Caution is the watchword for potential home buyers
Real Estate News & Commentary by Chris McLaughlin, July 9, 2009
http://www.shortsalesriches.com
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Caution is the watchword for potential home buyers
According to a survey conducted by Realtor.com, home buyers in the U.S. are hesitant to jump into the housing market, given the current economic downturn. Nearly 53% of the survey participants said they have postponed their home plan on account of their negative outlook. Uncertainty on the job front was the main factor for not buying a house for nearly a third of the survey participants. Nearly 16% said they worry about selling their current home, while 8% said they fear home prices will keep falling. Home buyers recognize that the housing market currently offers great deals; however, financial worries far outweigh attractiveness of the deals available. Nearly 20% said they were interested in foreclosed homes with an attractive price, while nearly 15% said they want to receive incentives such as the $8,000 tax credit for first-time buyers. Errol Samuelson, president of Realtor.com, said buyers feel that purchasing a foreclosed home is more “complex” than other transactions. Among the survey participants, only 28% said President Barack Obama’s plan to tackle the foreclosure crisis is working, compared with 41% who said it isn’t and 27% who didn’t know.
12 plead guilty in $100 million mortgage fraud
New York City prosecutors have charged 25 people, including lawyers, bankers, mortgage brokers and appraisers, and a mortgage company, with committing mortgage fraud. Robert Morgenthau, Manhattan District Attorney, said AFG Financial Group Inc. (AFG) and its accomplices inflated property values, created phony loan packages, forged W-2 forms, and bank documents to get loans from banks for unsuspecting buyers. Buyers did not know that the transactions were a sham. AFG, through its attorneys, would ask that the mortgage money be deposited in escrow accounts. Instead of paying the seller, AFG would take the money for itself. “These attorneys often did not meet or communicate with their so-called clients until the day of the closings … and were paid off by AFG for their efforts,” Morgenthau said. Buyers were left with bad credit while the lender foreclosed the seller’s property and took ownership. Banks which were cheated include New Century Mortgage Corp., which lost $32.2 million; Countrywide Home Loans, which lost $7.9 million; and Washington Mutual, which lost $8.6 million. “This is one of the reasons for the mortgage crisis,” said Morgenthau. Among those charged, 12 have pleaded guilty. All those convicted face up to 25 years in prison.
Analyst says AIG’s equity value could be zero
Joshua Shanker, an analyst at Citigroup, says American International Group (AIG) will have no value left after repaying bailout funds. “Our valuation includes a 70% chance that the equity at AIG is zero,” said Shanker. AIG has received over $182 billion as bailout funds from the government so far. Edward Liddy, the outgoing chief executive officer of AIG, said last month at the firm’s annual meeting that the company has an “excellent chance” of repaying the government. Liddy had earlier informed the Congress that the company can pay back bailout funds within 5 years. AIG said last week that its recent losses in derivates could have a “material adverse effect” on its results. “The company has not been forthcoming about the sequence of events that would result in a loss,” Shanker said. “Even a proportionally small loss could be significant.” The outgoing CEO has been under pressure to sell some of AIG’s assets to repay government funds. “The CEO’s motivation and ability to lead may be compromised by his preparations to transition the company’s top seat to another,” Shanker said.
Monthly retail sales data denotes weakness in consumer spending
Retailers, across segments, posted weak monthly sales in June on account of continuing unemployment and rising gasoline prices. Merchants such as Limited Brands Inc., teen merchant Wet Seal Inc. and The Children’s Place Retail Stores Inc. reported poor sales figures. Low-priced retailers too were not spared. Costco reported a sales decline of 6% compared to a year ago. “Consumers are under severe pressure on the job front, so discretionary spending is just not happening, “said Ken Perkins, president of Retail Metrics, a consultancy. “This is not setting up well for the back-to-school season.” Customers continued to trade down to essential goods. Costco said food was among the categories which exhibited strong sales. Recession has taken its toll on consumer spending. “Obviously, the consumer has been under severe pressure here throughout this recession,” said Perkins. “There just were no catalysts for consumers to spend in June.” Weather also played spoilsport. Consumers buy items such as light clothing and beachwear in June which marks the onset of summer weather. However, this year, June had a cool weather with record rainfall in cities like New York, Boston and Chicago. As a consequence, consumer interest for summertime merchandise dropped significantly.
UBS caught in diplomatic row
The U.S. government believes that the Swiss bank UBS has about $15 billion in secret accounts meant to evade taxes in the U.S. UBS says it cannot reveal the identity of its account holders on account of Swiss banking laws. Switzerland has made it clear that it would prevent UBS from revealing the identity of account holders. “Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS,” the Swiss government said in a response to U.S. authorities. Analysts believe that this issue souring diplomatic relations between the U.S. and Switzerland. Alan Gold, a district judge in the U.S., has asked the U.S. Justice Department if the government will shut UBS in the United States if the bank does not provide information on its account holders. The Justice Department will have to be careful in answering the judge’s question. “They’re going to have to be very delicate and thoughtful in terms of how they respond to this,” said Peter Hardy, a partner at the Post & Schell, a law firm.
Now on to our real estate investor education section…
Top Reasons Short Sale Investors Get Side-Tracked
Sooner or later you are likely to encounter a potential short sale investor filled with anticipation, eager to get started and checkbook in hand…who dwindles away with little to nothing to show. Find out the top reasons short sale investors get side-tracked and what actions are required to get back into the race.
- False Start. The excitement of doing something new overrides their discipline and true desire for success. Plain and simple, they don’t have realistic expectations or the knowledge to get the job done right. Start slow and invest in success by acquiring proper training, surrounding yourself with the right professionals and expect to confront a few bumps now and then.
- Justification. These would be investors tend to be cautious and perform well once they convince others it is the right track. Unfortunately, it can be tough to justify your position to everyone around you. If you need to prove your position before moving forward, either take the time to crunch the numbers in more detail or do a reality check on your readiness to invest. Having someone agree with you might feel good but does little for your bank account at the end of the day. Learn how to rely upon yourself rather than the opinions of others.
- Guilt. Paying for Past Mistakes can be a long and difficult journey especially if you are involved with someone that simply wants to “punish” you. Recognize that investment involves elements or risk and reward then move forward. Make what amends you can then walk away from the issue once and for all. Remember, investing is about the future –not the past.
- Recruiting. Investing isn’t like joining a golf club; there are very real reasons why it can be good to go it alone. This doesn’t mean you can obtain expert advice and surround yourself with professionals – that is always a good idea – but it does mean you are able to move forward without having half your friends and associates involved. Set the pace and believe us, they will show up once the profits begin rolling in!
- Going it Alone. Likewise, trying to do everything your self is another major reason many short sale investors get side-tracked. It’s simple too much to handle alone. In fact, even if you are able to do so for a short period of time, it’s not always the best use of time. Establish a process that makes the most of your valuable time with the greatest possible reward then hire out or subcontract the rest.
- Avoidance. Those that attempt to avoid all risk will rarely experience anything but the most limited gain – if not actually increase their total risk. It’s one thing to inform, educate and prepare yourself but quite impossible to avoid risk altogether. The reality is this is fear of the unknown which you are weighing more heavily than fear of that which is familiar…sadly, that isn’t always the least risky. Something familiar might initially seem harmless but in reality can be deadly. The same goes for finances – inflation can erode away even the safest investment making it the most risky route by far
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting nearly
450 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
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