Huge Savings Are Now Available on Condominium Resorts Worldwide

Most readers are aware that travel to timeshare resorts normally allows you to stay in one of the best condos in town. You are probably not aware that you are able to stay in these beautiful condominiums without the high cost of a timeshare purchase or the payment of numerous fees associated with timeshare ownership?

A unique situation has been created over the last 25 years with thousands of timeshare resorts opening and selling thousands of weekly timeshare units each year.

Here's how you can take advantage of this situation and use these properties with your own membership affiliation.

This program has been offered throughout North America for more than 25 years. Until March of 2007, when a new marketing arm was created, it was only available through the purchase of an expensive vacation club membership, and only offered for sale through private invitations to seminars. The membership cost was $10,000 or more. It's now available for immediate use for a fraction of that cost.

Why stay at timeshare resorts? If you have ever visited a timeshare resort, you realize that these resorts are in the best locations and are generally the nicest resorts in that location. Why? Each timeshare week will sell for up to $40,000. (That's for the use of one week per year, plus you'll need to pay an annual maintenance fee of approximately $500.00. ) Unfortunately, many thousands of timeshare weeks are not being used by their owners, these weeks turn into excess inventory and are sold to wholesale brokers and vacation clubs. This creates one of the best travel opportunities available in the world today.

What if you could stay in a luxury resort condo for as little as $298.00 for an entire 8 day 7 night week? There are more than 5,000 resorts participating in this program with no black out dates and it includes units that have one, two, or three bedroom suites for this price. You'll also have the luxury of a professional travel adviser to take care of airline reservations, ground transportation, and information about your destination area, all at the best available prices.

If you could stay at one of these one, two, or three bedroom suites in Hawaii, Las Vegas, Orlando, Branson, the Bahamas, Italy, France, Barbados, Cabo San Lucas, Vail, Colorado, or many other areas throughout the world for as little as $298.00 for the week, would you go? Many people spend more than $298.00 for a 3 day trip for their family to stay in a small hotel room. Many of these resorts are within a short drive from your home.

Thousands of smart consumers are now becoming members of this vacation program and are using these 5,000+ condominium resorts inventory for their family or business vacations. Others use this program to earn extra income for their family, their church or other non-profit groups in their community. Some people do both.

A Beginner's Guide to Condominiums

The condominium market has ido rising steadily in recent years. According to the National Association of REALTORS (R), condominium values increased by more than 27 percent between 2000 and 2002, and the median value of condos ($ 163500) sat just below that of single-family homes ($ 168400) in mid - 2003. While this trend is not guaranteed to continue, the condominium market has regained momentum and the importance it had in the initial boom of condominiums the 1980's.

Condo buyers are divided into three main groups: for the first time buyers to quit rent; people looking to buy a second home that will use part-time and retirees who are trading in high-end housing for low-maintenance a lifestyle offers condominiums.

A condominium can be a great purchase under the right set of circumstances, but some people still dismiss as glorified apartments. If you do not feel comfortable living in condominium rules and restrictions, and in close proximity to others, then a condominium is probably not the place for you. Before buying a condominium, be sure to understand exactly what is involved in condominium living.

What exactly is a condominium?

A condominium development can take the form of style apartment complexes, townhouses or become multi-family dwellings. What distinguishes it from other multi-tenant buildings is that the developer has legally declared that a condominium, and individuals can purchase units in the building or complex. In most states, this means that development is specially designated under the laws and regulations applied to condominiums.

When buying a condominium, the owner acquires title to his unit, until the walls, but not between them. A description of a condominium is a "box in the air."

The common areas of development, such as stairways, dividing and exterior walls, gyms and rooftop gardens, are shared ownership. Each unit owner has any interest in these spaces. In order to manage the maintenance and repair of common areas shared, each condominium development has a condominium association, also known as a unit owners association. The association is elected by the owners of condominiums and makes decisions in the communal interest of the community.

Condo costs include:

* Arras, mortgage and property tax
* Condo fees, also known as maintenance fees. Condo fees are paid by all residents to help with building maintenance, salaries of groundskeepers, janitors or tasks, and provide facilities such as luxury swimming pool, gym or rooftop garden. Condo fees are paid monthly and are subject to change
* Special assessment rates. These rates can be requested when an unexpected repair or planned modification exceeds the cost of fees collected condominium

Rules to live by

Condominiums are governed by a set of rules called covenants, conditions and restrictions (CC & Rs). The rules vary from one to another condominium development. They can impose restrictions on ownership of pets, noise levels, remodeling projects, and rent. The CC & R are implemented by the condominium association. It's a good idea to read the CC & R to make sure you're comfortable with them before buying a condominium.

Condo associations and fees

The condominium association budgets and determines the fees for all condominium units. Condo fees are often determined by the size of your drive, how many units are currently occupied, and projected costs for building maintenance and repair.

Condo associations vary in their organization and experience. Some questions you may want to see are as follows:

* Whether the association to maintain a reserve fund to pay for the unexpected and potentially costly repairs? This will help determine whether it is likely to beat with a special assessment rates.
* Has the association maintains the building in good condition? Can Handle repairs and maintenance before they become major problems? Before you buy, is a good idea to get an inspection in the unit you fancy, as well as the entire structure in order to identify potential problems.
* Whether the association intends to add facilities, such as a swimming pool or gym, in the near future? This could cause a sudden increase in their fees. Ask to see the minutes of recent meetings of condominium associations, which should disclose any such plans.
* The development is pending lawsuits? Are there any conflicts between landowners, developers or the association you should know about?
* What is the reputation of the association in the building? Talk to other owners for comments or complaints about the activities of the association.

A word about developers

The developers do not usually maintain a long-term interest in a building, but the work they put into it is important. A home inspection can turn up major structural faults in the building, but not based on this alone. You should investigate the developer's history, and find out if there had been any problem with its evolution. Also find out if the developer is still in business and whether it is financially stable. If the developer is no longer in business, its condominium association may have little or no legal recourse in the event of serious flaws are discovered on the property.

The planning of some projects home improvement? Finance with a home loan or credit line.

A "Dead-Cat Bounce" in the Rocky Real Estate Market

"The secret of success in life...is to be ready for opportunity when it comes." --Benjamin Disraeli

The phrase "Dead-Cat Bounce" is finance industry term derived from the notion that "even a dead cat will bounce at least once if it falls from a great enough height," and describes a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise--before resuming its downward movement.

The connotation is that the rise is not an indication of improving fundamentals of the stock. A "bounce" is often the result of speculation. Traders buy into what they hope is the bottom of the market, expecting a "bounce" and making a quick profit.

Thus, the very act of anticipating a bounce can create and magnify it.

There is evidence of a "Dead-Cat Bounce" happening in the current real estate markets in several parts of the country. Investors are rushing headlong into some of the worst markets (Stockton, CA is one such example) and actually bidding up prices against retail buyers for REO listings--on homes listed at prices still higher than the affordability levels for the areas where they are located!

Many investors have been brainwashed by Wall Street and the media to think that "buying low" is always a winning approach. But "buying low" all by itself, is a very speculative strategy--and more so in times like these.

The biggest challenge is that turnarounds are often difficult to spot because deflation in the housing markets typically runs about 18 quarters (4.5 years), and false bottoms in housing sales and starts are common.

It is imperative to stay focused on ways to navigate the foreclosure and pre-foreclosure markets right now because the real opportunity will only come in 2009-2011, depending on the region. So--buying for value is the optimal strategy.

Find news to use--avoid noise!

Booms are always set up by Wall Street and publicized by the media. When the inevitable bust occurs, Wall Street uses the media as their partner for denying the truth, while they take their profits and run. That is why most people suffer during periods of crisis.

Investors would be wise to ignore everything Wall Street, Washington, bank, and real estate industry shills state about the real estate and banking crisis, the economy, and the capital markets.

The few who make out big during busts are extremely selective about paying attention to only the most credible resources because their time is better spent doing their own analysis.

Success is never an accident. It is the result of high intention, sincere effort, intelligent direction, and skillful execution. It represents the wise choice of many alternatives.

For us as creative real estate investors and note investors, the biggest challenge we face TODAY is knowing WHEN and HOW to jump back into the marketplace--and avoiding the "noise" until that point.

