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Real Estate News & Commentary by Chris McLaughlin, January 11, 2010

by admin on January 11, 2010

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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Apartment prices fall 3%, vacancies up 8%

The national apartment vacancy rate rose to 8% in the last three months of 2009, according to Reis Inc., a commercial real estate information provider. That is the highest level Reis has ever reported.  The vacancy rate barely inched up from the third quarter — just 7.9% to 8% — but it rose significantly from a year ago, when it stood at 6.7%. Even more dramatic, vacancies spiked 45% from the third quarter of 2006, when they had bottomed out at 5.5%.  According to Reis economist Ryan Severino the main culprit is the recession.  Not only do people lose their jobs during downturns, many others are afraid of being laid off. And they all feel pressure to reduce their housing costs.  “Household formation rates slow down during recessions,” said Severino. “They may move in with their families or rent larger apartments and partner up with friends. They partner with others much more then they do during more prosperous times.”  Occupancy rates did climb during the quarter, with nearly 10,000 more apartments being rented than had been three months earlier, according to the report. But vacancy rates still managed to climb because 28,000 newly constructed units hit the market. A total of 120,000 new apartments came online during 2009, the most since 2003. 

Americans borrowing less

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades.  The Federal Reserve said Friday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected.  November’s $17.5 billion drop in total credit was the biggest amount in dollars terms since records began in 1943. That represents an 8.5 percent fall from the October borrowing level. That was the biggest percentage drop since total credit declined 9 percent in May 1980.  The borrowing category that includes credit cards fell by $13.7 billion, an all-time record decline in dollar terms. The drop was 18.5 percent from November, the biggest decline in percentage terms since a 29.6 percent plunge in December 1974.  The Fed’s credit report excludes home loans and home equity mortgages, only covering borrowing that is not secured by real estate.  The drop in overall credit for 10 straight months was a record in terms of consecutive declines, surpassing the old mark of seven straight declines set in 1943 and again in 1991.  Americans are borrowing less for a number of reasons. They remain fearful about their job prospects and they are also trying to replenish depleted investments.

DSNews.com – Future of Mortgage Purchase Program?

According to minutes released this week of the Federal Reserve Board’s closed-door December meeting, Fed policymakers have already begun debating whether the program should be extended, to ensure the already-fragile housing recovery maintains its course, but the decision has left a dividing line down the central bank boardroom.  The Federal Reserve has said it will end its purchases of mortgage-backed securities (MBS) from Fannie Mae, Freddie Mac, and Ginnie Mae on March 31, but the decision wasn’t unanimous. Over the past year, the U.S. central bank has purchased nearly 75 percent of the mortgages that Fannie, Freddie, and Ginnie have securitized. It currently holds just over $900 billion of these MBS bonds, and says by the time the program ends it will have bought a total of $1.25 trillion.

On Wednesday, federal banking regulators, including the Federal Reserve, issued an advisory to the nation’s financial institutions, warning them to ensure procedures and practices are in place to minimize their risks from loans and an increase in financing costs when interest rates do rise.  The government has already moved to reassure the market that the Fed’s withdrawal of its support won’t have as big a sting as some fear. In late December, the Treasury pledged “unlimited support” to Fannie Mae and Freddie Mac, and lifted the mandate that the two companies begin selling off large chunks of the securities they hold.  But some investors aren’t convinced. Ronald Temple, portfolio manager at Lazard Asset Management, told the Wall Street Journal that if the Fed stops buying mortgage bonds, we should expect mortgage rates to rise by at least a full percentage point. He says that combined with high unemployment and still large numbers of foreclosures could push home prices down as much as 20 percent.

Redefault Rates ‘Tragic’, Says Amherst 

According to Amherst Securities Group, default and prepayment rates on non-agency, private-label mortgage-backed securities (MBS) were constant in November. However, re-performance rates, where payments return to less than two months delinquent, were down and re-default rates “tragic” in November, according to market commentary provided by the firm.  The Amherst report, based on November payment data covering 98% of loans backing private-label MBS, said cash flow velocity continued to decline.  Based on performance data, Amherst projects that always-performing loans fell to $905bn in November from $930bn in October, as first-time defaults came in at $16bn, from $16.8bn in October.

Prepayments of $8.3bn were unchanged from the previous month.  Re-performing loans totaled $117.3bn in November, down from $118.1bn in October. Loans totaling $12.8bn became re-performing in November by getting back within two payments delinquent, down from $13.4bn in October. Total non-performing loans were $484.8bn in November, from $486.1bn in October.  Re-defaults after modification were $12.8bn, or 10.9%, up from 10.5% last month.  Laurie Goodman of Amherst has said the fundamentals of certain modification programs put them at a disposition for unsuccessful modification. The Treasury Department’s Home Affordable Modification Program (HAMP), for example, is “destined to fail” as it does not address negative equity.

