Rotten Neighbor is entertaining enough, what with toxic hipster couples and all.  But the banker in us has always found it far too subjective for any real use.

For instance: We dig it when a certain young man in the neighborhood walks down the middle of the street rapping unintelligbly at top volume, arms uplifted and triumphant, headhone wires dangling just so.  And when I pause in mid burger flip to appreciate his subtle stylings, and he stares back hard all "what?" the look I give him is one of kinship and genuine appreciation, as if to say "I hear you my man, rap on."

But I can also see how this behavior might irritate the local rotarians and other sensitive types.

Besides, unless you are a renter, entering your rotten neighbors is a self defeating excercise. Sort of a fatal flaw, no?

Anyway, this little widget (that our man Dave over at Doodledee dug up) renders a Yahoo map (searchable by city) that allows you to see which of your neighbors are currently living in custody under the gentle ministrations of the Hennepin County Sherrif.

Hard data. That we like, almost as much as amatuer a capella rap-synching.

P.S. We'd build a clone of this for Hennepin County Foreclosures, but it might crash Yahoo Pipes (that, and we haven't the first clue how.) Anyone?

Before we can talk about the good news of a recession, lets define exactly what a recession is: 

 ”In macroeconomics, a recession is generally associated with a decline in a country’s real gross domestic product (GDP), or negative real economic growth.  According to widespread definition, a recession occurs when real growth is negative for two or more successive quarters of a year.” - Wikipedia

The biggest problem with current economy is that there great debate on whether we are in a recession or when it might of started.  So lets forget about the guessing game of a recession and take a look at few facts.

Since the 1940’s there have been 11 recessions.  On average the have lasted 10 months.  The good news on past recessions is not only are they short lived but the economy is generally already recovering by the time we declare that we are officially in a recession.

More good news on recessions. According to a 2007 report from The Wall Street Journal the stock market has actually rose seven times.  Further more, of the last 11 recessions the market has seen returns at a 3% average.   

So if we are in a recession now, what can investors take advantage of?

Interest Rates: Individuals that have equity in there property, this is a great time to do home equity lines of credit (HELOC).  Heloc’s are tied to prime and that is currently at 5.00%.  While most individuals just rolled their eyes and thought about how Chase, Wells Fargo and many other national lenders only go to 65-80% of the value of their property.  There are still a number of Portfolio lenders out there that still go to 95-100% of the value of your property.  See my other article about “How to Find a Portfolio Lender” if you are curious.

Awareness:  While a recession does not effect everyone in a the US, it certainly can create awareness.  This awareness can lead to individuals paying closer attention to their personal finances.  By this I mean, purchasing things one can not afford, paying down unsecured debt and actually saving money. 

Rebound:  Historically the economic cycle has never failed.  It cycles both up and down, and there have been winner and losers in each cycle.  From a real estate prospective we can all predict that the market will return to normal.  Investor and home owners can argue about what normal is, but when appreciation returns to your market, that is a least a starting point.  The good news that every market has begun to see this return of appreciation.  Across the board you can find major resets in housing prices, mostly facilitated through foreclosures and short sales.   While these foreclosures and short sales are a travesty to the individuals going through them, it is an opportunity for others.   92% of the US are not apart of the foreclosures, this along with a new affordable price point will bring back the first time home buyers and appreciation.

While there is nothing any one person a can do to change a recession there is plenty one can do to prepare for one.  Some will reduce their expenses, some will save money and others will find new affordable homes.  But we should all raise our awareness and plan for the future, do not be scared there is always good news to find.  

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

The Good News of Recession

As expected, the omnibus housing bill was passed by the house yesterday.  There's all sorts of housing related fine print in this bill, but here are what we see as the key provisions:

This is a tragic story, no doubt about it, but the foreclosure of the home was the catalyst, not the reason. When you dissect the situation, the home was being foreclosed upon, but she never told her husband that she had stopped paying the mortgage  42 months earlier.

