Real Estate Investing Coaching - Brian Gibbons

Real Estate Investors - Need Private Funds? If you can find the motivated sellers.....

If you as a real estate investor need Private Funds for new first mortgages, look at this article below.

You may or may not know, I train Real Estate Investors to get Private Money Marketing.

The steps to getting millions in loans are:

• Learn IRAs and Self Directed IRAs
• Learn CDs
• Learn how to get lists of people that have IRAs and CDs
• Set up a Seminar Free to All from those qualified lists
• See them 1 on 1 and offer 10% with security of being a Private 1st Mortgage Lender no riskier than 80% LTV.
• Do the paperwork and have the right clauses and CYAs.
• Close at an attorney's office.

That's it!

And keep in good communication with your private lender.

And GET THEIR FRIENDS AND RELATIVES as referrals!

For more info on getting your private lenders for all your deals, email me at team@REISkills.com

Ask for MENTORING FOR PRIVATE MONEY!

All the best in 2009,

Brian Gibbons, REI Coach

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Real Estate Resurrection Begins
Hugh Bromma, Entrust Group 01.08.09, 3:45 PM ET

Sales of new and existing homes continue to decline in the U.S., as assets of all stripes are re-priced lower and consumers become more risk averse. But the news in real estate is not all bad, and in some of the hardest-hit areas, like California, Florida and Nevada, sales in some areas have been rising in recent months.

While the national real estate figures show the country continues to be mired in a downturn that started more than two years ago, there are increasingly pockets of hope out there. It's true that much of the recent uptick in real estate activity reflects distressed sales, such as foreclosures. But the fact is that drastically lower home prices and more attractive mortgage rates--rates are down almost a full percentage point on a 30-year loan--are creating more buying interest, especially in the areas that have been hurt the most.

In fact, October existing-home sales surged more than 37% in the West, primarily because of the rise in sales in California and Nevada. And in Florida, existing-home sales jumped 15%, the second straight month of rising sales in the Sunshine State. Meanwhile, mortgage applications more than doubled during the week of Thanksgiving because of the rapid decline in rates.

Adding to the budding sense of optimism are reports that the U.S. Treasury will look to take mortgage rates all the way down to 4.5%, which would provide a huge boost to would-be home buyers across the country. Of course, real estate, even more than politics, is all about understanding the local area, which is precisely where astute investors are finding extraordinary opportunities.

Experienced real estate investors who have been able to keep some powder dry and understand their local markets are now able to buy properties for 50 cents on the dollar, or even less than just a year ago. In many cases, these are the kind of prices that represent once-in-a-lifetime opportunities, where the downside is now very limited and the upside is incredibly compelling.

One of the keys to finding a great real estate investment is understanding the importance of cash flow. We recently had a client utilize his self-directed IRA to purchase a brand new property just outside of Los Angeles. The property, a three-bedroom, two-bath single family home, was purchased for about $150,000, half what the exact same home would have cost a year earlier.

The purchaser had about $60,000 in the IRA and put down about 30% of the purchase price, making his monthly mortgage payment approximately $1,100 per month. In this area, similar properties rent for at least $1,400, so the property should have no problem showing positive cash flow right from the start. In addition, if there is a pick-up in the real estate market, the purchaser should be able to sell it outright for a handsome profit.

This is the kind of activity we are seeing more of in what were the hardest-hit areas. The key, of course, is having available cash--if you're buying real estate in a self-directed retirement account, you will need to put down 30% of the purchase price--and understanding the unique dynamics of the market you are buying in.

As a large administrator of self-directed IRAs, we've witnessed thousands of investors use their self-directed retirement plans to buy properties and realize excellent returns by selling them at a later date or renting them and allowing them to cash flow, as discussed earlier.

If you do decide to explore some of the more downtrodden areas, do your due diligence and understand the market in which you plan to invest. How is the local job market there? How has the area done in previous economic downturns? There's no substitute for knowing your market and doing your homework.

Hubert Bromma is CEO of the Entrust Group and author of How to Invest in Real Estate with Your IRA & 401(k) and Pay Little or No Taxes, published by McGraw-Hill.

---

Investor Loans — December 1 Is Drop-Dead Day For Investor Financing

Investor Loans — December 1 Is Drop-Dead Day For Investor Financing 

If you’re planning to finance any investment property with Fannie Mae-funded loans, be sure to get your transaction closed before December 1, 2008.  This is because Fannie Mae will debut a much higher fee structure for investor loans as of that date.

And these are seriously punitive to investors.  Take a look:

• If your down payment is in the 10-15% range, you’ll have an additional closing cost of 3.75%
• With a down payment between 20% and 25%, you’ll pay an additional 3%
• And with a whopping 40%+ as your down payment, you’ll still pay an extra 1.75%

There are some other limitations as well, including a maximum number of investment properties you can finance (I think that is 4).

