We have had zero foreclosures for at least a year and that is about to change. I have heard predictions that foreclosures will increase by 1500% over the next three years as the market softens and interest only and ARM loans adjust for the first time. I've noticed one agent that specializes in foreclosures has gone from 3-4 lately to almost 10 just recently.

yep,i am specializing in foreclosures and also condemned properties.There will be alot of listings that investors will be salivating at the glands to snap up in the future.

I can't wait!

Two years ago in New Hampshire (recently named one of the most affluent states in the nation and one with the lowest poverty rate), we had about 50-70 foreclosure in the entire state every month.

March 2005 we had 170, which was the high for this year so far. October has 120 so far. We're a very fast foreclosure state, approximately 3 weeks. So listing a foreclosure is difficult here. However, a good listing agent can often get the bank to hold off for awhile. We are working on one right now.

(Warning: Another shamless plug coming) My goal for 2006 is to put together a team of real estate agents around the country specifically to help people survive (not just stop) foreclosure. I've already set up a website to that effect ( ForeclosureSurvivalKit.com ). There are a lot of vultures out there and a lot of misinformation. As real estate professionals, we should be the first line of defense. Let's face it. Sometimes they don't HAVE to sell. Sometimes they do. Only accurate information will help them in the long run. Wouldn't it be nice to be the one to provide it?

Mike@AssistedRealEstateSolutions.com

Do you think NH is in for another sizeable correction like the last big one?

I think many areas will be affected. In California the affordability index is 14%, that is 14% can afford to buy a home.

broker...

It's hard to predict. But I have five houses for sale right now in various parts of the state, and they are definitely NOT moving very fast. The main Nashua->Manchester corridor is still ok, but if you get off the beaten path, things are very slow.

I have seen some very nice houses here in the Lakes Region of the state on the market for a year or more. And yes, I've already made offers on them.

I do believe there is a way to make money from the coming downturn, without turning into a bunch of vultures (jackals, sharks, insert your favorite term here). I'm working on building a team to do just that (see below).

I've been doing forclosure bailouts for a few years. Basically, we get the owner caught up long enough to sell and still keep most of their equity. I'll do up to 80% LTV in California. Other states max out at 75%.

I wouldnt say it was extremely lucrative since most people are encumbered to high LTVs already and there just isnt room to stick alot of fees in there. Every once in a while you come across a good one though.

Interesting.... I never thought of that side of the business. What parts of San Diego do you specialize in?

how do you get the owner caught up with back payments? do you partner up with them and use your own cash to make it up then sell it? do u take it subject to?

what if they have little to no equity at all?

how do you get the owner caught up with back payments? do you partner up with them and use your own cash to make it up then sell it? do u take it subject to?

what if they have little to no equity at all? [/QB][/QUOTE]

Investors do many things in many ways... BUT Partnering with an owner in default or in distress is one sure way of loosing money and many nights rest.

Investors tend to make a very sharp and clean break from distressed owners... generally by taking the deed. Many ways exist for this and different investors handle it differently depending on your state laws. If your state has a good set of Land Trust Laws... taking it into a Land Trust and then changing Beneficial Interest with a Sub2, is often the less costly and most secure way. This is particularly good when your Exit plan is to Flip. You save transfer fees and you get additional asset protection by using the techniques.

The question on Equity is a math calculation based on your Investment Plan's criteria. Most investment plans call for making money at as many of the three stages as possible, Purchase below Market Value, Positive Cash flow during any hold periods and profit at sale. It is nice if you meet all three but often you will only have two or possibly one. The fewer points of profit you have make it less of a potential investment and more of a speculation or gamble. Your numbers will tell what is a deal and what is a dog.

I just saw on the news last night that the real estate market is in trouble in just about every state. I didn't catch it all, but I think they said it was because interest rates were rising.

Clint

Yeah that was why.

Arms are adjusting and for people who should not have had a home in the first place.

Some loan officers use these arms to meet debt ratio requirements. They also like to decide for the customer rather than giving them options and a choice.

I am sure things will get ugly and many investigations will open when more folks start defaulting.

The only "Trouble" would be with those foolish enough to have over paid and/ or over mortgaged... including interest only loans in the hope that the excessive appreciations would continue forever with out correction.

The sky isn't falling and interest rates are not the only factor that causes market adjustments and in this case not even one of the more significant.

Yeah that and negative am.

I see the ad all over TV for the Smart Choice Loan from Quicken Loans.

What a bad thing to push and market to everyone!

So many things are going to have people losing homes left and right.