Whether your believe the news these days is good news or bad news, if you are going to be successful as an investor, you have to take it upon yourself to analyze the entire scope of what is reported. Form your own studied opinion, explore your options, and make your moves.

Being static, without a well-conceived plan for when and under what conditions you will take action, generally leads to the same poor results as charging headlong into battle without a vision of the outcome.

Housing market declines are steep and accelerating

The current recession will most likely turn out to be the worst in decades. There are many more problems ahead. My forecast for the next 5 to 7 years includes the following economic scenarios.

• Deleveraging (the process of taking leverage out of the financial system) is the dominant theme in the markets in 2008 and going forward for at least a year, as the capital markets recoil from the massive losses in structured finance and the housing bubble. This process will transform the banking industry, putting an increasing drag on economic growth and corporate profits.
  
  

• Due to the weakness in the economy, the next trend in the housing correction will be a crisis in prime mortgages, and...
  
  

• A likelihood of a meltdown in the $40 trillion global credit CDO market for the same reasons that crashed real estate securitizations, as a massive credit card crunch is looming right around the corner;
  
  

• Many more hedge fund blowups, corporate bankruptcies, bank failures;
  
  

• The inherent rise or interest rates that has to come with bank deleveraging--only now in its early stages. After 2010, you should expect inflation and interest rates to really begin soaring, which will put an increasing drag on economic growth and corporate profits.
  
  

• From their peak in 2006, home prices will ultimately decline to pre-1999 levels between now and 2012. Commercial real estate market will also suffer.
  
  

• The rental market is set to heat up, and will provide good investment opportunities for patient and prudent investors.
  

The data is in, and it's pretty conclusive. As of May 2008, prices are down some 30% in the past 12-months--no surveyed city stayed above water. Prices in cities in the index have now pulled back to a level not seen since August 2004. But most middle-income workers still don't earn enough to buy a median-priced home in their home towns.

A quick update from recent reports includes The Center for Housing Policy's recent study comparing housing costs in 201 metro areas, with the median wages in those areas for 60 major vocations, such as police, firemen, nurses, teachers, customer service reps, officer workers, and food service personnel.

For typical working people in most markets home ownership remains far out of reach, although home prices fell in 161 of those markets in the 12 months ending September 30, 2007!

More recently, the well-publicized 2008 Harvard Housing study discussed the fact that the median wage-earner is unable to afford the median priced home and forecasts a drop in real estate prices to the 1999 level.

Affordability rules the day

Buy to deliver affordability to the retail real estate market, and you won't miss the bottom--you'll establish it! No hype. No Ju-Ju. No "Come-Bets." Use basic common-sense metrics, applied to the income/affordability specifics of a given area.

Bush signs housing rescue law

President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.

The Senate voted 72-13 in favor of the bill on Saturday, after the House passed it three days earlier.

"We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

The new law, one of the most far-reaching on housing in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

The legislation has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.

The White House last week reversed its long-standing threat to veto the bill. In fact, the administration still objects to parts of the legislation, including aid to states to buy foreclosed properties.

But the president decided to sign it since "oversight of the housing government sponsored enterprises (GSEs) and the new temporary authorities requested by [Treasury] Secretary [Henry] Paulson are urgently needed now, and they'll contribute to confidence and stability in housing and financial markets," Fratto said last week.

Helping at-risk borrowers

Provisions that will most directly affect consumers and communities include:

A larger role for the Federal Housing Administration. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - will be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.

While the law authorizes the FHA to insure up to $300 billion in loans, the CBO estimates that the agency is only likely to insure up to $68 billion and help keep roughly 325,000 people in their homes. Those estimates were based on the CBO's assessment of who is likely to qualify under the program and accounts for a certain number likely to default anyway.

(Here are more details on this provision.)

A stronger regulator for the GSEs. The new regulator will have a greater say over how well funded the two government sponsored enterprises (GSEs) are - a major concern in the markets that has sent stocks in both companies plunging in the past two months.

A permanent increase in "conforming loan" limits. The law will permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because those mortgages are more likely to be traded if they are considered conforming.

A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.

A ban on down-payment assistance from sellers. The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans.

The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

A new affordable housing trust fund. The law establishes a permanent fund to promote affordable housing. The fund will be paid for by fees from Fannie and Freddie.

Grants to states to buy foreclosed properties. The law grants $4 billion to states to buy up and rehabilitate foreclosed properties. The White House has opposed such funding, contending that it will benefit lenders and not homeowners.

Bolster Fannie and Freddie

A late and controversial addition to the new housing law provides temporary authority for the Treasury to lend a financial hand to Fannie Mae and Freddie Mac if the Treasury deems it necessary to help stabilize markets.

Concerns over whether Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) will have enough money to weather future losses in the housing market has sent shares plummeting in recent weeks. Since the beginning of June, Fannie's stock price has dropped 55% and Freddie's plummeted 64%. For the past year, they're both down over 80%.

Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages.

The law includes provisions that let Treasury offer Fannie and Freddie an unlimited line of credit and buy stock in the companies. The provisions expire in 18 months.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the companies could leave taxpayers with a fat bill to pay.

Treasury Secretary Paulson has said that merely having the powers in place may boost confidence in the two companies enough to preclude the need for Treasury to step in.

The Congressional Budget Office last week estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion.

Real estate firm charged with racial discrimination

The U.S. Department of Justice has filed a lawsuit on behalf of a fair-housing organization, charging a RE/MAX brokerage and an affiliated agent in northern Illinois with housing discrimination.

The lawsuit, filed July 18 in U.S. District Court in the Northern District of Illinois, charges that testing conducted by the National Fair Housing Alliance revealed discrimination based on race and national origin.

Officials at RE/MAX East-West, which is based in Elmhurst, Ill., did not respond to Inman News requests for comment.

The National Fair Housing Alliance conducted an investigation of the sales practices of RE/MAX East-West from June 2004 through February 2005 using undercover "testers" who posed as home buyers. The testers were of different races and origins. The results of this investigation led to an NFHA complaint, U.S. Department of Housing and Urban Development investigation and the federal lawsuit.

The organization has also conducted similar tests at several other brokerage companies (see Inman News article).

John Wassinger, who bought the RE/MAX East-West business in 2006, this week told a local newspaper, the Daily Herald, "If there is anything that is a mantra in this industry, it is that everyone is to be treated fairly and blindly." Racial steering "isn't tolerated," he said.

John DeJohn, the agent who is charged in the Justice Department lawsuit, left RE/MAX East-West and now works for another real estate company in northern Illinois, according to the lawsuit.

DeJohn in September 2004 reportedly steered a Hispanic tester, acting as a home buyer, toward areas that are predominantly African-American and Hispanic, the lawsuit alleges, and told the tester that one of the homes "'might be good for you,' or words to that effect,' " the lawsuit states.

DeJohn allegedly did not show or offer to show the tester any additional homes, and told the tester that she could not afford homes in several predominantly white areas, "even though in some cases the median home value in those areas was within the tester's price range," according to the lawsuit. Also, the lawsuit charges that DeJohn did not make any follow-up phone calls to that tester.

Later that month, a white tester made an appointment to view homes with DeJohn, who allegedly encouraged the tester to "research online to find out 'what the minority population is' of neighborhoods in the Chicago region, or words to that effect."

DeJohn allegedly steered the white tester toward predominantly white areas and away from predominantly African-American and Hispanic areas, the lawsuit states, and showed the white tester nine homes -- seven in predominantly white areas.

He allegedly told the white tester, "'I don't care if you are a bigot. If we go to an area and you don't like it, just let me know. I can't be a bigot but you can be one,' or words to that effect."

And while DeJohn allegedly told the Hispanic tester that one home "might be good for you," he allegedly referred to that home and another home as "dumps" and "repos" when speaking to the white tester. And the lawsuit charges that DeJohn made multiple follow-up calls to the white tester.

NFHA filed a complaint with HUD on Aug. 22, 2005, and amended the complaint on April 7, 2008. HUD officials "determined that reasonable cause exists to believe that illegal discriminatory housing practices had occurred," the lawsuit states, and on June 9 the housing agency issued a charge of discrimination in violation of the Fair Housing Act and later authorized a civil action.

The lawsuit seeks to enjoin the company and its agents and employees from engaging in discrimination on the basis of race and national origin related to home sales, and also seeks monetary damages to NFHA.