Freddie Mac plans to institute similar measures, and they will begin even sooner - November 7.

Contact your mortgage broker for more details - and if you’re privy to any good strategies for reducing the cost of investor financing, sound off in the comments area below!

From Bryan Ellis's Blog

A home buyer's market? Hardly - Buyers have a tougher time getting loans these days, but there are several ways to improve your chances.

By Liz Pulliam Weston

A home buyer today needs to have nerves of steel.

Tumbling home prices, stiff credit standards, gun-shy lenders and spooked appraisers have combined to make even routine transactions treacherous. It's not that deals aren't getting done -- they are -- but buyers face conditions that have changed dramatically in less than a year.

If you're going to wade into this maelstrom, you should know what you're up against and how to increase the odds of getting the home you want.

The housing market today is afflicted by two interrelated factors:

• A credit crunch resulting from the bust of the subprime lending boom.
• Falling home prices.

 

Not every area has seen prices decline, of course. The Seattle, Portland, Ore., and Charlotte, N.C., markets have remained resilient, and even in stricken cities, home values are still rising in some neighborhoods.

Average numbers don't quite tell the whole story, cautioned John Karevoll of DataQuick Information Systems, which tracks real-estate data.

Home sales have slowed overall, but sales of more-expensive homes are down dramatically, Karevoll said. Deals involving homes worth $500,000 or more in California, for example, are "at about half the level they were in August," he said. Without those higher-end sales to buoy the numbers, the median prices in many areas have fallen more dramatically than they would have otherwise. It's a kind of statistical glitch, if you will.

The jumbo question

Of course, the reason high-end home sales have slowed so much is important to potential buyers and sellers of these homes. Let's explore that.

Mortgages fall into two broad categories, conforming and jumbo:

• Conforming loans are mortgages of a certain size (currently $417,000 or less), most of which are purchased and resold to investors by Fannie Mae and Freddie Mac, the two big home loan agencies that also offer a guarantee if borrowers default.

• Jumbo loans are those exceeding that conforming loan cap. They're not purchased by Fannie and Freddie, but until the recent past they were bundled and sold to other investors.

 

For months, though, the jumbo-loan market has been all but frozen. Investors who were once eager for these loans have been scared off by the rising delinquency rates of subprime loans (those made to folks with troubled credit), said Michael Moskowitz, the president of Equity Now, a New York mortgage lender. The investors worry that borrowers of bigger loans soon will default in droves.

So, fewer lenders are making these loans. Most now are made by Bank of America, Chase, Wachovia and Wells Fargo, said Jim Svinth, the chief economist for LendingTree.com, and they're charging higher interest rates. Instead of jumbo loans being one-eighth to one-quarter of a percentage point more expensive than conforming loans, lately they've been 1 to 1.5 percentage points higher. On a million-dollar loan, that gap could boost the payment by $800 a month or more.

• MSN Real Estate: How the slump limits home buyers' options

Rather than pay those high rates or meet the stiff criteria for getting the loans, because lenders now often require a fat down payment and high credit scores, many potential buyers are simply sitting on the sidelines, waiting for the jumbo-loan market to loosen up.

The situation is likely to improve if Congress temporarily raises the caps on conforming loans. The proposal that's part of the economic stimulus package would allow Fannie and Freddie to buy loans worth up to 125% of an area's median home price, subject to a $729,750 cap. That could lower rates on affected loans by a percentage point and stimulate sales.

But buyers still are likely to face other hurdles. Let's look at those.

Factors you control

Lenders assess you in three primary ways:

• Your credit scores.

• Your down payment.

• Your income and your ability to document it with tax returns and other proof.

At the height of the lending boom, you could be zero for three -- lousy credit scores, little or no down payment and unable to prove your income -- and still get a loan. Today, "you better be two for three," LendingTree.com's Svinth said. Good scores, a down payment of 10% or more and a steady, provable income put you in the best position to get a loan.

The requirements for credit scores have changed the most significantly.

FICO credit scores range from 300 to 850. Mortgage lenders typically pull borrowers' scores from each of the three major credit bureaus -- Equifax, Experian and TransUnion -- and base their rates and terms on the middle of the three scores.

In the past, FICO credit scores of 620 and below were considered subprime, which meant getting a loan would be more difficult and expensive. At the height of the boom, some lenders lowered that bar to 580.

Today, 660 is often considered subprime, and any score below 680 is likely to result in higher rates and tougher terms.

"If you have mediocre credit, you better have a 10% down payment," said Dick LePre, a senior loan consultant for Residential Pacific Mortgage, who writes a weekly newsletter on the mortgage business. LePre defined "mediocre" as scores between 640 and 680.

