Category → Real Estate Investors
April 15th, 2010
Real Estate Investors: Tips for Spotting Scams
The majority of real estate investors are professional business men and women who engage in ethical behavior. In today’s foreclosure-rich environment, many scammers have emerged offering to help borrowers stop foreclosure or the promise of obtaining a loan modification or short sale approval.
Deceitful real estate investors circle like vultures, patiently waiting for their prey. They perch at courthouses, hunting for foreclosure and bankruptcy notices. Armed with contact information, these scavengers shape shift into harbingers offering relief to homeowners desperate to get off their financial roller coaster ride.
Others offer the promise of lining your pockets with handfuls of cash. They vow to teach investment strategies which allow you to purchase properties without using a dime of your own money. These smooth-talkers convince you their $2500 course will have you investing in multi-million dollar properties in a matter of days or buying your first investment property with no money down.
This is not to say all real estate investors are con artists and scammers. However, before spending your hard earned cash on investing courses, contact a local library and see if they have the course available. Oftentimes they do; allowing you to save a bundle of money, along with the stress of trying to return the course if it doesn’t meet your expectations.
The most recent real estate scams involve buying and selling distressed properties such as foreclosures and short sale properties. There is money to be made in buying properties that require repairs and renovations. However, multiple pitfalls and risks exist.
Individuals who are facing foreclosure and approached by real estate investors with an offer to buy their house need to engage in due diligence before signing over the deed to their home. Those who wish to invest in fixer-upper real estate can obtain much of the information they need online or by reading investment books offered through the library.
Investors seeking out distressed properties for sale would do well to work with other real estate investors who specialize in this niche. These investors can help locate properties across the country and save you a fortune in the process.
The secret is to locate private investors who purchase real estate owned (REO) bank portfolios. When investors purchase in bulk they obtain wholesale prices and pass along a portion of the savings. It is not uncommon to buy wholesale real estate for pennies on the dollar.
Another real estate scam involves organizations that offer paid foreclosure listings. Investors pay a monthly fee to receive updated lists of foreclosure properties. Most realtors offer local foreclosure listings at no charge. Foreclosure and bankruptcy petitions are a matter of public record and can be found though the County Recorder’s Office.
Reputable organizations that provide paid foreclosure listing services can save investors time. Experts recommend working with list providers who offer a trial version. Subscribe to two or three trials to compare properties. Be certain to cancel subscriptions before the trial period expires if you are not happy with the service. Otherwise, you will be charged a fee.
Bank owned foreclosure homes are generally published on mortgage lender websites. REO homes consist of real estate that did not sell at auction and were returned to the bank. If you are not familiar with local banks, browse the local phone directory to compile a list, than use the Internet to locate their website. Most lenders publish a link to foreclosure homes on their home page.
Falling prey to real estate scams could cost you time and money. Before purchasing investment courses or selling your home to real estate investors, take time to conduct thorough research. Doing so will ensure you are working with a reputable and trustworthy professional.
By admin • Posted in Real Estate Investors • No Comment
March 14th, 2010
How to Become a Real Estate Investor – Why Choose Real Estate?
Investors typically choose real estate for a number of reasons: cash flow, appreciation, tax benefits, and leverage. A real estate investor holds property for personal or commercial investment reasons. This differs from real estate dealer who holds property primarily for resale to potential clients. An active investor typically buys a property and then makes repairs or improvements with the intention of selling the property for a profit. A passive investor usually hires an investing firm to find and manage potential profitable opportunities, and is not actively involved in any improvements or negotiations related to the property. Unlike a professional realtor who has to pass a series of exams and be licensed by local and state agencies, an investor simply needs capital and confidence.
By putting down payments on a real estate transaction, an investor can significantly increase his profit percent and better the terms of the financing loans. By bettering the terms of the loan, an investor can increase his available cash for other transactions, thus increasing potential earnings exponentially. This process creates a strong cash flow. This cash flow is very enticing to real estate investors.