Shanna L. Smith, president and CEO of the National Fair Housing Alliance, which is based in Chicago, said in a statement, "We are pleased with HUD's decision to issue a charge ... and we hope that this will send a clear message to the housing industry that real estate agents and companies must be held accountable to the law."

NFHA reported this week that its 12-city investigation turned up an 87 percent rate of alleged racial steering and an almost 20 percent rate of alleged housing denial for African-Americans and Latinos.

Inman News has reported on several other complaints filed by NFHA against real estate companies in metro Atlanta; Detroit; Chicago; Fairhope, Ala.; Westchester, N.Y.; and Long Island. Among the companies named: Coldwell Banker The Condo Store, Coldwell Banker Marietta, RE/MAX Buckhead, Coldwell Banker Joe T. Lane Jonesboro, Detroit Century 21 Town & Country, Coldwell Banker Gold Coast, RE/MAX East-West, Manders & Company Real Estate, Peter J. Riolo Real Estate and Julia Stevens Realty.

Seller Financing Do's and Don'ts

One of the most valuable tools an agent or broker can use is seller financing. You can either know about seller financing, do it right and close more deals or you can watch potential commissions go down the tubes. In most cases, agents participate in setting up seller financing without structuring things properly or protecting their clients.

Pleasure and Pain
There are basically two types of human motivation. One is to gain pleasure and the other is to avoid pain. Would you agree with me that making more money would fit under the category of pleasure? Would avoiding a lawsuit or a loss of money be a way to avoid pain? If you agree, then you should have some good motivation to read this article, because we will talk about ways to do both.

It's Your Neck on the Line!
Whether you are an agent or private investor, there is a great deal of liability in the field of real estate. In particular, right now agents all over the country are being sued for the results of their negligence. A large number of these lawsuits have to do with the "paper" involved in the transaction. The courts are saying effectively, an agent has a liability to structure any carry-back financing to avoid problems and to best fit the needs of both buyer and seller. Many lawsuits have to do with the agent not disclosing dangers and risks with certain types of financing.

Ignorance in Action
In the case of investors, they are paying prices now for the decisions they have made in the past few years. The use of seller financing sounds easy and wonderful as it is preached over the podium, yet there are risks - AVOIDABLE ONES! I am in no way saying that there is anything wrong with seller financing. What I am saying is that for it to be used responsibly there are certain areas, options and alternatives that need to be known. In particular, there are six areas that can be of vital concern:

• TERMS
• CONTENT
• STRUCTURE
• FUTURE USES
• FORM
• NEGOTIATION

If You Like Profit
If you like to make money, then you should be very interested. A while ago I was giving a lecture and a young man asked to say something. He had attended my lecture the previous week and had made himself $17,000 from one idea that I had shared with the group. In another case a man back East wrote to me and thanked me because he had made $15,000 from an idea in one of my articles.

Knowing about what I term "NOTE KNOWLEDGE" can make a big difference in the size of the smile on your banker's face when he sees you walk in. Now let's look at these six areas in some more detail:

Terms
How the terms of a note are structured can make a big difference in the value of the note, the salability of the property and the ability of the buyer to meet his obligations. A good example to look at would be the "balloon payment". Is an agent being responsible to the client by putting the buyer of a property at the mercy of future money market conditions? Many of the foreclosures the last few years were due to buyers being unable to meet their balloon payment obligations. Why not explore other alternatives?

A good option to a balloon payment note is to structure a gradual yearly increase in the amount of the monthly payment. (Understand that this could complicate the note and make it a little less saleable ). This could totally eliminate the need for a balloon payment. Other options might be a shorter amortization on the loan or various clauses to provide flexibility if there is a balloon payment.

Graduated Payment as a "Balloon" Alternative
By a gradual yearly increase in the payment on a note, the amortization length can be greatly reduced and can eliminate the need for a balloon payment. This structure can be a very attractive opportunity whether a person is paying on the note or receiving payments. If a person is paying on a note, the security and peace of mind of not having to worry about the balloon payment is well worth the gradual payment increase and may make a property more saleable.If a person is receiving payments on a note, eliminating the balloon payment may make the note more valuable and more saleable.

Let's use as an example, a $10,000.00 note bearing interest at 10% with a 30 year amortization. The payment would be $87.76 per month. If this note had a five year balloon, the amount would be $9,657.21. If the payment graduated just $30.00 each year, the note would be completely paid at the end of six years.

This would also raise the present value of the note from $6,344.84 to $6,909.91, based on a 24% yield. If the payment graduated just $40.00 per year, the note would amortize in just over five years and would be worth $7,198.79, (for a complete breakdown see the chart). The increase in the payment in the first year is a 34% increase. This may not look too attractive, but it may look much more attractive than a $9,657.21 balloon.

The concept does not need to have equal or even steady increases to work. Unless you program a computer to do the work, you will just have to experiment and play around with the numbers to find out what will work The example below shows how to determine how long a $30.00 per year increase in payment will take to amortize the loan. The first step is to figure the amount of the principle balance after the first year of payments. The new balance is brought down to the next line, the interest rate stays the same, the payment is increased and the calculator solves for how long the loan would now take to amortize. The balance after one year's worth of payments is then calculated and brought down to the next line, the payment increased and etc.

$30 Per Year Graduation to Pop a 5 Year Balloon

I	PMT	PV	FV	N
10	87.76	10,000.00	N/A	359.93
10	117.76	10,000.00	N/A	148.19
10	117.76	9,567.41	N/A	136.19
10	147.76	9,567.41	N/A	93.46
10	147.76	8,712.55	N/A	81.46
10	177.76	8,712.55	N/A	63.26
10	177.76	7,391.22	N/A	51.26
10	207.76	7,391.22	N/A	42.37
10	207.76	5,554.55	N/A	30.37
10	237.76	5,554.55	N/A	26.09
10	237.76	3,148.60	N/A	14.09
10	267.76	3,148.60	N/A	12.43
10	267.76	113.74	N/A	0.43
10	113.74	113.74	N/A	1

Balloon Rollover Clause
This clause provides for the extension of a balloon payment for another year if financing is not available. It may include the payment of part of the balloon--such as 10% of the remaining balances. Another version of this also requires that the holder of the note helps to look for the financing.

Structure
A carry back note can be structured a variety of different ways. Thought should be taken as to the exact structure and the needs of buyer and seller. An example might be when a seller is carrying back a large amount of equity, such as $150,000. Many agents would create one $150,000 note and run to cash their commission check. Never mind the seller that might have a need to sell or hypothecate that note at some point in the future. Don't give any thought to the fact that there are fewer buyers for notes that large - causing the note to be harder to sell and discounts consequently higher.

A better idea may be to create several notes secured by one trust deed. This would be just as safe, yet provides smaller notes in case the seller needs all or part cash at a later time and needs to sell the notes. Several other times for splitting notes would be in the cases of split-ups of partnerships, divorces, gifting smaller notes to others or pre-division of interests of heirs in estates. For example, a couple taking back a $150,000 note might take back ten $15,000 notes that could be gifted to their children over a period of time. I call this a "Horizontal Split".

Form
In most states there are different forms that you can use and different times and situations to use each. For example, in Utah there are definite advantages to buy using an AITD (All Inclusive Trust Deed) and selling on a UREC (Uniform Real Estate Contract). It is important to know the needs of both buyer and seller as well as the laws and forms in your state. They change constantly, as in Utah where a few years ago some people hated the sight of the Uniform Real Estate Contract (now totally revised). In addition, there are circumstances in buying or selling when a wrap-around is a better idea than a second trust deed. There are also situations where the opposite is true. An example might be a seller with a tax liability when selling on a wrap may be considered an installment sale and using a second trust deed could trigger large taxes.

Content
The clauses and wording of contracts can make a substantial difference in the future happiness of buyers, sellers and their real estate agents. One clause that would have made a large difference in my past would have been an "EXCULPATORY CLAUSE". I became liable for payment on a note on a property I hadn't even seen, let alone owned in over two years. That is an expensive way to learn. In other cases you may want clauses included for the protection of buyer or seller. Sometimes clauses are justify out or even changed before the closing. Two years later is not a good time to find out. Exculpatory Clause - This clause states "The property is the sole security for this note." This means that there is no personal recourse on a note.