A year ago, you didn't need any down payment to swing a home purchase. Today, only a few lenders offer 100% financing, and you need sterling scores and solid income to get those deals. Otherwise, 5% down payments are typically the minimum required.

Factors you don't control

The final piece of the puzzle is the appraisal. Once accused of inflating valuations to appease buyers and lenders, appraisers are now under pressure to be conservative when assessing a home's potential value.

Matt Hackett, Equity Now's underwriting manager, said many deals are threatened and some fall through when the appraisals come in too low or an investor rejects the appraisal because the "comps" -- sales of comparable properties used to evaluate the home -- are more than 3 months old.

"In a lot of these areas, homes are sitting on the market for six months at least," Hackett said. "There are no comparable sales within three or four months."

There's also the issue of the "haircut."

In certain declining markets, mortgage experts said, Fannie and Freddie chop 5% off the amount they will lend on a house.

If the appraisal on the home you want to buy is $300,000 and you have a 10% down payment, for example, you'd normally get a loan for 90%, or $270,000. In declining counties, though, Fannie and Freddie instead will lend you 85% of the appraised price, or $255,000.

You either have to come up with extra cash, Svinth said, or arrange a secondary loan in these areas (mostly in California, Arizona, Nevada and Florida).

Before you make the leap

Given the state home markets are in and based on input from these experts, here's my best advice for potential home buyers today:

• Consider waiting. I'm not a fan of trying to time any market, but buying as real-estate prices are still falling takes a special kind of guts. If you're prepared for your home to continue losing value, your finances are in great shape and you plan to stay put for several years, you can go ahead and buy. In most markets, though, there's little penalty for waiting until prices start to recover, especially if you use the time to build your down payment and improve your credit scores. If you could benefit from the higher caps on home loans, that's an extra reason to put off buying until Congress acts.

• Whip those credit scores into shape. Read "7 fast fixes for your credit score" for techniques to boost lagging numbers. If your scores are good but could be better, consider paying down credit card debt and not using more than 10% of your cards' limits at any given time. It's particularly important not to open or close accounts when you're trying to improve your scores.

• Build your down payment. The more cash you can bring to the table, the better the loan you'll secure. Shoot for 5% as your minimum, but 10% is even better, and 20% is great if you can swing it.

• Identify your reserves. Lenders like to see that you'll still have money left over after making your down payment; that gives them a comfort level that you'll be able to cover your mortgage payments even if you suffer a temporary setback. Cash in a savings or money market account is good, but so is cash value in a life insurance policy or investments in a nonretirement account you could easily sell. You don't necessarily need to turn these resources into cash by borrowing or selling, but you should include them among your assets when filling out mortgage applications.

• Work with an experienced loan officer or broker. The mortgage lending situation right now is changeable and sometimes chaotic, so you'd be smart to have an experienced hand guide you through the process. Ask for referrals from friends and others you trust.

Liz Pulliam Weston's new book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published Jan. 31, 2008

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Congress Starts Action on the Sub Prime Problem - The following is a condensed version of a legislative "Alert" (update) distributed by NARHRI* from Washington, D.C., on Thursday, 11/15/2007

