Real Estate Information

If I had tried to answer this question even a month ago, my advice would have been, “Yes, refinance into the lowest fixed rate available. Buy down your rate if you re able to do it.”

Given the changes in the mortgage market since then, my advice has changed as well. Yesterday s announcement by Countrywide that it will refinance borrowers with adjustable rates, even though they don t qualify, just made it more difficult for the vast majority of homeowners who are making their payments on time. It s also punishing homeowners that took out fixed rate loans as downward pressure on the bond markets is making new loans less expensive than old ones.

If this were a one time occurrence, I would advise everyone to go out there and refinance to take advantage of it. However, it appears

right now that rates will be trending down for some time. The Fed has room to play and can push rates down all the way to zero if they need to. We ll see next week how well this theory holds up when the Fed meets on Halloween.

Strategies for refinancing now -

Overall, we re very much in wait and see mode. Only those homeowners with compelling reasons to refinance should attempt to do so right now. What are compelling reasons?

1. Rate resets on adjustable loans - If your loan is resetting to a higher rate, you should refinance. Homeowners in Salt Lake are fortunate because values have risen and many with 100% financing will now see their loan to values drop and therefore their interest rates will too.

2. No fee rates being lower than existing rates - If you can refinance using a “no-fee” loan and the payment is lower than what you re paying now, it would be wise to consider it. No fee loans have higher rates than standard loans, but if the new rate is lower it often makes sense, especially in a declining rate market.

3. You need to extract equity - If you are in a financial position where you need to take out some equity from your home, you should consider a cash out refinance. This is a very touchy subject because lenders are avoiding cash out loans considering the decline in home prices. It is difficult, but not impossible to get this kind of loan. Secondly, borrowing your equity is not free money. If your home declines in value at the time you sell, you ll be on the hook for the amount you borrowed. This should only be done if absolutely necessary.

4. 100% financing - In Utah, if you bought a house between 2003 - 2005 and used 100% financing, now is a critical time to refinance. Your home has increased in value and you may be able to get favorable rates and eliminate your 2nd mortgage or home equity line.

If your situation doesn t fit into the previous four scenarios, hold tight. In fact if you got a fixed rate loan in 2003 or 2004, you ll probably never even have to consider a refinance. Hold on and lets see where this rate train takes us.

I wanted to address a few things that have come up this week. I ve been trying to keep this blog more Utah centric and focus the national discussion over at Easy Mortgages, but this seems to be the best forum for discussion.

Sometimes a picture really is worth a thousand words. That was a screenshot from CNNMoney s coverage of the Countrywide story where the company reported a 3rd quarter loss of $1.2 billion dollars.

$1,200,000,000 lost!

More unbelievable than the loss is the statement/belief/prayer the company has already turned around and will post a profit in the current quarter.

The Countrywide results have been eagerly awaited as many analysts consider the country s largest mortgage servicer and originator as a barometer of the real estate market as a whole.

Countrywide s stock leaped after the earnings result and though it lost some of its position, still showed a double digit gain. Wall Street as a whole also jumped positive, though we ll have to wait until closing to see how permanent

those gains are.

President David Sambol remarked,

“We view the third quarter of 2007 as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008,” said a statement from President David Sambol. “Over the longer term, we believe that prospects for the U.S. housing and mortgage markets, as well as for Countrywide, remain very attractive.”Do you believe this guy? Like CEO Angelo Mozilo, Sambol has also recently sold a bunch of stock. I believe him. I believe over “the longer term” U.S. real estate is a good bet. I also believe Countrywide thinks they can make a turnaround. What I don t believe is anyone calling bottom. Bottom is something you only see in the rear view mirror. Consider the chart in the picture. In the beginning of August, you can see the stock began to rise. Was that bottom? Looking back, we know it wasn t.

If Countrywide pulls out this quarter like they say they will and through 2008, then I ll believe Mr. Sambol. Until then, call me skeptical.

I’ve often stated that one of the most important factors in your success as a real estate investor is your ability to select, screen, and retain quality tenants. This is something that I think I’m pretty good at, which has helped me as an investor.

I was going to write an article about this not to long ago when, bam, I ran into a problem: tenants who stopped paying.

