Here's the headline:
"July foreclosures up 9 percent from June
LOS ANGELES - The number of foreclosure filings reported in the U.S. last month jumped 93 percent from July of 2006 and rose 9 percent from June, the latest sign that homeowners are having trouble making payments and finding buyers during the national housing downturn".
Here's the fine print:
"The national foreclosure rate in July was one filing for every 693 households".
Perspective? Trying to figure that one out, but Realtytrac's data doesn't seem to go back far enough. In order, words what is REALLY scary... 3%? 5%? In my town, there's some areas with 1 in 10 houses in foreclosures and it's not falling into the earth.
Would love to know what the foreclosure rate was in the last three booms and busts as a matter of comparison.
Tuesday, August 21, 2007
Sunday, August 05, 2007
Dopey Flipping Article
Yahoo real estate posted a dopey flipping article:
http://promo.realestate.yahoo.com/best_places_to_flip_a_home.html
The premise is that flipping only works in hot markets. More BUBBLE BABBLE. Flipping is not market dependent, it is based on buying BELOW market, WHATEVER THE CURRENT MARKET IS. The only thing that changes is how LONG it takes to flip, which means you have to buy CHEAP and SELL CHEAP in a flat market.
http://promo.realestate.yahoo.com/best_places_to_flip_a_home.html
The premise is that flipping only works in hot markets. More BUBBLE BABBLE. Flipping is not market dependent, it is based on buying BELOW market, WHATEVER THE CURRENT MARKET IS. The only thing that changes is how LONG it takes to flip, which means you have to buy CHEAP and SELL CHEAP in a flat market.
Wednesday, August 01, 2007
Beware of the "Wholesale" Scam
Every newbie investor hears that it is imperative to buy real estate “wholesale”, not retail. The problem is, most newbies don’t know what a wholesale deal is, and there are a number of operators out there scamming newer investors with what they are representing as “wholesale” deals. Consider this a public service announcement and something to think about…
The following is a common scam I am seeing:
1. Scam-Investor makes a deal with a builder or developer on 30 new homes that are “appraised” at $215,000, but really worth $200,000 (if they were worth $215,000, they’d be selling regularly at $215k) Scam-Investor can buy them “wholesale” from the builder for $185k
2. Scam-Investor approaches newbie investor and says, “You can buy wholesale homes with no money down”… and I have access to lots of them!
3. Scam-Investor buys home from builder at $185k and flips to newbie investor for $195k Using a charade of fake down payments and passing money back to the buyer under the table (which is loan fraud), newbie investor ends up with a property worth $200k, with a “no money down” loan for $195k
4. Scam-Investor walks away with $10k, newbie investor has a house with almost no equity, and he thinks he has $20k in equity.
5. Newbie investor can’t rent house for breakeven cash flow, then tries to sell it for $215k, finally coming to the realization property is only worth $200k Newbie investor dumps property for $180k, losing $15k
This kind of activity is very profitable for the fast-talking scam artists who prey on the lazy, uneducated newbie investors. I deplore such scammers who prey on people, but I also must warn the newbie - “Buyer Beware”. There’s no shortcut to getting rich in real estate, and there’s no substitute for hard work, education and doing your own homework. If you trust others to find you wholesale deals without knowing what wholesale is, you deserve the lousy deals you get!
So, what is a “wholesale” deal? Well, wholesale means WELL below retail. Before you can figure out whether a deal is wholesale, you need to know what retail is. An appraisal is not retail. A tax assessment is not retail. Asking or listing price is not retail, and neither is a computerized “guestimate” from a free online comp website, like ZILLOW. Retail is what someone is willing to pay for a property based on average time on the market for similar houses. So, you need to get access to the MLS or a paid listing service to research similar houses in the neighborhood that have sold by ordinary means within the average time period for the market. Seller concessions, owner financing, builder concessions, financing concessions, real estate broker kickbacks and the like will skew the numbers, so look carefully.
Once you determine retail, then you can figure out wholesale. A house worth $200,000 retail is not a bargain at $192,000 in today’s market. In fact, it’s not a deal at $188,000 or even $185,000. In my market (Denver), a true wholesale deal means at least 15% off retail, closer to 20%. In your market, that might translate to 30% under market, or maybe 10% under market.