Congress Starts Action on the Sub Prime Problem - The following is a condensed version of a legislative "Alert" (update) distributed by NARHRI* from Washington, D.C., on Thursday, 11/15.   NARHRI ALERT Re: "Mortgage Reform and Anti-Predatory Lending Act of 2007" (H.R. 3915) __ The stated purpose of this bill is to prevent the events surrounding the subprime lending crisis from ever occurring again. The measure is due to begin debate on the House floor Thursday evening (11/15) and is expected to pass the House. See a SUMMARY of the main provisions of this bill at the end of this Alert. __ While this measure primarily targets the activities of mortgage brokers, not residential real estate investors, it is a major piece of legislation with the potential to impact the entire investment industry. __ One of our primary concerns about this bill is the de facto 'suitability' standards which it contains. Those provisions include language such as loans 'must be in the best interest of the consumer' and refis 'must have a net tangible benefit for the consumer'. While on the surface these provisions may seem innocuous, they concern us greatly because of the potential for lawsuits that could dry up credit and damage lenders who are already troubled. __ Class actions lawsuits for violating these suitability standards are prohibited under the measure, and the standards would not be retroactive. __ The House has added some related provisions, such as stricter regulation of appraisers. Additional issues under debate concern pre-emption of state law and homeowners facing foreclosure who have a renter. A GAO study of the impact of this measure on credit markets that will begin immediately. __ NARHRI's efforts on this measure will continue as it is considered in the Senate, and we will update investors as circumstances warrant. SUMMARY AS OF: 10/22/2007 (Introduced) Mortgage Reform and Anti-Predatory Lending Act of 2007 -- Amends the Truth in Lending Act to set forth a duty of care standard for residential mortgage loan originations. _ · Prohibits steering incentives to mortgage originators, including incentive compensation and any yield spread premium based on, or varying with, the terms of a residential mortgage loan. _ · Directs the Secretary of Housing and Urban Development and other specified federal banking regulatory agencies to prescribe jointly regulations to prohibit mortgage originators from steering any consumer to a residential mortgage loan that is not in the consumer's interest (loans with predatory characteristics). _ · Sets forth licensing and registration requirements for mortgage originators. _ · Sets forth minimum repayment standards for residential mortgage loans. Requires creditors to determine, based on verified and documented information, that a consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, insurance, and assessments. _ · Prohibits creditors from extending credit for residential mortgage loans that involve refinancing of a prior residential mortgage loan unless the creditor determines that refinancing provides a net tangible benefit to the consumer. _ · Subjects assignees and securitizers to liability for certain violations in connection with residential mortgage loans. _ · Sets forth defenses to foreclosure. _ · Proscribes certain practices, including: (1) certain prepayment penalties; (2) single premium credit insurance; (3) mandatory use of arbitration; and (4) negative amortization mortgages. _ · Redefines high-cost mortgages. Prohibits balloon payments for such mortgages. _ · Revises requirements governing prepayment penalties. Prohibits lending without due regard to repayment ability. _ · Prohibits certain creditor practices with respect to high-cost mortgages, including: (1) recommending default on an existing loan or other debt before and in connection with closing of a high- cost mortgage that refinances all or any portion of such existing loan or debt; (2) imposing late fees except according to specified requirements; (3) exercising sole discretion to accelerate indebtedness; (4) financing points and fees; (5) structuring certain transactions and reciprocal arrangements to evade the requirements and prohibitions of this Act; and (6) charging certain modification or deferral fees, and fees for notification of payoff information. _ · Requires pre-loan counseling. (Editor: bolding is ours.)  *NARHRI (National Association of Responsible Home Rebuilders and Investors) is the national advocacy group for real estate investors, based in Washington, D.C., which actively lobbies legislative issues nationally and in several states. NARHRI has been active in Texas since 2006 and TexREIA helps to provide financial support for their work here. To learn more and keep up with the work of NARHRI and TexREIA, visit www.TexREIA.com. Texas Real Estate Investors Association (TexREIA) is a non-profit, state-wide public advocacy group representing the independent real estate investing industry in Texas. Support TexREIA. Help us build and maintain an advocacy presence in Austin - to be a point of contact for legislators, and to be a voice to fairly and accurately represent the positive contributions of independent investors. Donations can be made online at http://friend softexreia.eventbrite.com Texas Real Estate Investors Association The Voice for Texas Real Estate Investors (This message distributed through the facilities and courtesy of DFWREIN.) email: texreia@sbcglobal.net phone: (972) 671-7346 web: http://www.TexREIA.com

Tips on selling your home in a slow market

                           

               

                  

If a for-sale sign is planted on your front lawn, it’s likely no surprise to you that home sales are slow. Sales of existing homes plunged 8.0 percent in September from the previous month, and stood at 19.1 percent below sales in September 2006, according to the latest figures from the National Association of Realtors. The national median price for existing homes of all types was $211,700 in September, down 4.2 percent from the $220,900 median a year earlier.

At the end of September, there were 4.40 million existing homes on the market, which NAR says represents at 10.5 month supply at the current sales pace. In a dismal market like this, what does it take to clinch a sale? Real estate experts say that sellers need to set a realistic price and be prepared for some hardball negotiating.

Consumer Reports Money Adviser offers the following tips to help your home stand apart from all the others on the market:

• Pick the right broker.  Look for agents who are listing, marketing, and selling in your area even if the market is slow. Visit potential brokers’ open houses to make sure they greet people, and show the home at its best, including details like removing pets.
• Know the real prices. To negotiate effectively you need to know if if deals in your area tend to include sweeteners. A house may sell for $400,000, but if the owner gave a 3 percent credit for deck repair and a new furnace, that’s a $12,000 reduction. Your real-estate agent should revise your deal to reflect what’s happening in your local market.
• Use staging to enhance your home’s appeal. A professional home stager can make over your home to de-emphasize your taste and make it more appealing to a broad range of buyers. A two-hour consultation can run around $300. Find staging pros in your area at www.stagedhomes.com or www.homestagingresource.com.
• Keep your MLS listing current. If it’s December and the picture of your house on the Multiple Listing Service shows your hydrangeas in full bloom, it’s a dead give away that your home has been on the market for awhile–and potential buyers may look elsewhere.

               

                                             

                  

If a for-sale sign is planted on your front lawn, it’s likely no surprise to you that home sales are slow. Sales of existing homes plunged 8.0 percent in September from the previous month, and stood at 19.1 percent below sales in September 2006, according to the latest figures from the National Association of Realtors. The national median price for existing homes of all types was $211,700 in September, down 4.2 percent from the $220,900 median a year earlier.

