Real Estate, what is the first thing that comes to mind? Based on the current economic situation in which we find ourselves, the first words would be Mortgage, Debt, Housing, Refinancing and Investment. These would best describe the feelings people are having today due to the heavy burden of the recession. Here’s a thought, why aren’t we all optimistic and look at it from a different perspective? After all, optimism definitely goes a long way in allowing us to let our imagination run wild and be creative regardless of the negative stigma.
Before I delve into the key aspects that are of interest, let me give you a brief overview about myself. The real estate business has been a lifeline for me and my family ever since, it’s in my blood if I may say so. I have been in construction, home improvement business, mortgage appraisal for most of my life. Being 54 years old has never been so fulfilling and rewarding, all thanks to my real estate roots. I can attribute my success in Real Estate primarily to my mom and stepdad being contractors and developers, growing up I was immersed in the industry in one way or another. My strong interest in construction allowed me to build several log homes in Montana, Monterey, and Salinas, CA. I was also able to build numerous houses in Texas; All in all, I had the pleasure of living in nine states after the construction, home remodeling, and real estate booms.
So where has my search taken me from this point on? I currently reside in Northern CA, although I was recently hit with a major downturn in the real estate market and giving credit to the global recession that has everyone slumping and saving pennies for quite some time now. Do I still build? It’s been a while, but my passion and enthusiasm for construction and real estate are not deterred. Is there still a market for real estate? Bet! Let me tell you about my latest business venture, buying bank-owned homes…
FORECLOSURE: Defined as the removal of the right to redeem a mortgage, a legal process by which the right of mortgage holders to redeem a mortgage is removed, usually due to non-payment.
It may sound pretty dry, but let me put it this way… Take for example someone who finds an exquisite home for sale. They would then evaluate your personal finances on whether it would be a great investment. They could take out a home equity loan through various loan modifications; then process the transaction with one of the creative types of financing. Then, due to some unmitigated circumstances, something changes. It could be an economic downturn, interest rates, a job, or an illness. Unfortunately, the payments would stop and now the homeowner would be in a rut and be upside down on the loan. This simply means that the loan is more than the house is worth. What can they do? They can’t sell it and they can’t afford the payment. And guess what? Life happens. MORTGAGE’S TRIAL!!!
You have lost the right to your Mortgage and your Home! Your credit is ruined, possibly for the next 10 years. This is a foreclosure. This is officially a bank owned house. This is the cold handicap of life.
You can whine for a while or get your act together. If you’re so firm, you can take it like a real man and walk away. Nah, I’m just kidding, so again… But seriously, there’s no need to collapse into depression. This is not a complete failure, you can always start over, although it is easier said than done, but always keep in mind that under every cloud there is always a silver lining. Just hope for the best and prepare for the worst. Always keep an optimistic outlook in life and eventually things will get better.
Now, eventually, it will all come down to a short sale: This is when all the entities claiming a vested interest in a property agree to take less than it’s worth, just for the sake of getting rid of it. You may be wondering why they would do this. Simply because they have so many foreclosed homes on the books that a loss is better than a home for sale that needs to be taken care of, taxes and insurance are paid every month and a price that can take eons to recover. In short, (pun intended) short sales generally take longer than foreclosures (isn’t that ironic?) since most of the time there are more people to deal with. There could be multiple people involved; These could be the lenders, the owners who may still be in the home, lending committees, the buyer’s lender, etc. Simply put, is it a foreclosed home or REO (Real Estate Ownership) Okay, let’s get to what’s keeping me busy right now.
So I went to Sacramento for a meeting with an esteemed real estate agent. I have already informed the agent about my preferences. To say that the list of exceptional picks is truly phenomenal would be an understatement. I ended up searching for about 4 hours to find two potential candidates who piqued my strong interest and made a reasonable offer. As of this writing, I am in contract with one and awaiting a response from the other.
Here is a brief description of what I considered worth investing my hard earned money. First, it’s a foreclosed home that’s 1081 square feet, three bedrooms, one single bath with an attached garage. The garage walls and roof are finished and the electricity is in excellent condition.
Here’s the deal. Since you may have noticed that the house is in foreclosure, the bank says that it is being taxed on all the houses that are foreclosure. This nifty little piece of wonder sold in 2005 for $315,000.00 when repossessed by the bank, previous owners had $207,000.00.
They listed the house for $177,000.00 and we paid $117,000.00 for it, $60,000.00 less than the original list price, almost half of the original price. Although the house needs some proper renovations and home improvements. You can’t argue with the fact that it was an excellent bargain for the price. A few minor household furnishings here and there that I don’t care for. A new roof, fixture updates, appliances, paint jobs, carpet and wall décor.
Food for thought… When the real estate market is down, guess what, you wouldn’t know if the rental market was up. Viola… hidden!!! Instant income opportunity, as long as you play your cards right in this business, there is always money to be made.
This home will now be a rental, generating positive cash flow from day one. Once the market has recovered and you’re back on track, imagine the income possibilities that would have.
I will be frank with you that I did not have financial abundance when I made this deal. In fact, I was scrimping as much as I could, but believe me when I say that lenders are definitely willing to negotiate. They don’t want all the houses they have and are willing to go for the low if you tell them “no go ahead.” Be assertive and keep in mind that you are the customer and your offer will always be considered, regardless of the lender’s marketing acumen.
You don’t necessarily need to have a business degree or marketing experience. Just a keen eye, a little intrepid curiosity, effort, and a bit of business aptitude and you’ll be set for real estate success!
Let’s make a deal… but not just any deal, let’s make it a “Great Deal”!