Where’s The %^* Inventory!?

There is a lot of interesting events taking place in the foreclosure real estate market, at least in Southern California.

Right now, there is an obvious and blatant lack of inventory.  We’ve been hearing “multiple offers” now for months now, but yesterday we heard a new record….52 offers on a 3/2 in Desert Hot Springs!…holy cow!

Now, yes, I know, “it’s coming, it’s coming, just wait, another massive wave is on its way”….and I do believe there will be another surge at some point.  However, there are some peculiar behaviors on the part of the lenders that control whether or not the foreclosure sales go through.  A very large percentage of the foreclosure sales that are being put on delay are happening on the lender’s own accord, NOT because it is mandated by the moratorium…why?

Sean O’ Toole, creator/founder of ForeclosureRadar, has a fascinating observation, “

“While many complain that lenders are foreclosing too aggressively, and others claim a wave of foreclosures sales is imminent, the data actually shows that lenders are doing everything possible to delay foreclosure…The reality is that we have very few homeowners being foreclosured on when viewed as a percentage of those scheduled to be foreclosed on, in default, delinquent, or upside down in their mortgage”.

I wish I had an answer for you that was not conjecture.  It could be that the lenders are being very cautious that they are not construed of running afoul of new legislation.  Maybe it’s because they are waiting to see what plays out?  I don’t know, but what I do know is that there are many areas where a quality house (with equity) that is available for sale does not exist.

So, the important part is what does this mean to investors and wholesalers, and what should the strategy be right now?

…Well, here’s the thing, when inventory is this scarce,

IT COULD NOT BE BETTER for retail flipping!

Yes, you can get deals.  But because there are so many multiple offer situations, it’s almost like we are all bidding at the trustee sales, so you need to put the deck in your favor AS MUCH AS POSSIBLE.  The rules of offer making have changed.  You have to be able to read a little bit between  the lines.

I am going to give you a list of strategies that we have used to still come up with some great flip deals.  We currently have 3 fix up projects…2 of which are in escrow, 1 is almost finished and will probably be sold the minute we are done.

But first, a few more comments on what’s happening so the tips make more sense.

First of all, just like in all of 2005, 2006, and 2007 the market was LOWER than the common perception, right now I suggest to you  that the market is actually HIGHER than the common perception…why?

Let’s look at the dynamics of how this works with an example:

Rewind to 2006-  you are about to sell your house, and you know your neighbor’s house sold for $325,000  just 5 short months ago (and of course your neighbors just have no taste in paint color or landscaping so surely yours will sell higher).  So you put your house up for sale for $340,000….nothing.  Nada. Zip.  Not even a nibble.

So, of course you are stubborn because you are sure it’s a fluke.  So you decide to drop it to $329,000….again, silence.

This continues until 8 months later you are at $265,000 and still nothing!!…remember, the most common method for evaluating property is “running comps”, i.e. looking at what has previously sold.  Well, because there ARE NO NEW SALES, because everyone is refusing to drop their prices enough, we base prices on the last available comps, which in this example is $325,000.  Well, it’s not even selling for $265,000 which is an indication that prices have taken a tremendous hit, but it’s impossible to know where to place the market because it’s all guesswork until we start getting actual “Solds” again.

Sellers had to keep dropping prices until finally the buyers started to come back in.

In January 2008, volume picked back up and has been exploding ever since, gobbling up inventory.  This combined with the moratoriums and holding back of new foreclosures has creating a severe scarcity situation.

New homes that come on the market are experiencing bidding wars.   Properties that are listed for, say, $135,000 are closing at $150,000, just as an arbitrary example.  What can we imply here?  You got it, prices are going UP at the low end and the driving force is scarcity!

Here is another point, just as before, there is becoming a lack of brand new “Solds”, not because no one is buying, but because there is NOTHING TO BUY!

I’ve seen this in a few neighborhoods now, namely Fontana.  Can you see how this is just like the example except in reverse?  I really think that if we had some more inventory, prices would actually reflect the pent up demand and would demonstrate these price increases, but

…until you have actual “Solds”, you can’t PROVE prices are higher.  USE THIS UNCERTAINTY TO YOUR ADVANTAGE.

