Last Thursday the twin mortgage giants Fannie Mae and Freddie Mac announced they were suspending all foreclosure sales and pending evictions beginning on November 26th through January 9th 2008.  Shortly after the announcment I started receiving calls from associates and clients asking me what affect I thought this would have locally on foreclosures.  My answer was not much at all.  Even though Fannie Mae and Freddie Mac own neary half of all loans originated in the U.S., the number of loans in their portfolio that are in foreclosure is actually very small.  It only represents about 2-3 percent of their entire portfolio.

The end result is that approximately up to 10,000 homeowners will have their foreclosure stalled for a few weeks in order to allow time to work out modifications with them.  For those homeowners, this is certainly good news, especially considering the upcoming holiday season.

Many of the people I spoke to were surprised to learn that so few homeowners would be affected by the announcement.  The reason is simple however, the majority of homeowners in foreclosure took out loans that Fannie and Freddie would never dream of purchasing.  They were the no income, no asset, no credit check loans that are the root cause to our current financial market’s collapse.

And no amount of bailout or releif programs are going to be able to help most of those borrowers.  When they couldn’t verify income or assets in the first place, it is highly unlikely they will suddenly be able to now, and one of the major tenants of all of the announced releif programs are that the borrowers must show they are able to qualify for the new loan terms.

Forbes.com recently posted an article listing Seattle as the #1 real estate market in the country most likely to rebound.  An excerpt from the story says “Seattle has a reputation for nurturing brainy industries like aerospace and software. That should help it weather the coming financial storm. Seattle also stays strong because of its vibrant, livable downtown where rents are going up and tenants are likely to stick around.”

It’s nice to know that the people at Forbes and the 700+ real estate professionals they surveyed for this piece echo the same sentiments that we at Real Estate Investment Firm have been saying for several months now.  When you look at the fundamentals of the Seattle area real estate market and the local economy, there is no better place to be to position yourself to make large gains when the turn around occurs.

You can read the entire article here.

Occording the Matt Steel, the owner of Real Estate Investment Firm, “this is the opportunity of a lifetime.”

As reported in a Seattle Weekly article on November 12, 2008, Steel talks about the current foreclosure market and how his company plays a part in it.  Helping thier investors find the “Hot” properties at auction each Friday or helping clients who are behind on their monthly mortgage payments find a buyer, through a short sale, to avoid foreclosure all together.

To see the full article in its entirety, go to http://www.seattleweekly.com/2008-11-12/news/foreclosure-vultures/

GOAL: The primary goal of Toys for Tots is to deliver, through a shiny new toy at Christmas, a message of hope to needy youngsters that will motivate them to grow into responsible, productive, patriotic citizens and community leaders.

OBJECTIVES: The objectives of Toys for Tots are to help needy children throughout the United States experience the joy of Christmas; to play an active role in the development of one of our nation’s most valuable natural resources – our children; to unite all members of local communities in a common cause for two-three months during the annual toy collection and distribution campaign; and to contribute to better communities in the future.

We treat people with kindness and respect, and we give without regard to race, creed, sex, lifestyle, residence, or other discriminatory consideration.

          Real Estate Investment Firm Cares   

                       GENTLY USED COAT DRIVE

Did you know that 90% of homeless adults need a new, warm coat each winter because they have no place to keep one over the summer months? But it’s not just homeless people who need our help; thousands of families are forced to make a choice between buying a winter coat and putting food on the table, or meeting other basic survival needs.

This year REIF Cares want to collect gently used winter coats and distribute them to thousands of men, women, and children who would otherwise go without.

Happy Holidays & a Joyous New Year

REALESTATEINVESTMENTFIRM

16300 Redmond Way, Suite 202, Redmond WA 98052

Please contact LoAn at 425-214-6744 with any questions or for drop-off information & locations. 

Often, hiring the right contractors to tackle a flip project is the difference between making a solid profit on a deal or going sideways or back wards on your investment.

