As I sit here, reflecting on real estate of the past and experiencing the present real estate mortgage market, it's hard NOT to feel bitter toward banks/lenders, on behalf of those who, now, need a loan to purchase some real estate.
Assholes ("Pioneers"), like the, now, defunct Countrywide, contributed to the mess we find ourselves in.
While it's yesterday's news, we all know why Countrywide, and many other "pioneers", no longer exist.
They "developed products", they knew were designed to fail - and they disregarded the people they trapped within their f*cking GREED ! - in the worse-case scenario we reflect back on, today.
I'm using Countrywide as a representative of the masses of banks/lenders that FAILED and were dissolved and/or sold/traded off to "responsible" such institutions.
Listen, our economy is in shambles because of greed, NOT capitalism.
Technology has turned us into robots - and unrealistic robots, at that.
We have so much information flying at us, from every direction, that we can't filter it all.
What does this have to do with getting a loan ??
What if you had a loan on some real estate, back in 2000 something, and the bottom fell out ?
You were always earnest in paying your, monthly, debt - believing your "investment" would provide shelter (as in taxes (mortgage interest/1099) and physical shelter too) and payoff in the end, relating to cash value.
Well, here we are, in 2012.
Cash value ? IF....with emphasis on IF, you purchased pre-2005 and did not over-leverage your real estate, you're probably sitting ok, generally speaking.
That said, now you're thinking about selling and you're expecting to get more than your investment back, at the POS (Point of Sale, or closing), resulting in a nice payday AND your ability to, now, take advantage of the real estate prices of today's market.
So, you get an offer on your property, that you believe is acceptable - and life is great.
Your buyer has a pre-approval or they're pre-qualified and you just keep smiling at the purchase and sale agreement, imagining how you're going to use the funds, after the closing of the sale.
25 + days go by and the closing date, as reflected in you PSA (Purchase and Sale Agreement), is approaching.
You haven't heard much, if anything, from your buyer/buyer's agent - or even your listing agent (DON'T EVER USE A LISTING AGENT/PAY 6% TOTAL COMMISSION) and you're concerned.
You decide to inquire and find that your buyer is having a tough time getting financed.
Underwriters are not satisfied with, what would have been acceptable in "reasonable times", your buyer's ability to re-pay the proposed debt that would result, as a mortgage, on the property you're trying to sell them.
NOT only that, but the lender's appraiser, who arranged to come out to your property, came back with a value that is less than what your buyer contracted to purchase your property for.
Remember, the real estate agents AND the lender all assured you that "everything will be fine".
So, 25+ days rolled by and all your emotions and dreams ran their course - now you're losing your buyer AND have to accept the fact that your real estate is not worth (according to the appraisal) what you were selling it for.
HERE'S THE DEAL:
There are many ways to find out if you're over-leveraged.
Simple ways are to Google/Bing/Yahoo....or whatever, the address of the property you're trying to sell.
What's the, CURRENT, tax assessed value ?
What have, similar, properties - in a 1 mile, or less, proximity to your property, sold for - in the last 45 days ??
Simple due-diligence will help you to arrive at a realistic value of what your property is worth, in today's market.
That will help your expectations too AND the research will, also, help you to understand today's mortgage market.
I believe that education is paramount in anything you opt to do, but when it comes to understanding the purchase and sale of, possibly, your most significant "asset", your understanding is most critical.
Lenders have gone from one extreme (Lending to everyone) to the other extreme (20% down and/or highly constrained guidelines).
Couple those "guidelines" with a challenged GLOBAL economy and "struggling" housing values and you have all the information you need to price your real estate accordingly, or to "HOLD" that real estate until things improve.
Whatever the outcome, it's VERY cool to have options.
New To You RE, LLC
I could put 100s more videos up, all claiming 2012 is the year when recovery begins.
By contrast, I could put up an equal number of videos stating the opposite.
Whatever your real estate knowledge or expertise, we're ALL speculating now.
I've been concentrating on the uptick of values, in specific areas throughout the country and the decrease of inventories, overall, nationwide.
These are signs that a recovery IS taking hold.
This Spring, I'm looking to see a significant spike in real estate inventories, from traditional sellers who have waited for this time of year, to banks that NEED to unload large foreclosure/REO properties to banks stepping up and approving short sales.
Being an election year, it makes this Spring Market even more significant and as weather improves and people's sunny day attitudes come back into light, we could see the best market we've seen since 2006.
Whatever your thoughts are in this "current" real estate market, history has shown us that nothing lasts forever AND that change is imminent.
Being a proponent for change, I do believe we're at, or close enough, to the point of shifting from a down real estate market to an upswing in real estate values.