At the end of September, there were 4.40 million existing homes on the market, which NAR says represents at 10.5 month supply at the current sales pace. In a dismal market like this, what does it take to clinch a sale? Real estate experts say that sellers need to set a realistic price and be prepared for some hardball negotiating.

Consumer Reports Money Adviser offers the following tips to help your home stand apart from all the others on the market:

• Pick the right broker.  Look for agents who are listing, marketing, and selling in your area even if the market is slow. Visit potential brokers’ open houses to make sure they greet people, and show the home at its best, including details like removing pets.
• Know the real prices. To negotiate effectively you need to know if if deals in your area tend to include sweeteners. A house may sell for $400,000, but if the owner gave a 3 percent credit for deck repair and a new furnace, that’s a $12,000 reduction. Your real-estate agent should revise your deal to reflect what’s happening in your local market.
• Use staging to enhance your home’s appeal. A professional home stager can make over your home to de-emphasize your taste and make it more appealing to a broad range of buyers. A two-hour consultation can run around $300. Find staging pros in your area at www.stagedhomes.com or www.homestagingresource.com.
• Keep your MLS listing current. If it’s December and the picture of your house on the Multiple Listing Service shows your hydrangeas in full bloom, it’s a dead give away that your home has been on the market for awhile–and potential buyers may look elsewhere.

               

Getting Free and Clear Fast

                                       

Posted by: admin, in Financing,  Selling Houses                                

Jerry and I worked together for a couple of years.  He confided in me that he was going to be able to quit his job and retire by the age of 35. Naturally, I asked him how and he explained a very simple approach that will work anywhere, anytime.

Jerry was going to retire by selling building lots.  Boiled down to its essence, Jerry bought more land than he needed, sold off the excess, and used the sale proceeds to pay off all his loans.  He kept the unsold lots as an investment for the future. When he retired, he expected to sell them off on contracts to, and use the income to support his life style.  Here’s his technique in slow motion:

He would buy a 40 acre tract with seller carry back financing, have it surveyed into ¼ acre lots, then sell off the lots until he’s sold enough to pay off the mortgage.  At that point, he stopped selling the lots and just kept the rest. He repeated this process as rapidly as he could find tracts, cut them up into lots, and sell them off.

He sold the lots on contracts which wrapped around the existing financing.  When he couldn’t get the seller to accept these contracts in payment for the land, he pledged them as security for a bank loan and used the proceeds to pay off the seller.

Why would the bank do this?

• First, having a lot of people owe them money instead of just one speculator was much safer for the lender.
• Second: These were building lots.  When the buyers were ready to sell, the lender would have an opportunity to make the construction and permanent home loans. 
• Third: In the interim, the banker was getting to know the borrowers.  He had their loan payment records and knew who paid on time and who was slow. 
• Fourth, Jerry was good business for the bank, and could be counted on to bring in more land loans in the future.

• It’s just a hop, skip, and jump to transferring this land technique to buying houses.
• Buy more than you need, sell off the excess, then use the proceeds to pay off debt on the ones you intend to keep. 
• This approach will work in any market with any priced houses so long as you have the discipline to work hard to find and negotiate to buy houses at a price where there is an instant equity and a ready market to sell into.
• In all but the very highest realm of house prices, any house will cash flow when it’s free and clear. 
• Using this approach you won’t have to manage them for 30 years until they are paid off.

• I’ve mentioned my friend who boiled this down to buying ten houses each year, selling off 5 to provide cash flow and to pay down debt, and keeping the rest as long term rentals. When he got ten of them free and clear, he quit and lived off the rents for 25 years.  He recently sold them and is now living off the income from the sales.

Why couldn’t you do this too?

MBA (Mortgage Banker's Assoc) goes to bat for seller-funded down-payment assistance

Industry  claims rule change could halve FHA loan volume Monday, August 13, 2007 By Matt Carter Inman News

Sellers have probably abused their right to provide down-payment assistance through nonprofit groups, but regulators should establish caps and more stringent eligibility requirements on FHA loans rather than ban the practice outright, an industry group maintains.

In a letter to the Department of Housing and Urban Development, The Mortgage Bankers Association said seller-funded down-payment assistance on loans insured by the Federal Housing Administration has "provided an important tool for low-income, minority and first-time home buyers," and should be reformed, rather than scrapped.

HUD has proposed tightening the rules governing down-payment assistance on FHA insured loans, in part because of concerns that allowing sellers and others who profit from a home's sale to participate in circular financing arrangements artificially inflates home prices.

