All posts by jd

Real estate broker, civil engineer and general contractor.
Real Estate

China Buying American Real Estate

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Chinese Flag
Chinese Flag

China may be having the same economic troubles that the United States is having, but groups of Chinese are coming here to buy up some bargains.  A trip organized by SouFun Holdings, China’s leading property website company announced a tour to America to buy real estate. The trip was heavily oversubscribed and only 40 will make the tour to buy property in the $300,000 to $800,000 range.

According to the Timesonline: “Mo Tianquan, the chairman of Soufun.com, told The Times that his clients were hardly run-of-the-mill Chinese in a country where GDP per head is about $4,000 a year. “These people are not ordinary members of the masses,” Mr Mo said.He said: “I don’t know how much money these people have. I would say they must have at least a million dollars in cash. That’s cash they can spend any time – not investments fixed already in real estate or shares.” 

Mr. Tianquan estimated that at least a third of the group were buying for their children studying in the United States. They are interested in both houses and flats, “properties near universities or high schools and bankrupt homes auctioned by the courts. Usually these houses are only half the price they used to be”

“He said: “I don’t know how much money these people have. I would say they must have at least a million dollars in cash. That’s cash they can spend any time – not investments fixed already in real estate or shares.”

One question is why the Chinese would want to buy in the United States when the yuan is seen as likely to rise further in the long term, thus effectively harming the value of their American property.

Mr Mo said that this was a minor consideration for these members of China’s tiny elite. “They don’t care if the dollar will rise or not,” he said. “They are using pocket money to buy houses. To spend these sums has no impact on their way of life. If it makes a profit, and how much, is not a consideration.”

There is one final hurdle: it is not clear how even the super-rich will get their assets out of China, which limits the amount a Chinese person can take out each year to $50,000.”

Its bargain time in the United State again. Some of you may remember the down turn we had in real estate in the 1980’s The Japanese came over here and bought a huge amount of real estate..They poured nearly $300 billion into high-profile properties like Rockefeller Center in New York and the Pebble Beach Golf Club in California. Do you have a feeling that history is repeating itself?  I remember the doom and gloom of those days, everyone thought it was the end of the real estate market. We’ve had several booms and busts in the real estate market since then. The real estate market, like the stock market, will always have it’s up and downs. 

Real Estate

Now is the Time to Buy Real Estate

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real-estate-sign
According to Forbes Warren Buffett is number two in the line up of the  400 richest Americans. If you believe in his wisdom, Mr. Buffett says now is the time to buy! (Mr. Buffett is worth 61 billion dollars)

I’ve read his simple rule for buying of stocks, companies and real estate, “Be fearful when others are greedy, and be greedy when others are fearful.”

He admits that fear now is widespread, gripping even seasoned investors. And that fear makes us sell stocks and hold on to cash, or hold off buying anything.

Then he observed, “In waiting for the comfort of good news, they are ignoring the great hockey player, Wayne Gretzky’s advice: ‘I skate to where the puck is going to be, not to where it has been.'”

Continuing with some other comments by Mr. Buffett, this is part of the text of an opinion piece written by Warren Buffett and published in the New York Times on Friday, October 17, 2008.

“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts”

So while everyone is selling, Warren Buffett is buying. So where are you, are you sitting on your cash, waiting for the market to settle down? Remember the greed of some investors when the market was soaring, they were buying real estate for whatever price the seller was asking. They were buying on the greed side of real estate and many lost their total investment. So who is buying during this fear cycle? Read my previous blog , For Some, Foreclosed Homes Equals Gold.

So if you have the money to invest, now is the time to buy, according to Warren Buffett.

Real Estate

Hard Money Loans and Some Pitfalls

money
First a brief definition of what a hard money loan is from Wikpedia:

Many hard money mortgages are made by private investors, generally in their local areas. Usually the credit score of the borrower is not important, as the loan is secured by the value of the collateral property. Typically, the maximum loan to value ratio is 65-70%. That is, if the property is worth $100,000, the lender would advance $65,000-70,000 against it. This low LTV provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property.

By now we have all heard about Thomas Hastert, 53, who now faces 73 counts of embezzlement, securities fraud, conspiracy and filing false documents . He is alleged to have misused funds taken from private investors that were supposed to be invested in real estate properties or construction of new homes.

I don’t know all of the various schemes that he is supposed to have perpetrated, but I am familiar with at least one. I was approached by a mortgage broker and asked if I knew any good hard money lenders because her friend had started building a home with a loan from Thomas Haskert . As the conversation continued, it was explained to me that Haskert had made the loan with insufficient money in her friends construction account.

I am not a lawyer, but I believe this is a felony. Prior to allowing the homeowner to sign papers for the construction loan, the loan must be fully funded by the hard money lender, the money must be placed in a trust fund independent of the lender after the papers are signed and a third party must inspect the construction phases prior to releasing any money. This protects both the investors and the borrower.

