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Join us tomorrow, January 7th, at Prosperity Through Real Estate to hear the ONE & ONLY Bruce Norris! Tony Alvarez will be at the Pro’s Corner answering all your questions before the meeting begins!
For more information, go to http://www.ProsperityThroughRealEstate.com
FHFA Recovers Nearly $8B from Banking Institutions in 2013
“As conservator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA), recovered nearly $8 billion on behalf of taxpayers in 2013 through settlements with financial institutions.”
Realtors’ Confidence in Market Tempered by Credit Access Concerns
“Realtors expressed overall confidence in the market tempered by concerns regarding credit availability, according to the latest Realtors Confidence Index from the National Association of Realtors (NAR).”
Homes’ Days-on-Market Remain Low in November
“Following a post-summer slowdown in the market, homebuyers across the nation put a little more force on the accelerator in November.”
Online Technology Likely to Play Larger Role in Mortgage Process
“A recently released borrower survey on shopping habits shows increasing reliance on online tools when mortgage shopping, though many still find the learning curve too steep.”
Is Real Estate Headed For A Fall?
“There are various people who think that both real estate and stocks are vastly overpriced. Last week, for example, the stock market closed with the S&P 500 over 1,800 for the first time while the Dow topped 16,000. How much higher can these measures go — or must they fall?”
As interest rates rise, hybrid mortgages may be a good option
“WASHINGTON — Higher mortgage rates for 2014? Count on it. Could this be the year to check out hybrid mortgages, which haven’t been popular lately? Maybe.”
Housing tear-downs on the rise as real estate rebounds
“The front-end loader swung to the right and took a bite out of the shingled roof of the quaint cottage. The roar of the engine and crackle of buckling lumber carried down Elm Avenue in Manhattan Beach.”
Home buyer bargains? Many markets are back to normal (VIDEO)
“Real estate expert Michael Corbett weighs in”
The Best Online Tools for Your Housing Search
“There was a time when the only way to find homes for sale was to engage a real estate agent to send you listings or drive up and down the streets scouting “for sale” signs.”
Mortgage Borrowers Use Technology to Advantage
“It’s been said that a little education goes a long way. The same can be said, apparently, for a little mortgage technology.”
Watt at FHFA Seen as Enigma in Fannie-Freddie Market: Mortgages
“Mel Watt’s first act overseeing Fannie Mae (FNMA:US) and Freddie Mac came before he officially started.”
New law Ability to Repay tightens mortgage regulations
“Mortgage lenders will soon have to work under stricter regulations after passage of the federal government’s Ability to Repay rule, designed to reign in loose lending standards that officials blame for contributing to the Great Recession.”
Economists Spar Over U.S. Recovery
“PHILADELPHIA—Economists John Taylor and Larry Summers exchanged pointed words Saturday about the best approach to spurring the economic recovery.”
Home Price Data Point to Moderation
“Clear Capital, Truckee, Calif., said the double-digit home price growth experienced over the past two years appears unsustainable going into 2014, as prices move into a “slow and steady” mode.”
What to watch out for in the 2014 MBS market
“The year ahead remains murky for investors even as the Qualified Mortgage (QM) rule takes effect and the Qualified Residential Mortgage (QRM) is hammered out, but there are signs of optimism for normalization.”
Housing analysts: Denver beats Phoenix in deadly animal cage match
“Clear Capital’s Home Data Index (HDI) market report confirms the consensus – home prices recovered strongly in 2013.”
When your Realtor goes mum…here’s why
“Questions Your Realtor Can’t Answer
You may be a single woman looking for a home and neighborhood where you can feel safe at night. Or a family with children who would like other kids to live nearby for easy play dates.”
Freddie Mac Announces First Multifamily K Certificates Offering This Year, K-714
“MCLEAN, VA–(Marketwired – Jan 6, 2014) – Freddie Mac (OTCQB: FMCC) today announced a new offering of Structured Pass-Through Certificates (“K Certificates”) backed exclusively by fixed-rate multifamily mortgages with a 7-year term. The company expects to offer approximately $1 billion in K Certificates (“K-714 Certificates”), which are expected to price the week of Jan. 6, 2014, and settle on or about Jan. 28, 2014. This is Freddie Mac’s first K Certificate offering this year.”
Move inland or leverage your life: The gentrification of the California middle class pushes many to use ARMs to leverage into homes they cannot afford.