When representing a buyer, there could be some circumstances where you would encourage this clause. When representing a seller, you would be wary of this clause and should know that it may affect the salability of the note.

Substitution of Collateral - This type of clause is used to provide for the replacement of the existing collateral with some other collateral. A sample clause that can be used in an earnest money receipt and offer to purchase (an offer) is "collateral for this note may be substituted at any time before or after closing with sellers approval." After closing refers to being able to replace the collateral at a future date. Before closing gives an out so that the same contracts may be offered on more than one property at one time. A similar clause should be included in the note.

Prepayment Penalty - This clause provides for a penalty for the early payment on a note. You would generally not want this clause in a note, unless it is a wrap-around note that you don't want paid off early. Most holders of seller financing would love to be paid off early. A clause providing a penalty could discourage a potential early payoff.

Prepayment Discount - A clause like this is one that you would want in a note you are paying on. It could provide for a discount of a certain amount or percentage if you pay off the note early. This clause could make a note less saleable for the note holder.

First Right of Refusal - This provides for the payor on a note to have the first right to buy the note if it is offered for sale. It usually provides that the payor has the right to buy the note for the same price that someone else provides a written offer for it.

Subordination Clause - This clause provides that a note can be subordinated to another loan. This means that another note takes priority to the one that is subordinated. An example might be when a seller takes a note and agrees that at a later date he will allow the buyer to put on a new first loan. The seller then ends up with a second instead of a first that he had. This clause would be used on a property where there is remodeling or some other major cash outlay and a new first or second loan may be needed at a later date.

Principle/Payment Reduction -If an extra payment is applied to reduce the principle of the loan, this provides that the payment may be reduced by the amount needed to amortize the loan in the same period of time that was originally scheduled. This results in the ability to lower the payment on the loan when extra principle payments are made.

Assignment of Rents - This clause provides for the ability to take over the management and income of a property (within state laws and practices) during the foreclosure process.

K.I.S.S. - The old adage applies with notes as to keep it simple stupid. The more complicated a note is the harder it may be to sell.

SPECIAL NOTE - Some sample wording and uses of clauses are given here as an example only. You should verify wording and practices with your legal counsel. In many areas, getting heavily involved in the wording of clauses could be stepping outside the domain of a real estate license.

Future Uses
What is the seller going to do with the note he takes back? Will he need to sell it at some time? Do you know what it is worth? Does the seller? Seemingly minor differences in terms can make a large difference in the value of the note. Details like whether a buyer has personal liability, what position the note is in or the loan to value ratio can drastically change the salability of a note and its value.

Let's say you have a seller that has a $100,000 property that is free and clear. They receive an offer that they consider acceptable for $6,000 down and a first trust deed and note for the balance of $94,000. Note buyers look for loan to value ratios of 80% or less. This could end up being an un-saleable note for your seller because the LTV ratio would be 94%.

Save your seller and everyone else some problems and suggest they structure two notes. A first loan of $80,000 and a second of $14,000. The first would now be saleable to a note buyer if the seller ever needed or wanted cash. I call this a "Vertical Split."

Servicing - Many note holders sell their notes because they hate having to collect or have done a poor job of it. The payors fall behind and take advantage of the fact that the note holder sticks his head in the sand and tries to hide from the problem. Every note should be serviced properly. Either a professional company should do it or the note holder should have some instruction. A good payment history can help the salability of a note. When poor servicing is done, the payor can many times slip so far behind that they cannot catch up easily. Precious time is wasted and a note holder could end up having to foreclose needlessly.

Insurance - In a private note transaction, you should be sure that the seller is named as an additional insured on the "Hazard Insurance Policy," in case of fire or other covered disaster.

Taxes - Thousands of note holders out there are unaware of their legal responsibility to provide tax information as to the interest received. A 1098 form needs to be filled out each year.

Negotiation
The terms of a note can be adjusted in ways to help with negotiations on the purchase or sale of real estate. An example might be when a buyer and seller are separated on the price. Let's say that a buyer has offered $85,000 for a property and will assume a $40,000 first loan. The down payment will be $15,000 and the seller would receive a $30,000.00 second loan at 13% payable $331.86 per month. The seller wants $11,000 more for the property.

What do you do? Would you walk away? Would you beat on the buyer and seller trying to get them to agree on price? In many cases when the seller is hung up on price, he may not be as hung up on terms. Do you know you can please both the buyer and seller at the same time?

If the buyer offered a $41,244.16 note at 9%, the payments would be $331.86 per month for the same period of time as the first note. Does the buyer pay any more? No! Does the seller receive his price? Yes! (even a little more) Both notes, if discounted, are worth exactly the same amount. The real difference is how it looks. You just have the negotiating advantage of understanding the correlation between interest rate and price.

Knowledge is Power
Whether you are a paper buyer or real estate investor (hopefully both), "Note knowledge" can be very valuable to you. I used to say that there are two types of people that need to know about paper - real estate investors and paper buyers. I have revised that now. The two types of people that need to know about paper are male and female. Real estate agents need to know how to protect themselves and their clients. Investors need to know how to be able to protect themselves and to make greater profits. Homeowners need to know how to be able to negotiate the best transaction and save themselves money. Anyone that ever puts a key in a door would benefit from this knowledge.

Ten Myths Preventing People from Succeeding in Real Estate Investing

The following are the top 10 reasons people use for not succeeding in real estate investing. If I offend anyone with this list, it probably means I'm right on track!

Reason #1: No Cash
The Myth: "You need money to make money."

The Truth: Find a good real estate deal, and the money will find you. Ask any seasoned investor and they will tell you that lack of funds is never an issue; lack of good deals is! If you can negotiate a good price on a house, you will find plenty of partners willing to put up the money.

Reason #2: No Time
The Myth: "I've got a job, a spouse, kids and little time on my hands."

The Truth: Throw out your television and you'll have all the time you need. People spend an average 3 hours per day in front of the tube. They spend even more time on weekends. Want to do something fun this Saturday? Load the kids in the mini van and go driving around looking for ugly houses. Make a game out of it giving a dollar to each of your kids that spots an ugly house. Tell them that each ugly house your buy means enough money to take them all to Disney World.

Reason #3: Everyone Says This Stuff Doesn't Work
The Myth: "That late night TV stuff doesn't work."

The Truth: You can convince yourself that anything won't work. Henry Ford once said, "Whether you think you can or think you can't, you are right."

Every real estate transaction has risks; some risks are realistic, while others are remote. If you listen to the critics, the naysayers and other pessimists, you'll convince yourself it doesn't work. Most people that criticize money-making ideas need to do so for their own ego. After all, if it were true, what's their excuse for not being successful? Make it a point of not taking financial advice from anyone who makes less than you do.

Reason #4: Too Much Competition
The Myth: "There's too many people buying houses to find a deal."

The Truth: There are more than enough deals to make everyone rich. At any given time there are hundreds of properties for sale in your market for each investor looking for them. In addition, a majority of people who say they are investors are just sitting on the sidelines waiting for someone to fall in their lap. Don't be one of them - go out and make deals happen.

Reason #5: It Doesn't Work in My Market
The Myth: "It doesn't work in my market."

The Truth: It works in EVERY market. True, it may work differently in some markets than in others, but there are investors making money in every city, every day of the week. You have to learn your market - the rents, the trends, the local customs, the bankers, the title companies, etc. Then, learn the techniques and adapt them for your market. If you are in a hot market, you can sell properties faster and ride inflation. If you are in a down market, you can find lots of bargains. And, in any market, there are people with financial problems that translate into bargain properties.

Reason #6: The Recession is Coming
The Myth: "Certainly, the September 11th tragedy, the huge number of layoffs and the decline of the stock market will kills the economy, so anything I buy will go down in value."

The Truth: Sell cheaper or with attractive terms. When Dell wants to move computers, they drop the price. When GM wants to move cars they offer no interest financing. Be creative and go things they make your houses sell and rent faster. If the prices are falling, buy way below market and sell just below market. If rental vacancies go up, offer free satellite TV (heck, it's $25/month). When everyone else is "dooming and glooming", it only clears out the competition.

Reason #7: Realtors Won't Cooperate With Me
The Myth: "Real estate agents don't want to cooperate with investors."

The Truth: The right agent can be your best friend and #1 source of business. I have a one agent that brought me six deals in the past year. He knows exactly what I want and only calls me when there's a deal. You need to educate a few agents and let them know exactly what you want. Few agents have repeat customers - you have to make them understand that you will be giving them business over and over again.

