Foreclosure Inventory

Sometimes it's hard to find some valuable good news to report. On those days I just have to report on the jaw-dropping news that makes you go hmmmmmm.

A new report from Lender Processing Services revealed that foreclosure inventory levels were more than 30 times that of monthly foreclosure sales volume last month. And the average loan in foreclosure has now been delinquent for an astounding (record) 537 days, while 30 percent of those in foreclosure haven't made a mortgage payment in over two years (lots of free rent). The numbers indicate a huge foreclosure backlog, exacerbated by the ongoing robosigning scandal, which should put downward pressure on home prices for some time as mortgage lenders are forced to sell them on the open market.

Additionally, February's data showed that foreclosures related to option arms increased 23 percent over the past six months, making them the worst types of loans out there at the moment.

--Submitted by Katherine Swanberg of TriStar Finance

Top Ten Zip Codes for Real Estate Transactions in Western Washington

Below are the top ten zip codes with the highest number of real estate transactions in Western Washington in the last six months. Beside each zip code is the major city, the number of transactions that occurred in that time frame, and the median single family home sales price:

1- 98012 Mill Creek 314 $319,700

2- 98387 Spanaway 267 $180,000

3- 98391 Bonney Lk 240 $251,200

4- 98059 Renton 199 $375,000

5- 98052 Redmond 198 $506,500

6- 98513 Olympia 195 $217,995

7- 98115 N Seattle 179 $465,000

8- 98375 Puyallup 178 $205,000

9- 98374 S Hill 174 $221,250

10- 98338 Graham 174 $234,425

Real Estate Investing Risk Management

Minimize Risk with Multiple Exit Strategies

In a recent blog, we stressed the importance of taking action as an investor. Taking action means making offers to sellers.

Before you make your first offer to a seller, you will have done your due diligence, inspected the property, estimated repairs and negotiated price and terms. What you negotiate will depend very much on the exit strategies you intend to use. Having multiple exit strategies will minimize the risk you take in making an offer.

Multiple exit strategies? You mean, I need to have more than one?

Yes, indeed! If Plan A fails, what is your Plan B? Better yet, if Plan B fails, what is your Plan C?

If your success is dependent on only one exit strategy, then you are at risk to fail as an investor.

Let’s look at some examples of multiple exit strategies. For example: Let’s say you have no cash, and no credit. So you decide you are going to wholesale property. Wholesaling means you find property at below market value and you sell it below market value. Typically, in order to sell low, you must first secure the property by successfully negotiating a purchase and sale agreement with the seller.

Along with many other savvy investors, I typically wholesale EVERYTHING. I will put an ad up on the internet offering the property for sale which I have just gotten under contract. If I get calls on it, then I know I have a good deal. No calls, well, then maybe it is not such a good deal….

If it is not a good deal, or I may have made a mistake, I’d better have some contingencies in my purchase and sale agreement that allow me to back out without a penalty. Inspection or financing contingencies are often used in this fashion. They allow the buyer to back out, or to renegotiate on price and terms. These are reasonable exit strategies if there are unpleasant surprises early in the contract phase.

But if it looks like a good deal, I have several possible exit strategies: I can go ahead and wholesale it at a price acceptable to me, or I can find the financing to keep it and develop it myself.

If I decide to keep the property, what are my options? Should I fix it up and flip it for quick cash? Or should I hold it and rent it out? I’d better sharpen my pencil, and see which of these options make the most sense, and what I need to do in order to succeed with either option.

If I keep it, I will need financing. Again, I need to have multiple strategies. Can I qualify for low-cost conventional bank loans? If I have no money, and no credit, probably not. Can I partner with another investor, the seller, or another private lender to raise the capital I need? If I decide to borrow hard money, how long can I afford to hold it until I can sell or refinance? What happens if I cannot sell the property within that time frame?

Working through multiple options will minimize the risk of moving forward on any investment. Typically, the best deals afford multiple exit strategies, all profitable to the investor. Remember Andy Heller’s “buy low, rent smart, sell high” approach to investing? If he bought at the right price, it did not matter whether he wholesaled the property, rented it, lease-optioned it, or sold it immediately. He made money either way.

A savvy investor will always ask him/herself, if this exit plan doesn’t work, what else can I do? And there had better be an answer besides “I don’t know!” If you always have a back-up plan, you will never be afraid to make an offer on a really good deal.

Looking for a Cash Buyer!

Awesome views of Lake Washington.

Two days on the market, and no offers yet. Phones ringing off the hook for the listing agent. Over a dozen real estate brokers through on the first day of listing. Bank-owned and priced to sell.

Definitely a "hot" deal. Definitely will go fast. Houses in this part of Seattle do not come on the market often; at least not ones where you step out your door and immediately onto the linear park that runs along Lake Washington Boulevard between Stan Sayres boathouse and Seward Park.

This house is priced well-below tax-assessed value, and at $340,000, significantly below Seattle's median home sales price of $375,000.

So what is wrong with it? It is a 1938 house in pretty much original condition. It is a major fixer. But in a neighborhood of million dollar homes and million dollar views, there is room to invest a substantial sum and still retain big equity, even in today's market.

Even in today's market, I suspect there will be a bidding war for this property, multiple offers, and that it will go for more than the list price. The successful bidder will likely be a cash buyer, who does not need bank financing (or who will get bank financing AFTER paying cash for the house). Nevertheless, proof of funds or a prequalification from Wells Fargo are required to even submit an offer.

Deals are out there, especially for cash buyers. Cash is king in this market, and NOW is definitely the time to buy....

PS. Please call me IMMEDIATELY if this property is of interest....