What would be more interesting is the thought of how to solve this from happening.

Ouch I got a headache from typing the idea.

Yeah, many will lose their property and the investors will win while banks lose. But the media does get it wrong "A LOT" and Real Estate isn't in as much trouble as they say. It is still the best investment. I have a friend that uses a negative am loan on investment property and it makes sense for him. He pays an extra $6,000/yr but the property appreciates $50,000/yr and his cashflow is still $800/month. But it only works in an appreciating market.

how do you get the owner caught up with back payments? do you partner up with them and use your own cash to make it up then sell it? do u take it subject to?

what if they have little to no equity at all? [/QUOTE]

I just provide them with a hard money HELOC up to 80% LTV. That brings the mortgage current and gives them time to sell on their own terms. If they dont have enough equity there nothing I can do.

I think a lot of the so called stated income loans will be in trouble. Most people "over" state their income and will be in deep trouble when many of the stated arm loans adjust.

And for those banks and brokers that encourage overstated income loans they'll get pulled in.

More likely you will see some serious refinancing!

What will they refinance into? Another stated loan at a higher rate which will increase debt to income? Most people get stated loan bcause they can't get conventional financing. At today's rate, refinancing is going to cost when DTI is added.

Well they are gambling on the hope that their property has appreciated enough to give them a lower rate due to a lower loan to value.

If you purchase with 100% financing with 6.25% on the first and 9.9% on the second, you have a 'blended rate' of 6.9%. If you can refi both into one loan at 80% LTV at 6.1%, obviously your payment will be reduced.

I do that for ppl all the time. If your property hasnt appreciated enough to do that, you better pick up a few extra shifts at work.

Yes, overpaid and overmortgaged has been the fare of late. I own a property management company in Seattle where many prospective clients land on my doorstep wondering why their investments aren't making sense. I take one look at the financials and bingo . . . your debt service is 98% of your revenues. And that's at 100% occupancy!

Where the heck were their agent's and lender's heads when they were putting these deals together. It's no wonder some real estate agents make a bad name for all of us.

I have to tell some of these folks 'you can't afford my fee' (which is very competitive). You also can't afford utilities, insurance, maintenance, or heaven forbid, a vacancy.

It's going to be a very bumpy road for a lot of people in the next few years. God help them.

Cate

I regularly receive lists of owners in default. I'd be interested in seeing more. Though selling these types of properties could be lucrative, I do feel compassion for the owners who were misinformed.

Stated loans = liar loans

Stated loans = fraud loans

been reading up on the mortgage industry and it gives me the shivers reading articles on people overstating their income and providing false CPA letters, etc. saavy realtors and investors are out there to clean up the mess when they preforeclose.

I just provide them with a hard money HELOC up to 80% LTV. That brings the mortgage current and gives them time to sell on their own terms. If they dont have enough equity there nothing I can do. [/QUOTE]

what are your points and rate for hard money heloc? also can you base the hard money on the 'after repair value'? wheres your collateral?

sorry im still learning the ropes on how to utilize hard money lenders

i know exactly what youre talking about.

right. that makes sense. ive read that its stupid to do a leaseback with the original owner after taking over the deed. so basically if i were to setup a land trust agreement, put the property into the land trust like "smith family trust", to prevent the DOS, investor becomes the trustee, take over the property subject to, the beneficiary will be the investor/LLC after the owner transfers his rights through quit claim. then implement your exit strategy to flip or lease.

in CA, i would mainly look for buying below market value, no positive cash flow in the middle, and a nice big nesting egg at resale. if we buy below market value and the interest rates were to suddenly jump, we can dump/sell the property without taking a major financial loss.

outside CA, i would focus more on a larger spread in the cashflow, large/medium profits in downpayments/deposits and small profits on the back end due to low appreciation.

When doing a hard money 2nd, rates are anywhere between 14% and 16% depending on the strength of the borrower. Thats strictly for someone in foreclosure tho. If you are asking about ARV, thats a entirely different deal.

Interesting Realty Check. Alvin and I were talking about someone doing the leaseback.

Thanks for sharing!

greg- there is no way to FIX the problem. bottom line....these loans are very profitable. yes, the margins have been cut over the last year, but the lenders seem to get even more creative.

most of the issues we face is due to lack of education. both with the borrower and lender.

let me ask this....husband and wife, sub-prime credit. they go by a new car....terms- 7.5 year 19% interest rate....$2500 down! on a depreciating asset. i see a hundred of these a month....but thats ok?