What does this mean to us as investors?  It means that flipping is fun again because if you can get your hands on a deal (which is the trick now), it will sell, and sell fast!  Of course, it is harder to get a deal, but it’s not impossible.  There may be bidding situations, but some investors are not reading the trends and are actually being too conservative.

Here is a real world example.  On one of our wholesale flips, our investor buyer was getting gun shy because of the existence of some low “Sold” comps.  However, we demonstrated a “bird’s eye” view, and pulled up EVERYTHING in a 3/4 quarter mile radius.  There were 25 “Solds”, 19 “Pending Sales”, and only 2 on the market!! And guess what?  We called the agent on one of those properties and….you guessed it, 10 offers and it was about to go pending.  We didn’t bother checking the other active listings because you can pretty much deduce that it was the same situation.

When our investor “read between the lines”, he couldn’t close on it fast enough, and he will undoubtedly make a nice, fast profit on that deal because it will sell instantaneously when he sticks it back on market (again, because it will be the ONLY thing money can buy).

***A word of caution*** How long will this drought last?  I think it’s impossible to say…and yes, it is possible that if you take too long to get your property rehabbed inventory will come out and torpedo your deal…I said “it’s possible”, but I wouldn’t overly worry about it too much at this stage…

There is SO much pent up demand, especially for clean and fresh houses, I believe that we will have a little bit of a warning period, BUT DON’T GET TOO COCKY…don’t mess around, get your flip cleaned up and on the market quickly.  Take advantage of the market while the iron is hot- move FAST.

Bottom line, we will get a little bit of a warning because excess inventory will be bought right away as it hits, and it just might even help your case by providing higher comps that will help your appraisal! ….but like I said, if you see inventory coming and you still have the entire fix up job to do….GET BUSY, you’ll be okay.

Next, do NOT over improve your house!  If you have the only clean house in the area available for purchase, there is NO reason to go overboard.  This is in stark contrast to a few years ago where the market was FLUSH with inventory, and you really had to give your buyer a big reason to choose your deal….not so much anymore, at least at the time of this post.

Another even more important and paramount reason not to over improve is APPRAISALS.  Excuse my Latin, but appraisals are horseshit right now..  If you are actively trying to flip a house or you are an active Realtor, then you likely have encountered this scenario….eg. 5 people want to buy your house for $225,000.  It’s beautiful, head and shoulders above anything on the market.  There are 5 comps in the area that are completely trashed and sold for $160,000 – $170,000….(and sold in 7 days nonetheless), you guessed it, appraisal on your property, EVEN THOUGH THE MARKET IS BEGGING TO BUY IT for $225,000, gets appraised for $190,000, making it  difficult to sell your house with financing.

The market is in a precarious situation- just as it is hard to find supporting comps on the upside because there is simply not enough solds, a new asinine House Bill has put the fear of God into licensed appraisers regarding coming out too high so it has made it even tougher….we are ARTIFICIALLY stunting the market’s growth!  This is a fiasco in light of our economy and how much we would benefit if we could let the damn market recover.  Yet that is another story for later.

…(more on this House Bill later, my post is already too long)

Now, I realize that the appraisal issue appears to contradict what I said about flipping being a piece of cake.  Well, it’s a hindrance and makes life more challenging for flippers (along with the 90 day anti-flip rule), however, these houses ARE getting sold, sometimes it just takes going through a few buyers.

The benefit of scarcity is that all the buyers get concentrated on your property, including the cash, and conventional (those with 20% to put down) buyers.  So don’t pass on a great deal for being in fear of not being able to sell….if you can get your hands on a property where there is nothing available, you WILL be able to sell it.

….Study comps, study comps, study comps

Okay, so that’s enough ranting for today- let me get to some “Bottom Line” tips for you that we are seeing work for our investors/wholesalers.

1.  Actives are MORE IMPORTANT than “Solds”. Study comps from a bird’s eye view….low sold comps are not so bad IF they have very low days on market (less than 2 weeks) and there is no inventory sitting on the market unsold.  If something IS sitting there NOT selling you MUST investigate..check property history, ignore it if it is a short sale, and don’t hesitate to call the broker and ask questions.

This is where you can get an upper hand b/c most investors haven’t figured it out.  You always want your flip to be the best value on the market, and that’s pretty easy when it’s the ONLY house on the market.

