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How to Irritate Lenders– Short Sale Newbie Mistakes

by Chris McLaughlin on April 10, 2009

Real Estate News & Commentary by Chris McLaughlin, April 10, 2009
http://www.shortsalesriches.com/welcome.html

——–

No money, no credit – but an honest desire to succeed?

That’s all it takes to get into the lucrative business of

finding and flipping short sale properties. We’ve had

people go from zero to six figures in less than six months!

See if there’re any spots left for this webinar tonight where

we explain it all this Saturday:

https://www2.gotomeeting.com/register/843758890

———

Mortgage rates up, but still low

Freddie Mac released the results of its Primary Mortgage Market Survey (PMMS) today. For the week ending April 9, 2009, the 30-year fixed-rate mortgage (FRM) averaged 4.87 percent, up from last week when it averaged 4.78 percent. Mind you, last year at this time, the 30-year FRM averaged 5.88 percent. Homeowner affordability should stay at record levels according to Frank Nothaft, Freddie Mac’s vice president and chief economist: “Mortgage rates rose slightly this week but still remained historically low,” he said. “Given these low rates, housing demand has strengthened. Conventional mortgage applications both for refinancing and for home purchases have increased over the past five consecutive weeks ending April 3.”

Oil demand to drop and stay low

The International Energy Agency (IEA) said world oil demand will drop by 2.4 million barrels per day in 2009, blaming a growing consensus that economic recovery won’t take place until next year. It said demand for this year was expected to be 83.4 million bpd, around one million bpd less than in its previous monthly report, a rate of oil demand contraction last seen in the early 1980s. The IEA’s report said expectations of a collapse in fuel consumption were not “solely conjecture,” and cited early indications of “much lower” demand in developed and non-developed countries for the first quarter of this year. The Organization of the Petroleum Exporting Countries has agreed to reduce supply by 4.2 million bpd since September, but in last month’s report, the IEA said even with strict adherence with OPEC supply cuts already in place oil stocks in developed nations won’t shrink until the middle of the year, and demand is already expected to contract further.

Goldman Sachs buying out of TARP?

According to a Wall Street Journal report, Goldman Sachs is considering a new stock sale to repay the $10 billion loan it received from the government last year under the Troubled Asset Relief Program (TARP). Goldman could announce the offering to investors as early as next week, the report said and it is expected to be several billion dollars. It’s really no wonder, since along with the money came an inquisition, all sorts of obligations, and public humiliation from the same politicians who set the stage for the problem in the first place. If there’s one thing worse than bankers with their hands on our money, it’s politicians.

Stress Tests pass, and fail

The “stress tests” the administration is conducting on the banks to see how well they would hold up if the recession deepens is under wraps for now, since President Obama asked the banks not to reveal the results until sometime around the end of April. The surprise profit announcement for Wells Fargo may have kicked off a rally yesterday, but the results of the stress tests will probably show that the banks will still need more bailout funds. Regulators say all 19 banks undergoing the exams will pass the tests, but add that no bank CAN fail them, since taxpayers will make sure they stay liquid. And in spite of the recent rally, some analysts say that with the recession, banks are likely to record further large losses on credit cards, corporate loans and real estate. Obama will meet today with Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Federal Deposit Insurance Corp Chairman Sheila Bair to discuss the stress tests.

What does $11 Trillion look like?

CNBC has a series of graphics giving viewers a visual of just how deep in a hole we are – or in this case how big of a stack we are. The national debt is shown as a huge stack of greenbacks dwarfing the Dubai Tower (tallest building in the world) and accompanied by the following caption:

US National Debt

$11,046,247,657,049.48 (According to US Treasury Direct, 3/26/09)

The mounting US National debt, growing by billions every day, has recently topped the $11 trillion mark. If denominated in $1 bills, the cash would stack as high as the tallest building in the world, the 2683.7 foot Burj Dubai skyscraper… 1,474,918 times. At this height, it would create a block of bills with a base approximately twice the size of the Empire State Building, which is just under the size of three American football fields.

It is also interesting to note that this number is approximately 13 times the amount of US currency in circulation, according to the Treasury bulletin, which lists the amount at $853.6 billion as of December 31, 2008.

