Archive for July, 2019

Buying A Home In Foreclosure

Posted in Real Estate by Michigan Real Estate Expert on July 31st, 2019

Buying A Home In ForeclosureForeclosure is a process that happens over many months. There are various opportunities to acquire real estate that is in a different stage of foreclosure, including before the foreclosure process completes. This short guide identifies the different stages and the opportunities that may exist to acquire a property at a discounted price.

Get The Money Lined Up First

To acquire a property at any part of the foreclosure process requires cash or pre-approved credit. Have the full amount of cash available to pay for the transaction or have a recent pre-approval letter from a reliable lender. The letter shows the amount of mortgage financing available and approved for buying a foreclosure.

Pre-Foreclosure

Before a lender forecloses on a home, to take legal possession of it, they must go through a legal process filed with the courts. All those legal filings are public records.

The borrower, who is in default on the loan, gets a legal “Notice of Foreclosure” that gives a date when the foreclosure will occur. There are subscription services that collect these dates from the court records and assemble a database of information about the properties coming up for foreclosure.

Up until the foreclosure date, it is possible for the homeowner to make a deal to sell the home, which pays off the lender and that stops the foreclosure.

Sometimes the existing loan can be acquired and the past-due payments brought up to date and that is all that is needed to satisfy the lender. In other cases, the outstanding loan must be paid off entirely or refinanced by the new owner.

To find an attractive deal in this stage of the foreclosure, a real estate investor looks for a property that has significant equity and the loan(s) on the property are far below the market value of the property.

If the home continues to foreclosure then the existing owner will lose all the equity they have in the property. This makes the owner very motivated to sell the property at any price, even at a steep discount, which helps them to not lose everything.

Foreclosure Auction Sales

Some lenders immediately put a property up for auction right after foreclosure. An investor with an interest in these foreclosed properties, bids with other bidders at the auction. The highest bid wins.

All that is needed is to get on the mailing list to be informed of upcoming auctions and have a cashier check in hand for the required deposit at the auction to be able to bid.

REO Properties

Other lenders take ownership of foreclosed properties and then sell them off through authorized broker/dealers who work for the lender. Some lending systems, like HUD, for example, maintain a public database online that shows all the foreclosed properties that are for sale and their minimum offer price.

Creating personal relationships with the bank/lending officers who manage REO properties is a terrific way to get leads. It helps to have the first chance to buy a foreclosed property, which is recently added to a lender’s REO system, that other investors may not yet know about.

Conclusion

Foreclosed properties may create significant opportunities; however, there are also serious risks when buying these properties because they are sold on an “as-is” basis. This type of investment is definitely a “buyer be aware” opportunity. It can be lucrative, yet investors need to be careful as well.

If you are interested in trying to find a foreclosed property, be sure to contact your trusted real estate professional for assistance.

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Making Money Buying Homes And More From Estate Sales

Posted in Real Estate by Michigan Real Estate Expert on July 30th, 2019

Making Money Buying Homes And More From Estate SalesAn estate sale is the sale of the property owned by a person after a person dies. This sale may include real property, such as a home, and personal property, such as the home’s contents.

There are two ways to buy property through an estate sale. One way is to buy it from the person who inherited the property. The other way is to buy it from the estate through the executor of the estate. The executor is the person with the legal authority to dispose of the estate’s assets according to the last will and testament of the person who died.

The executor of the estate may be working with the state authorities in a probate court if the estate is in probate. Probate is an action by law that occurs automatically if the person died without leaving a will. Probate legal proceedings may also happen if the beneficiaries of an estate dispute a will that exists.

Opportunities In Estate Sales

Usually, the property purchased from an estate sale is available at a discount from its market value. Sometimes, this discount may be significant. When a person buys a home sold this way, the purchase is usually on an “as-is” basis. That means the buyer takes all the risk when acquiring the property. The buyer may have to make significant repairs to the property if it needs them.

For this reason, the price of these estate homes is often much less than their market value. Moreover, when buying the contents of the home, it is possible to find treasures in the contents. Unfortunately, it is also possible to find only trash and junk that costs more to remove and throw out than it is worth.

