Real Estate News & Commentary by Chris McLaughlin, June 26, 2009
http://www.shortsalesriches.com
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“Strange New Automation Strategy Closes Short Sales
Fast and Easy!”
Think of it! Our new automatic system for finding and
closing short sales is letting people cut their
work-week in half… and triple their income!
If you’re ready to say good-bye to endless hours of
labor, and far too few dollars in return, find out
more for fr-ee – no cost, no obligation. Just click
the link below..
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Slow approval process for short sales hampers housing rebound
Experts believe that the current level of housing inventory has to come down for the industry to get into a phase of sustained recovery. Short sale transactions offer a win-win-win situation to buyers, sellers, and lenders, and help clear the housing inventory available for sale. While short sales have risen in the last year or so, experts believe that banks are still not fully prepared to approve the transactions in a timely manner. Rick Shargo, vice president of marketing at RealtyTrac, said: “Interminable delays of six weeks to three months are not uncommon, or banks rejecting a 20% discount at short-sale only to ultimately take the property back and market it at 40 or 50% lower.”
Banks have to report their mortgage assets on a mark-to-market basis, and any sale at a price lower than the value in their books will mean a reduction in their reported profits. Bankers also complain that some buyers take advantage of the current situation, and demand a price which is way below the market price. Walter Molony, spokesman for the National Association of Realtors, said: “Short sales have taken far too long. The faster you clear off this excess inventory the faster you can stabilize home prices.”
Savings rate at a 15-year high
The Commerce Department says personal income in May rose 1.4%, the biggest gain so far in the year. The rise in income didn’t translate fully into spending. Consumer spending rose only 0.3% in May, a rise for the first time in the last 3 months while savings rate jumped to 6.9%, the highest since December 1993. “Consumers are starting to return to malls to spend a little more as they think we’re through the worst,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi.
Analysts believe a sustained recovery in consumer spending is likely only after unemployment eases. “The recession is ending. Still, purchases are likely to be modest until the job losses ease and companies start hiring,” said Rupkey. Increasing job losses led to 0.1% drop in salaries in May. Retailers believe consumer spending will not rise to any significant extent in the near-term. David Dillon, Chief Executive Officer of Kroger Company, a grocery chain, said: “Shoppers remain cautious in this economy, and we do not anticipate that changing anytime soon.”
Economic contraction eases in the first quarter
According to the Commerce Department, the nation’s gross domestic product contracted at a 5.5% annual rate in the first quarter of this year, as against 6.3% in the fourth quarter of last year. Economists believe that the economy is contracting at about 2% this quarter. “The economic data we’ve seen so far for the second quarter suggest the preliminary number for the second quarter will show a modest decline, maybe half the rate we saw in the first quarter,” said Gary Thayer, senior economist with Wells Fargo Advisors.
Despite the good news, economists are worried about unemployment not showing any signs of sustained reduction. This week, the Labor Department said jobless claims for last week jumped unexpectedly by 15,000 to a seasonally-adjusted total of 627,000. Continued claims, which denote the number of workers still on jobless rolls after an initial week of claims, rose 29,000 to 6.738 million in the week ended June 13, the latest period for which the data was published. “We still firmly believe that the underlying trends in claims is downwards, but it is slow and uneven,” says Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Delay in GM bankruptcy sale could kill thousands of jobs
Fritz Henderson, chief executive of General Motors (GM), has said that the company needs to get out of the bankruptcy court as soon as possible in order to prevent many of its suppliers from going out of business. “Many of GM’s suppliers are already in the midst of a severe liquidity crisis, which has only been exacerbated by the current shutdown of certain GM production facilities,” Henderson said.
At stake are thousands of jobs in supplier companies. GM has shut 11 of its plants for close to 3 weeks in order to cut production and slash inventory. GM filed for bankruptcy on June 1 and is awaiting court approval to sell its assets to a reorganized company. According to the Motor & Equipment Manufacturers Association, at least 15 auto parts suppliers including Visteon Corp, Metaldyne Corp and Noble International Ltd., have either filed for bankruptcy or had their assets seized by creditors in 2009. Henderson said the company’s plan to resume operations at some plants by July 13 could be hit if the court does not approve GM’s asset sale.