Now on to our real estate investing education section…

How to Irritate Lenders– Short Sale Newbie Mistakes

With all the benefits to be derived from approving a short sale offer, you might wonder why any bank would rather risk long vacancies, vandalism, months of no mortgage payments and the eventual cost and uncertainty associated with a home going to auction or other foreclosure sale. Believe it or not, most short sale investors simply don’t have the know-how to get the job done right. To put it plainly, the lack of professionalism and irritating actions dramatically decrease their odds of obtaining a great investment property. Find out a few of the more common ways to irritate your lender then sign-up with the ShortSalesRiches.com series to learn the right way to make money from short sales.

Badgering. Let’s face it, nobody likes to be badgered. Yes, you might be excited by submitting your first short sale offer but resist the urge to call too often or otherwise badger overworked staff. Maintain regular contact and put a system into place.

How Low Can You Go—Not that Low! While lowball offers are expected, don’t waste everyone’s time by submitting something excessively below the current market value. Keep it realistic and plan to justify the reasons why you think the offer is fair.

Requesting Repairs or Refunds. Although there are exceptions to every rule, short sales are sold ‘as-is’. The price should reflect needed repairs – including time and labor. Don’t expect the bank, lender or current homeowner to fix or repair anything. Problems that arise after the sale are also your problem so be sure to add in a bit of wiggle room especially if the homeowner plans to occupy the house for some time during or after the sale.

Bad Credit. Yes, they will look. Get your own finances in order and make a point of presenting them in the best light possible.

Threats. Threatening to walk away from a deal, sue or other tactics rarely result in anything more than frustration for everyone involved. Unless a gross degree of misconduct was perpetuate against you related to a federal issues such as discrimination or other similar point, regular day to day mishaps are part of learning how to play the game. It’s essential to have a tried and true system in place that maximizes profit while minimizing time.

Homeowners with Assets. Homeowners have to demonstrate their need an inability to pay before a lender will agree to take a major loss. If your homeowner has other assets that could be turned into cash or compensate the lender for a loss then there is a high likelihood your offer will be rejected. Do your homework before blaming the bank – make sure the deal is win-win for all involved or you will likely just waste everyone’s time.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don’t miss our webinar Saturday at 3:30 PM EST, 12:30 PM PST:

https://www2.gotomeeting.com/register/843758890

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com
http://www.sixfigurebpo.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 flipping 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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Wells Fargo Announces $3B in Profit, Banking Sector Improves

by Chris McLaughlin on April 9, 2009

Real Estate News & Commentary by Chris McLaughlin, April 9, 2009
http://www.shortsalesriches.com/welcome.html

——–

No money, no credit – but an honest desire to succeed?

That’s all it takes to get into the lucrative business of

finding and flipping short sale properties. We’ve had

people go from zero to six figures in less than six months!

See if there’re any spots left for this webinar tonight where

we explain it all at 8:30 PM ET, 5:30 PM PST::

https://www2.gotomeeting.com/register/474558050

———
Banking sector improving — for today, anyway

In a glimmer of hope for the banking sector, Wells Fargo shares soared nearly 32% in early market trading on news that it had a better-than-expected profit of approximately $3 billion in the most recent quarter. Wells Fargo attributed the latest results to strong performances in its traditional banking and mortgage businesses. The news sent bank stocks higher across the board — including Citigroup, JPMorgan Chase, Goldman Sachs, and Morgan Stanley — driving the Dow up over 200 points in early trading.

Economy beginning to turn?

According to the Wall Street Journal, there’s a growing body of evidence that the economy is beginning to make a cyclical turn: wholesale inventories fell by the largest increment on record, and the inventory-to-sales ratio, the most direct measure of supply and demand in the economy, showed that the latter is gradually catching up with the former. Treasury prices declined, with the 10-year note sliding 16/32 to yield 2.921%, oil prices gained and gold prices fell, while the dollar strengthened against the yen and the euro.