The price range of houses you are dealing with also skews the figure, since higher-end homes tend to take longer to sell and you may need a larger discount. If the property needs repairs, then you need to get it EVEN CHEAPER. So, the formula should be X% under retail, LESS repairs, using a very conservative (high) repair figure. Having a local real estate agent, investor or mentor to give you a reality check is often helpful. And, make sure that person giving you advice does not have a stake in the deal.
Use your head, and don’t trust the values given to you by the person SELLING you the property! Do your own research and your own comps. If a person is telling you they have access to an unlimited number of “wholesale” deals, ask yourself, “How is this possible?” There’s no shortcut to success — as, Harvey Mackay says, “Beware of the Naked Man Who Offers You His Shirt”. I say, “Beware of the Homeless Man Who Offers You His House… for WHOLESALE”.
The following is a common scam I am seeing:
1. Scam-Investor makes a deal with a builder or developer on 30 new homes that are “appraised” at $215,000, but really worth $200,000 (if they were worth $215,000, they’d be selling regularly at $215k) Scam-Investor can buy them “wholesale” from the builder for $185k
2. Scam-Investor approaches newbie investor and says, “You can buy wholesale homes with no money down”… and I have access to lots of them!
3. Scam-Investor buys home from builder at $185k and flips to newbie investor for $195k Using a charade of fake down payments and passing money back to the buyer under the table (which is loan fraud), newbie investor ends up with a property worth $200k, with a “no money down” loan for $195k
4. Scam-Investor walks away with $10k, newbie investor has a house with almost no equity, and he thinks he has $20k in equity.
5. Newbie investor can’t rent house for breakeven cash flow, then tries to sell it for $215k, finally coming to the realization property is only worth $200k Newbie investor dumps property for $180k, losing $15k
This kind of activity is very profitable for the fast-talking scam artists who prey on the lazy, uneducated newbie investors. I deplore such scammers who prey on people, but I also must warn the newbie - “Buyer Beware”. There’s no shortcut to getting rich in real estate, and there’s no substitute for hard work, education and doing your own homework. If you trust others to find you wholesale deals without knowing what wholesale is, you deserve the lousy deals you get!
So, what is a “wholesale” deal? Well, wholesale means WELL below retail. Before you can figure out whether a deal is wholesale, you need to know what retail is. An appraisal is not retail. A tax assessment is not retail. Asking or listing price is not retail, and neither is a computerized “guestimate” from a free online comp website, like ZILLOW. Retail is what someone is willing to pay for a property based on average time on the market for similar houses. So, you need to get access to the MLS or a paid listing service to research similar houses in the neighborhood that have sold by ordinary means within the average time period for the market. Seller concessions, owner financing, builder concessions, financing concessions, real estate broker kickbacks and the like will skew the numbers, so look carefully.
Once you determine retail, then you can figure out wholesale. A house worth $200,000 retail is not a bargain at $192,000 in today’s market. In fact, it’s not a deal at $188,000 or even $185,000. In my market (Denver), a true wholesale deal means at least 15% off retail, closer to 20%. In your market, that might translate to 30% under market, or maybe 10% under market.
The price range of houses you are dealing with also skews the figure, since higher-end homes tend to take longer to sell and you may need a larger discount. If the property needs repairs, then you need to get it EVEN CHEAPER. So, the formula should be X% under retail, LESS repairs, using a very conservative (high) repair figure. Having a local real estate agent, investor or mentor to give you a reality check is often helpful. And, make sure that person giving you advice does not have a stake in the deal.
Use your head, and don’t trust the values given to you by the person SELLING you the property! Do your own research and your own comps. If a person is telling you they have access to an unlimited number of “wholesale” deals, ask yourself, “How is this possible?” There’s no shortcut to success — as, Harvey Mackay says, “Beware of the Naked Man Who Offers You His Shirt”. I say, “Beware of the Homeless Man Who Offers You His House… for WHOLESALE”.
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