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Real Estate News 1.3.2014

Job search: One year and counting…
“Lena Rouse has merely one resolution for 2014: Finally get a job.”

The smart home is a pipe dream
“At next week’s Consumer Electronics Show in Las Vegas, the tech industry will try to convince us that our homes will be completely automated in the next five years. Don’t believe the hype.”

Sell your home without a real estate agent
“How do I sell my home without using a real estate agent? — Bill, Chicago”

Luxury sales drive Manhattan home prices higher
“New York’s new mayor is vowing to shrink the divide between the wealthy and everyone else. But when it comes to the real estate market, he is facing an uphill battle.”

Fannie Mae, Freddie Mac got $7.9 billion in bank settlements in 2013
“WASHINGTON —  Fannie Mae and Freddie Mac collected $7.9 billion from large financial institutions to settle suits over bad mortgage-backed securities purchased by the seized housing finance giants during the subprime housing boom, their federal regulator said.”

Fannie Mae, Freddie Mac may be too profitable to shut down
“WASHINGTON — Federal officials swooped in to rescue mortgage finance giants Fannie Mae and Freddie Mac in 2008 with the largest of all the financial crisis bailouts — a combined $187.5 billion — because they were considered too big to fail.”

Morningstar Executive Gives Assessment of New CFPB Rules
““Under the new CFPB [Consumer Financial Protection Bureau] rules, servicers will have to provide very detailed and accurate information to borrowers about each aspect of their loans and/or any foreclosure procedures that may occur,” according to Richard Koch, SVP at Morningstar Credit Ratings.”

Industry Completes 50K Loan Modifications for Homeowners in October
“The HOPE NOW Alliance recently announced that an estimated 50,000 homeowners received permanent, affordable loan modifications from mortgage servicers during October 2013. This total includes modifications completed under both proprietary programs and the government’s Home Affordable Modification Program (HAMP).”

Alternate Home Price Index Records Weaker Gains
“While the S&P Case-Shiller Home Price Indices for October showed a significant 13.6 percent year-over-year leap, other measures saw more subdued gains for the month.”

Average private RE investment vehicle reaches $511M
“The average size of private real estate investment vehicles that closed in 2013 hit $511 million — the highest level recorded by Preqin since the start of its data analysis.”

Residential construction spending hits 2008 levels
“Construction spending on private, residential projects reached a seasonally adjusted annual rate of $346 billion in November, up 17% over November 2012. That’s the fastest pace since mid-2008.”

Lenders search for plan B
“Lenders and borrowers are looking to other avenues of borrowing as mortgage rates continue to rise and competition heightens among financial institutions.”

2014 housing forecasts filled with euphoria: Estimates looking at higher rates combined with higher prices and stagnant incomes.
“Euphoria unlike housing inventory is in plenty supply when it comes to 2014 real estate forecasts.  The glue holding the housing market comes from investors and generous banking policy.  The one thing about economics unlike other hard sciences is that it happens in real-time.  It also assumes certain rules are fixed but that really act more like clay to fit the whims of the power structure.  It was interesting to see how few analysts at the end of 2012 predicted the massive run-up in real estate prices during 2013.  What is typical of course is that analysts usually go with the momentum so it is no surprise that predictions for 2014 are rosier than they were for 2013 even though most are forecasting higher interest rates and most will acknowledge that this current pace is unsustainable.  Yet higher rates will add pressure on income constrained households.  Investors are already showing signs of pulling back in certain markets.  Let us examine the 2014 real estate forecasting landscape.”

3 ways Dodd Frank law will roil real estate in 2014
“Chris Dodd and Barney Frank have long since retired, but the namesake legislation they craftedfour  years ago is about to unleash sweeping changes in the mortgage and real estate markets.”

Can Selling Real Estate Make You Rich?
“When Roman Serra, a 29-year-old with a master’s degree in art, decided to switch careers, he enrolled in a two-week real-estate course. He took a personality test online and went through a short interview at Chicago real-estate firm Baird & Warner, where he took the class. If he passes his broker’s license examination in January, he is guaranteed a spot as an independent contractor and a desk at one of the company’s 22 offices. He says studying wasn’t difficult compared with his days in college. “I wouldn’t personally consider it intense,” he says.”

AZ real estate player, reality TV star in trouble for operating without license
“PHOENIX (CBS5) – A reality TV star made a name for himself bidding on foreclosed homes. Now he’s underwater, accused of operating without a license.”

Three Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions
“WASHINGTON—Three Northern California real estate investors have agreed to plead guilty for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.”

Real Estate in 2014: A Need-to-Know Guide
“After year of struggles, the housing market roared back to life in 2013. The rebound will continue in 2014, but the pace will slow.”

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Getting a RE License

Question:

Do you recommend getting RE agent license? If not, what is best way for newcomer to get direct MLS access vs. just getting listings emailed to me?
    