Disadvantages Of Property Acquisition Through Estate Sales

The main disadvantage is buying something without really knowing what it is worth or having a complete evaluation of its condition.

Other disadvantages are that if the sale goes through probate, it may take a very long time to close, perhaps up to a year or more. There is a need to check all the familial circumstances, the legal title, and the will carefully. Otherwise, there may be legal complications and claims of ownership even after the property is acquired.

This is why having competent legal counsel to review a deal before making the purchase is critical. Nobody wants to buy a property that brings them into a lawsuit.

Finding Estate Sales

If a disputed will, or the lack thereof, puts a property through a legal probate process, then this is part of the public records. These records are available to anyone who wants to look at the information. Properties may be put up for public auction as part of the probate process.

For properties sold through the executor for the purpose of dividing up the proceeds among the heirs, they can be found by reading the obituaries and making contact with the executor after a person died.

Summary

Buying property through an estate sale may be very profitable. Many specialists make their careers in real estate investing based on these opportunities. To be successful in this effort requires patience and careful attention to details with competent legal support.

Whether you are interested in buying a home through an estate sale or a more traditional sale, be sure to contact your trusted real estate professional.

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What’s Ahead For Mortgage Rates This Week – July 29th, 2019

Posted in Financial Reports by Michigan Real Estate Expert on July 29th, 2019

What’s Ahead For Mortgage Rates This Week – July 29th, 2019Last week’s economic reports included readings on sales of new and pre-owned homes and weekly reports on mortgage rates and first-time jobless claims.

Realtors® Report Sales of Pre-Owned Homes Fall in June

Sales of previously-owned homes fell last month according to real estate pros. 5.27 million homes would be sold in 2019 if the current pace of sales was unchanged for all of 2019. Analysts expected a reading of 5.33 million sales based on May’s reading of 5.38 million sales. Analysts said that sales of pre-owned homes fell despite lower mortgage rates and the seasonal peak home-buying season.

Sales of pre-owned homes rose 1.60 percent in the Northeast and were 1.60 percent higher in the Midwest. Sales fell 3.40 percent in the South and were 3.50 percent lower in the West. Factors contributing to lagging home sales included low inventories of available homes and steadily rising home prices.

Home prices have risen every month for more than seven years. Fewer homes for sale and higher home prices limit buyers’ choices and their ability to qualify for financing needed to buy higher-priced homes.

New Home Sales Rise in June after Two-Month Lull

The sales pace for new single-family homes rose to a seasonally-adjusted annual rate of 646,000 sales as compared to an expected sales pace of 657,000 for new homes. May’s reading was downwardly revised from a sales pace of 626,000 sales to 604,000 sales. New homes sold fastest in the South and West and were slower in the Northeast and Midwest regions according to the Commerce Department.

Mortgage Rates, New Jobless Claims Fall

Freddie Mac reported average mortgage rates approaching three year lows last week. Rates for 30-year fixed rate mortgages averaged 3.75 percent and were six basis points lower. The average rate for 15-year fixed rate mortgages dropped five basis points to 3.18 percent; rates for 5/1 adjustable rate mortgages averaged 3.47 percent and were one basis point lower.

First-time jobless claims fell last week to 206,000 new claims filed as compared to the expected reading of 218,000 new claims filed and the prior week’s reading of 216,000 first-time unemployment claims filed.

Whats Ahead

This week’s economic reports include readings on housing markets, pending home sales  and the post meeting statement of the Fed’s Federal Open Market Committee.

Fed Chair Jerome Powell is scheduled to give a press conference and the Labor Department will release monthly updates for public and private-sector jobs created and the national unemployment rate. Weekly reports on average mortgage rates and new jobless claims will also be released.

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What’s The Value Of Water?

Posted in Real Estate by Michigan Real Estate Expert on July 26th, 2019

What's The Value Of WaterWhen investing in real estate, few people think about water as a high priority. All of us have become used to water being readily available and rarely give it a second thought. Most would think that water is only a consideration for farmers who need it to irrigate agriculture. However, due to climate change and population growth, the world is experiencing large impacted areas and major cities that are running out of water.

