shadows…lurking…LOL
Are these greedy fucking banks hiding something from us?…yes and no…

A few months back, I submitted an offer on behalf of a client which was by all standards, a very competitive offer (above asking price, above comp prices, short close, good down payment). We were confident enough to skip the finger crossing and commence inspection lineups and even shop for home improvements. Just five days after submitting the offer, we discovered that the property was pulled off the market and was turned over to a new asset manager (bank)…they told me…”don’t worry we’ll call you”. It’s been 3 months and the property is still on my morning milk carton.

And so… we have the box office seats for the mysterious “shadow” inventory of foreclosed properties. To keep it short, it goes back to the simple universal price rule of supply and demand. There came a point in time (late 2008, early 2009) when banks knew to slow the exposure of the number of NOD (notice of default), NOT (notice of trustee sale) and REO properties on the market. It makes sense to not dump all the distressed properties on the market at the same time, otherwise prices could nose dive through the center of the earth. The bank bailouts all tie in as the lifejackets help these financial behemoths substitute borrowed money for time needed in order to recoup some of that mulah from these puppies. So how does this s-p-e-l-l out for the r.e. market?

1. Don’t misinterpret this as “Oh I can just wait until prices fall even lower!” it could cost you a huge opportunity if you don’t know what to expect.
2. Understand that the inventory being held is questionable.
3. As financial institutes/banks stabilize = home prices stabilize = interest rates leveling/rising (as direct / indirect as it gets)
4. The momentum is swinging toward buying or hanging in as opposed to selling right now. There is reason behind the stimulus’ , tax credits and programs to help people avoid foreclosure.
5. But be aware of people looking to exit their current mortgages whenever opportunity is allowed. (SF chron recently estimated half a million foreclosures not made available yet).

By limiting the amount of available inventory, prices in certain areas have definitely seen stabilization and a moderate increase in buying activity (hence the back to back pending home sales figures released the past months). This in turn boosts the general public R.E sentiment. In a sense all this justifies that there is some decent business practice/strategies in getting these banks back on their feet. The important thing is for home buyers and investors to adjust their expectations / objectives to correlate with today’s r.e market.

If I were the bank, I would be looking to hang onto grade A,B, and F properties for better days (hell yeah sell my cream of the crop at higher prices, or get a little more then two quarters for my shacks), while liquidating and recouping off my grade B- to D- properties (moderate areas, decent condition, semi fixers). But that is a very general rule, and each bank has it’s own agenda to fulfill. But one thing is fore certain…banks are reforming, short sale processes are speeding up, markets are seeing light (for now) and government assistance has shown some promise.

What this means is opportunity existed 6 months ago, opportunity existed 3 months ago, opportunities exist today and tomorrow. But to wait until the “real” bottom, and to wait until there is low to no inventory is foolish if you ask me. By that time, there is a good chance the economy will have recovered and the 2009 diamonds in the rough will be on the endangered species list. My two cents for the day ya dig. *STAY TUNED bully bank version 2.0 coming in June! bully bank TV and perhaps a new real estate office, come by to visit! - j the hot revolver.

It was already a rare occurrence to have Uncle Sam dish out the original $7,500 credit (repayable) to first time home buyers back in 2008. For the gov to boost that plan to a $8,000 and make it yours to keep tax free was unbelievable. Californians get some extra honey with the new state budget BUT it is LIMITED so let’s go into the details.

Ah what a relaxing monday, i’m back to enjoying breakfast on the porcelain throne … any hoo please read on.
We’re creeping toward the mid point of 2009, I think people would be better off hearing an echo just as a reminder as well as the specific details behind these tax credits.

1) $10,000 CA tax credit. Available for qualified buyers who on or after March 1, 2009, and before March 1, 2010, purchase a principal residence that has never been previously occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.
- This credit is made available through the new State budget, but is capped at $100million. That means the credits are issued on a first come first serve basis, once the funds run out, you will no longer be able to get a piece of the pie. As of April 22, 2009 over 4000 applications (new homes sold) have been submitted with an estimated $41 million already set to be used.