.....but if it's a 100% purchase, 6% seller concessions, no money out of pocket other then a years worth of homeowners insurance and an appraisal.......much less than the car cost!.....and they freak out at the 8.5% rate. amazing

it's all about education. americans are addicted to credit car debt and the $700 a month car payment. Much more dangerous than a 2/28 sold to a young couple. i am not sayin it's right.............i am just sayin.

-------------------------
James Keely
Florida Mutual Mortgage
Dir. Of Opertions
800-899-6198
http://www.zerodownflorida.com

Wow, this thread has moved a long way since I last read it.

Leasebacks: Be very careful with doing leasebacks. I have an article around here somewhere (can't post it as it's copyrighted from a newspaper) that talks about investors going to jail for doing these the wrong way. The problem is, doing it the right way is very difficult.

Stated Income Loans: They aren't all "fraud" loans. As a self-employed investor, I have very little verifiable income. And it's certainly not steady income. But I know what I can afford and how much I expect to make on a deal. So when possible, I fund my rehabs with a standard purchase-money mortgage through a local lender. I always use a Stated Income Loan, because otherwise, we have to dig through tax returns, accounting records. And at any given time, it's very hard to verify the numbers. I also make sure we stay well below 80% LTV, which makes it safer for all involved.

Hard Money Loans & Foreclosure Bailouts: One thing to beware of when bailing out a homeowner in foreclosure is predatory lending law. Basically, if you know or suspect that the borrower can't afford to make the payments, it's illegal to make them the loan. A lot of vultures will make the loan (or set up a fancy trust agreement to disguise the loan) with the sole intention of foreclosing on the loan later, because they know that most will end up in default.

And it's not limited to small-time lenders. Ameriquest Mortgage just settled with 49 states + DC to the tune of $325 Million for engaging in predatory lending. The story was in the paper here yesterday . HFC almost went out of business a few years ago for the same things.

hey mike,
when you buy investment properties using stated income loans, are you putting any downpayment? also do you provide a CPA letter and documents stating that youve been self employed for at least 2 years?

theres a way to do a leaseback to the original owner and foreclosure bailouts using PACtrusts or EHTtrusts. you can have the seller become a beneficiary with a small percentage within the trust agreement and the investor as a co beneficiary with majority of the percentage in the trust. im not an expert on this yet, but im still doing my research on this - so please do not take this as legal advice.

Alvin,

I usually put 20-35% down. The downpayment and fix-up costs come from a home equity line of credit. And yes, I have a CPA letter (though I don't think the last two deals required it, for some reason).

thanks for the quick response. =)

are you leveraging the downpayment and fixup costs from other investment properties or your personal property? btw whats the median price for SFR in NH?

The people who went to jail doing it were evicting the seller/tenant for very small violations, and keeping all the equity.

Or in some cases, an investor brought the foreclosing loan current and took title to the property "subject-to" the seller's mortgage(s). They then sold the house back a year for a quick profit (say $50k). The homeowner complained by suing the investor. A judge decided that the entire transaction was really a disguised loan at 500% interest and ordered the house be given back to the seller and fined the investor. Not pretty.

My personal belief is that if you want to do a leaseback, absolutely bring in a new loan, close at a title company and buy title insurance. That way there is a neutral third party there to say "yes, they sold the house." Then, don't give them a real option to buy it back. Just let them make you an offer to buy later.

My ultra personal belief is that I don't let the sellers stay in the house anymore. Every deal I've ever done that's backfired in my face started with me saying, "Sure, you can stay!"

Right now, I'm leveraging my personal residence. It's not ideal, but as long as I don't go too nuts, it's not been a problem. I figure I can handle three properties at a time: 1 in rehab, 1 being sold, and 1 being bought.

nice.
how long do your projects take and do you sell FSBO?
also are you a handyman type of person or do your hire out to professional contractors to get the job done quickly while you oversee and look for the next rehab?

I hire a realtor, of course! The projects always take about twice as long as expected, even when things go well. We're about two months into one in Hinsdale, NH. Next week I'm starting another one in Concord, NH. That's the short-sale I recently bragged about in my newsletter.

Right now I have a 2-man crew, with a 3rd part-time guy. I help out a day or two a week, but I've spending most of my time this week getting my new web sites up and running.

send me your newsletter on short sales.

alvin@preferredvalleyhomes.com

alvin hi
just wanted to know about the seminar this weekend? Is there a cost ? do you have to go all days thanks I wanted to learn about OWC lease opt.etc

LL: i sent you a private message