2.  Screen out the active short sales…they can make actives look very low, when they are artificial numbers that rarely have anything to do with the real market.

3.  Look at the trend…days on market, unsold inventory…if you see days on market shrinking over the past two months, inventory shrinking.  These are all signs that you have a very HOT area on your hands.

**Very important** you need to look at property history.  For example, let’s arbitrarily say a property will show 190 days or more on the market and looks like a horrible comp.  When you look at property history, however, it may tell a different story, it could appear to be sitting on the market with no one interested when in reality:

a)  it fell out of escrow multiple times, and in reality has gone into escrow within days before falling out

b) it’s a short sale that JUST got approved (after being on the market for 180 days!)

c) it experienced a drastic price reduction (it was on the market for $210,000 or higher for 180 days, then it got dropped to $175,000 and sold in 10!)...this is the stuff that will mislead the less savvy investors and cause them to be overly conservative-

…KNOW the REAL story! …’ya gotta dig, but it can pay handsomely

3.  Relationships!! – Don’t even think about sending in an offer to a broker without calling him or her!..Sometimes a great conversation can literally put your offer right at the top!  Close one with a broker and they may just bring you one before it gets listed!

4.  Although this is tougher to do for my wholesalers out there, increase your deposit amounts, and shorten your escrow periods in your offers as much as possible.  If you are a cash buyer, you have a big upper hand.  If you can team up with a cash buyer it definitely helps.

5.  Take MASSIVE before pictures and save every receipt.  Make it look as horrible as possible in your before pictures.  Get a statement if possible from a contractor or appraiser saying how horrible it is.  This is so that when you go to resale it and you put on your boxing gloves with appraiser (and you will), you will be fully armed with documentation of your improvements.
I literally decided as I wrote this post that this would be a great time to do a webinar on how to read comps and make offers in this market.  Join us and learn how to outbid the competition on these REOs that pretty much ALL have multiple offers now.

Join us Thursday June 25th online at 7PM Pacific time for an online presentation on how to get an unfair advantage by reading “in between the lines”…Be Happy and Prosper!
Kurtis

JOIN HERE, REGISTER BELOW:

https://www1.gotomeeting.com/register/932610377

Lipstick On A Pig

Here’s some inside scoop for you if you are planning a fix n’ flip… Across the board, every one of our professional flipper friends are pulling hair out over hitting appraisals.

Basically, the investors are getting killer deals, fixing them up BEAUTIFULLY, and when they put them back on the market they are getting offers right away (I’m telling you, flipping is fun again, Cindy and I have 2 going).

However, the challenge right now is that the end-buyers out there are actually qualifying for the loans, but the properties aren’t! …What do I mean?

These ludicrous appraisals keep coming back from the ultra conservative banks (NOWWW they decide to get conservative, it’s probably the safest time to lend in 7 years!).

They are comparing freshly remodeled houses against trashed lender owned stuff and being ruthless. A low appraisal means no loan for the buyer…what’s the remedy?

Well, a year ago we said your rehabs had to be really good- top notch- b/c buyers were sluggish, and they needed a GOOD reason to buy your property over the masses…well, buyers are now out in FULL FORCE, and we are seeing multiple offers on just about every good deal. So, what we are experimenting with, is get a killer deal of something that is in horrible shape, and do a clean, adequate job of rehabbing it (you always need new carpet and paint), but don’t go crazy with the appliances and higher end stuff..

..think clean, not glitz….

and put it on the market below the others and shoot for a lower selling price…don’t do a bad rehab, just a low end one- mow the yard, don’t re-landscape everything, see if you can get away with refacing or painting cabinets versus ripping them out, etc. With all the activity out there right now (be sure and confirm that with your area), you should still be able to sell quickly and make appraisal if you keep your end price down….we’ll keep you posted as the market continues to evolve….

Be Happy and Prosper,

Kurtis

…In Tough Times

I’m not a big “Ra Ra” guy.

At some real estate seminars, I get quite irked when 30% of the material is motivation.

I have two shelves of personal development, spiritual, and motivational books (not including what I’ve given away) and when I go to hear about how to make money in real estate, that’s what I want to learn.

THAT BEING SAID, forgive me if this post is a little bit “Ra Ra”, but I was cleaning out files recently and I came across something I had written 3 years ago during the hardest period of my life, and  I humbly share it with you just in case you might be struggling right now in the hopes that it may help.