No I want to respect the dead, but come on. This is a story of a wife failing to communicate with her family and hours before they are to be kicked out of the home she commits suicide. The foreclosure will get the headlines, but the reality is she did not want to face the lies that built up to it.

My heart goes out to her family, this is a tragedy. But this is not primarily a situation where the foreclosure caused the suicide. The lenders gave her 42 months of not paying her mortgage. This is a person who had other more serious issues in her life.

A 53-year-old wife and mother fatally shot herself shortly after faxing a letter to her mortgage company saying that by the time they foreclosed on her house that day, she would be dead.

Police said that Carlene Balderrama used her husband’s high-powered rifle to kill herself Tuesday afternoon, shortly after faxing the letter at 2:30 p.m.

The mortgage company called police, who found Balderrama’s body at 3:30 p.m. The auction was scheduled to start at 5 p.m. and interested buyers arrived at the property in Taunton, about 35 miles south of Boston, while Balderrama’s body was still inside, according to Taunton Police Chief Raymond O’Berg.

Police did not immediately release the name of the mortgage company. O’Berg said Balderrama’s fax read, in part, “By the time you foreclose on my house I’ll be dead.”

O’Berg also said a suicide note found next to Balderrama told her husband, John, and 24-year-old son to “take the (life) insurance money and pay for the house.” via ajc.com.

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Post from: The Real Estate Bloggers

Hours Before Home Foreclosed Upon, Woman Kills Herself

What does this mean? Overall the housing market is still declining. Sellers are still being confronted with competition from foreclosures and when they find a buyer, banks are being very tight lending money.

Eight out of nine regions showed declines as the worst housing slump in more than a quarter of a century deepened with banks cutting lending following $400 billion in mortgage-related losses and writedowns. Treasury Secretary Henry Paulson last week asked Congress to approve legislation allowing the government to extend credit to Fannie Mae and Freddie Mac and buy their stocks if needed to stem further declines in housing.

A new law including provisions for stricter regulation of the government sponsored enterprises “may have a positive impact on future house price performance,” Ofheo Director James Lockhart said in a statement.

Prices fell the most from a year ago in California, Washington, Oregon, Alaska and Hawaii, which recorded a 14.5 percent drop. Florida, Georgia, the Carolinas and states in the south Atlantic fell 5.8 percent, Ofheo said. In New York, New Jersey and Pennsylvania the decline was 2.1 percent.  via Bloomberg.com

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Post from: The Real Estate Bloggers

A 4.8% Drop in Home Prices For May, 2008

FHA seller-funded downpayment assistance programs (wherein the seller of a property makes a donation to a non-profit, and then this same non-profit gives this money to the buyer for their down payment) have been on Death Watch for years.  HUD and FHA have tried to eliminate them at various points, only to be stopped by legal challenges from the assistance providers themselves.

Looks like these programs will finally be killed, as reported by the Washington Post:

The fate of these seller-funded down-payment-assistance programs has been in limbo for weeks. The Senate version of the housing bill would have banned them. The House version would not. Negotiators crafting a compromise bill have agreed to the Senate's position, which also is supported by the Bush administration.

"We're going to yield to the Senate on that," said Rep. Barney Frank (D-Mass.)

The root of the problem with these programs is, and has always been simple: 

• They default at a higher rate.
• They have, at face value, been a legal end-run on FHA guidelines which requires borrowers to bring 3% of their own funds to the table. 
• Also, in practice, the sellers aren't really paying anything, the sales price was simply inflated to cover the cost, and the buyers wind up with a larger loan.

Now, the use of these programs was perfectly OK, and many very good homebuyers used them to great advantage, so none of this should be taken as an indictment of a homeowner that used seller funded assistance to buy a home. (full disclosure, a handful of our personal clients used such programs over the years.  Mortgage bankers are not to judge, only approve or deny a loan based on the allowable programs and guidelines.)