Will Water Run Out?

Las Vegas expects to run out of water by 2030. Lake Mead near Las Vegas is the water supply for more than two million people. Its level has been declining steadily for decades. Las Vegas gets a limited supply of water from the Colorado River that goes through Nevada all the way to Southern California. The river water is not sufficient to support the population there either.

California now has droughts that last for many years. This makes wildfires more likely, like the one that burned the entire town of Paradise and the surrounding area to the ground in 2018. This wildfire named “Camp Fire” burned over 150,000 acres, destroyed nearly 19,000 buildings, and cost $16.5 billion in damages. Sounds more like hell than paradise.

NASA scientists predict that California could run out of water by the end of 2020 and thereafter experience a mega-drought that might last for decades. All of a sudden, that multi-million-dollar luxury house in the desert or in beautiful, sunny California seems much less appealing.

Investing In Water Rights

Major investors, including gigantic hedge funds, have been buying up water rights all across the United States. Water rights are like any other mineral rights for a property in that they can be sold separately from the land.

Real estate investors who are interested in participating in the potential success of companies that own water rights can now consider investing in exchange-traded funds (EFTs) that include a bundle of stocks from companies that own these rights.

Water Everywhere And Not Drop To Drink

A homeowner might have beautiful lakefront property or a lot with a river running through the land. However, if the owner does not have the rights to access any of that water for residential use it is only a nice view and not a water resource.

Oceanfront properties have a vast supply of seawater that sits in front of them. However, again the legal right to use it may not exist and the cost of desalinization of salt water is still prohibitive.

Properties in rural areas may need to get a permit to drill a water well that must be approved by the county authorities. Even with an operating well on the property, it is possible for a well to run dry.

Conclusion

Real estate investors and home buyers looking to acquire a property now need to include the serious consideration of the access to water and any available water rights as part of their due diligence process.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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The Incredible Value Of A Business Mentor

Posted in Real Estate by Michigan Real Estate Expert on July 25th, 2019

The Incredible Value Of A Business MentorIf someone says that they are a “self-made” success who did it all completely by themselves with no help from anyone, they are probably stretching the truth. Success never usually happens in a vacuum. The definition of success is that something is recognized and respected by others. 

Honest business people recognize and appreciate the help that they received from others. They know it was a big part of what made them able to achieve success. Clever people, when they are just starting out in something new, find a mentor. A mentor is a person who is willing to help a new person trying something for the first time.

Why Would Someone Want To Be A Mentor?

If you ask a mentor why are they a mentor, you are very likely to hear a story about how they were helped by another person when they were just starting out. Mentoring is a powerful way to give back. It is rewarding on both sides of the relationship of being a mentor and a mentee. It is so rewarding because both people learn something about themselves by sharing information and experiences with another person.

Mentoring Is Best When It’s A Balanced Relationship

In a healthy mentor/mentee relationship there is a nice give and take that is balanced. The mentor may know much more than the mentee about a subject matter of mutual interest. However, a mentor does not necessarily know everything. A mentee may also have unique experiences to share that the mentor knows nothing about.

Mentorship Is Different From Internship

Having a mentor is different from an internship. Both are meant to be a learning experience, but having a mentor is more about sharing knowledge that includes life skills, whereas an internship is usually limited to job skills.

For example, it is perfectly reasonable to ask your mentor questions like:

  • How did you deal with setbacks?
  • Did you have self-doubt?
  • What kept you from giving up?

The Rules Of Mentorship

There are no specific rules in mentorship. It’s a unique relationship each time based on individual circumstances. The relationship can be as formal or as informal as you like. If the relationship feels strained or uncomfortable for either party, it is time to break it off. The period of a mentor/mentee relationship may come and go; however, sage advice lasts a lifetime.

Finding A Mentor

Many choose a mentor from someone that they already know. One way to meet a mentor is to volunteer for service work in your community. Many times you can make valuable contacts with successful people who are also giving their time and expertise to these projects.