In 2005 and 2006, when the onset of this crisis hit us personally, Cindy and I watched our savings and equity in our rehab projects evaporate.  We had a newborn, and my best friend since 8th grade passed away.  We lost two of our investments to foreclosure, and I really thought real estate was over for us.  At one point we had to yell at the kids not to open the refrigerator because our power had been shut off.  I had no idea what we were going to do.

Still, I did and do believe that a focused mind combined with bold action presents resources and genius that will create results that are mind blowing, even in the midst of dire situations.   The hard part, I think, is to stay focused on what you want when challenging times tend to pull our focus on what we DON’T want.

(At race car driving schools, they have a mechanism that disables the vehicle and causes it to start veering.  The instructor trains the driver to look forward in the direction he or she intends the vehicle to go, rather than looking at the wall, which is directly where the car would be heading!)

I had read  “Think and Grow Rich” by Napolean Hill more than once, so in the early part of 2006 sometime I dug it out and I took one his famous quotes and printed it out and taped it to my wall.  It said,

“Every adversity, every failure, every heartache
carries with it the seed of an equal or greater benefit.”

I had also read of a little exercise that helps keep you focused on what you want, versus what you DON’T.  The exercise is simply to write down every possible benefit you can think of about a problem you have.  The purpose is to help your mind loosen up a little and perhaps spark some creative solutions.

I asked myself, “What are the benefits, advantages, and opportunities in being flat broke right now?”

At first I drew a complete blank.  Then, some answers came to me.  Here is the exact unedited result that I banged out on my computer 3 years ago:

March 15, 2006

“What are the benefits, advantages, and opportunities in being flat broke right now?”

1. It forces us to find a way to make big money now!
2. It compels us to scrutinize our expenses.
3. It compels us to pay attention to what we spend on.
4. It makes it more exciting and meaningful when we become wealthy.
5. Gives us a deeper understanding of managing money.
6. Brings us closer together as a team.
7. Gives us even deeper knowledge of real estate and how to make money in good markets and bad.
8. we can share our experience with others who are struggling.
9. we can help others one day, and even sell a book or something
10. builds character.
11. Teaches us humility.
12. Teaches us to not be wasteful.
13. Teaches us how to be better about hanging on to money when we get it.
14. Stories to tell our kids and grandkids!
15. Will give us confidence that we have the ability to get out of tough situations.
16. Make us better people.
17. Compels us to take action on a lot of different things.

I wrote this in March 2006, almost exactly 3 years ago.  At that point there seemed NO WAY OUT.

We scrambled like crazy, I tried many different things including:  getting my RE license to broker hard money loans for investors, internet marketing, a foreclosure processing company, a “staging” homes business so that homeowners could sell faster, and running auctions for homeowners trying to sell (we were getting pretty damn good at it trying to auction our OWN properties!).

After a lot of flailing and picking up a check here and there, but not nearly enough to support us, Cindy and I sat down and said, “Now what the heck are we going to do about this situation?”.

We went over our strengths and realized that finding deals was our greatest strength, and deals were starting to crop up.  We had no money to do rehabs any more, so we put our entire focus on finding deals for other investors we knew, and I used what I learned about internet marketing to turbo charge finding buyers, and things turned around for us.

I really believe that things changed because as hard as it was, we kept asking the question of ourselves, “How can we not just survive this, but prosper in a way that is fun and offers value to others?”  If you are struggling right now I ask you to just try this exercise, and keep asking the question, “How?”, NOT “Why?”.  Our minds come up with just amazing answers, if the right questions are put in!  I believe this with all my heart, even more now.

Now, this doesn’t mean that I believe that if you sit in a room and think very hard about you want but not take any  action or give no value that the universe will ring your doorbell and the objects of your desire will be special delivered.

Write down every benefit you can think of about the challenge ahead of you, even when it feels like there are none.

Put it where you can see it and everyday ask “How can I improve my situation?” You will find your solution no matter the odds, if you keep focused on what you want, not what you don’t, do what you have to do when the answers come to you, even if it’s scary, and don’t give up.  It will not happen overnight, but it will happen.