What Haskert apparently did was to have the borrower sign papers prior to having the loan fully funded, putting his investors and borrower at great risk. For example, if you borrow $500,000 to build a home, then during the course of construction you incur costs of $150,000 in materials and subcontractors bills. At that point you are ready for a draw of $150,000. However, if Haskert has not fully funded the loan and there is insufficient funds to give you $150,000, you are in a lot trouble.

Now your property is subject to construction liens, you have a note against your property for $500,000 (the money you borrowed that is not there) and you are going to have some real problems getting out of this mess.

So remember, if you do borrow from a hard money lender for a construction loan, be sure all of the money is there, be sure that the money is put in a trust fund and that someone comes out and inspects your progress. If you invest your money with a hard money lender, check out how long they have been in business, which may or not mean anything (think Bernard Madoff), look at the property you are going to invest in, and determine that you have a safe loan to value ratio.

Real Estate

What, I was Just Having a Drink?

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Lock box and key
Lock box and key

 

You might have heard of the real estate agent in Hillsboro, Oregon who used his lock box key to enter into homes and burglarize them.   A homeowner returning from a business trip, walked into his house to find Michael Troy Messmer drinking a White Russian.  It seemed obvious that  Messmer had been in his liquor cabinet.

The homeowner asked Messmer what he was doing and Messmer replys, “I’m a Realtor” with that, him and his girlfriend walk out with a box full of the homeowner’s personal property worth about $260.  That was on February 1.

On February 5, this genius was found to have taken some minor items, toiletry and liqueur from a Cornelius home. The items were worth about $250. In both cases, he used his lock box key to enter the homes.

Of course Messner  was caught in short order.  This is because every time a Realtor uses his lock box key to open a lock box, (where the key to enter the house is located), a code is entered into the lock box leaving behind the agent’s name and the time that the house was entered.   It’s too bad that in every profession there is always somebody who is dishonest. Not only was this guy dishonest, but I think he makes the grade for the dumbest criminal of the year.

I don’t know if they do a background check on real estate agents in Oregon, but in California every licensed real estate agent and broker has to have background check prior to obtaining their license, giving assurances that people with criminal records do not get a license. 

Real Estate

For Some, Foreclosed Homes Equals Gold.

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gold

Foreclosed homes are a buying opportunity if you have the cash. For some investors, speculators and first time home buyers are thinking big and finding opportunities in plummeting home prices. A gold lining in the Golden State’s housing crash.

According to the The News

“For many young couples, plummeting prices and near record-low interest rates make it possible to own a home in California for the first time.

Investors and real estate speculators, meanwhile, can snap up foreclosed properties on the cheap to sell during the next boom in California’s boom and bust real estate cycle, a boom they believe is inevitable and possibly not far off”

“This is a buying opportunity of our lifetime,” said Bruce Norris, who heads an investment group that expects to purchase 100 homes in Southern California.”

The article mentions the group buying a home for $55,000 that originally was worth $360,000 at the top of the market, putting $30,000 into it for repairs and renting it $1,200 a month. I would say that’s a fantastic investment. 

I know an investor who bought homes during the last real estate downturn. He bought thirteen homes and turned them all into rentals. When his company told him three years ago that they were moving to Texas and if he wanted a job, he would have to move there. He’s still here, doing well living off of the income from his rentals and building a new home in Lake Tahoe.

Yes, now is the time to buy, if you have a secure job or money to invest, if you want an investment that has proven time and again that you can become wealthy buying real estate.

Nevada County, Nevada County Information

Angel & I on Nevada County

 

Angel, she does not like her picture taken.
Angel, she does not like her picture taken.

Angel asked me the other day why I liked Nevada County so much. She said she’s 49 now and we have always lived here. (Angel’s seven, but dogs age seven times faster then humans, although some times I think I’m keeping up with her)

I said Angel, it’s like this, to give you an example, I was a construction project manager for a large land development company that developed subdivisions in Truckee and North Shore. Once a month I had to go to San Francisco and attend a committee meeting. Thats where a bunch of people get together for hours to talk about nothing and what a single line text message could have taken care without all that waste of time.

Anyhow, I would get to the company’s office right in the heart of the financial business district on California Street. I’d stand outside and watch people who would seem to be in high gear, walking like they were all late for a committee meeting or something. You can’t believe the traffic there either, I think they have more cars in one block then all the cars we have in Nevada County and the buildings are so tall, they had to calculate the orbit of the moon before they built them.

Coming back from all the hustle and bustle of the Bay Area, I would come up Highway 49 and as soon as I crossed the county line at Bear River, I would start getting calm, a feeling of coming back to nature. Driving along the highway, first there were and still are the large oaks to greet you, then continuing on you are surrounded by large pines on both sides of the highway, tall sentinels welcoming you back, bringing you back to a true reality of life.