There are also formal mentor programs such as one offered by the Small Business Association. It is called the SCORE program and the services are free.

SCORE is a good program for aspiring entrepreneurs. It can help, if you do not know of anyone who is the kind of mentor you need. Seeking out help through the SBA puts you in touch with an experienced businessperson who is a part of their volunteer mentoring program.

Real Estate Agents Can Be Great Mentors Too

If you are interested in learning about investing in real estate in your local community, a great place to start a mentoring relationship is with a professional real estate agent.  Real estate professionals are well versed in the local market and can answer questions and guide you through your transactions to avoid major pitfalls. The best real estate agents can also find special opportunities to bring to investors that they are mentoring and help make your real estate investments more profitable.

Summary

Dale Carnegie wrote his classic self-help book How to Win Friends and Influence People in the 1930s. Carnegie was a great business mentor. He recommends that if you want to be a success in a particular area of life, be around people who are already successful in that area and copy what they do. That advice is still good, even almost ninety years later.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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What Is Eminent Domain?

Posted in Real Estate by Michigan Real Estate Expert on July 24th, 2019

What Is Eminent DomainEminent domain is a law that gives the federal, state, county, and municipal governments in the United States the legal right to “condemn” property and then seize it to allow its use for development. Eminent domain is supposed to be used by the government at the various levels to do things for the public benefit, such as to build new roads or construct new public schools.

Compensation Under Eminent Domain Seizure

The government cannot take property without compensating the owner for its market value. Disputes that lead to lawsuits arise when the property owner and the government have a serious disagreement about the value of the property.

Imagine an acre of desert land in Nevada with no water, nothing built on it, and no utilities. The owner would be lucky to get $10,000 for it. Now, imagine it is less than a few miles away and that same amount of land is on the world-famous Las Vegas Strip. Now, it can sell for up to $10 million per acre.

What if the vacant land becomes a part of a new extension of Las Vegas? Is it worth $10,000 or $10 million? This is the type of thing that causes major legal disputes over the property valuations.

Abuse Of Eminent Domain

Eminent domain is supposed to be only used sparingly for the public benefit. Unfortunately, that is not always the case. Developers sometimes use eminent domain laws with the complicit help of government officials to seize all kinds of property that the owners have no intention of ever selling at any price. People may lose their family homes where they lived for generations so that the city can allow a developer to build a parking lot.

To make matters worse, in 2005, the U.S. Supreme Court ruled in a case called Keto v. City of London that the city could seize property on the mere expectation of increased tax revenues for the city or jobs.

This landmark case basically removed any restrictions and expanded the ability of the government to seize property on a mere pretense of having an expectation of revenues. In response to the U.S. Supreme Court ruling, 44 states enacted laws restricting eminent domain seizures in those states.

Summary

When a property owner gets hit with an eminent domain action, it is usually a surprise. The owner should immediately seek out competent legal counsel to help protect their rights and not necessarily let the abusers get away with using eminent domain laws inappropriately. There are non-profit organizations that are legal action groups, such as the Institute for Justice working on these issues that can help as well.

If you are in the market for a new home or interested in listing your current property, please contact your trusted real estate agent.

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The Community Reinvestment Act Explained In Simple Terms

Posted in Real Estate by Michigan Real Estate Expert on July 23rd, 2019

The Community Reinvestment Act Explained In Simple TermsThe federal government adopted the Housing and Community Development Act in 1977, and the Community Reinvestment Act (CRA) portion was designed to prompt lending institutions to provide mortgages for low- and moderate-income Americans. The underlying reasoning for the CRA was to discourage discriminatory lending practices that inhibited low-income communities and neighborhoods.

Over the years, its regulations have been revised to improve effectiveness. During the early 1990s, upwards of five changes were made and more following the 2007 financial crisis. With the country currently in the midst of an economic comeback, the Office of the Comptroller of the Currency announced that it favored making changes to the rules that govern lending under the CRA. These changes could have a significant impact on the real estate market.