If you would like the audio to “Think and Grow Rich”, by Napolean Hill, you can download here.

http://www.farbelowmarket.com/thank-you.asp

Hang in there……and be NICE to yourself.

Kurtis

Second Wave Of CA Foreclosures Coming

Well, it appears that the results of California State Senate Bill 1137 accomplished what we thought it would, prolong a bad situation.

Bill 1137, what I call the “pull-the-bandaid-off-really-slowly” bill definitely did succeed in delaying foreclosures for a few months. However, it is turning out that the vast majority of the foreclosures are still coming home to roost, just in a delayed manner.

If you were following us toward the last quarter of 2008, we spoke a lot with REO brokers how listings were crawling almost to a halt. We knew it was mostly because of this legislation, but we didn’t know what the end result would be. Now that the moratorium is ending, we have some figures for you – check out this chart of California foreclosures from our friends at ForeclosureRadar.com.

Remember, Notice of Default is the first step in the CA foreclosure process. Lenders must wait 4 months after this is filed to actually foreclose, so there is a big lag time.

Now, if you look at the number of Notice of Defaults (NODs), the number plummeted to under 15,000 in September. By the end of December (following the end of the moratorium) this number was right back up to a new record, 43,000.

So it would appear as though we will be seeing another resurgent wave of foreclosures in 4 to 6 months following these defaults.

Now, there is a difference in what we are going to see in the next round.   Also, if we analyze the types of loans that went bad in the first tsunami, it  seems the subprime paper, the “warheads”,  that led the tip of the missile, are actually “contained” and have mostly worked their way through the system,  according to Mark Hanson of the professional Real Estate & Finance research group.

The new wave is actually alt A, higher grade loans that were a result of property values falling below the loan balance of the homes so even people with good credit had no way out but to rent and hang on or walk…NOT subprime loans…to me that alone is a good sign that we are at least working our way through the oceans of foreclosures.

Also, pending sales (properties are in escrow) continually increase. So we are seeing volume increasing and inventory decreasing.   If you read my past blogs you know that I feel these are much more important indicators than median home prices.

In summary, we will undoubtedly experience a large resurgence in foreclosures over the remainder of 2009, but the price levels we have dropped to have attracted a lot of buying activity and inventory levels are no longer exploding, possibly even decreasing.  We may not have hit bottom, but I personally think that the free fall we have experienced in the past has subdued.  We have historically low prices, low rates, you can cash flow properties in your sleep, and the government is taking pretty extreme measures to make sure that mortgage lending continues…it does not look at this time that home lending will “collapse” any time soon.

Bottom Line:

If you are a passive income investor and you are looking to build wealth, take advantage of these historic low prices, historic low interest rates, and now loosening investor policies (FNMA now allows 5 to 10 investor loans as opposed to 4 as of February 6^th FNMA New Investor Loan Guidelines DO NOT wait to start accumulating properties..in the words of Warren Buffet, “…if you wait for the robins, spring has already come”.  If you haven’t signed up to receive FarBelowMarket.com steals, sign up now on our homepage here.

If you are an active investor looking to generate a living doing real estate, build a business wholesaling investment properties to the passive buyers we just spoke to, do a few retail flips if you have the cash availability (to do retail flips you will need a money partner or SOME cash, hard money is very conservative these days).  Definitely go sign up right away at http://www.FlipForeclosuresForProfit.com for lots of free video on how to flip and wholesale houses.

And both camps should start learning how to use existing financing to build a portfolio of rentals over the next two years, if you don’t I can just about guarantee you will kicking yourself.

Join us for a free webinar on owner financing this March 2nd at 7PM Pacific by registering here:

Register HERE

RARE 2-Day Workshop That Will Get You Wholesaling

I am pleased to announce a new 2 day very intense live workshop that will be held in Palm Springs, CA Dec 5th and 6th.

Cindy and I are not “gurus”.  We make our living wholesaling houses, not selling info products…in fact, we’ve never sold an info product.

However, we did have a workshop in March, and it was a blast.

We said we wouldn’t do it again if it wasn’t a positive event, and it absolutely was-  just about everyone in attendance (that we know of) has done deals and made money.

We purposely keep it small, it’s very personal and informal and we cover every single minute detail of our business.

You will know EXACTLY how to assign an REO for cash to an investor and go right around the “no assignment” clause.  You will know how to do a land trust in your sleep, and you will get every scrap of
paper we use to make it happen…this process took us a year to develop.