That’s the way Nevada County is, an abundance of forest and terrain, having different eco-systems, from Penn Valley where you can raise horses and is more open, fewer trees, to areas around Nevada City higher in elevation, where you are surrounded by a canopy of trees and forest environment. You can live below the snow belt or above it. It’s an amazing County, where in just a few minutes you can be in completely different worlds. It’s a much slower pace here, more peaceful and more like life should be.

So Angel, that’s why I like Nevada County, the pace of life is much slower, more real and people are not in a rush to go to committee meetings.

Do you understand Angel? Angel; yes and now can I have a cookie?

 

Real Estate

Facing Foreclosure, Hire an Attorney?

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The Golden Rule, He who has the gold Rules
The Golden Rule, He who has the gold Rules

Hiring an attorney is usually the last thing I tell a client to do. It’s expensive and normally you can work things out with the party in question if both sides are willing to talk and negotiate.

However, the more I hear from friends and clients, it seems that the only way to get a bank or mortgage company to listen to you is to hire an attorney.

I just heard two more stories of people approaching their bank and was told, you’re making the payments, we don’t want to talk to you until you quit making your payments. In another case, the person tried for two months to modify their loan and finally gave up.

However, the person then hired an attorney and the bank immediately started modifying the loan. I don’t get it, why force a home owner who is under stress to spend an additional $1,500 to $5,000 to get their attention. 

In spite of article I recently read, the banks are not cooperating. The article went on to say that a client hired an attorney to represent them and the bank insisted on having a three way conversation with the bank, the client and the attorney. The bank said there was no need for legal representation; they would do all the work for free. Right, maybe you just need to hit the banks over the head to get their attention. 

Real Estate

Angel & I on Real Estate

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Angel, she hates to have her picture taken.
Angel, she hates to have her picture taken.

If Angel and I could talk to each other, the conversation might go something like this.

Angel to me, why are people so upset because the government might save their neighbors house who is facing foreclosure. After all, they’re saying I make my payments on time, I don’t want or need a government handout, why should they get one?

Well, Angel, it’s not that simple. I remember when I took a law class, the instructor (who was an attorney) said, there is right and wrong, then there’s the law. Now I say, in these times there is right and wrong and then there is real estate. Real estate needs help now, and it may not be exactly the right or wrong way to do it, but something has to be done.

Helping our neighbor to avoid foreclosure helps all of us. It keeps housing inventory from increasing, it helps prevent our home values from dropping and it keeps the neighborhood from deteriorating. There are vast neighborhoods that have just fallen apart, one home after another being foreclose on, vandals tearing the house apart, or homeowners selling parts of their home before they move. (See my previous blog “Rip off a House, Go to Jail”)

Now some people have further said, what kind of an example are we giving our children?  Are we teaching them that if they get in trouble the government will bail them out. I don’t think so; I think you need to educate your children as to the realities of the times. Sometimes, government just has to get involved for the good of the Nation.

What do you think Angel? I think that makes a lot of sense, can I have a cookie now?

Real Estate

President Obama’s Help For Homeowners

The White House
The White House

 President Obama will be in Phoenix today, to unveil his “Homeowner Affordability and Stability Plan” to help bring relief to homeowners and bring some order to the housing market.

A portion of his blog reads:

“The President’s strategy for economic recovery is a stool with several legs, as he’s said, and one of them is solving the foreclosure crisis.

“We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes,” he said yesterday as he signed the American Recovery and Reinvestment Act into law

To read the full text and explanation of what is proposed read the White House Blog at The Briefing Room 

Real Estate

Nevada County Sales January 2009

1sold

I’m comparing the month of January 2008 to the month of January 2009.  It is not really a good comparison in some ways, as a large sale can skew the results.  But it is a brief snap shot of what’s happening. As the year goes, by, I’ll start comparing the combined months of the year. For example, the next blog will be a comparison of January and February and so on.

Residential sales for the month of January 2009 increased five percent over January 2008. The average sales price declined eighteen percent from an average sales price of $449,358 to $370,351 from 2008 to 2009. However, in January of 2008 there was one sale of $1,950,000 which really skews the average sales price. Taking that out of the equation, the average sales price for January 2008 drops to an average sales price of $372,155 which is about what the sales price is this year.

Average days on the market remained almost the same, 140 days in 2008 compared to 138 days in 2009. To make a long story short, sales in January of this year compared to sales in January of last year are about the same.

Let’s see how the rest of the year goes. I believe the market is picking up and I expect there is going to be a lot of help from the Federal Government in the coming months.   A lot of investors are jumping into the market realizing that this is a great time to buy.