-Student

Answer:

1. Real Estate License – YES!!

2. Get friendly with starving buyer’s agent and get approved as assistant. Get password for access.

3. Money talks – make it worthwhile for someone to cooperate with you and give you access – usually an agent.

NO BRIBES!! What’s wrong with having them work for you? Regardless if an agent does research for you – you must get your own access and learn to do research yourself!

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Conflict of interest

Question:

On page 88 [course manual] Raising Capital you state using a RE agents be careful not to create a conflict of interest, can you elaborate?

-Student

Answer:

You have to be careful when you work with agents because you get very close to working with listing agents and the agents that are going to hand you the deals. It could be a conflict of interest for them if they’re getting too close to you, in other words, if they’re going to lend you money because sometimes those agents have a ton of money and they want to participate in the market, but they don’t know how to do these deals, believe me. And I know some of this may sound silly. I borrowed money from some and used it on another agent’s deals. NEVER use it on the same deal they’re selling you. You have to be careful with stuff like that, that’s what I mean by conflict. You get a smoking deal from an agent and the agent calls you and says, “Hey, you know I want to be on this that’s why I’m giving you the deal,” WALK AWAY! Tell them thanks, but I can’t do that. It’s a conflict of interest for that agent but believe you me when the mustard hits the fan, you’re both getting handcuffs and free food and living arrangements for a while. So, you have to think before you do stuff, just do what’s proper.

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How do you train an agent to know what’s a good deal?

Question:

When you first start working with a new agent, and he sends you a prop that is not a good deal, how do you “train him or her” on what is a good deal??

-Student    

Answer:

You think they don’t know?! I think you probably have an inexperienced agent, meaning that the agent is new, not the relationship. That’s just a process of really taking them by the hand and really explaining to them and being respectful and sensitive to not insulting them. Sometimes it’s like walking a tight rope when you first start working with an agent and he sends you a property that is not a good deal. When you’re dealing with a professional agent it’s tough. I explain this in my presentations and in the course that you have to go in there and sit with them, show them your stuff and say you can’t make this work, but if these numbers change, I will make the deal happen. Always leave an agent, especially a professional agent, with the possibility of making the deal if they get the numbers to change, because the numbers are going to change. Let them know that you will buy this if they get the price to a reasonable number. You never say “no, I don’t want this deal.” You say you can’t buy this deal because there’s no profit and you show them why. You want to show them that you calculated it and that you know what your fix up and carrying cost is, but if it’s a new agent, that’s even more simple. Unless they have a large ego, then you got to be careful about not stepping in it. It’s basically just a function of spending time with them. And geographically with a map, showing them these are the zip codes I want to buy in, even taking the time to show them some properties that have already sold. That’s why I tell you all to look at the MLS as to what sold because you have investors that have already bought stuff and you look at deals and go “how did I miss that?!” Then you rub salt into your wounds. It’s a very educational process. And you’re able to explain to someone else, it’s a great instrument. I use this in my mentor programs. I use actual transactions, deals that have actually happened to make a point. I say, “Look, this was happening at the time that I was buying this other thing.” You can use that same kind of stuff to train your agent and the more you train that agent, the more you develop that relationship, especially if they’re new, the better they’re going to be for you. Because, you want to get to the point where you guys are working like it’s a symbiotic relationship. I hope I explained that thoroughly for you.

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Agents “slipping” deals before listing

Question:

Is it considered fraud for a RE agent to “slip” us deals before they are listed? Bruce Norris posted an article on his FaceBook page recently, describing two brokers who were arrested for giving their investors preferential deals, before they were listed.

Just to clarify, the Brokers had other offers, but presented only the low offers of their investor, leading to a low sale and a resale for a profit. Do asset managers demand the property receive broad exposure before accepting offers?

-W.A.

Answer:

Here’s the clincher on this and I want you to understand, this is really important. ABSOLUTELY it’s fraud! Put yourself in the seller’s shoes. You’re going to list a property with an agent. You’re done rehabbing it, you bought it. You went through all the work, now you list it with your agent and you trust him to get you the highest and best deal and your agent sells it to his cousin and takes a low offer and then calls you and says, “Hey I didn’t get any other offers.” You know, I’d want his head smashed like a coconut. So, why shouldn’t the government be upset about that? That’s absolutely fraud!

But what makes it fraud is they purposely held offers. They had higher offers and only gave them this low ball offer for this investor. They should go to jail. Now, when I tell you that an agent will give you a tip on a listing that’s not even listed yet, he’s giving you a heads up. That’s called “prelisting favoritism.” But that doesn’t mean, by any stretch of the imagination, that he’s not going to submit all of the offers that he has on his plate. He will however, when he gets the offers, tell the asset manager, “You should consider this offer, even though it’s lower.” Why? “Because I know this guy’s a closer. Let me give you thirty-five other deals he’s done. Well let me explain to you why I think you should do it. The lender he’s using is solid. And I’ve spoken to them already. It’s a hard money lender it’s not a conventional loan. We’re not going to be in escrow for 30-40 days.” You know, that agent can do a lot of things that are considered proper without violating any laws, without doing anything underhanded. Without, by the way, including you in this scheme because, you’re going to be an accessory to that. I’m surprised they didn’t go after the investor on this. I’ll be surprised if they didn’t because, that’s just down right fraud. This is the criteria I use whenever I look at something; whether it’s improper or not. Do I want it done to me? How would I feel about it if I was on the receiving end of the situation? I’ve made a lot of money in my life in this business. I’ve never once stayed working with somebody who would come close to do any stupid thing like that. Uh, hello? You put your offer in and the guy knows it’s not going to close; he’s got the chance to be a hero. You know, asset managers don’t want those deals falling apart any more than anybody else. They don’t mind eating crow if they screw up and took a high offer and never had the chance in hell on closing.