The tenants were a flaky young couple that I knew I might be taking a chance back when they signed the lease in May. But I decided to rent to them and mitigated my risk by signing a short lease (six months, with renewal contingent on timely payment), charged them first and last month’s rent upfront, plus one month’s rent as deposit. I won’t go through the boring details, but they ended up breaking the lease and abandoning the property while they owed me money. If you find yourself in a situation like this one here are some points to keep in mind.

Property codes, generally speaking, exist to protect the tenant. However, most tenants who end up in situations like this have not followed the law. On the other hand, you have – assuming you’re a responsible landlord. The party who is on the right side of the law (you) negotiates from a position of considerable strength. Ensure that you use a current, legally compliant lease contract that includes specific references to the property codes. For example, all of my leases state that tenants are prohibited from withholding payment for any portion of any month’s rent on grounds that the security deposit is security for unpaid rent, and that bad faith violations may subject the tenant to liability up to three times the rent wrongfully withheld plus Landlord’s reasonable attorney fees. We all have our own style, but in tenant/landlord disputes you want to be more like Agent Friday (“just the facts, ma’am”) than, say, John Madden. Communicate clearly, calmly, and factually. Quote relevant state property codes, chapter and verse. Read the relevant clauses from the lease that the tenant signed. Use the facts, the contract, and the law as a blunt instrument.? Don t call or email when you re angry.? Back up phone calls with written communication – email or a leter. Tell ‘em on the phone, the follow up in writing to tell ‘em what you told ‘em. Keep copies of everything. Once you feel a problem brewing, keep a written log of?everything. Capture dates and times of phone calls and what each party said. Follow the law with regards to notices. You can’t just put deadbeats out on the street; you need to serve them with a Pay or Quit notice with the proper lead times. Consult your local property codes and know what your obligations are.

The idea of all of this is that you’ll be following a rational, well planned strategy. If you end up in front of a judge, either in an effort to evict the tenant or suing for damages, your ducks will be in a row.

This reminds me of my brother. Greg isn’t always right about everything, but if he offers to bet me about something then there’s a 99.9% chance he is. Greg hates to lose, so when he puts his money where his mouth is and offers to shake on a bet then I tend to back down. If you end up in court you want to be like Greg; you should know you’re going to win. Smart, ethical landlords don’t lose these cases.

And if you follow these guidelines then, in the end, the tenant (if he has a rational bone in his body) will often back down. That’s what happened in my case; they paid and got out, and I didn’t have to drag them to court. They saw the handwriting in on the wall.? Sure I wasted some time hammering out threatening letters and trying to chase them on the phone, but all in all it wasn’t a bad outcome.

The title says it all;? I just hate bandit signs.? When I see these things littering our corner intersections proclaiming cheap mortgages or foreclosure assistance I wonder who the poor saps are that actually call these numbers.?

The first thing that I think when I see a bandit sign is “here s a guy who s willing to do something illegal to make a little money.”? Not exactly a first impression that inspires me to pick up the phone and strike up a business relationship.

Laws vary from region to region, but in most areas the city comes around periodically to collect these things eyesores.??There s so much of it that I doubt that?anyone gets prosecuted for breaking city ordinances.? That might be enough to make you think “hey these guys are getting some pretty good free advertising;?I m missing out.”

Well there s another way - a better one.? When I m?looking?to find a tenant for a home that doesn t have good exposure to traffic I ll simply knock on a few doors.? I ll pick a nearby house?that does have good traffic, and then offer the owner $10 or $20 to plop a sign in their front yard.? You can get a sign from the FSBO center at Lowes or Home Depot for fifteen bucks or so, and some?vinyl stick-on letters?(recommended) for a few bucks more.??

Advantages:

1)? It s legal.? Ok, I know that not everyone out there is as uptight about the bandit sign thing as I am.? But some folks are - and bandit sign users turn off these potential?applicants.??

2)?It looks better and makes a better impression:? ?Bandit signs need to be cheap.? Why?? Because they re disposable; someone eventually will come along and toss them in the trash.? Therefore bandit signs tend to be cheap, flimsy and ugly.? But if your sign is legal then you re less likely to lose it, so you can spend a few bucks on a nice sign with stick-on letters.?

