saw this great article on Loan Mods.

http://mandelman.ml-implode.com/2009/11/how-banks-view-loan-modification/

1,004. 1,046. 1,083. 1,078. 1,120. 1,185.

Notice a pattern? That’s the number of signed purchase agreements each of the last six weeks in the Twin Cities housing market, growing most weeks at the spring buyer market heats up. The 1,185 pending sales during the week of May 9 were a robust 26.6 percent higher than the same week in 2008. Over the last three months, there have been 2,228 more pending sales than the same time period last year!

There are some caveats to this good news.

1.) Traditional home sales (excluding foreclosures and short sales) over those last three months are down 17.6 percent from a year ago.

2.) Sales above $190,000 are down. 19.2 percent from a year ago.

3.) Sales of new construction homes are down 16.8 percent from a year ago.

Looking through a sharper lens is sometimes the best way to fully understand market dynamics.

Active Listings Current Inventory One Year Ago One Year Change
Inventory as of: 5/18/2009 26,419 33,193 -20.4%
New Listings Current Activity One Year Ago One Year Change
For the Week Ending: 5/9/2009 2,058 2,257 -8.8%
Pending Sales Current Activity One Year Ago One Year Change
For the Week Ending: 5/9/2009 1,185 936 +26.6%
Month Supply of Inventory May 2009 May 2008 Percent Change
7.7 10.2 -24.5%
Supply-Demand Ratio: May 2009 - 5.23 houses for sale per buyer
*Data collected from the Regional Multiple Listings Service, for residential properties in the 13 county region exclusively

I was at my local REIA (real estate investors assocation) meeting last night and we were talking a bout foreclosure.

Mike Jacka, the host of the meeting showed this video below and I thought it was very thought provoking. My comments are below after you watch the video.

Charles Dickens’ “A Tale of of Two Cities” compared the fortunes of two protagonists who lived in Paris and London during the French Revolution. Paris was in a mob rule - full of chaos. Much like our foreclosure market. Then, there is London, repressed and quiet somewhat oblivious of what is going on in the other city.

In first housing marketing, many buyers/sellers find themselves in a deflationary reality where their home values, their neighbors home prices, and interest rates are dropping almost daily. REOs, short sale, foreclosures are all pulling the market down at a steady pace. This video talks about the affordability index. When affordability is at it’s lowest, it marks the peak in house prices, with a decline sure to follow. We’re now approaching unprecedented affordability index. The video stated the median income is 202% of what’s necessary to qualify for the median priced home. That means on average Minnesota’s make twice as much to qualify for our housing stock. Now is the time to upgrade and move up. If your thinking about buying, now is the time.

However, as an investment group, we are still seeing prices in a deflationary cycle. Therefore, we are trying to unload everything new we buy. We are not holding, unless it’s a can’t loose situation. The mobsters are the lenders and the government. However, things are soon to change.

The second market is one of inflationary price values. Inflation is bad - right? We’ve all learned that. How about hyper-inflation? This new “second” market will drive up prices once the built-in inflationary machine from the government begins gaining momentum. You think $4 gas was bad? Wait until you see $8 gas. Once we perceive prices going up, we will stop selling and spend as much of that cash that we’ve still got on more houses. We’ll let inflation drive up the prices while we rent them watching the prices go up and our rents increase.

stay tuned for more tips.

I’ve never bought in the war zone.

I guess I’ve never had a deisre to have my life threatened at or near one of my houses.   Of course that isn’t just necessarily restricted to the war zone.  I’ve felt very uncomfortable a few times at my apartment building in Fridley; then there was the time my tenant tried to blow up the house with me in it,  by leaving the gas line open.  In any case, the war zone has it’s own business model.

For those that read this blog, many of you know my good friend Brian Dickerson (www.briandickersonflips.com).  He knows more than anyone about working in the war zone.  He made his living in the neighborhoods where you needed a gun in order to fit in.

Below I’ve included an article that talks about free money available for real estate.   Who says there is no such thing as a free lunch?

Here’s the business model.
Identify a house to buy at 40% of value.  Hopefully it needs < 20k in work, and you’re buying it for about 20k (*worth about 80k).   Buy the house using the money talked about below and a little of your own if needed.   Fix and flip.  Fix and flip.  It’s a great cash strategy (strategy to bring you cash).
More tips soon.   If you’d like to sell your home, please visit our website at http://LakesAreaHomeBuyers.com

Housing: Agency collaboration could ease foreclosure crisis in Minnesota

by Scott Carlson Staff Writer

F&C file photo

Humphrey Institute panel says Minnesota could be role model in search for housing solutions

The foreclosure crisis is sweeping across Minnesota, just like other states. And some areas, such as north Minneapolis – with triple the foreclosure rates of that city’s other neighborhoods – have been particularly devastated.