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Price Impact on ROI

One of the most commonly used valuation models for single family homes and short sales includes the Return on Investment or ROI. Despite the ease associated with using this calculation, the ROI is a robust measure of investment value that is both quick and convenient. However, it is also subject to a high level of volatility based upon the price of the property and type of funding in place. In fact, ROI is so dramatically influenced by funding mechanisms it is frequently considered a cornerstone by investment advisors. Let’s take a look at a few hypothetical short sale situations to demonstrate the impact of price on the ROI as well as how it can be used to your advantage.

Cash is still king and it speaks louder than ever especially with tightening lending standards and other banking irregularities; however, one area where cash doesn’t hold up quite as well as the use of leverage is in the calculation of ROI or return on investment. Let’s assume a short sale investor opts to purchase a property in cash for $100,000. If the property generated a one year rental return of $10,000 the total ROI is a fairly straightforward 10% or perhaps the property was flipped for a $20,000 profit and thereby the ROI was a handsome 20%. Both are completely realistic examples and certainly above and beyond what stocks, bonds or other inferior investments are currently able to deliver but the total return is a bit misleading. This can be due to the cost of borrowing the money in the first place (ie, what interest rate is being paid on the funds borrowed or the “spread” of the borrowed interest rate versus the total ROI received). For example, if the short sale buyer took out a home equity loan or borrowed against a 401-k plan, the interest rate may be a very reasonable 3 to 4 percent versus a total return of 10% – leading to a “spread” or ROI of 6-7 percent.

On the other hand, some properties are truly purchased completely for cash so the entire ROI is theirs to keep…but is this always the best situation? Maybe-maybe not. There are a multitude of reasons to purchase a property for cash – not the least of which is the inability to obtain full financing on a distressed property, the ease and convenience of closing and the cost savings of not having to obtain PMI or other add-ons. However, there are very strong reasons to finance a property or use the maximum amount of leverage possible to maximize ROI. Going back to the former example, let’s assume you financed a property for 80% of the value…$80,000 of the total price of $100,000. You used $20,000 out of pocket and received the same $10,000 annual rental or flipped for a quick $20,000. Instead of a respectable 10% to 20% return, you will now realize an eye-popping 50% to 100% return on your investment!

Now let’s take this one step farther…how important is price when it comes to ROI? The final answer is “it depends”. Certainly buying right is a critical consideration in any short sale deal however, when using leverage, price becomes much less important due to the extreme rates of return generated. In the above examples, every $1,000 addition in cost reflects a significant gain or loss in the final cash ROI but in the leveraged position, paying an additional $1,000 for a property results in a paltry difference in the final ROI. Short sale investors should fully understand how to maximize ROI depending upon the price and funding source to be utilized for the deal. By doing so it is often feasible to pay more for a property while still maximizing the full profit potential of your portfolio.

See you at the top!

Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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 over
     400 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
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com

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Real Estate News & Commentary by Chris McLaughlin, November 19, 2009

by admin on November 19, 2009

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

* Join my Fan Page: http://www.mclaughlinchris.com

Land Flipping Finale … Tonight at 8:30 PM ET, 5:30 PM PST:

There was so much excitement about the new strategy in flipping land that we’re holding an encore tomorrow night at 8:30 PM ET, 5:30 PM PST.  There’s also a three pay option as well to help with your cash flow needs.

Here’s the link to RSVP:

https://www2.gotomeeting.com/register/530226171

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WSJ sees foreclosure tidal wave

In a lead story, the Wall Street Journal (WSJ) paints a dismal picture of the housing market in 2010.  Uncertainty over the extension of a home-buyer tax credit sent new-home starts in October crashing down a full 10.6% from September, and starts of single-family houses fell 6.8%.   That’s the lowest level since April, the Commerce Department said. This news suggests that foreclosures are not only going to keep rolling in, but that they may actually increase.  Richard Dugas,  chief executive of Pulte Homes Inc., the nation’s largest home builder, warned investors: “As we look out to 2010, we are expecting difficult conditions to continue.”  Wednesday’s data prompted some economists to revise their fourth-quarter forecasts down slightly. Macroeconomic Advisers moved its GDP estimate down to 3% from 3.2% and Nomura Securities predicts 3.4% growth, down from 3.6%. The data adds to the suggestion “that the recovery is a little bit rickety,” said Zach Pandl, an economist from Nomura.  Given that 3.4% of U.S. households — or about 1.9 million homeowners — are 120 days or more overdue on their payments, and that millions of homes are expected to go through foreclosure over the next few years, adding to supply, it’s a fair bet that foreclosure problem won’t be gone anytime soon. 