Also, we will show those who join the fun how to create a world class investor cash buyer list in days, not weeks, and not months…once you have investors, making money is snap because getting deals right now is a snap…(this is BRAND new stuff).

This will sell out because we are only going to open 25 seats plus guests so that everyone there has a fair chance to ask unlimited questions.
We are scouting the area for a perfect place.  Right now the weather is insanely perfect, there’s world class golf, shopping, and casinos everywhere…that’s why we leave Sunday open!

Stay tuned because we will announce the details over the next several days….this is just a “heads up” announcement… more to follow…K

http://www.FarBelowMarket.com

http://www.FlipForeclosuresForProfit.com

All Bank Owned Foreclosure Deals Completely Gone!

Just kidding…sorry, that was a dirty trick, but I wanted to make sure that I made a few things clear!

In regards to my last blog post, I had a couple respondents that were a little discouraged because they seemed to think that what I was saying is that bank foreclosures will stop being a source of deals. Another email I received read as follows:

“kurtis you are obviously on the cutting edge and I’ve enjoyed your perspective and opportunities in the past, but you are totally mis-guiding your following with these latest emails. time to get real”.

I appreciate and relish feedback like this, and through clash of ideas and debate we all learn and deepen our knowledge.

However, I don’t think I was entirely clear about my point- I take the blame for being obtuse with my message and I apologize.

First of all, I absolutely, positively, do not think REOs are about to dry up anytime soon, nor do I think they will stop being our primary source of deals anytime soon as well…nor do I think the market is making a u-turn and is about to head back up anytime soon.

Here is what I am saying…in the past decade Cindy and I have now experienced two major shifts where our methods of finding deals ceased to work (in what seemed) overnight…the first time was in 2002 (buying HUD foreclosure went from a booming business to almost completely dry in a matter of months).

Then, after experimenting with a barrage of impotent business models, we went to buying preforeclosures. It was such a hot competitive that it took months more of trial and error for us to start knocking out homeruns again.  Finally, we were knocking the cover off of the ball until, you guessed it, our solid ground gave way once again…in 2006, “Whammo!” …once again easy street went straight off a cliff when preforeclosures with equity became impossible to make a living from.

Let me tell you first hand, when this happens, when something really works well for a few years and you get it really dialed in, and then out of nowhere within several weeks it completely stops working…Well, it’s like being sideswiped by a Mack truck you didn’t see coming, and it is not fun…then the “OMG what do we do now?!” scramble dance begins all over again.  So, I am not trying to be Chicken Little here, we’re more like a skitish antelope in the Serengetti where the slightest shift in wind, the slightest sound, we stop and observe.

If you are a part-time investor throwing offers out there, that is one thing. However, if you are full time wholesaler or rehabber there is something to be said about having more than one source of deals so you will have a backup should things change. This is all I am saying…..and you cannot deny that we are experiencing massive change. It is impossible I think to predict with 100% certainty what the outcome of government intervention will be, and I was not exaggerating about the frenetic buying activity exploding in our area – things are moving and shaking out there.

For the last 2 years we have come to rely almost solely on bank inventory for our deals, we are regularly getting incredible deals; however,  I admit that this time around we ARE hyper sensitive to change …(people also thought we were crazy when we started writing bank offers at the end of 2006).

Although our business is thriving experience tells us to be downright paranoid; we watch the market like hawks and startle at the slightest bump in the night…we are on 24/7 guard duty for you.

So keep those offers going out, keep finding those bank deals, and keep your eyes open for new opportunities but don’t get too complacent if what you are doing works great, because the only thing that stays the same is that things will eventually change…and sometimes they forget to send you the memo first ; ).

Bailout Effects Already Seeing A Result

I have spoken with a few REO brokers now after looking at comparables the other day blew me away to find out, “What the heck is going on??”……no new REOs, and the ones on the shelves are selling like hotcakes.

It seems that Countrywide a.ka. Bank of America, and Washington Mutual/Chase did indeed impose a moratorium on auction sales.

All brokers I have spoken with have not had any new recent listings…their existing inventory is selling quickly as well…they are actually a little nervous because the faucet has temporarily been turned OFF.

