USFinances » Housing

7 Tremendous Tips for Buying Real Estate in Today’s Market

Russ Smith — Wed, 26 Nov 2008 22:50:26 +0000

1. Credit Check. This used to be important, now it’s critical. With today’s tight squeeze on credit by banks and lenders, finding out your credit score, and hence, ability to loan at a low rate is vital. You must find out your current standing, and what you can qualify for, as it has probably changed over the last 1-2 years. This includes getting pre-qualified for a loan. In this market, when you find the foreclosure or bank owned property you want, you have to be able to pull the trigger quickly. Double and triple check the pre-loan docs, so you have a fixed rate, and can afford the payments for the life of the loan.

2. Know your locale. Homework is the name of the game here. You need to study the neighborhood where you’re looking to buy meticulously. The better you know the neighborhood, the better you’ll be equipped to find the best deal. If your looking to flip, rent, or live in it yourself, you’ll want to buy significantly under the market value. And the only way to guarantee that is to study the neighborhood and its prices. Try going for a walk around the neighborhood at night. Do you feel safe? You always want to buy in a good neighborhood. Keep in mind: you can always change the property (i.e. painting, remodeling, etc.) but you can’t change the neighborhood. Be sure you’re looking in a good neighborhood.

3. Hunt. Here’s where you scour the street’s to see what’s available. There are no real secrets here; it just takes time and elbow grease. The best way to get a great deal is to know someone. Talk to your friends and family, build a network so that you’ll know every house coming and going off the market. This way, when a great deal comes along, you can snatch it up. Some other ideas are:

Craigslist: You’ll sometimes find good deals here, search your local area, and for ‘for sale by owner’
Drive around: This is sometimes a great way to find properties coming on the market, or that have recently come on the market. When you drive around, look for houses that aren’t kept up, and that look like they may be going into foreclosure soon. Watch them, and as they come for sale, try to talk to the owner about a possible quick sale.
Foreclosure Auction: There are more and more of these popping up as the foreclosure and bank owned properties have grown. Check out: LandAuctionBid.Com and www.ushomeauction.com.

4. Connect. Connect with other real estate investors, and share your story. Work together with others to get a feel for how they are doing, for understanding their strategy, and how they are playing the current market. It’s said, “What one can do, 2 can do better” so do all you can to develop relationships with other investors. Get business cards made, join networking groups, talk to all the people you know. You want to make as many friends in the field as possible.

5. Proper Documentation. In today’s market of bank owned properties, quick sales, short sales, and foreclosures, you want to make sure you have documented everything properly. Have your real estate agent help you with the forms, but you take the responsibility in making sure he’s crossing his t’s and dotting his i’s. They should be current and they should be official to your state/city/county.

6. Reduce Costs. As you go through the loan, approval, and purchase process, there will be lots of little charges, including the inspection, title/escrow, and realtor fees. Even if you can reduce these by a little bit, you can save a bundle. Go through the charges with an experienced investor or real estate agent, and have them help you find the areas where you can save.

7. Have a Plan. Before you even get your credit checked you should have a plan. Are you going to flip it or are you going to rent it out. Are you going to keep the property as an investment home, maybe for vacations? Are you going to live in the property flat out? You need to know your plan ahead of time, and then organize that plan. Come up with all the different scenarios that might come up during your plan/project. If, for example, your plan is to flip the property – and the property needs a little work. You need to establish what you’re going to renovate and how much you’re going to spend on it. Plan for as much as you can. Write it out on your computer in a word doc, and know it to the letter.

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5 Enthusiastic Real Estate Markets

Russ Smith — Fri, 21 Nov 2008 19:30:09 +0000

Photo by Jef Poskanzer

With all the doom and gloom of the real estate market, I decided to try and find out if there were any healthy areas where the real estate market might not be as bad as others. I was hoping to find economies with nominal unemployment, small amounts of foreclosures, plus the prices of homes being much smaller than the national average. Using data from Fiserv Lending Solutions, here’s what I found.

Lancaster, Pennsylvania: locals say Lancaster has been conservative in it’s lending which keeps the foreclosure and bank owned properties to a minimum. Also with a median home price of $206,000, and 12-month change in value still in the positive (+1.6%), this modestly small town of 498 thousand could be a wise investment. Not to mention a nice place to raise a family.