Unemployment claims flat 

The Labor Department announced that initial claims for state unemployment benefits were flat at a seasonally adjusted 505,000 in the week ended Nov. 14 – about the same as analysts polled by Reuters had forecast.  Applications have dropped significantly from March’s lofty levels, but remain above the 400,000 mark that analysts say would signal payrolls growth.  The four-week moving average for new claims fell 6,500 to 514,000 last week – declining for the 11th straight week.  The number of workers still collecting benefits after an initial week of aid dropped 39,000 to 5.61 million in the week ended Nov. 7, the lowest since March, and in line with market expectations for 5.60 million.  continuing claims have fallen from a peak of 6.9 million in June and the drop is likely the combination of fewer new applications for unemployment aid and many jobless workers exhausting their benefits.  The four-week moving average of continuing claims declined 83,500 to 5.71 million. The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was steady at 4.3 percent in the week ended Nov. 7.

Surprise!  Administration’s job claims “flawed”

This can hardly come as a surprise after the recent fiascos of non-existent congressional districts and wildly inaccurate job estimates, but a new report from the Government Accountability Office (GAO) concludes that the Obama administration’s recent claims about the number of jobs saved or created by stimulus spending are flawed.  The White House touted the Recovery Board’s report that claimed approximately 640,329 jobs had been created or saved through contracts, grants and loans in the stimulus package, and while the GAO has not issued corrective numbers, it found a slew of new holes in the data:  3,978 recipients reported jobs created or saved without actually receiving ANY Recovery Act funds, and 9,247 reports showed the receipt of money but NO JOBS were created or saved. In addition, there have been over 100 allegations of fraud surrounding Recovery Act funds, and more than half are still at various investigative phases.  In the final analysis, the GAO concludes it has been a “lessons learned process”, and there should be changes to how jobs created and saved are defined, while continuing to work with recipients to accurately report the impact of Recover Act funds.  Heck, it would be more accurate to just make up numbers.

Housing slump or not next year? 

The National Association of realtors (NAR) expects house prices to rise 4 percent in 2010 with sales hitting 5.7 million units, slightly above the 2007 rate, and that about 15 percent of sales will be the result of the tax credit, which requires a contract by the end of April and closing by the end of June.  It’s only fair to present the other side of the argument:  “Most of it [the tax credit] is simply shifting sales from one period to another,” says Global Insight economist Patrick Newport. “It doesn’t get rid of the fundamental problem; there’s still a glut of houses.”  David Crowe, chief economist at the National Association of Home Builders agrees: “We expect a little stall in 2010…I agree, you do advance demand, so you steal it for the future.”  The builders’ group forecasts sales peaking at 5.60 million units in the first quarter and bottoming at 4.50 million in the third quarter, for a 2010 average of 5.15 million. That’s marginally above the 2008 rate of 4.91 million. Most economists see the jobless rate—now 10.3 percent—peaking around 11 percent sometime in early to mid 2010 and then creeping down to around 10 percent by the end of the year, and that certainly drags on both sales and prices too.  However, any change in employment, even sentiment, will help sales in general, while a snapback in new household creation will mean the traditional supply of new buyers.  Historically low interest rates—which may creep up a full percent over the next 14 months—will still be low enough to keep home affordability high.

More healthcare taxes on the way

Meanwhile, back in never-neverland, while the economy is hobbling along and banks are burning, the government is still fiddling with healthcare.  U.S. Senate Democratic leader Harry Reid released a 2,074-page bill, which quickly set off what promises to be a lengthy and bitter debate over President Barack Obama’s top domestic priority.  Democrats said the Congressional Budget Office pegged the plan’s 10-year cost at $849 billion — below Obama’s $900 billion goal (well that’s a relief – oh, wait, I missed the “Democrats said” part).  The actual analysis from the Congressional Budget Office had not been released by mid-evening on Wednesday, but at least the Senate bill is less expensive than a more than $1 trillion healthcare measure passed on Nov. 7 in the House of Representatives. 

Republicans criticized tax increases included in the bill to help pay for the expanded insurance coverage, including a new tax on elective cosmetic surgery they dubbed a “botox tax.” The bill would also raise the Medicare payroll tax on high-income workers, which is used to finance the government health program for the elderly, and impose a tax on high-cost “Cadillac” insurance plans.  “This bill has been behind closed doors for weeks. Now, it’s America’s turn, and this will not be a short debate,” Republican Senate leader Mitch McConnell said. “Higher premiums, tax increases and Medicare cuts to pay for more government — the American people know that is not reform.”  If the Senate passes a bill, any differences with the House version would have to be reconciled before a final bill can be voted on again in both houses and sent to Obama to sign.

HAMP not working

Only a tiny percentage of troubled homeowners have received permanent modifications under President Obama’s Home Affordable Modification Program (HAMP), raising concerns about the effectiveness of the $75 billion effort.  Fewer than 5% of the trial modifications on loans owned or guaranteed by Freddie Mac were converted to long-term adjustments as of Sept. 30.  More broadly, the figures are even lower. As of Sept. 1, only 1.26% of all trial adjustments were made permanent after three months, reported the Congressional Oversight Panel, which monitors the government’s use of bailout funds.  The preliminary data, which has not been widely reported, underscores the next big problem facing the government’s effort: Officials have leaned on banks to offer more homeowners trial modifications, but the real test will be whether homeowners will receive lasting help. 