BUT as is often the case, a program that may be good for an individual family, may be a disaster when writ large across the entire spectrum of FHA borrowers (who skew toward lower credit quality in the first place.) And speaking of disasters writ large:

...seller-funded down payments present the single biggest challenge to its solvency. Borrowers who take part in these arrangements go to foreclosure at nearly three times the rate of borrowers who put their own money down, according to the [FHA]

The FHA's solvency is at risk, and for them to execute their new role as the backstop for the home lending universe (a mission they did not ask for, but are going to get out of this credit crunch, sure as the world) these programs need to go away, and should have a long time ago. The taxpayers are the ultimate bagholders here.

No word yet on when the ban will take effect, but in all likelihood they will still be available for the balance of 2008.  More on this as it develops.

In the meantime, if you are an aspiring homeowner, start saving, because the last true Zero Down option is having it's epitaph chiseled. 

When I go on dates, which is very rare since I am a workaholic, a “nice” restaurant to me is Ruby Tuesday’s (yes…now you know one of the many reasons I am single.) I mean, if I take a girl to the Cheesecake Factory or the Melting Pot, we better be engaged!

That being said, I believe that one of the only reasons to spend my hard earned money is to make more money. This includes my education and power team. I will never understand how any intelligent person, how anyone who is serious about success (only about 5% of people are truly serious) will not invest in their business. I know many folks out there love to “bash” courses and seminars. I guess these people are a lot smarter than me, because I never would have figured out how to do this business unless I worked with other investors, unless I bought courses and unless I attended seminars. I think the biggest problem that people who “bash” courses have, is that they are not implementers. These are the people who have attended a dozen seminars and who have 50 courses on their bookshelf, however, they have never closed a deal. (Just a quick thought…if you own multiple courses and have never done a deal, take a look in the mirror….it’s not the courses, it’s you.) Also, any decent course or seminar should have a 100% money back guarantee…so if the product stinks, which some do, just send it back.

Besides investing in your education, you should be investing in your power team. You need a good real estate attorney and accountant on your team. Sometimes I hear of investors who go to Staples and pay $14.95 for generic forms, rather than have a lawyer review a contract and spend a couple hundred bucks (knuckleheads.)

When investing in your education you need to think of the big picture and you need to think of the return on investment that you will get. For example, a few years ago I bought a course on short sales, which I think cost $1,000. I went on to do dozens of short sales and make a lot of money (I don’t do them anymore, because they are a pain in the butt, however, you get the point). So, whenever I invest in my education and in my business, I always want at least a 10:1 return on my money. And of course, I usually get many times that.

Also, when you are in Staples buying your $14.95 contract, think what it will cost you if you get sued over it, or if you lose a $50,000 deal because you didn’t want to spend $300 to have your lawyer review it. This is just like someone not spending $250 for a home inspection, only to find out later they have $10,000 worth of termite damage.

One more story, which will probably make a lot of folks eyes roll… As many of you know I am a student of direct mail, I am obsessed with increasing my response rates. My favorite niche to target is absentee owners and I am always searching for unique ways to boost my rates…so that I get more leads, more deals and make more money. Anyway, a few weeks ago, I got an idea for a “type” of direct mail which I know pulls very well and I wanted to incorporate this type of direct mail to send to absentee owners, pre-foreclosure lists, free and clear lists, etc. This type of direct mail gets very high response rates but costs a lot more to send out. You can send out a regular letter for about .50, whereas this will cost me about $1.50 a letter.

Anyway, there is a marketing expert who is very familiar with the type of direct mail that I want to use. I have been keeping an eye on this guy through his books, websites and marketing emails. So finally, I decided that the best way to launch my new idea was to somehow hire this guy as a consultant. I called his office, told them I wanted to hire him and eventually I had a phone call with him. To get to the point, I am spending on day of consulting with him at a cost of $5,000. When I told my friends and family about this, they all laughed and thought I was nuts (yes, these are the same people who work in a cubicle every day…when it comes to criticism, the people “below” you financially are almost always the negative ones…very rarely will you get criticized by someone who is financially better off than you).