If you had read my blog entry titled “The Bailout” several weeks ago this is exactly what I had predicted. I said the government/asset managers/loan servicers would start restricting the supply – this makes sense because it creates more demand, holds up values, and stops the relentless bombardment of inventory….and the difference is that now they CAN because the government is taking some of pressure off of the banks with a tool called “cold hard cash”…..

and this is exactly what is happening…

…less inventory (supply) = more demand, and this creating a strong support level for prices (in my area at least).

Personally, this is not as good for our business because it becomes a little more challenging for us to get deals…hey, if it benefits the whole, which I think it does, I am all for it…..and I’m always up for a challenge anyway ; )

(besides, if it is trickier to get deals, it makes FarBelowMarket.com services more valuable, so maybe it’s not such a bad thing for us)

Anyway, to recap, inventory is flying off the shelves and there is almost nothing available in my area that is not a short sale..

….this is HUGE for retail flippers, HUGE, HUGE…

For flippers, it may be a little tougher to get a deal, but once you get one you know you can move it fast….I would rather flip in that environment ANY DAY, over a dead market where you can get a deal fast but selling is a crap shoot.

It’s not quite as good of news for long term holders (not horrible news, just a little tougher to get a deal).  Also, perhaps restricted supply will keep the rental market strong, but that is a total guess.

How long this freeze will last and if the floodgates will come gushing again I can’t say, but you will hear it here first if and when that happens.

Be Happy and Prosper,

Kurtis

P.S. I am reiterating my advice that if you are used to shooting REO fish in the proverbial barrels like we are, you might consider adding some diversity to your strategy i.e. direct mail, “We Buy Houses” signs,

just in case…we are.  (don’t interpret this to mean that REOs will stop being  a source of deals, they will be for a long time, but maybe not as easy as we’re used to).

Moratorium On New Foreclosures?

Report From The Frontlines:

I was comping a property for a 1/4 mile radius in a solid Indio neighborhood yesterday, and I was STUNNED.

Of everything on the market, there was literally NOT ONE clean or semi clean property that was not a short sale…

Guess how many “sold” properties and “pending sales”?

THIRTEEN.

Of every single “pending sale” (no cherry picking, all of ‘em), guess what how many days it took to sell?

81397 Senegal 12
81416 Date Palm 0
81582 Sant Clara 8
45666 San Gabriel 63
45824 Chamerop Palm 12
45906 Chamerop Palm 32

AVERAGE: 3 WEEKS

This is GREAT news for retail flippers, REALLY good news.

We literally have a housing shortage here….sound nuts?

For THIS geographical area, and THIS price range, it is a SELLER’S MARKET…..lunacy?…hmmmm (did I mention that we are starting to hear “multiple offers” on most of our offers now?)

Our secret REO info source, our guy who does “trash-outs” for the banks (gets rid of debris and belongings and secures the property for recently evicted foreclosees) says there is a 90 day freeze on new foreclosures…at this point I don’t know if it is local or what but I’ll find out more and you’ll be the first to know…

….but if that’s true, it will exacerbate the falling supply, and increase demand even more. REOs will continue to be a goldmine but as an insurance policy we have decided to fire up our “We Buy Houses” campaign of signs and direct mail – if your sole source of deals is REOs, it might not be a bad idea to diversify a little bit just in case.

….this news is hot off the press, I’ve said for months look at SALES VOLUME and UNSOLD inventory, NOT home prices…

Provided that 1) there is no economic meltdown, 2) median income levels don’t plummet, and 3) our mortgage industry doesn’t lockup entirely -

I will debate anyone that we have reached a bottom or we are at least as close as you can possibly reasonably get for this geographical area at this price point….

…a sub $100k property IN CALIFORNIA can now generate $1,300 gross monthly rent. I don’t think we will see this again…this is well over 9% returns after property tax and insurance. Trust me, with the stockmarket the way it is, there is an infinite supply of buyers for this investment.

….I love opposing points of view so sound off at http://www.FarBelowMarketForum.com

if you disagree….but be prepared to tell me how prices can substantially decrease if there is literally almost no available inventory and decent properties sell in less than 30 days as they hit the market =0 )

Right now, it DOES NOT MATTER if foreclosure activity accelerates, because it is my contention that between first time homebuyers that can now afford and landord buyers that can cash flow these things all day long, there is literally an infinite buyer pool that can handle any inventory that the trustee sales can dish out. (A massive decrease in income levels would be a different story, but I don’t think that will happen or else we will have bigger problems!)