“I am convinced that Californians enjoy having a sordid affair with real estate. The amount of justifications that get thrown around during booms and busts would be enough to fill a diagnostic manual for any aspiring psychologist. It is fairly well accepted that mortgage rates will only move in one direction from this point forward. So why would anyone lock into an artificially low rate via an ARM that is set to adjust in a short timeframe? Many Californians are opting for ARMs to compete with big money investors over the tiny crumbs of inventory out in the market. After all, home prices will be up in 5, 7, or 10 years and by that time you’ll be playing the equity ladder game once again, right? The usage of ARMs is surging for the non-investor share of buyers. A big reason is that California is largely unaffordable for the masses.”
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.”
Buy-and-rent investors get squeezed
“It’s getting harder to make a bundle buying up foreclosures and renting them out.”
Silicon Valley investor: Split California into 6 states
“Is the most populous American state too big for its own good?”
Market Analysts Expect Slowdown in Housing Recovery in 2014
“The housing market recovery is entering a new phase, according to the analysts at Capital Economics. They say the rapid bounce in home prices seen this year, which was driven by investors and tight supply conditions, will soon start to moderate, and the next stage of the recovery will be characterized by strengthening activity among owner-occupants and mortgage-dependent buyers, as well as a much more moderate pace of house price inflation.”
GSEs Reach Foreclosure Prevention Milestone
“As the year closes, the Federal Housing Finance Agency (FHFA) is celebrating a critical milestone.”
U.S. Consumer Confidence Bounces Back
“Consumer confidence saw a boost in December on heightened optimism for the job market, the Conference Board reported Tuesday.”
McLean Mortgage Introduces RateFlex Program
“In Virginia, McLean Mortgage Corporation announced the release of its RateFlex Program, a new concept designed to aid homeowners and prospective homebuyers in today’s volatile interest rate environment.”
U.S. factory, jobs data show underlying strength in economy
“(Reuters) – U.S. factory activity held near a 2-1/2-year high in December and the number of Americans filing new claims for jobless benefits fell again last week, suggesting the economy was poised for stronger growth in 2014.”
MBA Economic/Mortgage Finance Commentary: Fed Begins Taper; Weakness Persists in Housing
“Recent macroeconomic data paint a picture of a strengthening economy, strong enough that the Federal Reserve is willing to begin to ease its foot off of the gas pedal. However, recent housing market data is not nearly as strong; particularly purchase mortgage application volume which is running 10 percent behind last year’s pace.”
Adjustable-rate mortgages regain popularity as prices, rates rise
“When Michael Shuken recently bought his family’s first home, a four-bedroom in Mar Vista, his adjustable-rate mortgage helped them stay on the pricey Westside.”
Mortgage tax break expires despite bipartisan support in Congress
“WASHINGTON — A 6-year-old tax break for struggling homeowners who won reductions in their mortgages has expired, alarming housing advocates and lawmakers who said it still was needed despite the real estate market rebound.”
Minimum wage to rise in 13 states on Jan. 1
“Starting January 1, minimum wage workers in 13 states and four cities will see higher paychecks.”
U.S. housing markets to watch in 2014
“Texas and California led recovery of the market in 2013. What are the next hot spots to watch for? Here are five cities to keep an eye on.”
5 biggest housing comebacks of 2013
“Six years later, the U.S. housing crash has grown more distant as the market continues to recover from record foreclosures and spiraling home prices. Here are five regions that experienced the most pronounced recoveries in 2013.”
Many Americans feel economy isn’t improving
“Despite a recent string of positive economic news, Americans say they aren’t feeling the improvements.”
Unemployment benefits for 1.3 million expire
“Michelle Marshall is one of the 1.3 million long-term unemployed Americans who is losing her jobless benefits.”
Pending Home Sales Edge Up in November
“WASHINGTON (December 30, 2013) – Pending home sales stabilized in November with a slight gain, according to the National Association of Realtors®. Monthly increases in the South and West offset declines in the Northeast and Midwest.”
Is Mortgage Market Deconsolidation Temporary or Here to Stay?
“In 1998, the top 10 mortgage lenders held around 40 percent of the market. By 2010, their share increased to nearly 80 percent; since then, it’s dropped down to around 60 percent.”
Even in Buyer’s Market, Homeownership Expected to Decline
“Zillow expects conditions next year to be a bit friendlier to homebuyers—but that doesn’t mean we’ll necessarily see more owner-occupied housing, experts at the real estate marketplace say.”