Modernization of the Community Reinvestment Act

Critics of the CRA say that it has failed to keep pace with the emerging technologies readily available in the low- to moderate-income communities it was designed to serve. Falling behind in this capacity reportedly inhibited the worthy goal of the policy.

Organizations such as the American Bankers Association are said to be in favor of modernizing the CRA. This group continues to press regulators to bring resources into the technology era. Improved technological resources appear to be critical elements to meeting community borrowing needs and improving banking transparency.

Another aspect of the CRA some feel has trailed behind the times is that not all lending institutions are subject to CRA guidelines. If the goal of the CRA is to give low- and moderate-income families a fair shot at the American dream of homeownership, other financial organizations may need to come under the CRA umbrella. A greater CRA borrowing pool is likely to increase residential and commercial buying.  

How The CRA Helps Communities Build Wealth

The current administration has made some hay about pushing policies that centralize ownership in community members’ hands. Several of the potential rule changes to the CRA point to improved home and business ownership within low- and moderate-income communities. In essence, the changes are a kind of throwback to the days when the person who owned the local bakery, breakfast restaurant and hardware store lived within the community.

If successful, the discussed policy shift would encourage residents to buy residential and commercial real estate where they live. In some sense, the administration appears to be shielding living, breathing communities from the widespread corporate takeovers that occurred in the 1990s and early 21st Century.

Critics seem to worry that tinkering with guidelines may lead to quantity over quality lending. However, proponents see a long-term plan to revitalize communities by restoring and increasing localized property ownership.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

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What’s Ahead For Mortgage Rates This Week – July 22nd, 2019

Posted in Financial Reports by Michigan Real Estate Expert on July 22nd, 2019

What’s Ahead For Mortgage Rates This Week – July 22nd, 2019Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, Commerce Department reports on housing starts and building permits issued.

The University of Michigan consumer sentiment index was also released. Weekly readings on mortgage rates and new jobless claims were also reported.

NAHB: Builder Confidence Rises as Housing Starts Slip

Home builder confidence in current market conditions rose one point to an index reading of 65 in June. Any reading over 50 means that most builders view housing markets conditions as positive, but July’s reading was lower year-over-year.

Builders have long cited a shortage of buildable lots and labor, but also face new obstacles including strict local zoning laws and overall regulation. High demand for affordable homes coupled with short supplies of homes in this market range provided challenges to home builders, communities and would-be home buyers.

Housing starts fell in June to 1.125 million on a seasonally-adjusted annual basis. Analysts predicted 1.244 million starts based on May’s reading of 1.265 million starts. The housing market index used to foreshadow the number of housing starts, but the two readings are no longer as closely connected.

The Commerce Department reported 1.220 million building permits issued in June as compared to 1.299 million permits issued in May.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported higher mortgage rates last week after three weeks of minor movement. Rates for 30-year fixed rate mortgages averaged six basis points higher at 3.81 percent. The average rate for 15-year fixed rate mortgages rose one basis point to 3.23 percent.

5/1 adjustable rate mortgage rates averaged two basis points higher at 3.48 percent. Discount points averaged 0.60 percent for 30-year fixed rate mortgages and 0.50 percent for 15-year fixed rate mortgages. Discount points for 5/1 adjustable averaged 0.40 percent.

New jobless claims rose to 216,000 new claims filed as compared to 208,000 new claims filed the prior week. Analysts predicted 220,000 first-time claims would be filed. The University of Michigan’s Consumer Sentiment Index rose in July to 98.40 percent as compared to June’s reading of 98.20. Analysts expected a reading of 99.00.

Whats Ahead

This week’s scheduled economic news includes readings on sales of new and previously-owned homes along with weekly reports on mortgage rates and new jobless claims.

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Pros And Cons Of Installing A Pet Door

Posted in Real Estate by Michigan Real Estate Expert on July 19th, 2019

Pros And Cons Of Installing A Pet DoorIf you’ve just moved into your new home and you have a pet, you may be thinking of installing a pet door. A pet door is a permanent door feature that is cut into the bottom third of an entry door. Before making a permanent alteration to your door, consider the pros and cons of installing a pet door. 