Reason #8: I Have Bad Credit
The Myth: "I need good credit to buy houses."

The Truth: Good credit helps, but you don't need it to make money in real estate. Lease/options, owner-financing, flipping properties and other creative techniques will allow you to buy real estate without credit. You can always use a partner who has good credit. You can also borrow "hard money" without having good credit. In the meantime, you can work on fixing your bad credit so you can use it as an asset in the future.

Reason #9: I Might Lose Money
The Myth: "Real estate is very risky."

The Truth: Real estate is one of the safest investments you can buy. The stock market is beyond your control. Savings, CDs and money market funds won't give your enough return to make money. You have to be willing to take a calculated risk to make money. The more you educate yourself, the less risky real estate becomes. However, don't think you need to know EVERYTHING before taking action.

Reason #10: I Don't Know What To Do
The Myth: "I need to learn more before I start."

The Truth: You probably know more than enough to get started in real estate. It takes years to learn a lot. You never learn everything. Success is an ongoing learning process. Read some books, take some seminars and go take MASSIVE action. Then, learn some more and take a lot more action. If you are really impatient, enlist the help of others.

Henry Ford said, "Why should I clutter my mind with general information when I have men around me who can supply any knowledge I need?" Henry Ford was a smart man because he realized that he didn't need to know it all if he could consult with others that did. Ronald Reagan's cabinet was said to be the team of the brightest people in politics.

Housing Bill Clears Final Senate Hurdle

A massive package of housing legislation that President George W. Bush has pledged to sign into law cleared its final procedural hurdle in the Senate on Friday, leaving only a final Senate vote before it's enacted.

Senate lawmakers voted 80-13 to limit debate on the measure, leaving a maximum of 30 hours before the chamber must vote on the wide-ranging legislation.

The solid vote in favor of the procedural motion suggests the legislation will receive overwhelming and bipartisan support when lawmakers vote to pass the measure, likely to occur Saturday morning.

If passed by the Senate, the combination of tax relief for homeowners, a new regulator for Fannie Mae and Freddie Mac, and a $300 billion program to avert foreclosures, would be sent to the President for his signature. The White House earlier this week backtracked on a potential veto of the bill, instead saying Mr. Bush would sign the measure.

Lawmakers have described the bill as the "most important piece of housing legislation in a generation." Intended to stabilize the still faltering housing market, it includes long-sought reforms for the Federal Housing Administration, millions in funding for counseling struggling homeowners, and nearly $4 billion in grants to cities and states to buy and rehabilitate foreclosed homes.

Also included is a dramatic Treasury Department proposal to help restore confidence in Fannie Mae and Freddie Mac, which have been the focus of growing scrutiny about their solvency and capital levels as the housing market continues to deteriorate.

The plan would increase Fannie Mae and Freddie Mac's $2.25 billion lines of credit with the Treasury, as well as allow the government to potentially buy an equity stake in the firms. It would also give the Federal Reserve a consultative role over the regulation of the firms, particularly the capital they must hold.

Treasury Secretary Henry Paulson and lawmakers have said there is no immediate need or plan to take advantage of the Fannie and Freddie backstop, but the bill sets few limits on the help that the federal government could provide if necessary. Any help would be subject to the federal debt limit, which lawmakers are voting to increase to $10.6 trillion as part of the legislation.

As Congress moves towards taking its most aggressive step yet to address housing woes, foreclosure data released Friday suggests the housing situation continues to worsen. Industry tracking firm RealtyTrac said the number of properties with some sort of foreclosure action has climbed for eight straight quarter, with 739,714 homes receiving a foreclosure filing during the second quarter of 2008.

"Forty-eight of 50 states and 95 out of the nation's 100 largest metro areas experienced year-over-year increases in foreclosure activity in the second quarter," RealtyTrac CEO James Saccacio said in a press release.

Renting Versus Buying A Home

Renters are often in a quandary as to whether it makes sense to continue renting. Buying a home makes more sense, particularly when taking a long-term view. Yes, even in the current hot real estate market.

Renting - Advantages

Renting can have a few advantages depending on the part of the country you live in. The primary advantage is your monthly rent payment may be less than an equivalent mortgage. A secondary advantage is the fact that maintenance and improvements to the property are the responsibility of the landlord. Still, these advantages pale in comparison to the disadvantages of renting.

Renting - Disadvantages

The disadvantages of renting are significant. If you have any opportunity to purchase a home or condominium, it almost always makes sense to do so.
The biggest disadvantage of renting is the loss of value. Assume you rent a residence for $1,000 a month and you live in the residence for two years. You will have paid a total of $24,000 in rent, a pure expenditure. The $24,000 is simply gone and you will have nothing to show for it other than the time you spent in the home. Compare this to what your landlord has gained.

Rent payments are closely aligned with a landlord's mortgage payment. Using the above example, lets assume your $1,000 rent exactly equals the mortgage payment. For two years, you have indirectly paid the landlord's mortgage, helping them build equity in the house by paying down the loan. In addition, the landlord has benefited from the appreciation of the property.

By appreciation, I simply mean the amount of increase in the value of the house. If the rental appreciated $20,000 in two years, the landlord has received a windfall. They may have seen a gain of $24,000 in appreciation and payments lowering the mortgage. As a renter, you have made this all possible. The landlord no doubt would like to thank you.

Now, what would have happened if you had purchased a similar home with similar financial figures? You would have seen an increase in YOUR wealth of $24,000, not the landlord's wealth. If you're renting, these figures should make your teeth grind.

If you are renting, you should be out shopping for your own property. After all, isn't it time to make your money work for you, not a landlord?

What is Flipping in Real Estate Terms

Most properties bought and sold on the real estate market are long-term propositions. Buyers simply are looking for a residence they can keep for at least a few years if not longer. This is certainly not the case with flippers.

Flipping a property means to buy it with the intent or reselling it in a short amount of time. The time span can range from one to six months, but never more than a year. In purchasing the property, the "flipper" has a defined plan as to how they are going to increase the value quickly and inexpensively. This increased value is then translated to a much higher sales price when the house is put back on the market. Once it is resold, the person has "flipped" the house.

There are a lot of strategies and techniques for flipping real estate. Strategies can involve finding owners in bad financial shape who will sell at a major discount or simply looking for property that can gain significant value by undergoing cosmetic improvements. Flipping properties isn't for everyone and takes a lot of work. For those that stick to it, however, flipping can be a very profitable venture.

How Appraisals and Assessments Differ

Many people think appraisals and assessments are the same thing or at least that they should be for the same amount. The truth is they can vary greatly. Let's look at each of them.

Appraisals

An appraisal is an estimate of market value. An appraiser can use many methods for coming up with this estimate. For income producing property, the appraiser may capitalize the value of the income stream. (It would take "x" dollars of capital invested at a "y" rate of return to produce an income equal to the rental income generated by this property.) For other properties, an appraiser may use "replacement value." (It would cost "x" dollars to build this structure if it were being built today.)

Appraisers usually use "comparable sales" when evaluating the market value of a home. They look at nearby properties with similar characteristics, which have sold in the recent past to see at what price they sold. They typically give the most weight to the property they deem to be most like the property they are appraising.

Buyers and sellers generally encounter appraisals when the buyer's lender has an appraiser make an evaluation of the market value of the property being sold. The lender wants to be sure of the value of the collateral for the loan. An interesting feature that comes into play in this situation is that one indication of value is at what price two unrelated parties will agree to buy and sell the same property. In other words, what is the contract price the seller and buyer of this property agreed on (if they are not relatives).

Assessments

An assessment is the value your local government puts on your property for the purpose of taxing it. How this value is derived varies from jurisdiction to jurisdiction. Some communities say the value is the same as market value. Some say the value is a percentage of market value. Some appear to actually do what they say they do, and some do not.

I was once a partner in an investment property that we were offering for sale at the time the county re-assessed it. Imagine my annoyance when the assessment came in at one hundred and forty percent of the offer price. We weren't dummies. The partners were real estate professionals. I appealed the re-assessment, but my appeal was turned down. I offered to sell the property at the assessed price to the appraiser the county had hired to handle the appeals when he was telling me why he could not reduce our assessment. He did not take me up on my offer. Our property sold at the listed price months later. We had paid six months' taxes on the property at a higher than market value.

