclosure and bankruptcy can cause serious damage to your ability to rent a place to live.  I’m not sure former homeowners can be too picky about where they’ll move to, but LaToya Irby highlights on About.com how to find a rental after foreclosure. Some of her advice,

“…look for houses, condos, townhomes, duplexes, and small apartment buildings that are owned by a single landlord. These types of landlords are less likely to do credit checks.

If you apply for an apartment before the foreclosure is updated on your credit report, you have a better chance at getting approved. Timing it is tough since most people don’t realize foreclosure is inevitable until it’s happening.”

A parent of a scout in my Girl Scout troop lost her home several years ago.  She swears that the smaller complexes and single landlord homes are the best places to search for rental opportunities.

I think the rental market could benefit, though Reuters reports the apartment market is stable.  I hope so for my would-be short seller.  They’ll need all the luck they can get.

I live in a major metropolitan area - not big like New York or San Francisco or Chicago, but the metropolitan area is at 1.5 million.  I’ve recently been on a quest to find a buyer a home and we’ve definitely been on a roller-coaster ride.  I don’t like roller-coasters because they make me think my head is going to explode when the migraine sets in after being jerked, rolled, and having had my stomach fly up to my throat.  Just no.  

Fortunately, the roller coaster Aunt B. and I have ridden hasn’t been that drastic, but some of the results have at least warranted an upset stomach for me.   The problems we’ve encountered in the hunt for her home begs the questions B. asks,

And it just leads me to continue to wonder–when we talk about there being a lot of affordable housing in Nashville, is that really the case?  Right now, for instance, there are 695 houses on the market under $125,000, which makes it seem as if there’s a lot of housing stock for working class people.  But if sixty percent of those are pits that need major help before you can get into them, are they really real possibilities for folks?  Because, even if you can rehab them–if you have the skills–if you don’t have the money, is that house really feasible?

This observation led to another’s comment that really sums up a silent problem our nation is having:

But more generally, the loss of affordable housing stock for the lower 50th percentile of folks is the unmentioned scandal of U.S. cities.

Are there affordable homes available in our U.S. cities?  If they are affordable, are they liveable?  Do they require tens of thousands of dollars in renovations before someone can move in?  Will the pipes need to be replaced to gain a strong water flow free of potential lead poisoning.  Is the roof ready to cave in?  Are there vines growing out from outlets?  I’ve seen all of these problems in the last year - most in the past month.

Forbes magazine recently published an article about the most affordable places to live.  Included are Atlanta, Cincinnati, and Minneapolis… a city for every climate!

From personal and professional experience, I can tell you that although home prices are dropping daily and meeting qualifications of FHA loans may become more difficult, it doesn’t mean buyers will have an easy time finding a home that meets their needs.

People looking for affordable homes often need to have easily accessible public transportation, need to be able to purchase food nearby, should live in an area with plentiful jobs, and the cost of utilities shouldn’t be crazy expensive.  Are there really places like this out there?

An always fabulous agent I work with told me recently about one of her closings.  She found a home for her buyer that had first been on the market for $145,000.  Following the market downward, it was reduced after several months to $130,000 in order to remain competitive.

Her buyer wanted this home, so they wrote a contract.  In the contract, they asked for 3% ($3900) in down payment assistance and 3% ($3900) in closing costs.  They also asked for a home warranty, a $1000 repair limit, termite inspection (we’ll say $75, but could be up to $800 depending on whether termites were found), and for the seller to pay for title expenses (another $1200).

This once $145,000 home was being purchased for

… drumroll …

$119,925 after the seller paid all of the concessions on behalf of the buyer.

That was $25,075 less than the original list price.  BUT because the market sets the price - and in fairness - the number would be $10,075 off the list price.  So the buyer made a full price offer on paper, and yet it was not a full price offer.

It got back to my friend the agent that the buyer’s father fussed at everyone he met because the agent didn’t get her son a “good enough” deal in a buyers market.  I beg to differ.  That she saved his son over $10,000 dollars from the list price was a pretty fabulous deal.

Yet there are always people who argue that it wasn’t enough.

Another friend of mine wrote a comment to me about full price offers saying, “No one should ever pay full asking price for anything that lends itself for negotiation possibilities…..there is always someone willing to wiggle….keep looking.”  I respectfully disagreed with her given the scenario outlined above.

I believe people need to always remember that just because you see something on paper, it doesn’t tell the whole story.  A full price offer may appear to be full price, but when a seller walks away with over $10,000 less than expected, they are not receiving full price.

Of course, you can also ask yourself how badly you want a house.  Even in a strong buyers’ market, homes in your price range in safe neighborhoods may not be available, so you do what you have to do.

I urge buyers and agents to never let the naysayers convince you that you made a mistake because only you know and have the complete picture of what your needs are.

Photo by Kathy T. and her blackjackii phone. Special guest: the calculator.