- Use form 3528-A (usually provided by the seller of the new construction home, but form available here)
- Unlike the fed $8000 credit, this state credit is applied evenly over 3 years toward your annual tax filings.
- Don’t be a hero, let the escrow company submit/fax the application for credit for you. If you try to jump the gun yourself you could face costly delays in the process.
- Must be submitted no later then 1 week within close of escrow date.
- Single family, condos, townhouses all qualify; but not owner built houses.

2) $8000 federal tax credit can be applied to first time home buyers and is yours to keep (non-repayable)

- must be applied toward 2009 tax filing form 5045 (available for download at http://www.irs.gov/) Line 69 of their 1040 filing.
- First time home buyer = anyone who hasn’t purchased a principal residence (home you occupy) in the past 3 years. (you can own income property and still qualify in most cases)
- single family home, condos, townhouses all apply.
- In order to avoid having to pay back the credit, you must occupy the property for at least 36 months.
- In most cases, to qualify an individual cannot make over $75,000 per year ($150k for married couples).
- It is possible to apply the credit benefit prior to closing the deal by allocating the credit toward your “tax witholdings” doing so permits you to apply more money toward your down payment (out of Sam’s pocket).

I just want to stress that only 2 months since it’s inception, the state program ($10,000 credit) has already estimated that almost half the available credit has been claimed.

*personal update, in addition to starting my new career with w. pacific securities this summer (as a stock broker / financial advisor ), I want my real estate office too. Ahhh the grind never ends here LOL, look out for bullybank v.2.0 !
cheers

…with money foo! (no shit sherlock). This is a lengthy read, but I think it covers the basics + some inside pointers. *video bloggin coming soon, lazy asses lol*

1. Know your budget (how much can you afford right now)
- Speak with a lender (bank/mortgage broker) and get pre approved for a loan. It takes 10minutes to speak with a lender (via phone or in person). Lenders will request information and documentation from you, usually by running a credit report, bank statements, tax and income statements. A professional usually gives you tips on how to improve your current situation (credit / numbers) in order to qualify for maximum amount of a loan. *Remember just because you qualify for a certain amount doesn’t mean you should always borrow that much. It’s like having a $10,000 limit on a credit card, does that mean you want to go max it out on a single purchase? no. Make sure you ask them the downpayment requirement (typically 20%) and ask them to break down what is called the good faith estimate report. The good faith summarizes how much your estimated monthly cost will be, as well as how much it will cost you to close the deal (closing costs). *Closing costs is usually in addition to the sale price of the property, think of it as an expensive processing fee.

2. Find a good real estate professional to work with you. *I say “work with” because we’re living in a day and age where buyers should understand it is a team effort in finding the appropriate property to buy. A good real estate professional should be informative and less persuasive. But if you are dragging your feet by not being proactive, I guarantee you are doing more harm to yourself then your agent. You will not only miss opportunities but end up getting dumped by your agent LOL. I maybe biased here but I think a good agent provides a lot of value in this business. Knowledge, experience, resources, guidance with all contractual agreements and it saves you TIME. Don’t get me wrong, there are some slackin’ass agents out there too that give the industry a bad name LOL.

3. Know your objective then build a general search criteria. Time is of the essence, you will find this phrase in a purchase agreement contract. But basically this should start as early on in the search for property as possible. Make your search efficient. Are you buying something to live in? for how long? Are you buying for investment purpose? Cash flow? or a combination of those. This requires you to have a pretty good idea of what you can afford (step 1), where and what.
-What city or cities?
- which part of the city?
- type of property? type of listing? (bank owned? regular sale? etc)
- price range?
- size of house? or number of units?
- year built? etc.