On another occasion I helped some elderly people sell a farm they'd lived in all their adult lives. The farm sold for a price a great deal higher than the value at which it had been assessed.

I believe the two examples are fairly typical. Many jurisdictions will "puff up" assessments for businesses and investors and "low ball" assessments for people who have lived in their homes for a long time. Sometimes there are formulas for doing this. "Land use" is one such concept, i.e., the property is taxed at its value as a farm and the fact that it is ripe for dense residential and commercial development is ignored or deferred. Sometimes there are no formulas. It is just done.

For these reasons, it is usually not a good idea to put too much credence in the assessed value of a property when you are trying to figure out market value. They may be the same. They may be vastly different.

Real estate agent's misleading information leads to bad buy

Q. My sister, brother-in-law and I purchased a beach house in North Myrtle Beach, S.C., last September from a developer represented by an agent. We informed the agent we wanted an investment we could sell for a profit. The problem is the property was misrepresented to us; the agent told us all the units in this development were reserved with deposits. This turned out to be untrue.

We are now stuck trying to sell this property for $20,000 less than we paid for it. This purchase started in July 2005 when we reserved the unit. We are considering suing the agent for purposely misleading us so she could collect her commission.

A. Real estate licensing laws are very clear about statements made by real estate agents to housing consumers. Misrepresentation of the physical condition of the property by an agent is an unlawful practice. Similarly, misrepresentation to induce a party to enter into a real estate transaction is also prohibited. Based on your brief letter and assuming that you have documentation supporting your case, you should consult an attorney.

Q. My daughter and I are co-owners of a condo in Lake Forest, Calif. She has resided in the condo for about five years. Her condo has a flat roof, which is very vulnerable to flooding during the rainy season if debris is not cleared off before the rains. For the past two years, the management company has been negligent in inspecting and clearing the roof of debris during the rainy season. This has resulted in flooding and damage to the interior of the condo each of the past two years, to the extent that she has lost the use of her bedroom each time.

The bedroom was damaged in December 2007 and she still does not have use of it because of the way the management company is handling the repairs. They will not pay for alternative housing during repairs. They have also been lax with regard to other repairs to her condo. She has written e-mails and complained at association meetings to no avail. What action can we take to get the management company and the association to be more responsive to our problems? I have consulted a few lawyers but they are not interested because the monetary rewards are probably too small.

A. Unfortunately, the quality of property management is a function of the integrity of your homeowner's association board and the management company. It is important to document the problems that you are having with the repairs. In addition to photographs, costs and chronological records, be sure to provide information on your problems and the lack of responsiveness in making the repairs at your HOA board meetings.

If information about your complaints and the long delays in repairing the problems is presented in an executive session of the HOA board, it is not a matter of public record.

In fact, meeting minutes for an executive session of a HOA board will likely have to be obtained through a court order. If other residents are having similar problems, you need to work together to get HOA board action.

You should explore suing your HOA in small claims court based on the percentage of space lost in relation to your monthly costs. It would be wise to discuss this approach with an attorney knowledgeable about common interest community law. You should contact your local bar association and obtain information about their attorney referral program. For a small fee, an attorney knowledgeable about the homeowner association disputes will discuss your case.

Buyers Remorse

Buying a property can throw your emotions all over the place. First, you are ecstatic when the seller agrees to your offer. Soon thereafter, you start worrying about the price, potential problems and the commitment you have made to pay hundreds of thousands of dollars over the next 10, 15 or 30 years. It can be a monstrous rollercoaster for your emotions. You need not have buyers remorse.

The first issue giving rise to remorse is almost always the purchase price. If it makes you feel any better, the seller almost always thinks they should have asked for more. In truth, the agreed upon price is almost always pretty fair if you obtain a mortgage loan. The lender is not going to give you a loan well in excess of the value of the home, so you can rest assured you probably got a fair price. Yes, you may have paid $10,000 too much, but it is a relatively insignificant amount given the value of the property over time.

The second area of remorse is the payment obligation. Buying a home sounds great until you realize payments of $1,500 or $2,000 are due each month. What if you lose your job? What if someone gets sick? What if, what if, what if? Stop worrying. Life is full of risks and buying a home is a relatively minor one compared to other decisions we have to make. If you default on a mortgage, so what? Yes it is bad, but they are not going to put you in jail. Most successful business people fall on their faces five or ten times before hitting it big. In a worse case scenario, you can do the same.

Buyers remorse can be an all encompassing thing. If you let it take hold of your emotions, you are going to suffer for no reason whatsoever. Remember, real estate is an excellent long term investment. If you keep the property in decent shape and hold on to the property for five or ten years, you will inevitably come out ahead. Stop stressing out over buyers remorse and enjoy your new home!

Read Those Regulations

Planned developments are all the rage these days in real estate. A developer doesn't just build a bunch of homes any more. Now, they build an image of a particular type of living style. To maintain this image, the developments come with rules and regulations that can be very overbearing. If you fail to read them thoroughly before making an offer on a home, you may be in for a nasty surprise when you move in.

Rules and regulations for developments, known as homeowner association regulations, set out the specific things that can and cannot happen in a development. Issues covered range from changes that can be made to properties to issues such as landscaping. To the surprise of many homebuyers, these regulations can be incredibly restrictive.

Assume you have a hobby of growing roses. In fact, you have become an expert in growing them and who could really object to beautiful roses being grown in a yard? Well, you might be in for a surprise. Assume you move into a Spanish themed development. The roses do not really mesh with the Spanish theme. If you are unlucky, you may find that the regulations detail very specifically the type of plants that can be grown. If roses are not included in that list, you may be barred from growing yours. If you persist in doing so, you may actually be fined or have a court order entered against you!

On a more practical level, are you aware that many developments have severe restrictions regarding pets? If you own a pet, say a dog, that is a bit noisy, you may be in for a heartbreaking surprise. Many developments have clauses in their regulations that require residents to remove noisy pets from the development, to wit, you have to give fido away. Talk about an ugly surprise!

Many people like developments because they contain regulations designed to keep the neighborhood from falling apart or changing dramatically. While that is a noble goal, it is important to make sure the regulations will not actually keep you from being able to live comfortably in your home.

Buyers: Focus On Your Needs

I love the national pundits on radio and television. This time last year, the real estate market was never going to slow down. This year…the refrain is “run for the hills!”

Before you get caught up in all the hoopla, step back and take a deep breath. Forgo the hype. What do we really know now? I’m not talking about what our neighbors are saying or the daily statistics. I am talking about the real estate market in general terms. If you focus on them, something will become apparent quickly.

• For the first five to six years of this decade, indeed century, the real estate market appreciated at absolutely bizarre rates.

• The real estate market has a traditional characteristic of correcting itself.

• The need for housing will never end.

• The housing market will start recovering as soon as the end of 2008 or sometime in 2009.

What does this all tell us? It says it is a glorious time to buy a home! Yes, the market is down. Yes, it is WAY down! So? Can you imagine a better possible time to be buying?

At this very moment, there are people who have been saving every penny they had for this day. They are buying everything they can. Why? Because in two years, the properties will have rebounded and these individuals will have made a killing. We are talking about the next Donald Trump types here.

If you are considering or need to buy a home, do it! Yes, the economy is slowing down. Yes, we are probably in a recession. Yes, gas costs more. So what? What does any of this really have to do with your decision to buy a home? As long as you can make the relevant mortgage payments and live comfortably, buy now. The market might drop a bit more, but it can only go so far.

As a potential buyer in the real estate market, you could not ask for a better situation. Homes are a steal. Properties you couldn’t afford 12 months ago may now have dropped into your range. Buy one and you could be looking at hundreds of thousands of dollars of gain in just two or three years. Heck, it would be a great result even if it took five years!

The point is this real estate market is presenting you with an epic investment opportunity. If you are considering buying a home, do it! You will thank the Lord that you did so in a few years when you are sitting on that huge equity gain.

FSBO Sellers and MLS Listings

Making the decision to sell your property without a real estate agent makes sense from a financial perspective. The commission rate charged by a real estate agent is traditionally six percent. This equates to a fee of $18,000 on a $300,000 home, $24,000 on a $400,000 home and a whopping $30,000 on a $500,000 home. Anyway you cut it, that is a lot of your hard earned equity to pay out. In fact, it may have taken you three, five or ten years of monthly mortgage payments and appreciation to build up that amount of equity.