Unemployment numbers slow, but unemployment stays high

If jobs were dollars, this would sound a lot like the national deficit, except that unfortunately the president can’t just print more jobs to make up for it. The number of people filling for unemployment benefits dipped to 654,000, but continuing claims hit a record high. In the week ended April 4, a total of 654,000 people filed initial jobless claims, lower than the previous week’s upwardly revised 674,000, the Labor Department reported. The 4-week moving average of people filing initial claims for unemployment benefits was 657,250, a decrease of 750 from the previous week’s revised average of 658,000. A consensus estimate of economists polled by Briefing.com expected 660,000 first-time filers last week.

Trade deficit shrinking

A new government report reveals that the U.S. trade deficit shrank in February by 28.3% to its smallest level since November 1999 as imports slowed and exports grew slightly in the face of shrinking global demand. The monthly trade gap dropped to $26 billion, down more than $10 billion from the revised $36.2 billion deficit in January, and about $10 billion less than Wall Street economist polled by Reuters had forecast. The February percentage drop was the steepest since a 34.9% fall in October 1996. Overall world trade is expected to fall this year for the first time since 1982 as businesses and consumers cut back on spending in response to growing job losses and a continuing credit crisis. Imports fell across all major categories, with crude oil imports falling to $39.22 from $39.81 the prior month. Exports increased slightly across all major categories: food, feed and beverages, industrial supplies, capital goods, automotive and consumer goods.

What to do with toxic assets?

As part of its plan to sell toxic assets, the Obama administration is encouraging several large investment companies to create bailout funds, not unlike the war bonds sold to finance WW II. Well, except that one was for a noble cause and the other is for banks… The idea is to share the risk, and give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. Or lose, and there’s the rub. If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could lose.

Berkshire Hathaway downgraded

Tell me it ain’t true! Berkshire Hathaway, the legendary company owned by Warren Buffett, has lost its coveted top-level credit rating from Moody’s Investors Service. Moody’s downgraded Berkshire by two notches to Aa2 from Aaa, claiming that severe stock price declines and the U.S. recession have weakened National Indemnity Company — an important Berkshire reinsurance subsidiary. Moody’s says the outlook for its rating is now stable and says it has no plans to make further cuts over the next 12 to 18 months. Before we all panic, hedge fund manager Whitney Tilson said that the Moody’s downgrade will have no effect on Berkshire’s holdings, and only a very small potential impact on its earnings. It may face slightly higher borrowing costs, but Tilson notes that Berkshire has lots of cash and doesn’t do much borrowing anyway.

Now on to our real estate investing education section…

Delays – Why the Long Wait

Just ask any real estate or short sale investor about the most frequently overheard complaint would be and you are certain to receive the same answer – long waits. Lenders tend to take their time when reviewing and approving a short sale offer. Some are certainly better than others but as the short sale arena goes into overdrive, savvy short sale investors would do well to understand what is taking place behind the delays and how to address the most common causes.

Multiple offers. One of the main reasons for a lender to take their precious time before approving a short sale is to consider multiple offers. Homeowners are increasingly entertaining several short sale offers in an attempt to get the best deal and maximize the likelihood of sealing a deal on their own timing. Ask homeowners if they are currently entertaining other offers or plan to do so in the future. Many short sale investors require contracts stipulating they are the only current offer on the table.
Lack of staff. Many banks are simply short on staff and unable to keep up with growing demand. Make it easy on overwork workers in every way possible; not only will they appreciate the reduced work but it certainly helps to present your offer in the best light possible.
Failure of the homeowners to prove financial hardship. Keep the lines of communication open and help the homeowner provide the appropriate paperwork in a timely manner. While it might seem a bit obvious, don’t expect every homeowner to have the motivation required to follow-up even on something that is likely to help their own situation. Many people simply shut-down when overwhelmed.
Lack of other offers. While entertaining multiple offers is more frequently the cause of delays when processing short sale offers, the lack of any other offers especially on an otherwise, “attractive” property may also result in longer approval times or outright procrastination on the part of the lender. It’s not uncommon to encounter a lender that rejects a short sale offer only to receive a lower net when a property goes to auction. Depending on your personal level of chutzpah, you may opt to date an offer then return with even lower offers until the property is accepted or rejected but don’t expect threats to make any appreciable difference in the responsiveness – or lack thereof – of the lender. In fact, rather than speed things up you are probably more likely to get on the last nerve of some overworked bank employee. Either way, remain analytical and don’t fall in love with any one house or property…remember, it’s a numbers game.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don’t miss out webinar Thursday at 8:30 PM EST, 5:30 PM PST:

https://www2.gotomeeting.com/register/474558050

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

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 flipping of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties

