Archive for October, 2008

If You Want To Invest in Foreclosures – You Need to Understand Lien Priority

Real Estate Investment Firm is a full service real estate investment company dedicated to assisting our clients create long term and lasting wealth through real estate investing. We specialize in Foreclosure Auction Purchases, Short Sales, and REO/Bank Owned properties. We invite you to attend our weekly "How to Buy Foreclosures" workshop held every Tuesday evening at our downtown Redmond, WA office. For more information or to register go to www.realestateinvestmentfirm.com

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King County Foreclosure Auction – September 2008 Sales Stats

Below are the foreclosure sale statistics for the month of September 2008 at the King County Foreclosure Auction.  The foreclosure auction takes place each Friday beginning at 10:00 a.m. at two locations in King County.  In front of the King County Administration Building in Seattle and in Factoria outside the offices of Northwest Trustee Services Inc. just behind the movie theater. 

Of the 465 properties scheduled to be sold at auction, 289 sales were cancelled, 140 properties reverted back to the bank or foreclosing lender and 36 were purchased by a 3rd party.  That does not mean their were only 36 good deals to had.  It only means that there were only 36 people or investors willing and able to buy that month.  Many of the 140 properties that reverted to the banks were great deals and represent a tremendous missed opportunity for anyone wanting to capitalize on this market.

To learn more about investing in distressed and foreclosure properties and how you can buy properties at 60-80 cents on the dollar, please sign up to attend our Free weekly workshop called “Never Pay Retail” held at our downtown Redmond, WA office.

When It Comes To Investing in Foreclosures or Other Distressed Real Estate ~ “Be Fearful When Others are Greedy, and Greedy When Others are Fearful”

“Be Fearful When Others are Greedy, and Greedy When Others are Fearful”  ~ Warren Buffet 2004

The above quote was written by Warren Buffet in his 2004 letter to shareholders of Berkshire Hathaway.  At the time Mr. Buffet penned the remark he was commenting on investors who try to “time the market” and was saying that if they insist on doing so, then they should keep in mind to “be fearful when others are greedy, and greedy when others are fearful.”

There is another famous quote regarding “greed” from Oliver Stone’s 1987 movie, Wall Street where the character Gordon Gekko, portrayed by Michael Douglas proclaims that “greed is good”.  The question then becomes, when should you be greedy!

In my opinion, that time is NOW!  Never before has an opportunity to purchase distressed and other below market real estate existed like the one before us now exists.  It is also likely to never occur to this degree again. 

Two or three years ago when the money flowed like wine from banks and other lending institutions and the masses were eager to run out and leverage not only all that they had but often they also leveraged what they didn’t, it was wise to be cautious.  It seems that any time their is a bull market in real estate most people develop amnesia and forget that real estate also follows a cycle.  You have periods of market appreciation and periods of market depreciation.  Tracked over any extended period of time and that line graph will always end up higher than when it started, but in-between there are always periods of ups and downs.

How many people who bought real estate in 2006, when just about everyone fancied themselves a real estate investor just because they watched a handful of “flip this house” episodes now are upside down on their “investment” or have already lost their house to foreclosure.  A perfect example of “being fearful when others are greedy”.

On the other hand, NOW is a perfect example of when to “be greedy when others are fearful”.  The savvy real estate investor knows that every crisis or correction in the market is only an opportunity to buy at a great discount.  Several factors have combined today to create a perfect storm of opportunity for those willing to educate themselves on the realities of the market.  While so many are afraid and sitting on the sidelines, those that pull the trigger today will reap the rewards of that decision tomorrow.

To learn how you can take advantage of the opportunities in this unprecedented market and buy investment or primary real estate please visit Real Estate Investment Firm and take the first step in creating long term and lasting wealth for you and your family.

Benefits of the Current Market – Why now is a great time to buy Foreclosures!

The following is a very insightful video-blog from Zach Anderson at Cobalt Financial Services about the current market conditions and the opportunity that is available during this turbulent time.  Zach is a Certified Mortgage Planner and Strategic Wealth Advisor with CFS. 

The Credit Crisis ~ Is the Federal Bailout the Best Solution?

The following article is a very helpfull explanation about “mark to market” otherwise known as FASB 157, a Federal Regulation requiring banks to report or “mark” their assets to the marketplace each day. 

Thank you Dean Ono from The Legacy Group for the valuable information and allowing me to repost it here for all of you.

The Chinese have a proverb: “May you live in interesting times.” And we are living through interesting times indeed.

Whatever the political posturing regarding the rescue plan, a plan needed to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of “toxic” mortgages. This has a lot to do with FASB 157, also known as “mark to market”.

Each day, lenders must mark their assets to the marketplace. It’s like you having to appraise your home everyday and, if your neighbor was under duress because she got very ill, divorced, lost her job and was forced to sell her home quickly, she may have sold it super cheap. Now, does that mean your house is worth that super cheap price, too? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But “mark to market” does not allow for this, which creates a vicious cycle.

Why is this so bad? Because, as lenders mark down their assets the amount that they have previously loaned becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to “mark to market” requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are still $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio…at cheap prices. And this makes the vicious cycle continue.

And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn’t just A paper or B paper etc. it’s everything. It’s got some A paper, B paper, C paper…and even what looks like toilet paper. An “A” investor buys the whole pool but because they are an “A” investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this, the opportunistic “shorting” done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan, the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.

This is not easy to understand for the general public. In fact most politicians don’t get this either. That’s why it is a difficult yet critical bill for them to vote on.

Once this is done, it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.

Dean Ono
The Legacy Group

As the turmoil in the financial markets continue it creates an amazing opportunity for investors and others to be able to purchase property at significant discounts to market value.  At Real Estate Investment Firm we help our clients create long term and lasting wealth through the acquisition of distressed property at 20-40% under market value.