“No one is really sure why the conversion rate is so low,” said Mike Zoller, assistant economist at Moody’s Economy.com. “We’re concerned these loans will eventually become foreclosures.”  Guy Cecela, publisher of Inside Mortgage Finance, a trade publication, says, “Everyone is going to be shocked at the low conversion rates from trial modifications to permanent modifications.”  The president’s program “won’t result in a significant number of loans being modified and won’t put a significant dent in foreclosure rates.”

Now on to our real estate investing educational arena …

Finding Cash to Get Started in Foreclosure Investing

One of the most common complaints voiced by those that have never tried a short sale is that they don’t have the funds needed to get going. The reality is that short sales and REOs are within the reach of most average investors – far more so than other funds that can bring a fortune into your life. Here are just a few ways to find the cash to get started in short sales investing:

1. Banks. This is the most common way but of course, it often requires at least a little out of pocket to get going. Keep reading to learn more ideas of where that might come from…

2. Hard Money Lenders. This is a viable option especially for those that intend to re-sell or flip a property quickly. It’s often worth the higher than average interest rates to turn a quick profit the finance your own from that point forward.

3. Line of Credit or Credit Cards. Personal lines of credit or “signature loans” are a super convenient method of obtaining cash for closing costs or repairs. Likewise, credit cards can be quite helpful – just remember to use responsibly.

4. Savings Account. Remember those? Plenty of people still have them and right now, the interest is dismal. Put that money to better use by investing in a short sale. Once the property is re-sold you can stash the cash away for safe-keeping or even add to it.

5. Bonds. Much like savings accounts, these under-performing assets are downright depressing. Consider the opportunity cost then put that money to work.

6. Insurance Loans. If you have whole life insurance it is often possible to borrow from your policy for a fraction of the cost associated with other credit terms. It’s a great way to make your money work for you without reducing liquidity requirements.

7. 401-k. Another popular option for generating quick cash at a relatively low cost.

8.  Home Equity Loans. Although more difficult to obtain than in the past, those with good credit are still able to tap into equity. Other options include reverse mortgage loans or loans made with other secure collateral.

9. Friends and Family. While doing business with friends and family can be risky business, borrowing from them need not be if you write up the proper contract. It is often a win-win since you obtain needed funds and they get better than average returns on their money.

10. Join a Professional Group. The “big boys” of investments have used syndicates for a long time but small investors rarely have been able to generate the same types of returns. Today, there are a multitude of options for those seeking the temporary use of funds from others.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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 over
     400 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
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
    * Join my Fan Page: http://www.mclaughlinchris.com

{ 0 comments }

Foreclosures hit over 1.5 million homes in first half of 2009

by Chris McLaughlin on July 16, 2009

Foreclosures Jump 33% in June Over Prior Year

Real Estate News & Commentary by Chris McLaughlin, July 16, 2009

http://www.shortsalesriches.com

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

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of how you can do 3 simple things that you can even

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And it doesn’t cost you a cent to find out about it this

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Foreclosures hit over 1.5 million homes in first half of 2009

foreclosuresAccording to RealtyTrac, foreclosures rose 15% in first half of 2009 compared to a year earlier, impacting over 1.5 million homes. Foreclosure filings increased more than 33% in June compared with the same month last year and rose nearly 5% from May. More than 300,000 households have received foreclosure filings in each of the 4 months till June. About 79,000 homes were repossessed by banks in June, up from 65,000 in May.

Analysts say that the $50 billion in subsidies announced by the Obama administration for tackling the foreclosure crisis has not been effective so far. “Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing. Nevada saw the highest foreclosure rate in the first half of 2009 with over 6% of the households receiving a filing. Arizona was next to Nevada, followed by Florida, California and Utah. Analysts say the mortgage modification program announced by the government is mired in inefficiency and mortgage companies are not equipped to handle the program. “They need to automate the process, and they need better technology, and they need to do this quickly,” said Bill Kelvie, chairman of Overture Technologies.

Mortgage securities boost bank profitability

Despite all the gloom and doom in the housing market, mortgage securities are helping banks post better results. An analysis of the second quarter results of banks shows that banks have made hefty gains on account of the recent rallies in the price of mortgage securities. “It’s the mother of all mortgage quarters,” said Meredith Whitney, a banking analyst. Traditionally, mortgage banking has accounted for about 3% of revenues for large banks; it has more than doubled to 6.4% in the first quarter of this year.