3)? It s an excuse to strike up a conversation with your neighbor.? Sometimes they might know someone who is interested in renting the property.

?Related Link:

Citizens Against Ugly Street Spam

It is expected that the Australian real estate investing market will continue to grow in the near future, however, the rate of growth is expected to slow in NSW and Western Australia where the markets are expected to correct themselves.

Although, some regional areas of NSW such as the Newcastle / HunterValley area will probably continue to grow at a steady rate and Western Australia is still experiencing a high demand which is largely dependent on the resources boom.

Queensland, particularly South East Queensland, is expected to maintain strong capital growth in the residential property market as a result of continued migration from other states. However, rental yields are not expected to increase substantially despite low vacancy rates.

Therefore, Australian real estate investing in Queensland in the future should be focused on long term capital gain rather than the benefit of rental returns. Brisbane is expected to continue to grow rapidly with more than a thousand people relocating there every week and there is no indication that population growth in the Gold Coast is about to slow down. Continued growth in the residential sector is also a predictor of the increased demand for goods and services and therefore the continued upswing in the commercial sector.

This suggests that commercial investment in the south east of Queensland may also be a profitable consideration for those considering Australian real estate investing.

The South Australian property market still has a lot of room to move. Unlike the sharp property increases experienced in N.S.W., Victoria, Queensland and Western Australia, South Australia has maintained a steady capital growth in its residential property markets. It is comparatively affordable for an investor to enter and offers reasonable rental returns. It also offers steady long term growth for Australian real estate investing.

The Victorian residential property market is still vibrant and will likely offer people interested in Australian real estate investing continuing strong growth, as well as excellent rental yields, well into the future. Melbourne housing prices still have room to move despite having experienced significant capital gains and Melbourne has lower house prices for comparable properties in Sydney.

Tasmania offers the most affordable housing in Australia. Between 2003-2006, median house prices in Hobart rose by 103% and despite negative growth in the last quarter, analysts predict that the medium term prognosis for Australian real estate investing in Hobart is positive.

However, rental returns are low and the fact that high capital growth was experienced in Hobart between 2003-2006 is the result of prices being significantly lower than those in the rest of the country. Future capital gains are expected to be relatively modest.

Tasmania offers the advantage of low prices but this has to be counterbalanced by the expectation of lower returns on invest.

It is expected that the residential property market in Queensland will continue to grow and provide excellent returns for Australian real estate investing well into the future.

For long term capital growth, Queensland and Victoria offer the best property market environments for investors for the foreseeable future.

All the best in your Investing downunder!

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I got some interesting emails from readers responding to my recent posts on real estate fraud. Here’s one of them (posted w/ permission from the author, with names and minor details changed):

Chris,

I was approached by an acquaintance, Phil, to invest into a get rich quick scheme. I was to be the buyer and mortgage holder for two houses, but all documents and paperwork would be mailed to Phil’s residence and Phil would be responsible for all mortgage payments and monthly maintenance fees. I was promised a gift of cash in exchange for using my good credit. All was good for several months, and then I started receiving calls from American Servicing Company for non-payment.

Unfortunately, being very trusting of Phil, I did not ask for copies of any documents that I originally signed. Phil kept everything. At this time, I don’t know what to do. Phil does not return any phone calls. As of today, the two residences are unoccupied. Please, any advice is welcome.

First of all, I m not a lawyer and laws/property codes vary from state to state. This shouldn t be considered legal advice. You need to contact a lawyer.

A couple of things that I would do were I in your situation.

1) Don t ignore the mortgage company. Regardless of what happened between you and Phil it appears you’re currently on the hook for these mortgages. Call the lender.

2) Get ready to go to trial. I understand that you don’t have the paperwork, but you must have some documentation that a deal was done receipts for cash payment, etc. Get these together, along with a written narrative of what occurred, and discuss these with a lawyer.

Now I m guessing that one of two things might have happened here .