****take a breather if you have to, continue reading****

“avoid cold feet”
4. Play ball. This means be proactive. If you are fully aware and comfortable in your search you will be able to avoid cold feet when reality sets in. Remember, a good agent should be BUSY. That means they aren’t going to always be able to take you to see a house at a drop of a dime. They will however MAKE time. But you can do your part with an efficient search by first touring the area yourself prior to the showing. Make time to go over all listings forwarded to you. If you take too long to review your emails / faxes provided by your real estate professional this could be very inefficient. A real case scenario is the client who keeps talking about how eager they are to find a house to buy. They say they don’t want to miss the opportunity, yet when their agent emails them the newest listings, it takes them 3 days to respond back. It then takes another 2 days to schedule a viewing and by the time they are ready to go see the house, it has already gone pending to another buyer. You know what I say to a client that makes this habitual? Fuck You.

5. Understand, property search and submitting an offer is just THE BEGINNING. After weeks of searching you’re ready to submit an offer. Make sure your agent provides a comp report similar to a CMA report, basically a report that gives you a sense of how much similar houses in the area have sold for (3 to 6 months back). Your agent should try to get a feel for how many offers are on the table and profile the seller. Is the seller a bank? a stubborn owner? a motivated owner? all this can help you sculpt your final offer price. You cross your fingers and 9/10 times you think you will get the house. *Remember, the best offer doesn’t always mean highest price. Some sellers might take an all cash offer of $300,000 over your financed offer of $315,000, why you ask? because the all cash offer is FOR CERTAIN, while there is still a chance your loan might not go through (explained later).

Submitting an offer requires a pre approval letter from your lender (stating that you are approved for the loan amount), a general purchase agreement contract (10 pages of signing your life away, jk), agency disclosure (disclosing relation between you and the agent), and your EMD deposit (earnest money deposit check, 1 to 3% of your offer price). *make sure you negotiate enough days for you to order home inspections like structural, pest, roof etc. Why is this important? if your inspection period passes, you maybe in waste deep now and not back out of the deal without suffering the loss of your deposit $. Worst case scenario you end up buying a property that will cost a fortune to fix, so doing inspections is crucial. Also give your lender enough days to process your loan, usually 17 days is standard for loan contingency. After this package is submitted you wait for the seller’s acceptance, rejection or counteroffer.

6. After submitting your offer. If you are rejected you move on, and find out either you low balled too much, someone just had deeper pockets or just a more solid offer. If your offer was accepted, cool, don’t pop the champagne just yet. Time to open escrow, make deposits, schedule inspections, appraisal and get your loan in motion. Escrow is opened with a third party title company, who’s service is to make sure buying and selling side handle their responsibilities fairly, fully and timely in order to close the deal. All money is held with this third party until everything is complete. General house inspections should be ordered asap, they will run $300 to $500 average. Termite/pest inspections will run another $150 to $400 (depending on size of property). Simultaneously make sure your lender is in motion with processing your loan. You may find if you have a condensed number of days for inspection, a good agent will MAKE IT HAPPEN. Remember EVERYTHING must be done during your escrow period (usually 30 to 45 days). Trust me, there is never a 100% smooth escrow period. NO REGRETS, your first house should never be your last house. Real Estate is a life long business if you do it right.

This was just a summary of the process LOL. But hopefully you were able to gather some good pointers from my experience with my clients.
*Oh the stock market, could it get any more boring as of late?

In the past 6 months, there have been some incredible opportunities in real estate (you SHOULD be saying “duh”). And so as of late, people are finally aware of how much activity is going on in distressed real estate. I was forced to miss the boat being broke, others missed the boat by not having a f*cking clue. I’m definitely not the lone ranger of retrospect here and so the real question is if we missed a rafting trip across the river? or a cruise trip across the world? By looking back on missed opportunities, we should be better prepared to recognize the next best one. With the rise in unemployment we could very well see a second wave of ” opportunities” coming, but there will be a much more abundant set of eyes, ears and hands on the pot this time around. Don’t forget about the tax incentives and cash back home buyers get in 2009 and this year only ($10k back from the state for new houses, $8k back from uncle sam). I’m getting ready and hopefully you may want to be too.