According to Inside Mortgage Finance, a publication, lenders issued about $1 trillion worth of mortgages during the first half of 2009. Banks have seen an increase in margins in mortgage lending. New accounting rules which allow banks to book lower losses on troubled loans are likely to help. Jack Ciesielski of The Analyst’s Accounting Observer estimates that the earnings of the biggest banks could have decreased significantly but for the new accounting rule. With the housing sector not showing signs of sustained recovery, some analysts say profits from mortgage business may not sustain. “You might believe that the environment has stabilized, but looks are sometimes misleading,” said Whitney.

7-Eleven’s growth strategy amid weakness in the real estate market

7eleven7-Eleven, which has a chain of about 5,700 convenience stores, plans to add more than 200 new outlets this year. This is in contrast with retail chains closing their stores due to economic downturn. The company says the current weakness in the commercial real estate market will help keep its expansion costs low. The company has identified California and New York as the states where it will open most of the new stores. Dan Porter, vice president for real estate and new store development at 7-Eleven, says the company is getting access to retail space which was earlier too expensive. Consumers are trading down to necessities and chains like 7-Eleven are likely to be less-impacted by the recession than chains which sell high-end products. ”While the business is not recession-proof, it’s recession-resistant, and doing well, given the marketplace,” said Mike Friedman, a senior vice president of CB Richard Ellis, a real estate firm which works with 7-Eleven.

CIT Group on the verge of bankruptcy

citgroupIt looks unlikely that CIT Group (CIT), a troubled commercial lender to small and medium firms, will be rescued by the government. CIT, which has already received $2.3 billion in bailout funds, has not been able to convince the government that its failure will lead to the collapse of financial system. CIT said that “there is no appreciable likelihood of additional government support” in a statement. CIT is facing a significant cash crunch and has to confront $1 billion debt maturing next month. The Federal Reserve, after conducting stress tests on CIT, concluded that CIT will need an additional $4 billion in capital under the worst economic scenario.

Government officials are reluctant to infuse additional funds since they say that the firm has no viable business plan and there is no point in throwing good money after bad. CIT has posted a loss of $3.4 billion across 8 straight quarters. “It’s a killer,” said Sean Egan, president of Egan-Jones Ratings while commenting on government’s refusal to infuse additional funds. “What’s next is that they’re going to have to scrape for capital to meet the next loan payment and it’s highly likely that they’re going to file for protection.”

Goldman’s average employee compensation set to double in 2009

With Goldman Sachs delivering a knockout second quarter profits, analysts say that the bank is on its way to doubling its average employee salary. Goldman’s compensation expense including salaries, benefits and severance payouts, was $11.4 billion in the first half of 2009; this is well above $8.5 billion in the first half of 2008 and $11 billion in the first half of 2007.

The average Goldman employee is projected to make $773,000 for 2009, more than doubling their 2008 salary; this is more than 10 times the typical American family’s income. Given the current mood in Capitol Hill, Goldman’s employee compensation could well become a target of populist anger. Some analysts say Goldman has performed better than its rivals by shedding risky assets, holding adequate cash reserves and raising capital, and hence its employees deserve pay hike. “Look, I hate the corporate welfare,” said David Merkel, chief economist at Finacorp Securities. “But at least Goldman did play all its cards right.”

Now on to our real estate investor education section…

Order of Work By Profit Potential

Whether you are seeking new ways generate the best rates of return or just searching for a bargain basement price to begin building a real estate portfolio, sooner or later you will encounter a property that needs work. The decision on what project to start with is more than an academic question – should you run out of time, or experience a set-back in funding, having the most important work performed first assures the highest selling price. In order of profit potential (or missed opportunity as the case may be) here are the major projects listed by order of importance:

  1. Exterior. Plain and simple…exteriors make or break the bank. Ugly houses bring less money. Pretty houses make more money. Search for ugly homes that are below the standards of the neighborhood then bring them up to par in order to buy low and sell high.
  2. Clean. It’s simple yet effective. Make sure the interior and exterior of the home is clean and freshly painted. Trim hedges, pressure spray walkways and driveways. It’s simple yet effective.
  3. Roof. Undoubtedly the next “biggie” when it comes to selling the home is the condition of the roof. Even the slightest appearance of a potential roof problem turns hot buyers cold. Research shows a disproportionate loss of income potential on a property that requires roof repairs…even if the repairs are relatively modest. Learn how to calculate the cost of roof repairs and submit bids where others fear to tread…and always makes sure the roof of your own property is in good condition to fetch top dollar.
  4. Exterior Doors, Windows & Siding. Exterior doors should be replaced with low cost builder quality models if damaged or aged. Windows must be in working order and should be appropriate for the weather in the given area. You can often repair windows for a fraction of the cost of replacing as long as they aren’t an eye-sore. Repair siding whenever needed – but only after taking care of doors and windows.
  5. Plumbing. The majority of plumbing problems tend to be relatively simple and straightforward but you will likely be surprised how many are neglected. Don’t allow your home to show any leaks or water stains! Invest a few bucks in washers or new faucets then cover or repair any areas that have water stains.  Builder quality is sufficient for basic homes as long as it looks clean and fresh. Upscale homes should reflect better quality products and amenities.
  6. Duct Work & Insulation. The emphasis on clean and green has more savvy shoppers paying special attention to air quality and energy efficiency. Have an inspection performed and take care of any known problems in advance. It’s typically a low cost fix.
  7. Lighting, Molding & Other Details. Walk through the house beginning at the front door to make sure each door knob, trim and other details are in acceptable condition. Each should be clean, stable and perform without problem…otherwise, fix/replace it. Luxury homes should evoke a “ahhh” response for each item while modest homes should simple not evoke any response – ie, the items should be invisible.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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
* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Add me on Facebook: http://www.facebook.com/mclaughlinchris

