Only it’s not the end. In a simultaneous escrow the investor has already “flipped” your house to another buyer for a hefty profit. You don’t know anything about this transaction. Wouldn’t you be upset if you found out? Wouldn’t you feel rather dumb that you didn’t get the price for the house that the investor was able to? Wouldn’t you feel taken advantage of?

This is basically what the real estate “gurus” are teaching when you hear about one of them putting on a seminar or a workshop. As a Realtor, we are not allowed to do this type of investing without full disclosure to all of the parties. It just seems to me if everything is above-board, that’s the way it should be.

What the heck?

It’s pretty scary times for real estate out there, and I don’t just mean because of foreclosures and big drops in value causing people to lose all their equity. It’s scary because on one side you have people who still think like it’s 2005, on the other side you have “real estate gurus” coming out of the woodwork teaching creative financing and doing deals like they did 30 yrs. ago, and then in the middle you have the government relaxing standards and doing the same kind of loans that got us here in the first place.

Then I see a question posted in one of the Real Estate forums from someone wanting to know about hiring a Realtor or a real estate attorney to help with the paperwork on a piece of property she’s buying. One of the answers she got was from someone saying to let the other agent do the paperwork, and the title company handle everything. That’s how they bought theirs and there was never a problem. While I concede that there are many deals between people that didn’t use either a Realtor or an attorney that turned out OK, there are many that turned into nightmares. In a transaction described like the one above, who is looking out for her interest? What recourse is she going to have against the seller if she has the seller’s agent write up the contract? Do you think that agent is going to worry as much about taking care of her as he is the person that actually hired him and is paying him? I don’t think so. While we have a code of ethics that states we have to be “fair and honest” in all our dealings, do you think everyone really is?

Then we have the ads on Craig’s List where investors love to advertise to buy homes. One I read yesterday specifically said “No Realtors or attorneys”. Now why do you think that is? I understand they want to save on costs so they don’t want to pay commissions, or a lawyer a fee for looking over the paper work, but do you think it might be also because all their contracts, etc. may be geared their way with no concern for the seller, or buyer, whichever the case may be?

Remember the old saying “Desperate times call for desperate measures”? Don’t be so desperate you make your situation worse instead of better. If you’re in a situation where you need some help with a contract most Realtors will look it over for you for free (like me. LOL) in the hopes of either getting your business in the future or a recommendation to your friends on what a nice person they were. Take advantage of the service.

I have a buyer that has a friend whose a Realtor, but until I came along no one ever went through the contract with him and his wife to know what they were signing. It’s like hiring a stock broker. No one is going to watch out for your money with the same love and care that you are, and the same is true when it comes to getting involved with buying or selling real estate. It’s your job to make sure you are protected. No one is going to cry with you when you get yourself into a mess. All the courts care about is what you signed your name to. It’s up to you to make sure it’s something you can “live” with.

If I can help with any of your real estate needs, please feel free to contact me by phone, email, or leave a comment below. I’d be honored to help in any way I can. Like I said, it’s pretty scary times in real estate right now.

Investing in Foreclosures

Investing in real estate in Silicon Valley is a real possibility right now but there is not much of a margin for error. As prices have fallen and rates are low, it is possible to buy a “rental” property for specifically that reason, to rent it out. This is an opportunity for investors we haven’t seen for many years and they are coming out of the woodwork like crazy. I must get at least 5 e-mails a week from somebody with a new “system” for buying up property. Unfortunately, they’re not “new” and most of them are totally illegal for a licensed real estate professional here in California.

I’m sure most of you have heard that the FDIC is going broke. That FHA is in trouble. Fannie Mae and Freddie Mac have been in trouble. Besides what’s on the market (the MLS) these institutions are dumping properties as well.  It’s amazing some of the bargains you can pick up, although you do have to be careful and do your own due diligence. Make sure you crunch all the numbers. A condo that looks attractive numbers-wise when you figure the mortgage payment, may not be so attractive if you add in a hefty Homeowner’s Association Fee, along with insurance on the unit itself. Remember, the Homeowner’s Association only insures the outside of the unit, nothing inside the 4 walls.

What is amazing to me is that for as much as everyone is saying credit has dried up, etc. many of the same loans that got us where we are today are still out there. Oh sure, for now your credit score has to be a little higher than it used to be, but I’m not sure how long that’s going to last since now even people with A+ credit are going into foreclosure. FHA has laxed a lot of their standards so that their loans are more usable. Not only that but they have a loan program that will help you buy the property and give you “fix up” costs. It’s almost as if they will pay you to fix up your new property. VA still has a no money down adjustable rate mortgage. Some of the conventional lenders are willing to bend criteria a bit to get properties off their books.

The one thing FHA has tightened up on is “flipping”. They have a “no flipping rule” that says if you buy a property using an FHA loan, you may not sell it for at least 90 days. Now to me, if you move into a property you’ve bought, fix it up while you live in it, which is not at all unusual for investors, and you’re flipping houses every 91 days, you can still do quite well. You have to pay to live somewhere anyway. Why not the property you’re buying to fix up and sell? Not only that, but the lenders look much more kindly on properties that are going to be owner occupied.

I realize it’s pretty much a feeding frenzy out there, but if you’re going to invest, invest smart. The “gurus” of real estate don’t talk about the properties they get stuck with, or the holding costs, or the bad tenants. They talk about the upside without the downside. I’m all for investing in real estate to build your wealth, but be prepared. It’s not all the bed of money it’s cracked up to be. And if you think you can go negative cash flow on a house because it’s only $50 or so, think about how much that turns into per month if you do 10 of them, or 100.

If I can help you with any of your real estate needs, whether looking for a bargain on your first home, looking to invest in a rental property, or selling your home for the best price in a down market, feel free to contact me or leave a comment below.

I am always ready to learn new things that I can use to help my clients where ever they come from, be they a renter wanting to buy their first home, an investor buying several homes, or a seller needing to get out of a bad mortgage in a hurry. I thought this would be a prime time to learn a little from the expert, Mr. Trump, even if it wasn’t him but one of his students doing the seminar. I thought there would be some really new innovative techniques for this market that I hadn’t heard yet or that I could incorporate. I’m so sorry to say that wasn’t the case.

Granted I did not learn everything they have to teach in a 90 minute seminar, which is why they have a 3 day workshop for $1495., but I did here enough to know 1) it was the same information I had learned 25 yrs. ago when I started out in real estate as a buyer and watched the late night infomercials on TV 2) that many of the techniques I as a Realtor cannot use as they are illegal when you are licensed in California 3) If anyone practiced what this gentleman did teach in the order he said to use it, they are looking at a possible lawsuit also.

I’m sure he just got the order of a couple things wrong due to trying to pack so much information into a 90 minute seminar, but… how much wrong information do they pack into 3 days?

This is a fabulous market if you’re just starting out and buying your first home or you’re an investor buying homes for your portfolio, but please people, be sure what you are learning or who you are learning it from is telling you things that pertain to your particular state and their laws. Also make sure  they are telling you all the downside that can go with what you’re doing, as well as dangling all the cash you can make before your eyes.

If you have any questions about different types of transactions, or something you’re about to do, please feel free to leave a comment below or email me direct. I’d be happy to help.