And yet, some housing experts see a glimmer of hope in the coalition of agencies, organizations and individual efforts converging to solve Minnesota’s problems.

Several Twin Cities housing experts, speaking at a Humphrey Institute forum Thursday, said Minnesota could even wind up serving as a role model of how the United States may be able to extricate itself from the nation’s growing mortgage foreclosure crisis.

Minnesota is “at the forefront of the mortgage-foreclosure recovery,’’ contended Thomas Fulton, president of the Minneapolis-based Family Housing Fund. “The housing industry (in Minnesota) has built a tradition of collaboration.’’

Fulton said a key source of collaboration is the Minnesota Foreclosure Partners Council, whose more than 20 members include cities, housing agencies, counties, trade groups and state agencies. Formed in 2007, the nonprofit council’s mission has been to develop a rapid, coordinated response to the mortgage foreclosure crisis affecting the Twin Cities and greater Minnesota. Its ultimate goal is to help stabilize neighborhoods and assist families recover from foreclosures, or help avoid the process altogether.

The Council’s efforts come at a time when foreclosures in Minnesota have gone from 6,500 in 2005 to nearly 30,000 in 2008. In north Minneapolis, about a fifth of the homes are in foreclosure; in other areas of the city, the rate is still less than 10 percent of neighborhood homes.

Fulton conceded that there are no signs the foreclosure crisis will abate any time soon, but added that “we are in a good position to act decisively … on the issue.’’

Carolyn Olson, president of the Greater Metropolitan Housing Corp. in Minneapolis, said her group has bought nearly 160 foreclosed homes in north Minneapolis since mid-2007 for rehab and resale. The GMHC has carried out the program largely with $10 million from the Minnesota Housing Finance Agency.

Olson said this pool of money is often helping her group beat speculators in bidding to buy foreclosed properties. Increasingly, GMHC is looking to sell homes to low- and moderate-income families on contract for deeds when they are having trouble getting mortgages because of the lack of traditional financing, she said.

Olson also noted that her group has been one of the first in the nation to benefit from the National Community Stabilization Trust, which is allowing Minneapolis and St. Paul, as pilot cities, to acquire foreclosed properties before they are put on the market. Under this program, the GMHC has looked at nearly 493 properties since September and closed on 23, she said.

Given these kinds of initiatives, the GMHC is starting to help push back up home values in north Minneapolis, Olson said. And the group’s efforts of restoring homes – in some cases, five to seven homes on a block at the same time – are giving local residents hope that their neighborhood is due for a rebound, she said.

I came across this article from my friend Todd Grill over at Entrust Midwest.  It talks about lending out of your IRA.   Thought you’d enjoy it also.

Either a Lender or a Borrower Be

Money in self-directed IRAs can be loaned out to any person who is not a

Entrust Retirement Services

By: H. Quincy Long

Personally, I think Shakespeare had it wrong when he penned this advice in Hamlet: “Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.” Perhaps he may be forgiven for his error, however, since Shakespeare suffered from a lack of the tremendous benefits of a truly self-directed IRA.  

Money in self-directed IRAs can be loaned out to any person who is not a “disqualified person.” While this means that you cannot loan yourself or other related disqualified persons money from your self-directed IRA, you can loan the money to anyone else. Loans can be secured by real estate, mobile homes, equipment or anything you like. If you are really a trusting soul, you can even make a loan from your IRA unsecured (although in that case I personally would tend to support Shakespeare’s advice).

First, let’s look at it from the borrower’s perspective. At our office we offer a seminar entitled “Make Money Now With Self-Directed IRAs.” One of the ways you can make money for yourself right now with your knowledge of self-directed IRAs is by creating your own “private bank.” To do this, simply share the news that an IRA can be a private lender, refer people with IRA money to Entrust to open a self-directed IRA, and then borrow their IRA money for your own financing needs.

With private financing the loan terms can be whatever the borrower and the lender agree to within the legal limits. If you know a person who is getting 5% in a “safe” IRA at a bank, and you can offer them 9% secured by a first lien on real estate with only a 70% loan to value, would they be happy with that? Even with a higher interest rate, private financing can work for you. IRA loans can be done quickly and without a lot of fees or fuss, which may mean you can get a deal which might be lost if you had to wait on the bank. This is especially true in distressed sale situations, such as a pre-foreclosure purchase.

