Norada Real Estate Investments

Archives for June 2010

Fannie and Freddie Delisted! What Does it Mean for Real Estate?

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You might have missed this little item in the nightly news report; government home mortgage giants Freddie Mac and Fannie Mae are delisting from the New York Stock Exchange. Despite $145 billion in taxpayer funds spent to shore up the pair, shares have dropped so significantly they no longer qualify for inclusion on the exchange but will continue to be traded via the infamous bulletin board instead.

In order to participate in the traditional exchange, shares must trade above $1…Fannie has been below that level for well over a month making delisting a legal necessity. Freddie has continued to struggle at just over the $1 level but will also be delisted given the eventual prospects. Given the difficulty of becoming profitable…much less an actual attempt to repay the government aid, it's unlikely any serious effort to revive the failing entities will be forthcoming.

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Foreclosure Timeline

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Novice short sale and other real estate investors are often confused by the entire process; it's not your fault! Foreclosure has never been simple but with the current backlog and other pressures, it's become worse than ever.

Here to help is an easy to read foreclosure process timeline. It will help novice investors understand the different methods used to purchase short sale, pre-foreclosures and foreclosed properties.

  1. First month missed payment. This counts as day one for the bank but notice, the homeowner had 30 days just like normal to come up with a payment. They will always remain 30 days ahead of the bank schedule.

  2. Second missed mortgage payment…day 30 for the bank.

  3. Third missed mortgage payment…day 60 for the bank. The loan is now seriously delinquent.

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Bank Note Blunders

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Buying bank notes for non-performing loans is one of the easiest ways to make money in real estate today. Sure, it's not absolutely fool-proof (nothing is) but it comes pretty close. So, why does it seem there are so many people making a mess of buying bank notes?

Like most things in life there are always a few people that give something a bad name but that doesn't mean it should stop you from adding bank notes to your personal investment portfolio.

Find out for yourself what the most common bank note blunders are (and how to avoid them) with this quick checklist:

  1. Failure to verify the outstanding balance due and the actual repayment terms of the note. Yes, it sounds obvious enough but you might be surprised at the number of people that don't really understand what they are buying. Take time to inform yourself about the original conditions of the note and terms before finalizing the transaction. A little information and education can go a long way.

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Don't Become a Seminar Junkie: Experience is the Best Teacher

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I know of some people who have become totally caught up in the euphoria of newfound knowledge and just couldn’t stop buying audio programs and attending very expensive seminars and bootcamps.  This seminar junkie must have spent at least $50,000 within a 12 month period and still hadn’t bought their first .  They were just bouncing around from one great idea to the next.

I don’t know whether, in their case, it was because they were just caught up in the excitement of that environment, whether it was their way of convincing themselves they were active when they may have been too scared to get started, or they were honestly trying to find the best strategy for them.  I’m guessing it was a mix of these things.

I also know of an investor who took quite the opposite approach.  He stumbled across a pretty good investing strategy and didn’t check out any other alternatives but went ahead and spent over $10,000 getting a good education in that one area.  He went on to build a decent portfolio over a few years but then realized there were some even better strategies out there.

This second story isn’t so bad because he built some success and he could afford the further education he now sought.  However, he told me once that it was a little disheartening because if he wanted to pursue a different strategy he had to start the learning process all over again and it felt very much like he had his “ladder to success” leaning against the wrong wall.  And even though he could now afford the education more easily it was still another $5,000 – $10,000 that he could have avoided spending.  If only he'd done his homework first.

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Fed Set to Hold Rates Low as US Economy Struggles

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The US Federal Reserve is expected to keep US interest rates at historic lows when it meets later Wednesday, as it tries to keep a languishing recovery on track. The Fed's top rate-setting body is widely expected to keep its main rate of borrowing at between zero and 0.25 percent to help spur economic growth.

Faced with reams of data showing the recovery is still fragile, the debate over whether the Fed should quickly raise rates to stave off inflation has all but disappeared in recent months. The Fed's announcement will still be keenly watched as investors look for any hint that a double-dip recession is on the way, or that the worst of the danger has passed.

Jobs growth remains anemic with employers still reluctant to add permanent positions during the fragile recovery. The unemployment rate is expected to hover near 10 percent for quite some time as the economy regroups after the worst downturn since the Great Depression of the 1930s Consumers have been cautious about spending, which normally drives about two-thirds of the activity in the world's largest economy.

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Short Sales: Fact vs. Fiction

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Looking for big profits in short sales? An internet search for the phrase “investing in short sales” brings up tens of thousands of hits, many of which offer strategies and tricks to make a killing on the rising number of short sales in the U.S. These properties are sometimes viewed as easy money because the seller is in distress. But this is not necessarily the case.

The concept behind a short sale is this: a homeowner is unable to continue making mortgage payments; however, the outstanding mortgage on the property is higher than the market value of the house (i.e. “upside-down”). The homeowner makes a deal with the lender to sell the property at market value, and the lender eats the loss.

But are short sales really the money-making scheme that many believe them to be?

Not that it’s impossible to get good deals – many investors manage to buy short sales at a discount – but investors should be aware that negotiating a short sale is no walk in the park.

“Our biggest challenge [with short sales] is getting the banks to recognize that the property is not worth what they think it is. When we submit offers, and we think it’s a fair offer, and we fight with the banks on behalf of…the buyer, it’s very difficult to get them to meet us halfway at times,” says Mia Lutz, president of Say No To The Bank, a community counseling organization that works with foreclosure buyers and sellers.

Time frame can also be a major impediment for looking to purchase short sale properties. Short sales can take anywhere from 30 days to six months from contract to closing, and the deal can fall apart at any time.

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National Economic Outlook (May 28, 2010)

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The two large questions on the minds of are: when will the economy recover? and when is a good time to reinvest in the housing market? We think the economy has reached the point where aggressive investors can find good opportunities in selected housing markets. Although the national economy will just be creeping along for another couple of years and home prices will be weak, some local markets have enough long-term potential to warrant taking investment chances.

The latest bad news for the housing market is that the fall in home prices in the last four quarters was worse than expected, showing weak demand for housing and competition for from vacant properties. Overall, home prices fell almost 7 percent, whereas the fall for the four quarters of 2009 was 5 percent. Although the biggest drops were in Florida, California and other markets out West, the effect was felt across the country. The good news is that rental vacancy rates seem to have stabilized most everywhere, and are falling in large markets like Atlanta, Chicago and Miami. On balance, we seem to be looking at a housing situation where the downside in some local markets has become quite small.

Even though the economy grew at a 3 percent rate in the first quarter, the job situation has not improved very much, indicating a much longer recovery period. Over a million jobs were lost in the last 12 months, many in construction and manufacturing. We expect job gains during the next year, but in lower-paying areas such as retail trade and health care. And the number of temporary workers will continue to grow.

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Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

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