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Property tax appeals surge across the country

by Chris McLaughlin on July 6, 2009

Foreclosure Crisis Unveiled: Subprime isn’t the real story

Real Estate News & Commentary by Chris McLaughlin, July 6, 2009

http://www.shortsalesriches.com

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

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Property tax appeals surge across the country

propertytaxAs local governments grapple with the problem of dwindling revenues, they now have a new problem to confront: rise in property tax appeals. As home prices fall, homeowners and associations are appealing to the local authorities to have their property taxes revised downwards. “It’s worthy of a Dickens story,” said Gus Kramer, the assessor in Contra Costa County in California. “These people are desperate. They know their home’s gone down in value. They’ve watched their neighborhoods being boarded up. They literally stand in there and say: “When can I have my refund check? I need to feed my family. I need to pay my electric bill.” In some states, property tax values are falling for the first time since World War II. In Atlanta, thousands of people have made appeals for reassessment. In part of Ohio, reassessment appeals have multiplied fivefold. In suburbs of New York, tax lawyers are so busy that they have hired extra employees to go through the paperwork related to property tax reassessments. “We’ve been absolutely getting killed,” said Robert W. Singer, the mayor of Lakewood Township in New Jersey. Singer’s town expects to pay $2 million in tax refunds to homeowners. “We’ve never had this before. Usually they’re undervalued. Now, everyone’s overvalued.”

California seeks to expand its tax-credit program for home buyers

California, in its budget in February, introduced a program by which home buyers could get up to $10,000 credit when they buy a new, previously unoccupied home. The program was aimed at boosting home sales in the state. The program funding, capped at $100 million, was meant to run until March 2010. The response to the program was positive with the state receiving 9,800 applications seeking $94.7 million. California Tax Board, which oversees the program implementation, announced last week that the program would be stopped once it received 12,000 applications.

“We didn’t realize how successful [the tax credit program] would be,” said Bob Dutton, a Republican Senator who sponsored the bill which created the program. Lawmakers in California have now introduced bills proposing the expansion of the program to at least $200 million and extending it by at least one year. Some analysts believe the program has not been effective so far. According to Hanley Wood, a market research firm, new home sales in California in terms of both units and average prices have declined in March and April this year over the earlier year. Robert Kleinhenz, deputy chief economist for the California Association of Realtors, says the program is benefiting first-time home buyers. The impact of extending the program on the state’s $21 billion budget deficit is worrying to some lawmakers. Ira Ruskin, an Assemblyman in California, says, “We have to be very careful what we do with general-fund money” given the state’s budget deficit.

Court approves GM asset sale

courtapprovesgmsaleIn a 95-page ruling, Judge Robert Gerber, of Federal Bankruptcy Court in Manhattan, consented to the asset sale plan proposed by General Motors (GM). The court received over 850 objections to the restructuring plan during a 3-day hearing. Harvey Miller, GM’s counsel said none of the objectors to the sale of assets had a credible plan as an alternative. Miller argued that liquidation would benefit no one. Judge Gerber agreed with GM that the asset sale was critical to keep the company going. “Bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve — to prevent the death of the patient on the operating table,” said Judge Gerber. “In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.” Under the restructuring plan, GM’s prized assets, including the Chevrolet and Cadillac brands, will be transferred to a new company which will bear the General Motors name. The majority shareholders of the new GM will include the United Automobile Workers union and the American and Canadian governments. The “old” GM, which will stay in the bankruptcy court for liquidation, stands to receive $1.175 billion, by way of loan from the government, for winding down the estate and settling claims.

Is wage seizure leading to more bankruptcies?

bankruptcyAccording to research carried out by the Associated Press, states that allow wage seizure by creditors by way of the so-called garnishment laws have much higher individual bankruptcy rates than states that do not. States such as North Carolina, Pennsylvania, South Carolina, Florida and Texas, which prohibit or limit wage seizures, have much lower rates of bankruptcy than their neighbors where economic conditions are similar but do not limit or prohibit wage seizure. The nationwide bankruptcy rate is 42% higher than the rate in those 5 states. When wage seizures happen, collection companies may seize up to 25% of the disposable income of borrowers. The mere threat of wage seizure can force borrowers to file for bankruptcy. David Cherner, a director at ACA International, which represents debt collection agencies, says wage seizure is typically looked at the last resort by collection agencies.”The debt collection industry isn’t necessarily enjoying a lot of success at this point,” due to a rise in personal bankruptcies, Cherner said. “While volume (of credit collection activity) is up, consumers are hurting.”