2013 in Review: The Consumer Financial Protection Bureau
“Mortgage industry commentators may argue (and they certainly have) about the Consumer Financial Protection Bureau’s (CFPB) performance over the last year, but one thing is certain: The bureau knows how to command headlines.”
Trulia Economist Sees 2014 as ‘Year of the Repeat Homebuyer’
“As prices continue rising in the new year—albeit at a slower pace—investors will begin to ease back from the purchase market, but repeat homebuyers will be there to pick up the slack, according to Trulia’s predictions for the housing market in 2014.”
Feature: New World Order
“The veterans of this business can remember when market conditions were “normal”—when REOs ran in the neighborhood of 150,000 a year, delinquency rates were just around 4 percent, and you only needed a credit score of 620 to qualify for a prime mortgage loan.”
Commentary: What’s in Store for Housing in 2014, Part 1
“Many economists and market observers have suggested the market is poised for continued growth as the recovery enters its third year, and there are positive elements in play that provide some reasons for optimism.”
Jobs, Population Growth, Low Prices Create Investment Opportunities
“Analysts at HomeVestors and Local Market Monitor say the formula for a nearly risk-free single-family investment opportunity is one part job growth, particularly in lower paying jobs, and one part population growth, mixed with relatively low home prices.”
The next article is from Christmas eve but I thought you may want to see it.
20 Cities with Biggest Foreclosure Discounts
“As the housing market continues to recover in 2014, finding a foreclosure deal is more important than ever to ensure you get the most bang for your buck and land a home with built-in equity. RealtyTrac has identified the top 20 U.S. cities with the deepest discounts still available on foreclosure homes, including several markets on both coasts, from the high end to the low end, and plenty in-between.”
Fannie Mae Reaches $591 Million Repurchase Agreement with Wells Fargo
“WASHINGTON, DC – Fannie Mae (FNMA/OTC) has reached a $591 million agreement with Wells Fargo to resolve repurchase requests on certain loans originated prior to 2009. After adjustments for prior repurchases, Wells Fargo will pay Fannie Mae $541 million in the fourth quarter of 2013 and be released from repurchase liability for these loans, with certain exceptions. “
Fannie, Freddie give non-investor home buyers ‘first look’ period
“WASHINGTON — An important resource for first-time home buyers and others who find themselves in unfair competition with deep-pocket investors bearing cash just got better: The two biggest players in the mortgage market, Fannie Mae and Freddie Mac, are now giving non-investor shoppers 20-day exclusive rights to bid on and buy new listings they are selling.”
Nov. home sales fall to a 5-year low in Vegas
“The Las Vegas market turned into the comeback kid after investors flooded the city in the wake of the real estate bust.”
LPS: Home price increases slowed in October
“October proved to be a tepid month for home prices, with no state increasing more than a full percentage point, according to Lender Processing Services’ most recent U.S. Home Price Index report.”
Flagstar Bancorp reaches $10.8 million repurchase settlement
“Flagstar Bancorp (FBC), the holding company for Flagstar Bank, has entered into an agreement with Freddie Mac to resolve substantially all of the repurchase requests and obligations associated with loans originated between Jan. 1, 2000, and Dec. 31, 2008, reaching a total amount of $10.8 million, the company announced in a press release.”
New home sales and mortgage apps see growing divergence
“The November new home sales data from the U.S. Census Bureau includes “some surprisingly positive data points, and a continued divergence from the weekly purchasing applications trend as released by the MBA,” according to research from Compass Point Research & Trading.”
U.S. Stocks Little Changed as Home Sales Miss Estimates
“U.S. stocks were little changed, as the Standard & Poor’s 500 Index headed toward its biggest annual gain since 1997, after data showed contracts to purchase previously owned U.S. homes rose less than forecast in November.”
YEAR IN REVIEW: Stabilizer sums business scene in 2013
“One word: Stabilizer.
With its twists and turns, moments of trepidation, transition and glory, 2013 was a year Inland Southern California’s retail giants, small business, manufacturing companies, banks and real estate industry gained surer footing.”
Where did all the single family homes go? Half of foreclosed homes still occupied and big investors not reselling properties. Investors purchase $1 trillion in real estate since 2011.