From a lending perspective, your IRA can grow at a nice rate while someone else does all the work. In a typical hard money loan, the borrower even pays all of Entrust’s modest fees as well as any legal fees for preparation of the loan documents. True, you won’t hit a home run with lending, unless you are fortunate enough to foreclose on the collateral. But the returns can be quite solid. For example, by making very conservative hard money loans my Mom’s IRA has grown by about 10.5% in one year. This is much better than the amount she was earning in her money market fund before she moved her IRA to an Entrust self-directed IRA.

Even small IRAs can combine with other self-directed accounts to make a hard money loan. My brother recently combined his Roth IRA, his traditional IRA, his wife’s Roth IRA, his son’s Roth IRA, his Health Savings Account (HSA), and 5 other IRAs to make a hard money loan. The smallest IRA participating in this loan was for $1,827.00! Each IRA made 2% up front and 12% interest on an 18 month loan, secured by a first lien on real estate with no more than 70% loan to value.

One thing to avoid in hard money lending is usury. Usury is defined as contracting for or receiving interest above the legal limit. The usury limit varies from state to state, with a few lucky states having no usury limit at all on commercial loans. Some people have the theory of “What’s a little usury among friends?” However, if the investment goes bad and your IRA has made a usurious loan, the consequences of the borrower making a claim of usury could include the loss of all the principal of the loan plus damages equal to 3 times the interest. Some states even have criminal usury statutes. It is best to consult with a competent attorney prior to making a hard money loan to make sure your IRA does not violate any usury laws.

To see how well hard money lending can work, let me give you an actual example. One of our clients made a hard money loan from his IRA to an investor who purchased a property needing rehab. The terms of the loan were 15% interest with no points or other fees except for the attorney who drew up the loan documents. The loan included not only the purchase price but also the estimated rehab costs. The minimum interest due on the loan was 3 months, or 3.75%. The investor began the rehab by having the slab repaired, and before he could take the next step in the rehab process, a person offered him a fair price for the property as is. The investor accepted the offer, and they closed about 6 weeks after the loan was initiated.

From the investor’s perspective, was this a good deal? Yes, it certainly was! True, he was paying a relatively high interest rate for the time he borrowed the money. However, he was able to purchase a property with substantial equity which a bank most likely would not have loaned him money to buy due to the condition of the property. Also, while the interest rate was high, the cost of financing was actually comparatively low. With a normal bank or mortgage company there are fees and expenses incurred in obtaining the loan. Common fees include origination fees, discount points, processing fees, underwriting fees, appraisal fees and various other expenses relating to the loan. On the surface an interest rate may be 8%, but the cost of the financing is actually higher than 8% since a borrower has to pay the lender’s fees in addition to the interest on the loan. Spread out over a lengthy loan term these additional fees do not add much to the cost of the financing. However, if an investor has to pay all of these fees up front and then pays the loan off in only 6 weeks, the cost of the financing goes way up.

In this case the investor’s total loan costs were limited to 3 months minimum interest at 3.75% plus $300 in attorney’s fees for preparing the loan documents. Best of all, the investor walked away from closing with $20,000 profit and no money out of his pocket! Far from “dulling the edge of husbandry” this loan actually made the “husbandry” (ie. the purchase and resale of the property) possible. Incidentally, the purchaser of the property was absolutely thrilled to get the property at less than full market value so that they could fix it up the way that they wanted it.

What about the lender in this case? The lender was also quite happy with this loan. His IRA received 3 months of interest at 15% while only having his money loaned out for 6 weeks. For the 6 week period of the investment, his IRA grew at a rate of approximately 30% per annum! Although his yield was above the legal limit for interest in Texas on loans secured by real estate, prepayment penalties are generally not included in the calculation of usury here, so there was no problem. The investor was happy, the new homeowner was happy, and the lender was happy. Anytime you can create an investment opportunity with a win-win-win scenario, you should.

When I lecture about hard money lending, I ask the audience what they think is the worst thing that happens if you are a hard money lender. Invariably, most people in the audience answer that you have to foreclose on the property. Nonsense! If you are doing hard money lending correctly, the worst thing that can happen is that the borrower pays you back! Unfortunately, this is a common risk of hard money lending. Most hard money loans are made at 70% or less of the fair market value of the property. If you are fortunate enough to foreclose on a hard money loan, your IRA will have acquired a property with substantial equity while the investor did all the work of finding and rehabbing the property!