Of particular concern are charitable organizations that sellers often use to circumvent FHA restrictions on seller-funded down payments. Down-payment assistance from nonprofit groups has grown from 1.7 percent of FHA-insured single-family mortgages in 2000 to more than 30 percent this year.

In addition to inflating home prices, studies suggest loans that rely on seller-funded down-payment assistance don't perform as well as other similar loans. A November 2005 study by the Government Accountability Office found that the default rate on such loans was 22 to 28 percent, compared with 11 to 16 percent for loans with other forms of down-payment assistance.

New rules now under consideration would prevent sellers from providing charitable donations or service fees from the proceeds of a home sale to charities that provide down-payment assistance.

The proposed rule change would still allow down-payment assistance from family members, governmental and public agencies, employers and labor unions, and IRS approved tax-exempt charitable and educational groups. The IRS no longer considers charities that provide down-payment assistance tax exempt if they accept money from sellers.

Citing testimony from such groups, the MBA says seller-funded down-payment assistance has helped nearly 500,000 low- and moderate-income buyers purchase a home, with 81 percent of those loans still performing.

The proposed rule could reduce FHA loan volume by 30 to 50 percent -- at the expense of low-income, first-time and minority home buyers, the group said.

"Considering that (FHA's) market share is lower than at any time in recent history -- less than 2 percent -- the impact to FHA could be quite serious," MBA Chairman John Robbins said in the Aug. 7 letter to HUD.

"While there appears to be much evidence that … seller-funded down-payment assistance has been abused, it is unnecessary to fully eliminate the program in order to address concerns of abuse," the industry letter said.

Requiring more stringent controls could reduce the percentage of nonperforming loans and keep artificial price inflation in check while preserving the benefits of the program, the MBA said.

The MBA recommended that HUD:

 

• Cap seller-funded down-payment assistance at 6 percent or "what is customary for the area," whichever is less.
• Establish more stringent loan eligibility requirements and screening for high-risk factors such as low or no reserves or poor credit history.
• Introduce better valuation controls to reduce the likelihood of inflated sales prices for homes with seller-funded down-payment assistance. In addition to standard appraisals, lenders could be required to use automated valuation tools "when available and appropriate" or perform desk reviews.

The National Association of Realtors advocates allowing the FHA to insure zero-down-payment loans for first-time home buyers, which the group claims would be "a major step" in eliminating the incentive for the "most abusive" seller-funded down-payment programs.

The House of Representatives in July passed legislation that would allow the FHA to introduce risk-based pricing and insure zero-down loans. The Expanding American Home Ownership Act of 2006 has been referred to the Senate Banking Committee.

***

A Wicked Credit Crunch- Led by seismic subprime holdings, the roiling debt markets are casting a pall over the entire real estate sector. And so they should.

Forbes.com

Real Estate Intelligence

Peter Slatin, Forbes/Slatin Real Estate Report 08.13.07, 11:00 AM ET

Led by seismic subprime holdings, the roiling debt markets are casting a pall over the entire real estate sector. And so they should. Before central banks around the globe acted in unison to inject liquidity that lubricates the mortgage machine, published reports put the total number of unsold loans sitting in financial institutions' warehouses waiting to be resold at around $260 billion in the U.S. and another $200 billion in Europe.

And with investment spigots turning off across the U.S., that money is going to sit for a while.
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On a recent conference call with investors, a team of Wachovia Securities research analysts in credit markets and real estate addressed the rapidly changing nature of trading in debt and property. Dan Sullivan, a Wachovia managing director who tracks fixed-income securities for REIT debt, called the current situation "a buyers' strike. There is a complete malaise on corporate credit."

Fixed-income market strategist Richard Gordon noted that what was more surprising than the subprime meltdown itself was "how many [lenders] refused to alter their positions despite a sure bet of an increased default rate on subprime and collateral mortgages originated in 2006."

Last year saw a significant deterioration in underwriting standards, noted Gordon and others on the call. Gordon went so far as to say that some loans were even "fraudulently securitized and sold up into the secondary markets through collateralized debt obligations."
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The ensuing blow-back from all of this, said Gordon, "has morphed into a bigger problem in corporate credit" in general.

Today, two critical questions remain unanswered: First, how deep is the subprime problem, and how deeply will it affect the entire economy or create other credit problems?

One estimate is that at least half of the risky subprime deals have yet to surface, indicating much more bad news is on the way. But the second issue is of perhaps even greater concern: What are the long-term problems that could be created by the unwinding of a "massive pipeline" of existing leveraged buyout and other restructuring deals written in the last few months and predicated on pricing assumptions that no longer hold true? Many of these corporate deals were "priced aggressively or with risky structures, and it is impossible to get these deals done now. There is no acceptance for that type of risk," Gordon said.