 While the current market necessitates more of a buy and hold strategy once in a while, a house ends up at the foreclosure auction and the numbers are so good you still have an opportunity make a decent profit from a fix-and-flip.  That profit can quickly evaporate into thin air however, if you hire the wrong crew to perform the rehab.  One of the keys to successful real estate investing is knowing what projects will bring value to your property and which will only take money from your bottom line.  When rehabbing a property it is crucial that the general contractor and his crew and the various sub-contractors involved understand that the needs of an investor are quite different from the average homeowner.  For the investor, it is always about the bottom line.  What will the job cost, and what will it return in dollars. Speed, quality and skill are what a successful rehab needs from his contractors, especially in this uncertain marketplace.

 One company and owner I have come to know very well in the recent months is Jerzy Radka, owner of Greenwood International.  Greenwood is a family owned business based in the Seattle area.  The founder and owner, Jerzy Radka, is also a real estate investor and he intimately understands what it takes to turn a flop into a successful flip.  After working with Jerzy and his crew on several projects I learned very quickly there isn’t very much this guy can’t get done.  His company is a complete one-stop-shop for all your home remodeling and rehabbing needs.  His crews work quickly and efficiently throughout the project, jumping from one task to the next as they work through the punch list.

To learn more about the type of work and projects that can be completed by Greenwoodii, please visit the following page: Greenwoodii International   

I strongly encourage anyone who is about to tackle a remodeling or rehabbing project to give Jerzy and Greenwood a call.  And if you want to learn how you can purchase or invest in foreclosures in King, Snohomish or Pierce County, please visit www.realestateinvestmentfirm.com

The month of October has proven to be a memorable one when it comes to buying foreclosure properties at the King County and Snohomish County Foreclosure Auction.  The deals that are available today at the trustee foreclosure sale are the best I have ever seen.

The roller coaster swings of the stock market, the federal bailout package, the collapse of WAMU, Fannie Mae and Freddie Mac and much, much more have created what I can only call the perfect storm of opportunity to buy these properties at discounts of 30-45%.

With such a small amount of liquidity available these days, the investors of a year or two ago can no longer play in this arena.  Since there are no more stated income loans, little or no down loans, etc. many real estate investors are forced to sit on the sideline and a new breed of investor has emerged to capitalize on this unprescendented opportunity. 

Today’s investor is likely to work at companies like Microsoft, Google, and Boeing, etc.  They do not see real estate investing as the path to overnight riches and a lavish lifestyle.  Rather they see real estate investing for what it should be.  What they do see though is opportunity. 

With the banks taking the radical ^{(Yes that is sarcasm)} position that for a person to qualify for a home loan they need to be able the document the following items:

1.  A steady and verifiable source of income (ie. they need to have a job)

2. Verifiable liquid assets (money in the bank)

3. A history of paying back loans (good credit)

many would be buyers and investors have been frozen out of the market.  This seemed to reach its peak during the beginning of October when you had the Dow Jones dropping like a lead balloon and Congress unable to come together at first regarding the bailout package.  This caused uncertainty and resulted in a 90% drop off of properties that get purchased by 3rd parties at the foreclosure auctions.  When 3rd parties don’t buy, the banks in turn end up with even more REO properties and they quickly realize that unless they act dramatically they will end up taking back even more of the foreclosure properties that go to auction.  When this happens the only real remedy the banks have is to stimulate 3rd party interest in the properties again.  The only way they can do that is to dramatically drop their opening bids down to levels that will assure that the foreclosures end up getting bid on at the auction instead of reverting back to the beneficiary.  THIS IS EXACTLY WHAT THEY HAVE DONE!  Lenders have begun to discount their opening bids by as much as 50%.  This equates to several hundred thousand dollars in some cases.

One example is a West Seattle property one of our clients purchased at the foreclosure auction on October 24th 2008.  The foreclosing lienholder was a first mortgage with a balance owed of $636,000.  Late Thursday the lender posted an opening bid of $311,000.  Our client was able to purchase the property at the King County foreclosure auction for $326,000.  The current market value of this custom built 2003 home is $500-550K.  That represents over $200,000 in instant equity for the buyer. 

This is just one example of many in the month of October.  November is traditionally a very busy month at the foreclosure auctions.  Don’t let this opportunity slip away. 

You can register to attend our free workshop, “Never Pay Retail” held every Tuesday at 5:30 in our Redmond office.  There you will learn how you can participate and profit from buying foreclosures at the foreclosure auction.  Sign up today!