     * 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

—

{ 0 comments }

Some Banks Give Back TARP Funds

by Chris McLaughlin on March 11, 2009

Real Estate News & Commentary by Chris McLaughlin, March 11, 2009
http://www.shortsalesriches.com/welcome.html

——–

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live on Thursday night at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/870900265

Why would I do that for no charge? Because
I want a chance to tell you about the other
high-income opportunity, too.

And I can’t do it in an email.

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early. See if there’re any spots
left:

https://www2.gotomeeting.com/register/870900265
———
The government gives…and now the banks say no thanks. With all the scrutiny (much deserved, in my opinion) these banks have received lately, a few of the well capitalized banks that were asked to participate in the TARP program are now saying that they’d like to return the money and get out of the program. They are tired of the media spotlight, and even though the money came cheap, they don’t want Uncle Sam running their internal operations. So who’s nice enough to send us back the money?

Signature Bank of New York announced that it would return the $120 million it received from the government just three months ago. It indicated that the new restrictions on executive compensation weren’t palatable to them, so they’re ready to return the money. And the rumor mill for who else will return the money continues, but The New York Times reported today that TCF Financial Corporation, Iberia Bank of Lafayette, LA, Goldman Sachs and Wells Fargo are among those who may just give it all back.

So why did they take it in the first place? Actually the big boys like Goldman and Wells were asked to do so. Former Treasury Secretary Hank Paulson asked that all major financial institutions participate so that they wouldn’t be singled out for taking it and therefore a run on the bank would ensue.

The financial markets traded sideways most of today. As of 2:30 PM ET, the Dow Jones Industrial Average was down 38.47 to 6,888.02 and the Nasdaq was up 2.25 to 1,360.53.

Now on to our real estate investing education section …

“You can’t know it all. No matter how smart you are, no matter how comprehensive your education, no matter how wide ranging your experience, there is simply no way to acquire all the wisdom you need to make your business thrive.” Donald Trump

Whether you like Donald Trump or make a mad dash for the remote at the first sign of bad hair, one thing is certain…he thinks big and has been around the block a few times when it comes to real estate. Short sale investors should take note of the above words of wisdom from one of America’s larger than life billionaire real estate investors; trying to do everything your self is a recipe for failure when it comes real estate. Savvy short sale investors understand when to seek outside help and how to avoid the burn-out, excessive cost and time traps that often turn a would-be profitable enterprise into a money pit. The following represent the most common jobs best left to others:

Education. Like Trump said, there simply isn’t any way to acquire all the wisdom you need to make your business thrive; it would require all of your time and effort while leaving you little time to do anything else – like actually invest in short sales! Instead, team up with others that have the skills, knowledge and networks you need. Invest in the best information and education you can afford when first getting started then hit the ground running – your first deal will more than make up for the difference.
Sales & Services. Put a team of hardworking sales and service experts in your courtyard then deduct the cost from taxes. Very few people are able to break even when doing sales and service related work on their own; not only do they take longer and typically yield less impressive results since they are not experts in the area but the IRS excludes deducting for one’s own time unless you are a full-time professional in the area. When you calculate the total cost of hiring others to do the job for you, 9 times out of 10 you will come out ahead by taking the tax deduction and moving on to bigger and better things.
Renovations. While sweat equity may be the only way for some people to get into the game, renovations can be costly, time consuming and expensive to tackle on your very own. Calculate the cost of doing all the work on your own then get creative about hiring help; bartering, hiring day labor or independent contractors can drastically reduce the time required to get the job done at a fraction of the cost. Don’t forget, you can have a company perform all the screening, background, payroll and taxes on your behalf – another major time saver!