The answer to your question is yes. It is fraud for an REO agent to slip an investor a deal before they’re listed, but not to give you information before it’s listed. An agent can give you information on a listing any time he wants. But he also will tell you it has to be listed. Some lenders, not all of them, but some lenders require the listing to be exposed to the multiple listing for a certain amount of days. Other lenders have more flexibility. Listen, you have lenders out there that’ll tell an agent “hey I’m listing this listing with you; get me somebody who’s going to close.” They’re really interested in closing. So, if the agent says “hey I can’t get you a $100,000 and it’s an all cash transaction.” A lot of times they’ll say “get that guy in here. If you know the guy’s solid, it’s a done deal.”

-TA

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Today’s Real Estate News 10.22.2013

Summary: CNN Money reports that the unemployment rate has fallen yet hiring has slowed. Fortune explains how the jobs report won’t be accurate for the next few months. Reuters shares that U.S. construction spending is showing hopeful signs in a 4 ½ year high. Bloomberg reports that lenders are shrinking in the mortgage business, BofA is said to endure three more legal probes into its’ mortgage-bond sales and China’s real estate bubble is affecting Manhattan. CNBC explains how the JPMorgan deal could affect homebuyers in qualifying for a mortgage. The Motley Fool shares how the online real estate market has become a huge aspect of the business and Fox Business educates on why location is such an important role in real estate.

Unemployment falls but hiring slows

“The unemployment rate fell to its lowest level since November 2008, but the government’s latest jobs report still shows a muddled picture of the economy.”

Why the jobs report has become meaningless

“FORTUNE — Employers added 148,000 to their payrolls in September, about 20% less than economists expected and the third smallest monthly increase in the past year. But the unemployment rate dropped to 7.2%, which is the lowest level in nearly five years. And the number of people actively looking for work was up, meaning people are more optimistic about their prospects for finding work.”

U.S. construction spending approaches 4-1/2 year high

“(Reuters) – U.S. construction spending hit a near 4-1/2 year high in August, boosted by increases in both private and public outlays, a hopeful sign for third-quarter economic growth.”

Shrinking Lenders in Mortgage Hub Cut Into Recovery: Real Estate

“CashCall Inc., a lender run by racehorse aficionado Paul Reddam, is one of the mortgage industry’s biggest office tenants in Orange County, California. It’s about to get smaller.”

BofA Said to Face Three More Probes of Mortgage-Bond Sales

“Bank of America Corp., sued by U.S. attorneys in August over an $850 million mortgage bond, faces three more Justice Department civil probes over mortgage-backed securities, according to two people with direct knowledge of the situation.”

China’s Real Estate Bubble Hits Manhattan

“Fosun International Ltd., a Chinese conglomerate that invests in everything from steel to pharmaceuticals to Club Med, has agreed to buy the office tower at 1 Chase Manhattan Plaza from JPMorgan Chase & Co. for a whopping $725 million. This isn’t an isolated incident.”

Jumbo loan availability lifts Chicago housing

“In recent years, the inability to access higher-priced mortgages left many Chicago residents – especially those pursuing properties valued above the area’s conforming loan limit – without the option of moving up to newer, larger homes.”

FHA single-family mortgage guarantee program squeezes taxpayers

“The Federal Housing Administration’s single-family mortgage guarantee program moved dramatically from having a net savings to costing taxpayers money as higher-than-expected borrower defaults hit the firm.”

How the JPMorgan deal could curtail credit

“The Justice Department’s potential $13 billion settlement with JPMorgan may go a long way toward appeasing consumers’ anger at big banks for the financial crisis, but it probably won’t help those same consumers get a mortgage. In fact, it may make it harder.”

How to Play the Online Real Estate Market

“The Internet has become the first place to look for real estate. In 2007, more than 80% of home buyers actively used the Internet as part of their research process before buying real estate and before contacting an agent. This proportion keeps increasing, making online real estate a very attractive market. However, competition in this space is very fierce. Most real estate agents and companies have already built their own sites, and invest heavily in online marketing.”

Why Location Matters in Real Estate

“Ask just about any real estate agent to list the three most important things a property should have, and you’ll likely hear: “location, location, location.” That phrase has been in use at least since 1926, according to The New York Times, and is just as relevant now as it was then.”