Lien Priority for a Property in ForeclosureIt is very common today for a piece of real property to have several different types of liens filed against it.  An example might be a property that is subject to:

•  Deed of Trust
•  Construction/Mechanics Lien
•  Federal Tax Lien

Another might be subject to:

• 1st Mortgage Deed of Trust
• 2^nd Mortgage Deed of Trust
• HOA lien
• Delinquent property taxes

As a general rule, in Washington State, the priority of liens depends on the order in which they were created.  Lien priority is established by the date the lien documents are recorded with the County Recorder.  The lien that gets recorded first gets first priority for payment.

There are a handful of exceptions to this rule.  Special attention must be paid by anyone buying a foreclosure property as to the status of any property tax liens, condo association liens, mechanics liens and IRS tax liens. 

Property Taxes and Special Assessment Liens from Municipalities – These liens always have the highest lien priority.  Any past due taxes will need to be paid and brought current as will any outstanding special assessment liens (typically for local improvements such as road paving or sewer lines).

Condominium Association Liens – Laws have been enacted in 16 states and the District of Columbia granting community association liens senior lien status under certain conditions.  These liens are referred to as “Super Liens”.  Washington State is one of the 16 states that allow for “Super Liens”.  In Washington State, a lien for unpaid condo dues is granted lien priority over liens that may have been recorded before it.  The statute does cap the amount to be paid to 6 months prior dues.

Mechanics Liens – Mechanic’s Liens, otherwise known as Construction Liens may have a higher lien priority than other liens recorded before it.  The determination of lien priority in the case of a mechanic’s lien is based upon the date the work started on a project or the date materials were first delivered to the job site.  For example, a property that had the following liens:

•  
  • Deed of Trust* (Recorded August 15^th 2006)
    • *Foreclosing Lien Holder
  • Mechanics Lien (Recorded October 12^th 2006)

In this example the mechanics lien would take priority over the Deed of Trust, only if the work began or material was delivered to the job site prior to August 15^th 2006.  If work commenced after that date or material was delivered after that date then the lien would have junior lien priority to the foreclosing deed of trust. 

There is also a secondary exception with mechanic’s liens.  Since Washington State’s statute provides for a time limitation as to the validity of mechanics liens, a mechanic’s lien is only valid for a period of eight months.

“No lien created by this chapter (Washington Revised Code RCW 60.04.061) binds the property subject to the lien for a longer period than eight calendar months after the claim of lien has been recorded unless an action is filed by the lien claimant within that time in the superior court in the county where the subject property is located to enforce the lien.”

Unless the claimant takes the additional step to convert the mechanics lien to a judgment by filing suit in Superior Court in the County of Jurisdiction then the mechanic’s lien will self expire after a period of eight months and one day.

IRS Tax Liens – An lien filed for unpaid income taxes is often mistakenly thought to have a higher lien priority than other liens.  This is not the case.  Lien priority for IRS Tax Liens is based upon the date of recording.  What is granted under federal statutes is a redemption period.  If a property is sold at foreclosure auction and the IRS has filed a tax lien against the property, then the IRS has a 120 day right to redeem the property to satisfy the unpaid debt.  If the IRS exercises their right to redeem, it can only do so by reimbursing the purchaser.

The IRS’ redemption payment to a purchaser of a property at a foreclosure auction would include the following:

The winning bid plus 6% interest from the date of sale,

PLUS

• Expenses incident to the preservation of the property:
• All payments made to senior lien holders,
• Any necessary legal fees (i.e. title defense, etc.),
• A prorated reimbursement for prepaid property taxes and fire insurance premiums.

MINUS

• Any income the new owner received from the property and/or the fair market rental value of the new owner’s occupancy of the premises.

*Any improvements made to the property will not be reimbursed by the IRS.

It is important to note that the IRS has not redeemed a property in King County in over 4 years.  That does not mean that they won’t do it tomorrow, it just means they don’t do it very often.

When it comes to buying properties at a foreclosure auction, having detailed knowledge of the condition of title is important.  What is more important though is understanding lien priority and how the various liens of record may affect you and your investment.

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.

“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.

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.