Given the above figures, why do people use real estate agents? In many cases, they do so because they think using a real estate agent is the only way to get into the multiple listing service for their area. The multiple listing service, better known as MLS, is a directory of homes for sale in the area that real estate agents and buyers can access. What most people selling their own property do not understand is that they can be listed in the MLS without retaining a real estate agent.

In many areas, access to the MLS has been opened up to FSBO individuals. You can contact discount brokers that will list your home in the service. The brokers typically charge you a flat fee for the listing. The fees can be a bit pricey, but they are always much, much less than paying a realtor commission. If you feel like you need some additional help as well, most discount brokers offer tiers of service where you can pay a bit more to get help with closings, contracts and so on. Again, the ultimate fee is much less than paying a realtor commission.

While inclusion in MLS is probably a wise decision, it is not absolutely necessary. One of the reasons MLS listings are now easy to get has to do with the Internet. Simply put, the web has revolutionized the real estate industry. A recent study found that over seventy percent of buyers now do their initial research on the web. This makes sense given the fact it is lot less time consuming to simply point and click through a large number of homes without having to blow money on gas driving all over town. In simple terms, this means you need an Internet advertisement for your property more than you need a straight MLS advertisement.

If you are trying to decide whether to sell your property without an agent, do not worry about MLS listings. FSBO properties can and are listed in MLS listings every day.

Sellers Should Focus on Local Trends

The real estate market is usually a pretty stable, slow moving area, but it is in the media like never before these days. While it makes for big news, sellers should focus on local trends, not national markets.

There is something rather humorous about discussing the national trends in real estate. Simply put, there is no nationwide real estate market. It is a discussion based on averages, but the communities making up those averages are entirely different and come with unique circumstances.

Consider the situation in Stockton, California. It is basically a nightmare. Much of the real estate market is either in foreclosure or distressed as shown on 60 Minutes. Basically, it is the worst of the worse. That being said, does it represent a national trend? Of course not.

National trends in real estate mean next to nothing. According to the news, this is the worst real estate market in a very long time. Well, homeowners in Jacksonville might disagree. The market is strong their. Sales are happening. Prices are rising! Does that sound terrible? Nope.

The truth is every real estate market is a self-contained local phenomenon. There are even markets within the markets. Don’t believe me? Consider San Diego. Homes carry outrageous values with average being in the $500,000 range. Homes from $800,000 on up are still selling and carrying their values. Homes under this are hurting. Basically, we are talking about two markets in the same geographical area, but divided by price.

As a homeowner, you should learn from these examples. National and even state trends really don’t matter too much. What matters is what is happening in your neighborhood. Focus on the local statistics. How fast are homes selling? Are home values rising, dropping or simply stable? These are the numbers you need to know, not what is happening in Stockton!

Staging and Showcasing for the Home

Sometimes you have to spend a little money to make a little money. If you are a seller in the current market, this means staging and showcasing for your home.

There is one question you must always ask yourself as a seller in a buyers’ real estate market. What makes my home stand out from those comparable to it in the community? If you can’t answer this question objectively, then there is little reason for you to expect an offer on your home.

The most common method for getting your home to standout from the competition is price. It is a simple strategy. One just undercuts the competition. The advantage of this approach is you don’t really have to fix up the home. You want it to look a bit worn as the condition will support the price. Many buyers try to buy the “worst” house on the block with the belief they can fix it up and make big profits. The problem with this strategy, of course, is you cut into the amount you ultimately pull out of the property.

The second approach to making your home standout is to simply add on to it. People will spend large sums remodeling kitchens, bathrooms and the like. They may even add on to the home with a new bedroom or such. If you are ready to sell, however, you usually don’t have the time or money to take this approach. Fortunately, there is an easier way.

Staging and showcasing for the home is a relatively new practice for private sellers. Developers, however, have used it for a very long time with model homes. The idea is to create a home experience that buyers will drool over. This means bringing in home stagers or interior designers to create a fantasy living experience.

As a homeowner, you have probably already experienced this situation. When shopping for a home, you probably ended up in a model home or two. These homes are used by developers to “sell the dream” of living in their developments. The home has immaculate landscaping, interior paint schemes that create a warm, distinct feeling and furniture positioned perfectly in a style that matches everything.

It is the perfect home and many people slap down deposits then and there. Of course the home they actually buy has no landscaping, white walls throughout and no furniture whatsoever. This can often lead to a bit of buyer’s remorse, but the developer doesn’t mind since the sale has been made. This is the power of staging and showcasing a home.

To make your home standout from the crowd, home staging is usually a good, cost effective strategy. Basically, you get more bang for the buck with a minimum of fuss compared to slashing the price you are asking for or doing a remodel. Contact a home stager in your area for a consultation. You will be stunned how big a difference it can make to the appearance of your home. So will buyers!

Home Buyers Checklist

Finding the perfect home can be both a grueling and incredibly euphoric task. It is a rare day indeed when the first home you look at is the magic one. Instead, you are going to do a lot of driving and rolling of the eyes. As this process continues, you can lose sight of the goal and get frustrated. The next thing you know, you own a home that ultimately isn’t really what you were after. Welcome to the concept of buyer’s remorse.

What is buyer’s remorse? It is a nightmare. It is sitting in a home you paid hundreds of thousands of dollars for and wondering what you could have been thinking. Since turning around and selling it immediately probably does not make financial sense, you are stuck.

One way to beat buyer’s remorse is to focus on your goal. The first step to house hunting is not to go look at houses. It is to sit down and make a home buyers checklist. The checklist should include a wide variety of things. On the positive side, it should include a list of things you like including particular home styles, locations, layouts and those particular little things you want such as a workshop or whatever. Once you have the list of positives, you are half way there.

You should also create a negative section for your home buyers checklist. This should include elements that you absolutely do not want in the home you are going to buy. Items can include the location in relation to major roads, particular styles, layouts, yard size, garages and so on. The point is to get everything you don’t want on the checklist.

Once you have a master checklist, you must stick to it. Discipline is the key. If you find a home that has everything, but is located one house from a high traffic road, don’t make an offer. Don’t be tempted! Stick to your checklist! If you find a great home in a bad area, move on.

Your home buyers checklist should be like a religious document to you. Stick to the guidelines you have put down and you stand a very good chance of avoiding buyer’s remorse. Stray from it and you have nobody to blame but yourself.

Why Photographs for Your Listing Are Important

One of the most important things that will set your property out from others is photographs. When a buyer is looking in a local MLS, on the internet, or in some other location, photographs draw their attention. Is this shallow? Well, yes and no.

Unless you are talking to a lawyer or psychiatrist, words are cheap. Indeed, the real estate world has its own lexicon of terms that don't really mean what they say and are the basis for some snide remarks. For instance, a "cozy" home is a real estate methodology for saying a property is SMALL! The question, of course, is how small are we talking? This is why photographs are key to your marketing efforts.

In the view of most buyers, the initial proof in the pudding is in photographs. Almost nobody really believes any of the adjectives used in real estate advertisements. Frankly, they words could mean anything. Much like a dating site, however, photographs tend to shed a more objective light on the subject. Unlike a dating site, a property doesn't tend to dramatically age over five years, change hair color, go bald or gain some unwanted pounds. Put in practical terms, buyers don't believe your words, but do believe your photographs.

If you give some thought to what I just said, you will realize that I am suggesting that most buyers assume you will lie about your property in advertisements. Don't take it personally. They don't know you, so why should they trust you? Frankly, they should not. That being said, you can use this distrust to your advantage.

You would be shocked how many people put little or no effort into the photographs of their property. As an old commercial slogan stated - Image is everything. A shallow statement, but true. Your photographs represent the first curb appeal impression buyers will get of your property.

This means you need to strongly consider hiring a professional photographer to take the photographs. They understand lighting, angles and so on. It may sound like an unnecessary expense, but it can be the difference between a sale and sitting on the market for month after month.

An alternative is to take LOTS of photos and try all sorts of angles. Usually interiors look best when only two walls show in any photo, and more of one wall shows than the other. Be sure to get everything that's architectually interesting -- fireplace, Paladian windows, fish pool, etc. If you need 15 photos, take 100 and choose the best.