Non-evil Phil case: Phil got all fired up from attending one of those Rich Dad Poor Dad seminars or some other such motivational pep rally. Then, realizing he had no credit, talked you into backing one of his deals. Phil overpaid for the houses,?realized he couldn t lease them out, ran out of money, and buried his head in the sand. Now your phone is ringing off the hook as the bankers are looking for their money, which you owe.? It s possible that Phil didn t set out to rip you off, but he abused your trust and, in the end, skipped town.? Evil Phil case: Then again there are lots of ways to rip someone off in a case like this. Example Phil found a seller selling his house for $100k. Phil offered $110k on the condition that the seller kicked back $10k at closing. The seller got his price, Phil pocketed $10k, and you’re stuck with a $110k mortgage on a house that s only worth $100k. There are many, many other schemes.? It s possible that Phil is a genuine scumball.?

In hindsight (not helpful, perhaps) there are lots of problems that led to this. The most important are a) you got into a deal that you didn t really understand, and b) you can t rely on trust; you need a contract.

This probably isn t much help, but at this point the horse is out of the barn.? Call a lawyer, deal with the mortgage companies, and good luck.

Related Posts

Why I don t like Rich Dad Poor Dad Real estate investing psychology How contracts help me to build solid relationships Real estate shell game :: Recognizing fraud Real estate shell game :: Part II Real estate shell game :: Part III

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Yesterday I posted a YouTube video about a sting operation busting some shady “Investment Advisors” who had defrauded a group of investors using a common tactic.? This was a variation on the standard buyer-seller kickback scheme that I previously wrote about.? Here s how it works:

I love real estate.? There are millions of honest, ethical investors out there making prudent, informed responsible investments to secure their financial future, but there are also a brigade of scumballs busying ruining it for the rest of us.? Keep your eyes peeled.?

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Third quarter numbers are out for Utah s real estate market and they aren t pretty. I previously reported that volume was down, but the average sales price held up pretty well.

The new numbers reflect median sales prices which turned out to be 50% lower than the average.

Selling prices in Salt Lake County were up 5.4 percent in the third quarter, to $253,000, compared with the same period in 2006. Prices in Davis County were up 9.7 percent, to $230,500, with Utah County increasing 8.1 percent, to $241,000.

Having gains is still better than many other areas of the country, but it s clear the market psychology in Utah has changed. How long this will last is yet to be determined.

News reports, lower access to loans and highly publicized cases of mortgage

fraud have buyers holding back while record numbers of homeowners are putting their homes up for sale. Now that we re headed into the slowest real estate season of the year, I don t see things picking up, though last year s fourth quarter outpaced the previous one in appreciation gains.

Is Utah destined to become like California and Nevada in terms of a downturn? I don t think so. Like many others, I simply see the market slowing down before building up steam again. I don t see a market crash.

“Our housing market is slowing down but it s still solid,” said economist Jeff Thredgold, a consultant for Zions Bank in Salt Lake City. “I don t see big-time declines in prices. I just see appreciation slowing down to single-digits [annually].”

That s not to say certain segments of the market won t see declines. In 2002 many new construction homes priced in the $600,000 range lost half their value after the Olympics. For those that held out, they were richly rewarded in the past two years as those losses turned into gains. Currently, the softest segment in the Utah market are those homes above $350,000.

How long will this last? That s the million dollar question. Until we have successive quarters showing diminished gains, it s too early to draw any conclusions. Third quarter could be the start of something worse, or merely a blip caused by national concerns. Passage of FHA reform could make the market here and elsewhere turn on a dime.

We are definitely at a “wait and see” point now.

I m pleased to announce a new feature of the Salt Lake Real Estate Blog. Today was the inaugural issue of The Inside Scoop, an e-newsletter put out by local real estate agent Mark Alder of Windermere Realty and myself.

Mark has been sending out this newsletter for two years and wanted to add greater value to his subscribers. I ve been wanting to put out a newsletter, but didn t have an established base. Voila, The Inside Scoop.

Mark is also keenly interested in real estate blogging and has been writing his own blog this year. We are offering unique content in the newsletter you can t find anywhere else, so it s well worth the 5 seconds it will take to sign up. We re not interested in spamming you either and our list is maintained by a trusted third-party - Constant Contact. You can easily opt out at any time.

So take a look at The Inside Scoop and subscribe today. This month s articles discuss housing inventory levels in Salt Lake City and what you need to know about FHA loans.

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