“The real estate market has slim pickings for traditional buyers. Funny thing that we have to use the “traditional” preface since the market is overrun with a hoard of investors. I am seeing this with my own two eyes. You are seeing it as well. In most ordinary cases a rise in prices would be accompanied with some sort of rise in supply. Yet this is no ordinary situation. Scouring over a few reports I found that nearly half of foreclosed homes are still occupied. In places like California and Miami this number is closer to 60 percent. When these homes finally get fully repossessed, they are likely going to big money investors that end up holding on to the property, removing it completely from the market. There is little doubt that investors are a big part of the market. Since 2011 they have purchased over $1 trillion in real estate. With razor thin inventory, this is a big deal.”
Have you ever heard the term “guru” used in real estate blogs, articles or other posts on real estate communities and social media? I’m sure you have. But, have you EVER found ANY of them using the term in a positive manner? I never have, not a ONE! Typically, in its derogatory fashion the term guru is used to describe or identify someone who is really not truly knowledgeable about the real estate investing game, or maybe someone who basically “overcharges or scams” a new unwitting student to real estate investing/speculating. Most of the time the person writing or making the comment is trying to make a point, but instead of constructively referring to their own facts or supporting their own position or point of view with something concrete, they just site complaints of the many that decided to pay the “ridiculously over-inflated prices for basic real estate investing education” and move on to use a comparison between themselves (or someone they want to pump-up as the good guy) and the devious elusive “guru”.
The point is that anytime someone wants to make themselves look good, win public opinion and prop themselves up as the savior of the wannabe real estate investor community, all they have to do is taint the reputation of someone else teaching real estate by labeling them a guru. I’ve read so many real estate articles and posts where the title “guru” is used in a derogatory fashion I’m starting to think it has never had any other meaning but a derogatory one. I happen to respect and revere the term guru. But I keep seeing it in article after article, post after post especially by individuals trying to benefit from undeserved accolades (much as the real estate “gurus” they are trying to besmirch.) This is probably not the wisest method of trying to make an intelligent point, as it basically amounts to no more than demeaning or degrading the term “guru” and then applying it to whomever, or whatever the writer or speaker is trying to deface. But unfortunately, most folks buy it!
For the record, I must admit that over past years I’ve been guilty of making similar unwise and immature statements myself about a host of things. Honestly, I think we all do it, occasionally without regard for the damage we may cause to others or the impact we can have on someone else’s decision making. But when connected to real estate it’s become an epidemic!
For the sake of accuracy, let’s take a closer look at the true original meaning of this big bad term “Guru”. As I’m sure most of you already know, according to Merriam-Webster “guru” pronounced gu•ru noun ˈgu̇r-(ˌ)ü, ˈgü-(ˌ)rü also gə-ˈrü, is defined as
: a religious teacher and spiritual guide in Hinduism
: a teacher or guide that you trust
: a person who has a lot of experience in or knowledge about a particular subject
“In Hinduism, a personal spiritual teacher. In ancient India, knowledge of the Vedas was transmitted through oral teaching from guru to pupil. The rise of the bhakti movement further increased the importance of gurus, who were often looked on as living embodiments of spiritual truth and were identified with the deity. They prescribed spiritual disciplines to their devotees, who followed their dictates in a tradition of willing service and obedience. Men or women may be gurus, though generally only men have established lineages.”
So actually the TRUE meaning of the term guru is pretty cool, and deciding to continue to sarcastically use it to demean someone we are basically trying to crush is extremely inappropriate.
I suppose the appropriate term to use for such an awful underhanded individual would be closer to “Charlatan” pronounced char•la•tan/ˈSHärlətən,ˈSHärlətn/ and defined as
Noun: charlatan; plural noun: charlatans
1. A person falsely claiming to have a special knowledge or skill; a fraud.
Synonyms: quack, sham, fraud, fake, impostor, hoaxer, cheat, deceiver, double-dealer, swindler, fraudster, mountebank.
YEA… THAT’S THE TICKET!
As for the actual title of guru, well I suppose anyone that has ever helped us in any way to see, learn or understand anything we wanted to master by explanation or actual example (even if the only thing we learned from them was that real estate is definitely not for us) then I’d say the person we received that wonderful gift from could, in fact, be considered our guru… whether we paid them or not!
Oh, by the way, I LOVE GURUS! 😉
Due to my eminent retirement, we will no longer be providing articles on a daily basis. If I find anything that I consider highly interesting or valuable, I will post it. For relevant real estate related articles & postings, please “like” The Norris Group on Facebook and visit their website www.TheNorrisGroup.com. Aaron Norris’ “Real Estate News Round Up” is exceptional!