Get in - now - and watch your investment grow.
When everyone else starts jumping in, that's when it's time to pick up your toys and move on to your next opportunity.
New To You RE, LLC
Opportunity - LOTS of opportunity AND mortgage rates are at all time lows -
At the time of this writing, rates are in the 3s !!
Rates in the 3s, combined with an abundance of discount priced housing really does present an amazing opportunity.
Are you taking advantage of this market, or sitting on the sidelines, contemplating if this is the right time ?
Here's a fact:
Real estate markets are, and always have been, cyclical.
They rise and fall - with no set time when they'll move on to the next cycle.
Here's Another Fact:
Real estate has produced more wealth than any other investment -
Investors know there's no guarantee relating to when values will rise or fall - then again, there's few guarantees in life.
The list of names/companies is a loooooooong one, who have found success in real estate. Smart $$ knows that any success is built on risk - and knowing when/how to leverage that risk is the difference between success and failure.
In your lifetime, has there ever been the abundance of balance between discount real estate and historically low mortgage rates that currently exist ?
Do you think it will stay like this forever - that this is the "new" normal ?
Those investors who get in, now, will be those investors who enjoy the value increases that are sure to come - history repeating.
Here's One More Fact:
When everyone starts getting in, that's when it's time to cash out and move on to your next opportunity.
Get in, now, before you're caught up in the wave as opposed to riding the wave in, Kahunas !!
The Capital Gain Tax Rate will increase in 2011 from 15% to 20% per the sunset provisions in the current law. On top of the 5% increase, starting in 2013 a new Medicare Contribution Tax, IRC § 1411, will subject the “net investment income” of individuals, estates and trusts to an additional 3.8% tax to the extent the taxpayer’s “modified adjusted gross income” (MAGI) exceeds threshold amounts. “Net investment income” includes capital gains from sales on investment properties and rentals (property held in a passive activity). Thus, it will apply to most 1031 properties held by individuals, or by partnerships and S corporation. It will not apply to properties used in an active trade or business or by a C corporation. The income thresholds are $250,000 for married couples and $200,000 for other taxpayers.
The definition of net investment income applies the tax to MAGI above the threshold levels “to the extent taken into account in computing taxable income.” Thus, gain deferred under Section 1031 should not be subject to the tax, although regulations have yet to be issued.
A single taxpayer has MAJI of $150,000, including $100,000 of gain from a rental home. The tax does not apply because the MAJI is less than $200K.
A single taxpayer has MAJI of $250,000, including $100,000 of gain from a rental home. The tax applies to $50,000 of the gain (the net investment income in excess of MAJI).
A single taxpayer has MAJI of $300,000, including $100,000 of gain from a rental home. The tax applies to the full $100,000 of gain.
WHEN WILL IT BE SAFE TO BUY REAL ESTATE AGAIN ?
Hi, it's Mik with New To You RE, LLC and that is the number 1 question other investors ask me, as of 11/30/10.
Here's the REAL concern behind that question:
Property values have fallen, throughout the country.
The "sand states" have been the hardest hit (FL, NV, AZ and CA), with their values plummeting 50% and more.
What alarms many is the fact that real estate values dropped at all.
They believe that this has NEVER happened before and that this event must surely signal an end to real estate investing profits.
BULLSHIT - This happens EVERY 10 - 12 years, on average.
Admittedly, NOT to the degree of recent declines.
Not to panic, though.
While real estate values HAVE dropped, the root cause was the employment sector.
Generally, housing values are challenged every 10, or so years, as I stated above, and that is usually due to supply and demand, as well as other factors that are STRICTLY related to real estate.
THIS TIME, the values were mostly affected by:
1) Subprime loans that should have NEVER been made
2) A poor job market - which caused a
3) Weak economy
When 3 MAJOR factors, like these, combine - the result is NOW
Just understand that STRONG VALUES will return, in 3 to 5 years - as long as the current economy continues to improve.
DOES THAT MEAN I SHOULD BUY REAL ESTATE - NOW ??!!
YES - it absolutely does.
Most wealth, in real estate, is MADE in this kind of market.
LET ME PAINT YOU A PICTURE:
Mik finds a sweet deal on a house that he is buying for LESS than other "RECENT" comps have sold for.
As the rental market is STRONG in this economy, he puts a renter in the house and concentrates on finding more great opportunities - using all the knowledge that he acquired from NEW TO YOU RE, LLC !!
A couple/few years pass and that SWEET DEAL has become MUCH sweeter.
Mik sees all the investors that are NOW starting to come back into the market - looking for GREAT opportunities.