Now, if Riverside County is a leading indicator for the rest of So Cal, which I have always hypothesized that it may be, it could be good news on a broader scale (I am not crawling out to that limb quite yet!).

Stay Tuned….change is happening on so many levels….and change = opportunity…God Bless our country and our new leader.

Kurtis

Real Estate Training In Southern California

If you’d like a 7 part free video series on how to find and flip foreclosures to hungry investors for instant cash go sign in right away to http://www.FlipForeclosuresForProfit.com.

If you’d like to join our community and look around first, check us out at http://www.farbelowmarketforum.com

There you will find real estate training in Southern California on how to locate and make strong offer that get accepted by banks on REOs.

Kurtis and Cindy Squyres

The BAILOUT

Here are some of my thoughts on the events occuring and my guess as to how it might affect us specifically as property wholesalers.

We are still very early, and I think (I know) I could spend a small novel about what I think is going on and how it will affect us.  I will restrain myself right now, however, because it is so early pretty much almost all of what I have to say at this point is conjecture, there are so many different ways this thing can play out.

Rather, I would like to talk about how we find our deals and why I think what happens “out there” will most likely have little effect on our day to day operation.

How do we find and acquire our deals?  I have written extensively on how we do it- and it comes down to one key word, we take advantage of inefficiency in the marketplace.  What do I mean by this?  Well, just imagine I walked up to you and asked you to sell over 10,000 properties strewn across the United States as fast as humanly possible…I mean, I want them gone yesterday.  How would you do it?  How can you accurately find the perfect price point for each property?  …answer; “YOU CAN”T”.

CIndy and I sometimes have a difficult time ascertaining the value of a certain property in our own urban village- it could be on a very unique street, it could be the only “big” or “small” oddball property in the area.  It could be the only one with a pool…etc. etc…can you imagine trying to find value on such an elusive asset class as real estate for such a hugely diverse geographical location as the whole of the United States?

Hence, this is how we get our deals in a nutshell…we know VALUES better than ANYONE for our local hunting grounds.  We study our marketplace 24/7, we use our relationships with brokers, we use automatic e-lerts from the MLS, we know about every price drop, every new listing…if a dog pees on a corner, WE KNOW ABOUT IT!  I know I win the “beat a dead horse to death” award, but the very simple key to getting real property for 60 cents on the dollar and much less in this environment is KNOW the marketplace, and STRIKE when the marketplace presents INEFFICIENCY

Let’s take a look at the stock market, for example.  The stock market is EXTREMELY efficient, which is why day trading is not easy- pretty much any and all news gets immediately absorbed and then factored into the market.  Not so with individual foreclosure property that floods the market in your area- it is EXTREMELY inefficient.  Asset managers are buried, inexperienced, and often completely out of touch.  By being aware of your marketplace, you STRIKE fast and hard when you spot a large discrepancy between sale price of a property and the actual market value.  It is all about hitting the right ones fast, NOT low balling randomly and hoping your offer will go through, it usually won’t.

This brings me to what may happen with this bailout.  Regardless of who is in charge of liquidating assets, these inefficiencies would be extremely if not impossible to correct.  If more authority is given to the brokers to determine price, again sale prices will be subject to the subjective unique opinions and prejudices of each broker.  if the government takes over I would imagine they would have to rely on the established asset managers to some extent because they simply don’t have the administrative resources to deal with liquidating these properties; could they do a much better job?  i mean, i know the government is extremely efficient and all ; ) – but I don’t think there exists an administrative juggernaut that could do the job.

Now, granted, what may happens is that government restricts the supply of foreclosure inventory hitting the streets.  This could ease the pressure of having to dump inventory at all costs, but it’s not as if the crisis and the emergency will instantly end!  There is still a huge need to move these non performing assets, and I don’t see anyway anyone is going to want to slow the acquisitions of these things by investors and end users…bottom line?…sorry, gotta go now and make some offers! (keep going my investor brothers and sisters, don’t slow down, we will all make it through this).

Be Happy and Prosper,

Kurtis

http://www.FarBelowMarket.com