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

The Recession Proof Real Estate Investing webinar is this Thursday at 8:30 PM ET, 5:30 PM PST. Don’t miss out … click here:

https://www2.gotomeeting.com/register/870900265

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com
http://www.sixfigurebpo.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 flipping of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties

     * 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

—

{ 0 comments }

A Case of Stupidity: A Two Month Review

by Chris McLaughlin on November 3, 2008

Mid-Day Market News & Commentary by Chris McLaughlin, November 3, 2008
http://www.shortsalesriches.com/welcome.html

—

Get your own personal short sale coach!

If you already have the system, are you ready to really take it to the next level? Go to http://www.shortsalescoach.com to learn how. For just $7 a day you can begin implementing an amazing system! And that $7 just got even cheaper … be one of the first 8 clients to use coupon code “SILVER50” to take $50 off the Silver Level Membership up until 2 PM EDT today (Monday)! Click on http://www.shortsalescoach.com quickly!

—-

There was some positive news out of the US Department of Commerce this morning. Construction spending dropped, but it fell by less than many economists had been expecting. The spending fell by .3% when many analysts had expected .8%. Housing continued to be soft with a 1.3% decline in new construction.

Circuit City announced that it plans to close 155 underperforming stores by the end of the 2008. James Marcum, acting President & CEO, said in a statement that “[t]he weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendor…The combination of these trends has strained severely our working capital and liquidity.”

Now … let’s recap what the heck happened over the last two months…

Goldman Sachs reported the worst quarter since they went public with their 3^rd quarter profit plunging 71%.

Lehman Brothers now trades for pennies and is bankrupt.

Bank of America scooped up Merrill Lynch.

Washington Mutual was purchased by JP Morgan Chase for pennies on the dollar.

And the government decided to bail out not just Fannie and Freddie, but also insurance giant AIG. My former colleague at TheStreet.com, Jim Cramer, said “AIG is too big to fail” and that the government needed to come to the rescue. AIG has a trillion, that’s with a t not a b, in assets. A meltdown of a trillion dollars would have sent shock waves throughout our economy. On the other hand, now everyone wants a bailout. Automakers are clamoring for a bailout, and consumers behind on mortgages say they need one, too. All of this becomes a slippery slope, doesn’t it?

And in a move reminiscent of the Resolution Trust Corporation (remember the good ole’ days of the S&L Crisis), US Treasury Secretary Henry Paulson developed a plan to take the bad debts from banks and investment houses and package them up for an orderly sale. That gave some stabilization to the markets for about a week or so, but then Paulson took a cue from his European counterparts and said heck with the mortgage purchases, we’ll just give the banks the money directly by buying stock in them. And that worked … for a week or so. Now the banks are hoarding the cash instead of lending it. So the credit crisis continues.

So let’s get this straight. Mom and Pop don’t have much money anymore, but what little money they do have is now is in jeopardy. Credit has tightened beyond all recognition and the thought of getting a loan that isn’t government backed is laughable.

You know what really frosts me? The Congress gives billions for bailouts, a problem created because of its poor oversight of the SEC and Fannie and Freddie, but then they totally screw up what should be something simple: a tax credit for first time homebuyers. Sure, they’ll allow the folks at AIG to waste $400,000+ on a huge party at the St. Regis with the people’s money, but no way are we going to just “give away” money to folks buying a home for the first time! Instead we’ll complicate it and make it an interest free loan that has to be paid back over the next 15 years, $500 a year. That way it won’t really cost the government anything … please…

Do these “lawmakers” really understand consumers? Consumers do not want to owe the government anymore. I can’t tell you how many times we explain the $7,500 to purchasers and the buyers tell us they don’t even want it! Yes, they don’t want to owe the government the money back. Either give it or don’t. You sure give all your friends on Wall Street enough. How about Main Street, too?

Ok, I’ll get off my soapbox about all this stupidity. What I can tell you is that after tomorrow consumers will be more interested, not less, in getting in a new home. Whether McCain or Obama wins, it will be a welcome change from the status quo, and I expect more consumer confidence to help us sell more distressed properties and short sales.

So let’s get excited about moving more short sales!