Barring any unforeseen declinations in quality, real estate, unlike a car, generally appreciates in value. This means that once a property is purchased, the value of that property steadily increases over time. Residential real estate is especially prone to this process. This is so because residences are comparatively priced. This means that the value of a property is largely dependent on the value of the surrounding properties. Therefore, if one house appreciates in value, then the surrounding properties also increase in worth. An investor can force appreciation by investing in repairs or improvements.
A somewhat lesser known reason that so many people are learning how to become a real estate investor is the beneficial tax rules governing such transactions. State and federal governments try to encourage investment by writing financial rewards into the tax code. There are two main rewards built in. First, an investor can claim monthly mortgage payments as a tax deduction. Secondly, tax deductions can be made through a process called depreciation. Though a property may appreciate in value, an investor is allowed to make the assumption that it will actually depreciate over the projected useful lifespan of the unit. He or she is then allowed to claim this theoretical loss as a tax deduction.
Another strong reason for becoming an investor is called leverage. Leverage can best be explained through an example. Say you bought a house for ten thousand dollars and then sold it for eleven thousand dollars. Your profit margin would be ten percent. However, if you get an initial loan for the purchase and make a down payment of only one thousand dollars, then your profit margin would be one hundred percent. This method is called leverage and is a great way to maximize profits.
For all these reasons real estate investing is both an easy and very profitable business to get into.
By admin • Posted in Real Estate Investors • No Comment
February 24th, 2010
Home Valuation Code of Conduct: Important For Investors
Today marks a major change in the lending landscape and the way loans are sold to Fannie Mae & Freddie Mac…. Specifically, how they are appraised.
If you have not heard of Home Valuation Code Of Conduct (HVCC),just ask your favorite mortgage broker about it and more than likely their response will be something like:
&$#@%^&%$#^%$#@#$%^
(sorry, but can print what they really will blast you with)
In short, this change is designed to fix the evils of the past.
As always, there are good and bad sides to every change. We will explore the good, bad and ugly of this new approach but first, let’s synopsize what it is about.
WHAT IS HVCC (Short Story)
So what does the code say? Basically, it’s that the people responsible for originating mortgages can have nothing to do with the appraisal process.
In addition, the code also:
* Prohibits lenders and third parties from influencing or attempting to influence appraisals.
* Requires lenders to ensure that borrowers get a free copy of appraisal reports at least three business days before closing.
* Allows lenders to have in-house appraisers, so long as they’re completely independent of sales staff and their compensation does not depend on their estimates or on loan closings.
* Requires lenders to test a randomly selected 10 percent (or other statistically significant percentage) of appraisals and report any problems to Fannie Mae or Freddie Mac, which may force lenders to buy loans back from them.
* Requires lenders to report appraisal misconduct to applicable state agencies.
You can download a copy of the HVCC at: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvcc.pdf
WHY IS HVCC GOOD?
Let’s face it, the appraisal business has been a bit “rigged” over the last several years.
In short, only appraisers that could “get the deal done” were used on a repeated basis by mortgage brokers, realtors, and or builders. It only makes sense that this is the way the system worked. If you were a realtor, or even if you were a new home buyer, the last thing that you want is for your appraisal to come up short and the deal fall apart.
Since appraisals are somewhat subjective, the appraisers that always got called were those where the subjectivity worked out in favor of the deal.
However, many appraisers felt very pressured to make the deal work….. their future business counted on everybody walking away happy. Of course we are now seeing some of the consequences of that type of approach with our current housing and mortgage crisis.
WHY IS HVCC BAD?
Because now your purchase or sale is a crap shoot.
Why?
Simply because appraisers will be pulled out of a “blind pool”. From my personal experience, only about 20% of appraisers are good at their profession (you know, the ole 80/20 rule).
So you now have an 80% chance of a mediocre appraiser being assigned to your appraisal. Are they really capable of determining the value? I am skeptical.
In addition, most the incentives for the appraisers are now set up to appraise low….. The safe play is to come in BELOW what you may be thinking is actual value.
CONSEQUENCES
HVCC will be implemented May 1, 2009. Many people believe, myself included, that this is going to severely disrupt the home seller market, and investor market, for a period.
Everybody’s major hope is that soon, tweaks will be made into something that is workable for all in the industry.
By admin • Posted in Real Estate Investors • No Comment