The rising mountain of debt

Currently, the national debt of the U.S. amounts to $11.4 trillion and it is growing by over $1 trillion each year. At about $37,000 for each and every American, the national debt is likely to cause significant problems if it is not tackled soon. “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” warned Federal Reserve Chairman Ben Bernanke recently. Interest payments amounted to $452 billion last year. Analysts say debt servicing is crowding out other government spending. In order to reduce debt taxes have to go up or government spending has to come down, or both. President Obama says the debt is “something that keeps me awake at night” and his administration is planning to rein in national debt to “acceptable” levels. Alexander Hamilton, the first treasury secretary of the U.S., once said: “A national debt, if not excessive, will be to us a national blessing.” Not many would say that the current level of America’s debt is a blessing.

Now on to our real estate investor education section…

How to Get the SBA to Finance Your Short Sales Empire

In yet another display of support for the short sales concept, the Small Business Administration recently announced breakthrough changes to the 504 Loan Program in conjunction with the American Recovery and Reinvestment Act of 2009. Small business owners (defined as those that do less than $5 million in business each year) will be eligible to refinance existing loans that were used to buy real estate or other assets. Even better, the 504 program also provides funding to allow small business owners to purchase real estate as well as fixed assets…including short sale real estate.

This is no small boon for those short sale investors searching for a way to obtain financing in a tough market or wishing to expand their short sale empire through the acquisition of additional types of properties. Keep in mind, small business loans may be interested in acquiring many different types of properties including residential real estate, commercial real estate, retail, storage or many other forms of distressed property.

The enhancement of the 504 Loan program to include refinancing and funding for new acquisitions is especially timely for those short sale investors who have taken steps to incorporate their business or who would like to purchase short sale properties as part of their existing small business. Forming a subsidiary or acting like a holding company is one way to allow your small business to cash in on short sale profits and broaden your bottom line holdings with the bank.

In addition to expanding the scope of new and existing financing options, the program has also increased the guarantee level to 90 percent while correspondingly reducing fees and transactions costs. ARC loans have also been made available to companies facing immediate financial hardship.

Eligibility Requirements:

“Expansion” includes any project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business. The following are some of the conditions under which borrowers will be eligible for refinancing:

• The debt being refinanced was incurred to acquire land, to construct a building or to purchase equipment.  The assets acquired must be eligible for financing under the 504 program.

• The existing debt is collateralized by fixed assets.

• The existing debt was incurred for the benefit of the small business.

• The new financing provides a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are taken into account.

• The borrower has been current on all payments of existing debt for one year prior to the date of refinancing.
See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

PS:

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Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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
* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Add me on Facebook: http://www.facebook.com/mclaughlinchris

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Home Resales Up 2% in April

by Chris McLaughlin on May 27, 2009

Real Estate News & Commentary by Chris McLaughlin, May 27, 2009


http://www.shortsalesrichesturbocharged.com


It’s LIVE! The Launch of the Year has begun .. find

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PM PST:

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Home Resales Up 2% in April

According to a survey conducted by Bloomberg News, resales of home rose by 2% in April from March. Falling prices, tax credits, and low mortgage rates may be contributing to an increase in home resales. The rise in foreclosures also helped home resales. Foreclosed properties accounted for 50% of home resales in March. “Home sales are being boosted by foreclosure sales and that’s helping to keep activity stable,” says Celia Chen, an economist at Economy.com, a provider of economic analysis. Many analysts believe that the market is stabilizing. “Home sales and construction activity are probably at the bottom,” said Chen. Robert Niblock, Chief Executive Officer of Lowe’s Companies, a large retailer of home-improvement products, said in a conference call that “there have been some encouraging signs in recent weeks that suggest perhaps the worst is behind us. Consumer confidence has ticked up. Housing turnover, especially in certain markets, is showing signs of a bottom.”

Mortgage applications drop

According to the Mortgage Bankers Association, its index which tracks applications to purchase a home or refinance a loan dropped 14.2% in the week ended May 22, as compared to the earlier week. Requests for home loan refinance dropped 18.9%. While some believe the market is about to stabilize, housing analysts rule out the possibility of a sustained recovery unless unemployment goes down. Pete Flint, chief executive of Trulia, a real estate website, says, “The housing market is not going to recover until foreclosures stabilize and reduce, which is unlikely in the short run. I would feel a lot more hopeful for the housing market when I see some positive signs in the employment statistics.” The unemployment rate in the U.S. is currently 8.9% and is expected to climb in future.