While it is true that foreclosing on a property owned by a friend may cause an end to that friendship, a properly secured hard money loan will at least not “lose itself” as Shakespeare asserts. In fact, it may lead to substantial profit for your IRA! To avoid losing a friend, simply don’t loan money from your IRA to someone you would feel bad foreclosing on. In order to be a successful hard money lender, you do have to be prepared to foreclose on the property if necessary.

In modern times I believe the proper advice, at least in the right circumstances, is “Either a lender or a borrower be!” You can make more money for yourself right now by borrowing OPI (Other People’s IRAs). Borrowing from someone else’s IRA can even lower the total cost of your financing compared to a conventional loan from a bank or mortgage company, especially on short term financing. From a lending perspective, your IRA can make great returns by being a hard money lender, either through higher than average interest rates or, better yet, through foreclosing on property with equity. You may find that hard money lending from your self-directed IRA is a great way to boost your retirement savings without a lot of time and energy invested on your part.

The top investment banks in the country are using our tax payer’s money to line their executive’s pockets. See this video to get the full story.

It’s sad but not really all that unthinkable. The executives of the big banks think they can do whatever they want, b/c they have the country right where they want us. I’m here to tell you about a solution. Something that will get the banks right where it hurts them most.

The investment strategies that I use don’t require banks. The bank is the enemy and if you stay clear of them you’ll be just fine. In the next series of posts, I’ll explain how to buy, fix and flip houses or buy, fix and keep houses using none of your own cash or credit. The strategies are perfect for this market, and I will teach them to you in the next few months, intermixed with my thoughts and ideas on the local and national market.

Here’s another link to a similar story:
http://www.foxnews.com/politics/2008/12/21/study-banks-failed-executives-earned-b/

The purpose of these instructions are to give you solid, factual information that will help you to make the best decision(s) for yourself, your family, and all those who may be affected by a home in foreclosure.

The Minnesota Foreclosure laws are some of the most liberal in the entire nation. Thankfully, I’m not a lawyer nor an accountant, so this is not legal advice, nor accounting advice. In fact, this isn’t even advice and I’m not really here right now.

Learn about the Minnesota Foreclosure Process and how it works: BELOW IS A TIMELINE OF THE FORECLOSURE PROCESS IN MINNESOTA: 
Step One, Day 0: The process begins when a lender files a Notice of Default with the county recorder identifying the default amount and the date the borrower must pay off the default. The notice is mailed and served to the borrower and other affected parties.   Up to the day of the sheriff’s sale, the borrower may pay off the default plus any applicable costs of foreclosure and stop the foreclosure process.  Six weeks after the notice of default is filed, the lender can schedule a sheriff’s sale of the property.    During this period of time, the lender (or their attorney) must advertise the sale in a publication (either the finance and commerce or the local newspaper).   This notice identifies the parties and the date of the sale and the amount claimed or amount due to bring the defaulted note current.
Step Two, Day 42: Forty-two days after the Notice of Default is recorded, the sheriff sale takes place.  The Sale/Auction is held as a public auction at the time and place designated in the Notice of Sale (published in the newspaper and copied to the homeowner), and conducted by the sheriff w/ a lender’s representative. The successful bidder must pay immediately with cash or cashier’s checks in the full amount of the bid. The successful bidder receives a sheriff’s deed on completion of the sale. The lender usually bids in the amount of the balance due plus costs. If no one else bids, the property reverts to the lender.  
Step Three, Day 43:  After the Sheriff Sale, the homeowner no longer has the right to catch up the defaulted loan.   However, the homeowner does have the right to the propety and the right to sell the property for 180 days.  This 180 redemptiion period is a time the homeowner gets to find a new loan or sell the property.  If the homeowner is successful at selling the home and paying off the loan, the foreclosure says off their credit.    There is usually not a lot of equity in the property so the chances of paying off the loan may be slim; however, sometimes things can be worked out with the lender where they take less than what’s owed as full pay off.   At the end of the 180 days, the sheriff will physically evict you out of the property if you are not gone already.    This video shows what how that looks.  

Believe it or not, your lender does not want to own this real estate and foreclosing on homes for them is a losing proposition – well, really for everyone involved. There are two main ways than we can help. The first being that we bring some clarity and hopefully closure to your situation. The second major way is that by avoiding foreclosure you are really helping save your credit.

You see, most banks are dealing with a tremendous amount of foreclosures right now, and they have set up, what are called loss mitigation departments to handle alternatives to the sheriff’s sale. One of the most common strategies is called the pre-foreclosure sale or short sale. This is when the lender agrees to accept less than what’s owed on the property as full payoff and may consider the account closed.  