"The markets have shut down" as investors wait for risk to be repriced,” he said, noting that the overhang is "billions of dollars in bridge loans" that have not yet been funded. The result? "We have seen this drag down markets that are fundamentally very sound, especially commercial real estate and the financial sector."
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Some serious risk factors have taken on elevated profiles in recent weeks, noted Wachovia's Tony Butler, a director specializing in collateralized debt obligations and commercial mortgage-backed securities research. These include "systemic risks" that a larger percentage of assets in a given debt pool will default, as well as the "growing risk of implied correlation"--the spreading of risk across other asset classes.

"Almost all assets are mispriced to some degree," said Butler.

As a result, the credit markets are heading into what may be a sustained repricing period. The simple fact of the slow late-summer trading season, with many traders on vacation, could actually delay the kind of activity needed to eventually create a "more permanent repricing to risk that was mispriced." Indeed, said Butler, at present there is almost no lending activity, which has more to do with concern in the market than carousing at the beach.

"The clear message is that investors simply will not tolerate the lending standards of 2006," noted Butler.
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The new turbulence in markets last week is certainly exacerbated by the monthly marking to market by hedge fund managers of their investments. Just as American Home Mortgage kicked off the most recent leg of the subprime slide, news of BNP Paribas hedge fund woes and persistent negative rumors involving Goldman Sachs have roiled the markets further.

Panic to some, though, is mother's milk to others. "There are real money accounts interested in buying good collateral at cheap prices," said Butler. "When those accounts start to apply capital, we will see liquidity return."

Much of that money is believed to be overseas capital sitting on the sidelines waiting for the appropriate moment to jump in; clearly, that moment and the bottom it signals have not yet arrived. Even when it does, says Butler, "the downturn in the credit cycle will take some years to play out."

Still, investors, traders and lenders watch to see where the next shoe will drop--or who will have the nerve to call a bottom and dive in and start harvesting. Or who will simply decide it's time to start counting and cutting losses.

Peter Slatin is editor of the Forbes/Slatin Real Estate Report. Click here to learn more about this newsletter and its model real estate portfolios.

Send comments and questions to newsletters@forbes.com.

More Real Estate Intelligence columns

How Much Money Are You Leaving on the Table?

I just got back from the High Volume Wholesaler seminar at sea.  Bob Lucroy, Walter Wofford and I crammed as much information as we could into four days of classroom time plus daily breakout sessions.  We wish we could share even more, but it’s hard to squeeze 30 plus years of combined real estate experience into four days of training.

We’ve each had some huge success and after reflecting on what makes our wholesale businesses work so well, we were able to boil it down to just a few reasons ( or “secrets”) for our long term success.

You might be surprised to learn what they are:

1. Focus on building a buyer list above all else.

2. Build a relationship with that list, and continue to follow up with the people on the list to strengthen that relationship.

3. Focus only on finding properties my buyer’s have told me they want.

Sounds too simple, doesn’t it?

Well, I have found over and over that, at least in business, simple beats complicated pretty much every single time.

Those three “secrets” (obviously, they aren’t really secrets - I more consider them RULES for my
businesses) are the reason my real estate business run so smoothly.

They are the reason that we never have problems wholesaling the houses we find.  They are the reason that our buyers keep coming back for more and more.

If you follow those rules, then it is really difficult for me to imagine a scenario where you won’t succeed.   It’s as close to a sure thing as I know.

Now I am going to throw one more thing in here…
my FOURTH secret to success.

This is one that took my existing success and put it in overdrive. Too bad I didn’t figure it out until I had been in business for about two years.

But once I found it… well, my profits doubled in the following year.

So here it is, my fourth secret to success in my wholesale business:

4. Always make two offers to the seller.

Make one offer that is a low, all cash offer. 

And one offer that is about 10% higher with a very low down and low monthly payments.

About half the time, the seller will go with the all cash offer and the other half of the time, the seller will go with the terms offer.  Many sellers don’t need the money now and the higher price is more attractive.

Either offer is fine with me, but I really prefer that they pick the term offer because it makes it possible for me to create NEW profit centers when I can offer Seller Financing to my buyers.

Here’s an example:

________________________________________________________________________

$100,000 house that needs a lot of work.

a. With an all cash offer, I might get an option for $45,000 and sell to a rehabber for $50,000. I get ONE payday of $5,000.

b. But, if the seller will accept monthly payments, I can make more money – see the example below:

• Let’s say the seller accepts an offer of $50,000 with $1,000 down and monthly payments of $400( notice, no mention of interest) and the loan will be paid off within one year.
• Now, I can offer seller financing to my buyers which makes it easier for me to sell.  Here’s what the numbers might look like on the sell side:
• Sell for $57,500 with $5,000 down and 12% simple interest (monthly payments of $525)
• See  what I’ve created:

$4,000 payday up front
$125 cash flow every month for a year ( $1500)
$2,500 when the loan is paid off
I made a $8000 on the deal because I was able to provide Seller Financing.