Yes, $5,000 is A LOT of money. It is about how much I spent on my last car. However, when I think of it with my “business” hat on, I know I will have a very high return on investment. Right now, I specialize in purchasing properties subject-to and selling them on a lease option. My minimum profit is $30,000, but on average around $50,000…so, if this consultant shows me how to use this new type of direct mail and it gets me one more house, then obviously it paid for itself…but of course I will buy many houses with this and get a ridiculous ROI! (also, like I said above, each letter will cost me about $1.50. I could spend a small fortune “testing” this type of mail, or this guy can show me what will work best and save me time and money.)

I know this is a long post, but this is sooooo important to your success as a real estate investor. If you are cheap about investing in your business, then you will have a much more difficult and longer process to making big money in real estate. Another great reason to invest, is that it drastically cuts your learning curve…I can only imagine how long it would have taken me to figure out shore sales on my own!

So please remember that anytime you invest in your business, you:

1. Get a 10:1 return on your investment
2. Make sure you will implement what you have learned (or it will be a total waste of money)
3. If the product or course is terrible, return it
4. Think of the big picture
5. Only spend money if it will make you money

Now get out there and start treating real estate as a business and not a hobby! (Yes, that means that accountant who charges $30.00 an hour, who just became a CPA after finally passing the test after the 30th time and who does not own a single property………. probably won’t cut it).

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

Do You Want To Be Cheap Or Do You Want To Be Rich?

Candy Spelling caught heat for putting her husbands mansion up for sale weeks after his death and sold for a reported 130 million dollars.

Her new home will be less than a third the size of the old one — just 16,500 square feet — but with a killer 360-degree view spanning the horizon from downtown Los Angeles to Santa Catalina Island. The condominium building called the Century is going up next door to the Century Plaza Hotel on Avenue of the Stars and will be completed in late 2009.

“She will be moving into it, though it won’t be up for a year or so,” said Spelling’s attorney, Stephen Goldberg, who confirmed the sale Monday.

At a time when headlines are focusing on plummeting home prices, foreclosures and bad loans, the sale highlighted the vast differences in the region’s housing markets.

There are still wealthy buyers keeping the very top end in play — often at ever higher prices. The price of $2,848 per square foot paid by Spelling at the Century is a record for a Los Angeles condo. The old record of $2,700 was set in February — at the same building. via the Los Angeles Times.

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Candy Spelling Trades in Mansion For Record 47 Million Dollar LA Condo

He and his staff have been on this story since 2001. That is right, 2001. While the rest of the media and government kept it bottled up, he has been trying to expose the corruption and waste that has been coming out of Fannie Mae and Freddie Mac.

The abiding lesson here is what happens when you combine private profit with government power. You create political monsters that are protected both by journalists on the left and pseudo-capitalists on Wall Street, by liberal Democrats and country-club Republicans. Even now, after all of their dishonesty and failure, Fannie and Freddie could emerge from this taxpayer rescue more powerful than ever. Campaigning to spare taxpayers from that result would represent genuine “change,” not that either presidential candidate seems interested.

Read the whole editorial at WSJ.com

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So You Want To Know Why We Are In This Mess?

Yet at the end of the process they are typically selling for 74 percent of the unpaid mortgage. So any downpayment on the home is lost and 26 percent of the mortgage amount has also disappeared. This is a crushing blow to others trying to compete with these foreclosures.

And to make it worse, selling them still takes nearly half a year. This helps explain why the real estate market is in such a tough position.

Freddie Mac-owned properties spend an average of 152 days on the market and typically sell for 92 percent of the listed price, usually about 30 percent less than the peak prices of 2006, said Ingrid Beckles, vice president of servicing and asset management. The company re-evaluates prices every two weeks, she said.

“We are very careful to ensure our properties are not driving market values down and they show well,” Beckles said. “Our challenge is like everyone else’s from a volume perspective: maximize recovery and minimize credit losses, and balance that with making sure we’re not driving down property values and not destabilizing neighborhoods.”  via Bloomberg.com: U.S.

If you are looking for foreclosures click here for a free 7 day trial at Foreclosure.com are in your neighborhood.

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Post from: The Real Estate Bloggers

Fannie Mae Has 5 Billion Worth Of REO Property