Oil companies worried about the impact of carbon legislation
The American Clean Energy and Security Act was recently passed by the House of Representatives Committee on Energy & Commerce. The legislation, introduced by Congressmen Henry Waxman and Ed Markey, proposes to tackle climate changes by reducing greenhouse gas emissions. Oil companies, when they refine oil in the U.S., would have to buy allowances for carbon dioxide spewed from their plants and from vehicles when motorists use their fuel. Instead of refining oil in the U.S. if oil companies import oil, they would need to buy permits only for emissions from motor vehicles and not for emission from their plants. Oil companies say this would favor oil imports rather than production in the U.S.
ConocoPhillips Chief Executive Officer Jim Mulva said: “It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment.” Roger Ihne, a consultant at Deloitte Consulting, believes that about 2 million barrels of daily U.S. refining capacity will shut down because carbon costs will be several times the operating profits for some plants. Some analysts believe that the saber rattling by the oil companies is with an aim to get concessions from the government to offset increased costs on account of compliance with carbon legislation. John Coequyt, a lobbyist with the Sierra Club, an environmental organization, said: “The strategic value of this is pretty obvious. They want to qualify for rebates under the competitiveness test, which of course they do not.”
Now on to our real estate investor education section…
What’s Your Defensive Interval Ratio?
Do you know your defensive interval ratio? Most novice short sale investors don’t’ have a clue what this even refers to while veteran investors have probably already rattled off their ratio. If you aren’t the accounting type don’t worry – a defensive interval ratio Is really quite simple. It’s the level of liquidity that reflects the ability of your business to meet current debt obligations. Plain and simple – how prepared are you to withstand a little period of insecurity? It’s a good number to know and something to keep an eye on in order to preserve your spending power and look good at the bank.
How to Calculate
Calculating the defensive interval ratio is easy; simple use the following formula to plug in your own numbers:
Defensive assets (anything you can sell or access when in need including money owed to you by others)/Projected daily operational expenditures – noncash charges
For example, let’s assume you have cash on hand of $50,000, access to bonds in $25,000 and expect to receive another $25,000 from debts, deals and other income for a total of $100,000. Your daily cost of sales, operating expenses and other income requirements amount to $1,000 per day giving you a projected daily expenditure of 100 days
How to Use
Keep an eye on both your personal and business defensive interval ratio. As a rule of thumb, more is better but it is possible to have too much cash sitting on the sidelines. Financial managers and short-term creditors pay special attention to defensive interval ratios so they are of particular interest to those seeking OPM or outside funding for quick cash deals or other relatively short term transactions.
Personal – Strive for at least a 90 day defensive interval ratio up to whatever makes you happy.
Professional – Calculate independently of your personal ratio. 30 days is a solid score but anything above 180 days tends to work against you by reflecting an overly cautious investing style with money sitting on the sidelines. Put the money to work in order to demonstrate your ability to formulate solid returns and mitigate risk. If you are unable to find appropriate investment instruments due to a relatively minor sum of money, try pooling it with others or use it as collateral when approaching deeper pockets than your own. In either case, show that you know and understand the concept behind the approach.
Research – Finally, take time to perform your own research with potential partners and others prior to sealing any deal. Obtain a quick look at their position before lending money or going into a partnership with anyone. Looks can be deceiving especially when it comes to elusive ideas like short sales. Make sure they have the staying power requires to become equitable partners rather than a burden which weighs you down in the long run.
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com
PS:
“Strange New Automation Strategy Closes Short Sales
Fast and Easy!”
Think of it! Our new automatic system for finding and
closing short sales is letting people cut their
work-week in half… and triple their income!
If you’re ready to say good-bye to endless hours of
labor, and far too few dollars in return, find out
more for fr-ee – no cost, no obligation. Just click
the link below..
https://www2.gotomeeting.com/register/255427331
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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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