What would happen if you negotiated NO PAYMENTS for one year with your Seller and they just got a balloon payment at the end of the year?

Or what if your payment was less than $400 to the seller?

Or what if the payment to the seller did not start for 3 months?

See how you could make an EXTRA $1,000 - $4000!

Keep in mind that I don’t have ANY of my money in the deal because I used the Buyer’s money for the down payment…..and get this…. I NEVER needed to use a private lender to make this work!

You can do this!

If buyers have two deals to pick from and one requires that they get a hard money loan, but your deal is offered with seller financing, which one do you think they will go with?

When you make it easy for your buyers to buy, you are helping to build a good relationship with your buyers!

• What would happen if my buyer wanted to pay me off early?
• Or the seller wanted to be paid off early?

That could create even MORE profit centers, here’s how:

• I could negotiate a discount for paying off the loan early – I might make an extra $2,000 - $3000 profit or more.

When you can get the seller to accept terms, there are many different ways you can create profit centers.

• You might be thinking, but what if your buyer defaults.

No problem!  You get to sell the house again and make an extra $5,000!!

See how just a little tweak here or there can create NEW profit centers to make your business more profitable with less work and less effort.

There’s one more secret— the FIFTH Rule

5. Continuing education

The best way to breathe new life into any real estate business is to learn and implement new ideas.   

When I started going to seminars to learn new ways to make money, my real estate business really took off.  I would learn new things from what was being taught at the seminar, but quite often, I’d learn just as much from networking with the seminar attendees.

Why do you need to learn new things?

If you just keep doing things the same old way you will never get new results.  You do want new and better results don’t you??  Well you should!  You should constantly be looking for ways to improve all aspects of your life and your business.

I know it is hard to believe, but I honestly think my business runs better when I get away from it every once in awhile.  It gives me the opportunity to work “on” my business instead of “in” my business.  And it makes me much more productive.

That’s it… those are my FIVE secrets that have led to my success… and brought my business to a level that I simply couldn’t have imagined back when I started.

To YOUR Extreme Success,

Jackie

P.S. Want to learn how to create many NEW profit centers in your real estate business?  That’s what the Alaska cruise is all about! Join Jack Miller, Walter Wofford, Quincy Long and me September 12 – 19.  We are going to spill the beans about the multiple profit centers we have created in our businesses.  But you better hurry!  Our cabin block ends February 15th, so you need to sign up now if you want to go.  You only have to put up a $300 deposit you can reserve your cabin and you have until June to make the final decision.  If you decide not to go, you get the $300 back.  For more details, see www.CashFlowConcepts.com

Liar Loans

                                       

Posted by: admin, in Ethics,  Financing                                

Possibly one of the most tempting and prevalent fatal flaws in an entrepreneur’s arsenal of techniques is loan fraud.  Most of the time this occurs because a buy/sell dealer made some financial mistakes along the way and figures out that selling for an inflated price will enable him to move on with enough money to make another mistake another day.

Loan fraud is a most tempting crime – and it is a federal crime - because it can bail out a bad deal with a profit.  It’s so easy to fall into this trap, and when caught, the perpetrator can almost bank on doing time in club fed.  How does this happen?

It’s easy.  People get lured into mortgage fraud step by step. Here’s a short trek down the path toward a criminal career: An inexperienced or unknowledgeable person pays too high a price for a property using short term expensive money or seller financing with unfeasible terms; then spends more borrowed money to cure unexpected defects in, or to over-improve a house he expects to sell.

Next, he sets a sale price that guarantees a profit without regard to actual fair market values.  Then, when qualified buyers refuse to pay the price, he sells it to a person with insufficient income or poor credit who wouldn’t ordinarily be able to get a loan, and has no choice as to what he pays.

Then he finds a culpable mortgage broker who encourages the buyer to falsify his income and job history to help him get a low down payment loan, then gets an appraiser to appraise the property at a value that more than justifies the price and loan.

Let’s say that all goes well. The entrepreneur walks away with enough money to pay for all his mistakes and the buyer moves in. Sooner or later several things happen. Something in the house could break, leading to claims that the seller had failed to disclose defects.  Or the buyer stops making payments and the lender has the house appraised only to discover he’s been duped.  Or any of the co-conspirators gets into trouble because of loose practices and turns everybody else in to save himself.

In any case, it’s easy to unravel this little plot because it has been used thousands of times before.  The judge throws the book at the miscreants and they lose everything in addition to spending time in the lock-up.  When they get out, their record is there for all to see with whom they might try to do business.

Take my advice, don’t use liar loans to bale out bad deals.  Learn enough about houses to avoid bad deals and to start making good deals and you’ll be healthier and wealthier, and hopefully much wiser.