Also, you can click HERE to see all of the sources that I typically go to for real estate information.
Hello Tony,
Thanks for your excellent “tip” after the Inland Empire Investors Forum meeting in Corona about pursuing the REO Pendings, instead of the Actives, for any that fall out.
I have one question that I hope you can lend some perspective on.
If the REO Broker’s lender accepted the high, over-listing offer that keeps happening in Moreno Valley on the homes that I’m making offers on… what is the conversation like with the REO Broker when I can still only offer 65 percent of ARV minus repairs, and that isn’t very close to the listing price… lower than probably several other all cash or hard money offers they got the first go-round?
Obviously, your brokers call you and they know what you’ll pay. I am dealing with these brokers for the first time, as I will not use my buyers agent. I’m going to be asking these REO brokers (or their own buyers agent) to write up my offer directly if the pending sale falls out… but it will more than likely be much lower than the asking price.
Because of the over-bids on low REO inventory, I get the feeling I would be upsetting them or getting off on the wrong foot with them with the TNG offer I need to make.
Just curious how you perceive that conversation if you were me (essentially unknown to them), how you think that would go, and is it a risk for the first impression or relationship building you teach in your course.
Also, as I mentioned, I’m interested in your small group mentoring program when you get it up and running again.
Thanks for your consideration.
Best regards,
B.S.
Sorry it’s taken so long to get back to you. Here’s the short answer, I never worry about how an agent “feels” about my offers or me, for that matter, that’s counterproductive. Next time you’re speaking to an agent, start the conversation with a question. Ask them this, “If you’re listing a property for sale, and you had one of these two offers to choose from, would you like the highest offer or would you like the one that’s going to close escrow?” Obviously, they would love to have the highest one close escrow. But, in today’s market that’s far from reality. There are just too many hurdles to clear from the moment the offer’s accepted to that closing that can screw up that deal. It’s not your job to educate experienced brokers and agents. But unfortunately, that’s exactly what you end up having to do. And this is exactly the reason why I place such importance and emphasis on you staying on top of the specific day to day changes affecting your target market.
40.5% of buyers could not secure a mortgage. 36.5% of buyers changed their mind. 5.6% of buyers did not have a down payment. 0.0% of owners decided not to sell. And a whole bunch of other ones ran like hell once they figured out how much they’d have to spend on fixing that house.
Do yourself a favor, stop worrying about all the other offers – cash or otherwise. Focus your attention on the numbers that you need to hit so you can secure a profitable deal. Stop listening to your mind giving you all the reasons and excuses why everyone is going to hate you. If I’ve said it once, I’ve said it a million times,
“your mind is not your friend.” – Vernon Howard.
Focus on providing a solid offer that you can stand behind and close on without hesitation. Make sure that you remind the agents you’re working with of the percentage of fall outs that are presently being experienced in the market due to all of the reasons that I’ve already stated. Over time, this is what will give your offers their strength and solidify your deals.
This may take a little bit of time and some effort on your part. But just like any other mental conditioning, it’s your job to consistently remind them of the nightmare of accepting a supposedly “higher, better” offer that will, more than likely, crash and burn, in exchange for your superior offer that WILL close escrow and secure them a commission check.
Piece of cake, right?
Best,
Tony
Hi Tony…and thanks a million for this invaluable forum!
Got one for you about private lenders. I’ve started talking it up. I’m going to focus primarily on flipping in the beginning but I want to hold some as well once I get rollin. When I explain the dual focus some are asking the rate difference. I explain that the rate to retail is higher than holding on rentals. I’d like a better answer.
What should the difference be? If retail is say 9% what would long term be?
(if that was answered in your course…plz forgive me!)
Last one…should the Note provide the ability for the lender to convert if they like? It seems prudent to craft that in with friendly language along the lines of “we have the right to convert” so people know it’s possible from the outset and so I don’t have to go back and explain it once things are in motion.
One person said straight out…”I like the rate and security but aren’t crazy about it being short term.” I’m guessing that on occasion I’ll need to finance out retail money with different lenders who would be happy with less for a longer term. But it would be nice to convert people if I choose and/or if I need to because the property isn’t selling for one reason or another.
Did I say thanks?
Many, many, MANY thanks Tony.
-M.