Timing The Bottom of the Real Estate Market

One of the big questions in the current real estate market is whether there is a bunch of money on the sidelines. This brings us to the subject of timing the bottom of the real estate market.

Timing is the great white elephant, the unicorn and various other mystical creatures. It refers to the act of taking action at just the right moment. In baseball, it is getting your swing just right to hit a home run. In sales, it is making your pitch at the perfect time.

In real estate, timing is usually a non-issue. The real estate market traditionally has been the turtle to the hair. It just putters along in a generally positive direction. There might be dips every couple years or so, but real estate has been shown to appreciate consistently over the years.

Then a new century started.

The first eight years of this century have seen the most volatile of real estate markets. Price and appreciation rose to unheard of rates for the first five years. Alas, the pendulum had to swing back and it has. Now they are coming down at a similar rate. While this has resulted in foreclosures and ulcers for many homeowners, it has also created a pool of buyers who now view timing as being very applicable to the real estate market.

What are they trying to time? The bottom of the market. Home values have been falling pretty dramatically. Will they fall more? If so, how much? These are all questions that people sitting on cash are trying to figure out. It is an interesting intellectual game, but it has definite risks.

The problem with timing a real estate market is there is no way to know when the bottom or top of a market occurred until many months after it occurred. The raw data is just not produced fast enough. The same goes for the economy. This is why you hear “experts” saying we might be in a recession. They don’t know because there isn’t any hard data as of yet. When the data comes out, they can then look back six to nine months to see what happened.

If you are contemplating timing the market on a purchase, be careful. Real estate trends are notoriously fickle. Local markets are volatile. In San Diego, for instance, an odd situation has developed. Homes over $1,000,000 are generally seeing a solid market and price values are down only slightly. Homes valued under $1,000,000, however, are getting pounded. San Diego is an extremely expensive market, so there are a ton of homes over a million dollars just to make sure you understand this is a meaningful comparison.

It may be time to step back and view the market as a whole if you have been trying to time it. Anyone buying a house these days is going to get a great deal. Prices are down. They might go much lower, but they also may not. What will definitely occur, however, is they will come back up. Anyone buying a home today, may see the value double in the next five years. Why? Because people always need a place to live. This makes homes a great investment in the long run.

Considering Property Taxes When Buying a Home

Most discussions and articles on buying homes highlight the need for you to ascertain what you can and cannot afford in a property. The discussion boils down to what type of mortgage you can qualify for and the monthly payments you can realistically afford to make. Most people then throw in issues such as down payments, points and fees to come up with overall figures. Unfortunately, there is one other subject that needs to be included in your calculations.

You are making a mistake if you do not take into account property taxes when evaluating your financial situation. In some communities, property taxes can be significant and require some savvy budgeting so you do not get caught out when they come do. If you are squeezing by on your monthly mortgage payment or plan to, this can lead to unmitigated nightmares since you do not have the money available to pay the property taxes. Remember, most communities require the payment of property taxes in a lump sum once or twice a year.

Property taxes are dictated and controlled by counties. To keep things from getting out of control, state law typically sets a cap on the property tax that can be assessed. As you might imagine, each county charges different rates. In general, you should expect rates from one to two percent of the total sales prices of the home. For example, the purchase of a $500,000 home in an area with a one percent property tax rate would mean an annual payment of $5,000 in property taxes. If the rate in your area is two percent, you will have to come up with $10,000 on the same home. Obviously, it is vital that you look into this issue in your area and ascertain the exact rate.

How many people fail to take into account property taxes and get in trouble? Enough people that mortgage lenders habitually require borrowers to pay property taxes into an impound account as part of their monthly mortgage payment. Lenders know that borrowers are forgetful or just fail to plan for the lump sum payment, so they force you to plan for it. The only situation in which a lender will not require this is if you put more than twenty percent down.

While buying a home is an emotional decision, the real issue is your financial situation. When dealing with it, make sure you keep property taxes in mind so that dream home does not become the Amityville Horror!

What to Really Expect for Closing Costs

One big thing that every person in the market for a home needs to remember are the closing costs involved with the purchase. Closing costs can be picked up by either the buyer, seller or both. The amount that will be covered by each is negotiated and decided upon prior to the purchase. It is important to know that in most circumstances the buyer is responsible for the majority of closing costs.

All closing costs are pointed out in the lender's Good Faith Estimate. It is crucial for buyers to shop around for mortgages from multiple lenders so as to obtain the lowest possible closing costs. Although good faith estimates are just as they sound, estimates and nothing more, they will still give you an idea as to which will lead to the fewest amounts of closing costs.

There are also many different factors involved in closing costs. Discount and origination points are related to the mortgage amount. Discount points refer to how much of an interest rate deduction you will receive, usually the rate being each one point of the amount given in down payment (points being equal to 1% of the loan amount) will lead to an eighth percentage deduction in the interest rate. Origination points are additional fees charged by the lender for evaluating, preparing, and submitting the mortgage loan.

Other fees to be aware of include application fees, appraisal fees, credit report fees, title search and insurance fees, survey fees, escrow fees, flood certification, lender and buyer attorney fees, and plenty of other taxes, fees, and certifications that must be purchased. The division of these fees among buyers and sellers is almost entirely a matter of negotiation, so don't be hesitant to bring up the costs during negotiations on the offer for the property.

All in all, closing costs are an annoying aspect of a home sale and can add up quickly. If you want to know what to really expect for closing costs, negotiate the responsibility prior to agreeing to the transaction and get everything in writing.

Fixer Uppers

Fixer uppers! Ah, the American Dream to the road to riches. The goal is to find a decent to nice neighborhood with one home that can charitably be considered to have a lot of "character." Translating this infamous real estate term, the place is a dump and needs lots of work. Homebuyers can be suckers for these homes. They tend to see a low price when compared to the rest of the neighborhood and think they can make a killing when they fix the home up. This can, in fact, happen, but you must be very calculating.

Can you make a ton of money flipping fixer uppers? Yes and no. If you can do the work yourself, the profit potential is much better. If you must hire contractors to do it, you really need to take a moment and break out the calculator. Many people fail to do so and regret getting into a fixer upper.

One of the place people make mistakes with fixer uppers is failing to consider code requirements. The "code" refers to regulations requiring the use of certain materials and products in a home. Many older homes are not in compliance with code requirements, but often do not have to be as long as nothing is changed. If changes are made, however, the code can become a problem.

For instance, assume you make some change to heating or air conditioning in the home. In an older home, you may be forced to also update all of the electrical wiring. The same goes for plumbing where older pipes may need to be replaced with new ones to meet code. Obviously, these can be expensive fixes and run your cost in upgrading the home through the roof. What was one a tremendous real estate deal quickly becomes a money pit.

Flipping a home that needs some cosmetic repairs can be very profitable. If you do not understand the full costs associated with the upgrade, however, it can become an emotional and financial nightmare.

Finding a Competent Home Inspector

If you are considering buying a property, you absolutely must get a home inspection. What most people don’t realize, however, is it can also be valuable to retain one before you sell a property to identify any problems before your accept an offer. Fixing such problems before hand makes a lot more sense than panicking in the middle of escrow.

Regardless of your particular position in the real estate process, the home inspection is only as good as the inspector. Frankly, some inspectors are less than credible when it comes to qualifications and their background. To bypass these individuals, the following organizations should be used as a resource.

The American Society of Home Inspectors, Inc. is located in Des Plaines, Illinois. Known as ASHI, it was founded in 1976 to create a resource and quality control atmosphere for home inspections. You can get referrals to ASHI inspectors in your area by contacting the Society at 800-743-ASHI. In doing so, you will avoid hacks calling themselves inspectors.

The National Association of Certified Home Inspectors is another credible organization. Located in Valley Forge, Pennsylvania, the Association maintains both a code of ethics and strict standards of practice for its members. With over 9,000 members in North America, you can find an inspector in your area by calling 1-877 FIND-INS.

Another organization that stands out in the home inspection industry is the National Association of Home Inspectors, Inc. Located in Minneapolis, Minnesota, the organization also requires members to abide by strict practice standards and a code of ethics, which should be comforting to you. You can contact it to find a home inspector in your area by calling 800-448-3942.

The old cliché is garbage in, garbage out. By using a credible home inspector, you can put this cliché out of your mind.