Irrational exuberance

The Standard and Poor index is up more than 30% since early March. With the economy not showing any signs of sustained recovery, the enthusiasm of the market could well be misplaced. In its latest budget projections, the U.S. government estimated that the economy will grow by 3.2% next year and by the year 2012, the growth will be 4.6%. Many analysts expect the economic growth to be lot lower. The economy has been bolstered by government spending. The question is what would happen if there is a reduction in government spending. Jeffrey Rosenberg, head of global credit strategy at Bank of America Securities Merrill Lynch, says, “When you remove the government stimulus, what the private sector can generate in terms of growth feels like a recession.” According to Rosenberg it would take another 3 years before banks recover from credit crisis and during that period economic growth could be as low as 0.5 to 1%. When the economy grows at a rate as low as 1%, it is susceptible to external shocks such as rise in the price of oil. History suggests that when recession is caused by financial crisis, it takes a lot of time for the economy to recover.

Consumer confidence grows

Data released by The Conference Board, an agency which carries out economic research, suggests that consumer confidence is on the rise. The index of consumer attitudes, published by The Conference Board, jumped to 54.9 in May from 40.8 in April. This is the biggest one-month jump since April 2003. Analysts believe that the jump in the index is an indication of “less of bad news.” Lynn Franco, director of The Conference Board’s Consumer Research Center, says, “Consumers are considerably less pessimistic than they were earlier this year.” Less of pessimism doesn’t exactly denote optimism. The consumers covered in the survey for collecting index data offered mixed response with regard to their purchase plans. The proportion of consumers planning to buy a car in the next 6 months rose to 5.5%, the highest in the last one year. But only 2.3% said they intended buy homes.

General Motors inches closer to bankruptcy

The large majority of bondholders of General Motors (GM) have rejected the company’s offer to trade their $27 billion bonds for a 10% stake in the company’s stock. This effectively negates the possibility of GM’s debt restructuring plan, and pushes the company closer to bankruptcy. Some believe that GM’s bondholders are likely to get a worse deal if the company files for bankruptcy. It looks highly likely that the U.S. government will increase its planned stake from 50 to 70% in GM, in order to reduce the company’s debt burden. The bankruptcy, if and when it happens, will be among the largest and the most complex in the history of American industry.

Now on to our real estate investor education tips section …

Is Your Body Language a Barrier to Short Sale Success?

Let’s face it – everyone is prone to the occasional sigh or less than enthusiastic response especially when dealing with complex or challenging people. Unfortunately, short sale investors must learn how to successfully negotiate with sellers, lenders and others in order to put together the best deals – no matter how positive or negative you feeling are – it’s important to keep your body language under control. Learn how to identify – and correct – the most common body language barriers holding back your success:

Off the Top of Your Head…did you realize that most people tend to look upward in a diagonal position when trying to think of an answer? It’s true – and others are able to pick up on that almost immediately. Stay prepared to avoid negotiating by the seat of your pants.

X-Marks the Spot…crossing your arms is often associated with a defensive posture. Rather than attempting to fix it (which is likely to only make you appear even more uptight), simply learn how to calmly communicate what you don’t like about the current conversation. Practice using a relaxed voice and your body language will follow suite naturally.

Ahead of the Crowd…overt enthusiasm and gestures that display a sense of urgency can be a dead give-away. Learn how to demonstrate a calm demeanor even when excessively excited. If you are absolutely unable to curb your enthusiasm, put it into writing instead. Think of it like a poker game – and keep your cards to yourself.

I Can’t Believe my Eyes…rubbing eyes or constantly turning your face away or indicates doubt and disbelief. Stop and allow the information to sink in slowly or ask questions rather than showing serious doubt or disbelief. It keeps the lines of communication open rather than putting the other party on the defensive.

Nervous Habits…biting nails, tugging at the corner of something, fidgeting with a pen and other time consuming habits either indicate boredom (if they are performed slowly) or impatience. Either one sends the wrong message. Keep track of what nervous habits you tend to display and rather than trying to eradicate them – replace them with something positive instead.

Ask a friend or family member to point out your most common body language pitfalls then make a point of developing successful forms of physical communication. For example, a brisk erect walking manner that portrays confidence or an open palm resting in a relaxed manner when speaking (sincerity, openness). Use “steeple fingers” when negotiating (authority) and a tilted head when listening to others (interest). Film yourself and practice until it becomes second nature. …but most of all, learn how to feel comfortable in your own skin.

See you at the top!


Chris McLaughlin

http://www.shortsalesrichesturbocharged.com

PS:

It’s LIVE! The Launch of the Year has begun .. find

out tonight what all the fuss is about at 8:30 PM ET, 5:30

PM PST:

https://www2.gotomeeting.com/register/501676394

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog


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 and Supervising Broker 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
* On twitter:
http://twitter.com/mclaughlinchris
* On facebook:
http://www.facebook.com/addfriend.php?id=709199143

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