Okay, out of the gate let me just make one point very clear. When you’re trying to solicit money from people that have it, they’re motivation for lending it is as varied and different from one to the other as are grains of sand in the ocean.
You’re job is to attract the money based on the probability of a successful outcome. The two things that anyone lending money is typically focused on is:
1. The return ON their investment
2. And the return OF their investment
(the latter being the most important).
How you structure the notes (conversion) or the interest rates is solely up to you. What they will accept, you’ll soon find out, is solely up to them. I have found that what buys me the most leverage when wanting to skew those negotiations or numbers in my direction, typically have to do more with how good my deals are and how good I am at making them reach a happy and profitable conclusion.
I cannot, in good conscience, give you specific advice on what interest rate you should offer between short-term and long-term money, as I honestly believe this is a moot issue. Industry standards on this topic are clear and available for anyone who cares to look for them. Most investors know they can easily place their money with professional, respected hard money lenders like The Norris Group and earn an easy, effortless 12% on short-term and 9% on eight year financing.
I have found that the more geographically local the investor lender to my specific Target Market, the more familiar they are with my individual properties, my level of knowledge and experience, and successful track record, the more motivated they are to jump on my wagon and the stronger position I hold for negotiating. This typically becomes a “their money is chasing my deals” rather than the other way around.
I hope this helps.
Your friend always,
The Big Cheese
Tony
;D
Tony:
I am following your course more or less to the letter and made some good listing agent contact. I have to admit I am surprised how these guys are surprised to have me come to their office and just chit chat about general things rather than fly in saying I am an investor and need some good deal. I have never come into their office and said I was an investor and that really seems to take tension down a notch or two. Of the 3 I have met one has already asked me to come again for lunch and he was putting me on his 1 call list. I also have a couple of cash buyers and made a few offers. I am stoked!
One thing all the agents have told me though is the banks (fannie mae) won’t even look at an offer less than 85% of the mls list. The properties I am looking at are for the most part not the ones just on the MLS but older properties and have either been a BOM or had price reductions. Have you faced this “nothing less than 85%” threshold? I am going to keep doing what I am doing but not spend time on the fannie mae and freddie mac properties.
D
D, I LOVE YOU! YOU’RE DOING A GREAT JOB! It’s wonderful to see when somebody gets it! It’s not that complicated, is it, D? It’s not like we’re reinventing the wheel here.
The 85% thing is real. However, so are the deals that fall between the cracks. The bottom line is this, all listings that do not sell during the initial listing period MUST be reduced until sold – NO EXCEPTIONS! No one at the lenders office owns this property personally. No one at the lenders office holding the title to this nonperforming dead asset gives a hoot about holding onto this pig longer than they have to, that property has got to be sold at some point. And that always occurs when the listing price is lowered enough to motivate someone to pay for it.
Now here’s the thing, every time an REO listing sells, what I mean by that is goes pending, and then falls out before the close of escrow, the asset manager’s as well as the listing REO broker’s motivation for liquidating that property increases at an alarming rate. When a deal falls out of escrow that’s the time that the REO agent and asset manager are most highly motivated to cut listing price and accept concessions to get rid of that property. And if anyone tries to tell you any different, they are full of crap.
You have to make a lot of offers at your prices, meaning, at prices that make profitable sense to you as an investor. Always respectfully, intelligently, and calmly explain to the listing agent or your buyer’s agent how you’ve arrived at your final offer price. Always remember that if an REO listing agent is hinting at the fact that they do not want to submit the offer on a Fannie Mae or Freddie Mac listing because it is not within the 85% of listing price AND you know that number will not work for you, it is important that you explain to the agent not only that that price doesn’t work for you but that you are still interested in purchasing that property once it is reduced to a reasonable listing price. Remember to always leave the agent with those words “I WILL BUY IT.”
One final note, please remember that all of these regulations, these 85% rules, these 90 day restrictions will all get kicked to the curb sooner or later. The problem is we never know how or when. Here is what I do and I suggest you do, stay the course. Ignore the chatter, be aware of these senseless stupid rules and regulations that they keep adding and removing faster than you can spell them. In other words, this market, if anything is fluid, ever changing and will eventually turn completely to our benefit as investors. And the only reason this will happen is because the lenders are completely motivated by greed and self-interest. This is the only thing that you can absolutely unequivocally rely on. These guys will hand us their butt on a plate when they finally realize that is what will put the most money in their pockets. How do ya like them apples?
Big Hug
Love,
Uncle Tony