Clarksville, Tennessee: A close suburb to Nashville, Clarksville is able to enjoy the attractions of a larger city, and at the same time a median home price of $130,000. House prices has have also continued to climb slowly 1.4% over the last 12 months.

Albuquerque, New Mexico: Albuquerque is a pretty large town, population 832,774 and at the same time continues to have growth in home values. The current median value is very affordable at $172,000 – rising steadily at 1% over the last 12 months. Other cities the size of Albuquerque have fallen victim to massive speculation and hence accelerated foreclosures.

Burlington, Vermont: Strict zoning standards have kept speculators out, and kept foreclosures to a minimum. Median home price is $250,000. Also the small population of 145,360 keeps locals in touch with their lenders. Those relationships keep foreclosures down.

Pittsburgh, Pennsylvania: Strong job markets in health care and technology drive the city. The population is very large at 2,355,712 and home sales have slipped 16% this year. But values have remained, and grown steady over the last 12 months at 1%. The home values are very affordable at $137,000, which keeps a lot of growth, and show lots of signs of potential.

Johnson City, Tennessee: Median home prices are at $120,000, which puts them -41% vs. the rest of the nation. Largely the students and faculty at East Tennessee State University, which used to commute between north and south for the winter, but now stay put, keep the market steady.

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A Closer Look at the History of Foreclosures

Russ Smith — Tue, 18 Nov 2008 18:12:56 +0000

Photo by respres

It doesn’t take long, usually a 5-minute walk in your neighborhood will do, to see that the foreclosure bug is reaching and infecting people everywhere. Last year there were 1.3 million homes receiving foreclosure-related notices.

Foreclosure: “the process by which a promise to repay a loan or debt secured by a deed of trust is enforced against real property. At the conclusion of foreclosure proceedings, the real property is sold to repay the debt or loan at a public auction called a foreclosure or trustee’s sale.” – www.consumer-action.org

The word “foreclosure”, and it’s meaning are becoming much more colloquial these days, and I thought it might be interesting to do a little research and find out when they started, if they have been as bad as they are now, and what lesson’s could be learned from looking at the history of foreclosures.

The first occurrence of mass foreclosures I could find was during the first major American depression or “Panic” of 1819. It was largely due to the rippling economic effects of the war of 1812. Because of falling prices in cotton, banks were forced to tighten their credit, and this resulted in farms going into foreclosure.

Foreclosures also surged during the second largest American depression, which happened in 1837. Again sparked by cotton prices. The rapid speculation of land, and problems associated with a variety of currencies in circulation, caused a number of New York brokerage firms to fail. Also causing at least one bank president to commit suicide, and real estate prices to crumble.

During the Great Depression of the 1930’s, large portions of foreclosures were farms. 1000’s of farmers could no longer pay their bills because of lower demand on food and lower profits. But foreclosures were also hitting the average American home – some estimates say that nearly half of all U.S. urban home mortgages where delinquent as of January 1st, 1934.

Today (as of December 2007), the foreclosure rate had hit 2.2 million (up 75% from 2006). This is a staggering number, but looking back at the history of foreclosures, and seeing the tremendous downfall, and valleys of the U.S. Economy gives me hope that our current foreclosure crises really isn’t that bad. Time will only tell when this economic crises will start to rebound, and although it helps to look at the history of foreclosures, it does seem to hit home when I walk around the neighborhood and see so many fore-sale signs.

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A “P/E” and “Dividend” For Real Estate?…I Like It!

Russ Smith — Mon, 10 Nov 2008 22:03:06 +0000

I found an interesting article over at bankrate.com today. The article basically compares housing to stocks – looking at a properties price versus renting cost, and the ‘dividend’ earnings coming from owning a home, such as tax write offs, rental income, etc.

If we calculate the current price of a home, and divide it by the rental earnings, we would find that on average the US ‘home P/E’ is about 20 – which is still a bit high. The overall average is 16, says economy.com. If you’re still on the fence, this is a great resource to see what you should actually be paying for the property, and if it’s a good time to buy or not.

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