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Want to learn how a 27 year old kid with no formal education makes over $100k a month flipping short sales? Join our Webinar tonight at 9 PM EDT/6 PM PST by clicking here right now:

https://www2.gotomeeting.com/register/869392054

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Foreclosures Up 71% in Q3

by Chris McLaughlin on October 23, 2008

Mid-Day Market News & Commentary by Chris McLaughlin, October 23, 2008
http://www.shortsalesriches.com/welcome.html

The BEST fr’ee webinar that you’ll ever attend on real estate short sales & wealth building in this market:

Join us tonight, Thursday, October 23^th (Tuesday) at 9 PM EDT, 6 PM PST:

https://www2.gotomeeting.com/register/745919360

There are only 17 spots left … log on now to claims yours!

—-

This probably won’t come as a surprise to the many Realtors and investors reading this e-mail, but RealtyTrac announced today that US foreclosure filings were up 71% in the third quarter over the same period last year. Almost 766,000 homeowners had a sheriff show up at the door and with a foreclosure complaint in hand. Six states made up for nearly 60% of the list: Arizona, California, Florida, Michigan, Ohio, and Nevada. If you think for a moment that short sales and REOs are just a 2008 event you’re crazy. This will continue well into 2010 as the market absorbs the inventory that is just now coming online…

Alan Greenspan, famous for his “irrational exuberance” comments that took the air out of the Internet bubble, now has a new moniker he’ll be known for: “Credit Tsunami.” Greenspan testified before Congress this morning and told lawmakers that he was in a state of “shocked disbelief” over the extent of the credit crisis and the credit tsunami that has ensued.

The former Fed Chairman said that the key to relief will be stabilizing home prices, which he doesn’t foresee happening for “many months in the future.” “Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,” Greenspan said. “Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.”

In banking news, the venerable Goldman Sachs plans to announce today that it will lay off 3,260 employees, reducing its workforce of 32,500 by 10%.

Now, on to our real estate education section …

Back to the Future

Ahhh, the good old days. It may be hard to believe but there was a time when the average selling price of a home in this nation was under $30,000…in fact, it cost $28,900 to purchase a middle class home in 1973…a mere 35 years ago. Of course, gasoline cost 38 cents a gallon, a first class postage stamp was 8 cents and a dozen eggs were 45 cents. Yes, wages were also lower with the median family earning just over $12,000 a year…but it took $8,000 a year to qualify for the mortgage leaving the average family an extra $4,000 a year to save or spend as they see fit…nearly 1 out of every 3 dollars earned.

Today all of that has changed. The average cost of a home is over $200,000, gasoline is $3 to $4 a gallon, stamps seem to go up by the week and a dozen eggs are $3 to $4 a dozen. Although wages are higher, the median household income of $52,000 leaves less than $7,000 needed to qualify for the mortgage even with lower interest rates.

Ask yourself one simple question…how many houses would you have bought for $28k in California, Florida or other areas of the country in 1973 if you had the opportunity? Remember, this was the median selling price –many homes could be bought for much less! Let’s take a quick walk down memory lane to see the price of homes throughout the years:

1973: $28,900

1977: $42,900

1979: $55,700

1981: $66,400

1984: $72,400

1988: $89,300

1990: $97,300

1992: $102,700

1995: 117,000

1998: $136,000

2000: $147,000

2002: $167,000

2004: $195,000

2006: $221,000

2007: $217,900

Yes, short sale investors will notice the cost of a home has dropped in recent years but take a look at the big picture and ask yourself if it would have been a good idea to have bought 10 or 12 of those homes back in 1973…for the price of one today. What would your net worth look like now if you had?

There are two people in this world…those that let inflation work for them and those that are consumed by it. Short sale investors buy low and sell high. In recent weeks and months the Federal government has been printing money like never before. Experts agree inflation is likely to consume the savings and retirement accounts of millions of Americans like never before. Sooner or later the price of goods and services is likely to increase as the ravages of inflation resume their never ending progression. Make it work for you not against you.

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.:

Interested in learning how to make over six digits a month flipping real estate short sales on autopilot?

Join us tonight, Thursday, October 23^th (Tuesday) at 9 PM EDT, 6 PM PST:

https://www2.gotomeeting.com/register/745919360

RSVP early as spaces are limited!

P.P.S.: If you already have the system, are you ready to really take it to the next level? Go to http://www.shortsalescoach.com to learn how.

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