Because Mik had the foresight to BUY earlier, the increased real estate values, on the properties he acquired over the last couple/few years, have created a TREMENDOUS opportunity to sell, capitalize on instant equity, and continue to find other investment opportunities.
Once the real estate market is flooding with buyers and investors, that drives up real estate prices/values !!
DON'T miss the opportunities that are all around you.
CURRENT Market conditions are all set to make you INCREDIBLE PROFITS in real estate.
OPEN YOUR EYES, OPEN YOUR CHECKBOOK AND RULE THE REAL ESTATE WORLD !!
Some things never change. People always ask me "How's the real estate market doing around here?" It's a great question - I'm glad people care to know rather then believe the dramatic and often negative soundbites they get from TV.
First of all, we're much better off here in the Triangle than in other areas of the country. We have a diversified job market. We never had the real estate bubble that places like Florida and California experienced. Therefore, the national reports don't tell the local story. And we all know that real estate is about location, location, location. Foreclosure filings are way down in the Raleigh area as of August 2010.
Second, affordability is back. Granted, that some people can't afford to buy right now because of their job situation or problems with their credit. For those people with stable jobs, you can get a better house price and a lower interest rate. Imagine the idea of holding onto a mortgage for more than a couple years! This is a great lesson for those homeowners who used their house like an ATM to buy cars and keep their not-so-modest lifestyle during the previous 5-10 years. Get a mortgage today at under 5% and other than insurance and property tax increases, know that you will have the best deal for years to come.
Banks are being more cautious about loaning money which is what they should have been doing to begin with. Data shows that recent loans since 2009 are doing well and most are staying current. With house prices decreasing slightly in most Triangle cities and towns coupled with it being a buyers market, buyers can get a house that is reasonable for their income and where they work.
For homeowners who want to sell in the Triangle right now it's not all bad. Homeowners need to be prepared to do whatever it takes to price their house properly, which in many cases means pricing it below what they want or think they need to get from the sale. Pricing + condition = offer. Condition means they have to repaint or do the work - no more allowances for new flooring or solid surface countertops. And sellers cannot turn down showings - you would be surprised to hear stories that local real estate agents have of trying to schedule an appointment with plenty of advance notice to be turned down by the seller. Sellers need to understand that sends a clear message to the buyer that the seller is not serious or motivated to sell their home. In most cases the buyers will not reschedule. The buyers have too many choices to deal with a seller they do not feel is ready to sell and reasonable.
National data is showing that consumer confidence is increasing from 2009. My experience can support that here in NC. I think public sentiment is cautious but the economy is moving. People are out there buying products and services. More consumers are trying to keep local more than they used to - we understand that supporting our neighbors will keep everything going instead of focusing on the cheapest price for a product or service.
2010 has been an interesting year, so far.
We've seen new legislation, regarding the sale of short sale properties - across the country.
We've also seen more cooperation, relating to the servicers/lenders in approving short sales.
We've witnessed numerous "reliable" sources, many of whom are affiliates of each other, simultaneously state that home sales are up AND home sales are down.
Nationwide, unemployment sits at 16%, overall.
We continue to see property values in decline at the same time we see HUGE shadow inventories of REOs.
Simultaneously, as property values decline, we talk to too many sellers/homeowners, facing foreclosure, that are applying for loan mods that do NOT understand what a loan mod will accomplish for them - relating to the fact that the mod WILL NOT be based upon the current market value of their property, that the past due payments and late fees (arrears) will be added in, as well as what the lender's process is for approval.
In fact, a majority of the homeowners we talk to, who had applied for a loan mod many weeks, or even months before, are still scheduled to be foreclosed upon - which is, in my opinion, deceiving to the homeowner - because the homeowner, in good faith, is lead to believe that their loan mod/file is being reviewed - so the homeowner believes that their foreclosure has been postponed until the loan mod review has concluded.
We also see many sellers/homeowners, who are NOT faced with foreclosure, but want to, or need to, sell their properties, struggling with a solution to their dilemma.
Many of these "non-distressed" homeowners owe more, on their property, than they could sell it for - so what should they do ?
What would YOU do ?
What if you were offered a better job, or business opportunity in another city, or state - that is hundreds of miles away from your current residence ?
Would you be able to sell your property for the amount of debt owed on it ?
Maybe you could cash in some of your stocks or take some $$ out of your 401K or retirement fund - to make up the difference ?
When will you get that money back ?
Bottom Line: While our government has been too busy trying to "save" the economy, they've succeeded in creating our largest deficit (In other words, we owe a TON of money to coutries like China), which creates an entirely new set of critical issues.
In other words, this aint over yet.
At mikcohen.com - we enjoy sharing insights, helpful tips and specific information. Feel free to comment and share your knowledge and experience, but please keep it respectful.