(Bay Area, CA) The bidding wars and actual stabilization in housing prices in CERTAIN areas are continuing. You’re probably thinking “woopty woo, tell me something the San Fran Chronicale doesn’t have headlined”, well some insiders like myself have been forecasting it since the Autumn of 2008 when the headlines were the exact opposite. The early signs of undervaluation did not stem from any crystal ball. My eye brows raised when certain areas suffered over a 50% drop in prices in about a 12 month period. Yes predominantly these houses were not in the most prestigious locations. But the drops practically wiped out 15 to 20 years worth of appreciation. That means current prices matched the prices of the mid 1980s. Another sign of opportunity was the word “cash-flow” resurfacing for income properties, where the rates on rent could easily cover mortgage + tax + insurance and leave you with some residuals (Unheard of during the 2004 to 2007 run in real estate).

Don’t expect the numbers I mentioned above to be available in all areas, and don’t expect a repeat of the above if there is a second wave of property defaults. But being prepared isn’t as easy as having money and buying any foreclosure out there. Here is when unfortunately, a real estate professional, their clients or experienced investors have a leg up on the general public. Just because you can afford it doesn’t mean you are experienced enough to not catch cold feet, able to recognize value, and being able to execute in a timely fashion. Are you in it for immediate, short term or long term equity gain? residual income? or a combination of both? In any case, I personally don’t want my clients or myself to miss a next wave.

Moving on, current home owners or people engaging in loans.
Here’s some recent changes in Mortgage programs

1. New Refi Plus and can go up to 105% LTV (loan to value; ratio of loan amount vs value or property). You may go stated income & stated assets. As long as your 2nd mortgage agrees to subordinate the new 1st loan, your CLTV (combined LTV) is unlimited. No minimum Fico (credit score) requirement. Minimum fico 620 required if monthly payment is increased by 20%. Max closing cost can be financed is $2500.

2. Check if your loan is a FNMA / FHLMC loan. Just go to this link HERE and you can able to find out whether your existing mortgages are belonged to FNMA / FHLMC. . If your loan belongs to either FNMA / FHLMC, you might be eligible to refinance under the stimulus plan which you may not have been able to do it before. If your loan is does not belong to either organization, you have to deal with your existing lender for any possible loan modification / any plan that may offer you.

The following is copied from official C.A.R newsletter:
3. C.A.R. launches mortgage protection plan for first-time home buyers The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today launched the C.A.R. Housing Affordability Fund Mortgage Protection Program (C.A.R.H.A.F. MPP), for first-time home buyers.

To apply for the program, home buyers must request an application for the H.A.F. Mortgage Protection Program from their REALTOR. - source C.A.R

I’ve placed a limit order this morning to purchase even more FAS $4 Puts, $10/contract.

The markets are showing very bullish signs but I feel the recent rally has been a bit excessive. Of course you could argue that the sell off prior too was excessive as well, but overall the markets are reacting to mixed signals in regards to economic data and a bag of solutions which have yet to prove themselves. I would love to go into specifics but I just got back home and am a bit tired. I will say this though, Wall Street has to acknowledge sooner or later, that home prices, company valuation and stock prices in general are currently priced quite fairly.

If we see the major indices like the Dow Jones “recover” another 15%, I think we’ll be way ahead of ourselves and the markets could be setting themselves up for disappointment. It will only take one more unexpected huge dip to cause a lot of average investors to flee from the markets completely, I believe it. Too much too soon is not a good thing when it comes to appreciation or depreciation. Fool me once shame on you, fool me twice shame on me … we could be on the third time shortly (I want to say I hope not but for my short position’s sake, I hope so LOL). The protests at this week’s G20 meeting in England should not be overlooked. A lot of people’s views on the corporate world have been turned upside down, and I think it’s more then just a fad.