You see, most banks are dealing with a tremendous amount of foreclosures right now, and they have set up, what are called loss mitigation departments to handle alternatives to the sheriff’s sale. One of the most common strategies is called the pre-foreclosure sale or short sale. This is when the lender agrees to accept less than what’s owed on the property as full payoff and may consider the account closed. 

If you or anyone you know needs help to avoid a foreclosure, please have them contact us via our website at http://LakesAreaHomeBuyers.com

Thanks.

I’ll tell you exactly what this bailout means for us as investors.

Think of the bank’s books in terms of a balance sheet. They have assets on the left (notes or mortgages they hold) and liabilities on the right (deposits that they’ve borrowed from you and me). So, if a note goes in to default or gets written down in value, and the liabilities stay the same, the bank has just lost value in their balance sheet. stink - huh? Well, then the government in their wisdom steps in and says, “we’ll protect those mortgages so you don’t have to write them down”. So great, but the banks still don’t have any money to lend. So the government again sticks their nose in to it and says “here’s so money”, but the banks are scared to lend. They’re happy to have the money, so they can pay the light bill, but they aren’t lending anymore than they were last month. This bailout is only going to delay the recovery of the housing market. It’s not going to do a thing for us the investor. it may help the retail buyer here and there, and it’ll help our tenants by easing up on the credit card crunch; however, it’s not going to do a thing to us investors. Banks are still reluctant to make loans. Then, what is making matters worse, is the short sale market has also dried right up. Has anyone who listens to this blog had a short sale approved since the 2nd week in October? The banks are not giving discounts b/c they just got their Christmas Bonus from Uncle Sam.

We need to take a wait and see attitude toward this economy. There are still fundamentals right now that will work in the Creative Real Estate world; however, if you’re unaware of the fundamentals that I pound the drum upon, then you’d better just go back to Piper Jaffray or Target Corp. or Accenture b/c you’ve not learned the lessons of 2007 yet. Debt is bad, get rid of it. Any loan that’s indexed should also go the way of the buffalo. If you do not heed my advice, you will go down. you will go down to china town. Get rid of those properties with indexed loans (or loan mod them to fixed rate loans) quickly.

more later.

p.s. I shwacked some phesants this weekend with my family and my dogs.  it was a great time.  See photos on my facebook page. 

p.s.s. if you’d like to sell your home quickly and easily for a fair price, please visit our website at http://LakesAreaHomeBuyers.com 

I met with a seller who was losing his house the other day who had an interesting theory.  He said that the terrorists sure got their victory when they took out the financial district.  It didn’t come immediately, but the cause-effect relationship of our boom times post 09/11 created the mess that we are currently facing. 

I thought that was a very interesting theory; however, nothing could have created such a monster but greed. 

How will the bailout take it’s toil on local real estate?  well hopefully things will start selling again.  However, the short sale business may dry up in the mean time.  I’m not sure what will happen with the short sale side of things.  I was actually hoping for a little more pain on the side of the banks.  I didn’t think the REOs (bank owned properties) were selling for low enough.

If you’d like learn real estate, sign up for my newsletter at http://1RECoach.com
If you’d like to buy a house with no bank qualifying please visit my site at http://mn.arenter.com

More later.   

Marc

P.s.  I saw my good friends in Dallas this past week.  We were down for a Roop-Doran seminar hosted by by friends Richard Roop and Dan Doran.  We had a great time and reconnected with old friends.  It is truly the best time to be in the real estate business.

We have 2 closings this week.  Both of the quick-turn short sales.  The model works well, but it’s 8 months to cash, which doesn’t work well.  You have to be patient and dot your I’s and cross your T’s. 

here’s the business model.  Get a short sale signed up.  Work the short with the banks and lien holders which may take up to 180 days.  Once the BPO comes back and we find out the value, we list the property at the BPO price -  continuing the short sale process with our original offer.  the bank may counter our original offer, meanwhile we’re looking for a retail buyer (and possibly putting some money in to the property to clean it up).   Once we have either an approval or a buyer, we bring the price together, making a spread for us, and get the approval.    We then go to close and do a back to back closing.  Sound simple?    Well, there are a lot of moving parts, but it’s pretty simple. 

I like this business model for bringing in some cash, however, it’s a long road and there’s not guarantee that it’ll work.   For more strategies, stay tuned.

To sell your house quickly and easily for a fair price, vist us at www.lakesareahomebuyers.com

To learn the real estate business, or if you need a coach, visit http://1RealEstateCoach.com

thanks.