Pro: Your Pet Can Come And Go As Needed

A pet door could cut down on indoor pet accidents if that’s a problem you’ve had to deal with in the past. This is especially convenient if you get home late to let the dog out, or if they have a temporary gastric illness that requires more frequent outings. 

Con: An Unwanted Visitor Could Get Inside

Pet doors are designed to give egress to pets, but your pet door might give indoor access to an unwanted animal. It’s not common, but it does occur, particularly in areas where wildlife is abundant.

Pro: You Could Do Without A Litter Box

Cats can be trained to go outdoors instead of using a litter box. With a pet door, you can dispense with the odorous litter box entirely, knowing your cat will always be able to take care of business outside.

Con: It’s Something Else You Must Remember To Lock

Most pet doors have a locking mechanism for times when you need to secure the home, such as at night. But this is just one more thing you’ll have to remember to do, along with setting the alarm and locking windows. And, the more you have to remember, the more you could forget.

Pro: Better Energy Efficiency

Anyone with pets knows that they can ask to go out and come back in numerous times per day. Every time you open the door you’re letting hot air in, cooled air out, or vice versa. With a pet door, your conditioned air stays in the home much better because there’s a smaller opening, and less time spent with the door open.

Con: New Homebuyers Might Not Want It

If you ever sell your home, the new homebuyers might see a pet door as a negative. Since a quality new door costs around $500, they could ask for a price discount on the home purchase.

A pet door can be a huge convenience, but there are some drawbacks as you can see. However, depending on your view (and the opinion of your pet!) the pros may outweigh the cons.

If you are interested in buying a new home or listing your current property, be sure to contact your trusted real estate professional.

 

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The Monopoly Technique – How To Build Value By Acquiring Adjacent Properties

Posted in Real Estate by Michigan Real Estate Expert on July 18th, 2019

The Monopoly Technique - How To Build Value By Acquiring Adjacent PropertiesHave you ever played the classic board game called Monopoly? The object of the game is to collect all the properties until one winner bankrupts all the other players. The other part of the game is that accumulating properties adjacent to each other increases the value of the individual properties. When a player acquires all the properties of the same color (two or three), then the rents go up and property development can begin.

The Monopoly Game In Real Life

The same basic principles sometimes work in real life. Owning a property and then buying the one next door creates a value-added possibility of the combined properties being worth more than the individual pieces.

To start this strategy, tell the neighbors of having an interest in buying their home in the future if they want to sell. This is a way to get the first option to buy a home before it lists on the market.

Control Of The Neighbors Adds Value

In many neighborhoods, there is one home that creates severe negative pressure on property values. These homes may be neglected and badly needing a paint job and landscaping. The home may be a source of neighborhood noise problems or heavy traffic.

When considering buying into this neighborhood, make a plan to buy the derelict house. Then, before bringing it back into a marketable condition, there may be a chance to buy the ones next door for a steep discount from the market value.

If possible, buy all the properties at once and close them around the same time. This helps avoid triggering a profit demand from those who are opportunistic and learn about the interest of a buyer in more than one property.

Cashing Out

If possible, buy three houses, one of each side of the derelict house, then renovate all three properties. Make them into rental units or to sell them as a “flipped” property after the renovation for a big profit.

If there is the possibility of controlling a full block on both sides in a rundown neighborhood, it is possible to start with one block of home improvements at a time. Entire neighborhoods may improve one block at a time.

Redevelopment

In some neighborhoods, there is a chance of re-zoning and redevelopment. For example, it may be possible to build a larger structure by combining two properties. There is profit possible in assembling the land for redevelopment purposes, even for those who do not do the construction for the redevelopment.

Summary

Playing Monopoly in real life can make investing in real estate fun. It is possible to start with a few low-cost rental homes. For rental properties, it makes it much easier to manage them if they are next to each other. Values may increase in the neighborhood by the renovation of a derelict house.

If you are intested in listing your current property or in the market for a new home, be sure to contact your trusted real estate professional!

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