Warren Buffett Says Now Is The Time To Buy

Mid-Day Market News & Commentary by Chris McLaughlin, October 17, 2008
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The market was up today after legendary investor Warren Buffett said that now is the time to buy. In a rare op-ed in the New York Times, Buffett said: “I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my money and my mouth both say equities.”

In real estate news, home construction took another downturn after the Commerce Department announced a 6.3% decline last month in new construction, a surprise to many analysts that were expecting a decline of just 1.6%. Not since January 1991 has new home construction been this slow. The drop was most significant in the Northeast, which was down 20.9%, compared to a slight increase of .5 percent in the South and a 5.6% increase in the Midwest.

Now on to our real estate investing educational section …

Why Lenders Like Short Sales

Although many brokers may try to persuade short sale investors against making low-ball offers on potential properties, the fact is there are a variety of reasons why lenders actually like short sales. Understanding how short sales benefit banks – as well as homeowners – is the first step in building your own real estate empire.

1. No need to fix. Banks are not in the rental business so the goal is to sell a foreclosed property as soon as possible. Unfortunately, distressed homeowners are not always able to keep up with needed repairs required to make the property desirable for resale. The last thing banks want to do is put more money out of pocket on a property that is already under-performing.

2. Vacancy and Vandalism. Empty homes are prime targets for vandalism or even potential lawsuits should a child or other individual be hurt while playing on the vacant property.

3. Taxes, HOA & Maintenance Fees. Just because the home or condo is empty doesn’t mean the bank is off the hook for property taxes, homeowner association fees, yard and pool maintenance or other common costs. Every month the property sits empty continues to cost the bank more in additional upkeep and expense.

4. Foreclosures & Legal Fees. Banks are experiencing a double-whammy when it comes to foreclosures; missed mortgage payments combined with court challenges that result in missed mortgage payments for 6 months to a year. Homeowners eventually stop paying the mortgage and then challenge foreclosure proceedings in court. Bad documentation has led to a situation where it may take several more months for banks to demonstrate the proper ownership required to file foreclosure proceedings.

5. Eviction. Once a bank finally forecloses on the property they now must actually evict tenants or the former owners from the property. Depending upon the state, eviction can take several weeks or even months and has to take place after the foreclosure in most states.

6. Commissions. The property is now finally available for sale…along with hundreds or even thousands of other properties. The real estate agent and broker must be paid a commission to show and sell the property. So why not go ahead and pay it now if you have to pay it later anyway.

When presenting a potential short sale offer to a bank take time to run the numbers. Knowing how much a bank is likely to spend on each of the above will help short sale investors come up with a competitive price likely to result in a win-win for banks and buyers alike.

Warren Buffett Says Now Is The Time To Buy

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