Broker's RoundTable Notes 7 by Bill Roberts
We had another meeting of the San Diego chapter of The Mike Watson Institute Broker's RoundTable last night.
As usual, we had about twenty-five serious real estate investors in attendance. Membership is comprised of 
students of Mike Watson from various disciplines within real estate. We have real estate agents, mortgage brokers, appraisers, contractors, architects, title reps, and investors among others.
The first order of business is a discussion of market conditions. Last night this was very lively. We discussed what is happening in the capital markets. Basically, underwriting criteria is being loosened up but jumbo loans for investors are still problematic. One area of lending is encouraging however: single close loans for construction seem to be back in force. CountryWide is jumping into this business with a 90% loan-to-cost product with no payments during construction. But Wachovia's wholesale division still has an 80%LTV based on the after-built value. It seems that this probably translates into a 100% loan.
Then the conversation turned to foreclosures and what this means to the future of the real estate market. Word is that foreclosures will probably reach their peak in the middle of '08. But the banks are holding some of these REOs off the market in an effort to "staunch" the bleeding. How well this will work is anybody's guess, but they seem to be very serious about getting a good price for any house they have to take back.
It seems Wells Fargo and other big banks would prefer to just foreclose than try to do a workout or approve a short sale.
There is a real question what the effect of a foreclosure will have on a person's ability to get another home loan. My guess is that when the capital markets get back to normal, they will once again be looking for ways to make more loans. Two or three years will be enough time to erase the effect of the foreclosure.
Right now however, the rental market is hot. Some of our condo projects will be built out but treated as apartments. When the real estate market heats up, then these units can be sold. Another benefit of this strategy is the two year liability builders have for unseen defects. We are not going to sue ourselves for defects.
One project one of our teams has going is a lot split in Poway. This is a very nice house on an acre lot. It was right in the fire area. As part of the project the team cleared a lot of brush from the lot for $3,000.00. The fire burned 25 houses in this area but didn't get this one. It seems that the brush clearing saved the house. Because all the "landscaping" was burned, they received $28,000.00 from the insurance company. That money will go toward landscaping the way they wanted to do anyway.
We discussed commercial condominiums in San Diego. It seems there just aren't enough. Food for thought.
The meeting was adjourned for networking.
If you are interested in joining a real estate investment PowerTeam call me. Bill Roberts (619) 244-4610.
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I have been a real estate broker since 1975. I specialize in commercial real estate, business opportunities, and finance. I coach real estate investors and teach retirement strategies. DRE #00527512
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Very good info Thanks for the post keep up the good work. Great info
Bill,
I too am amazed that a bank would rather foreclosure than work with someone ... sounds like a situation the will require some legislation ... and then we are all in trouble
Richard, thanks for commenting.
Bill Roberts
Allen, there are lots of reasons for this, including:
Legislation is not always the answer.
Thanks for commenting.
Bill Roberts
Bill- Thanks for keeping us informed as you attend these meetings. It sounds like you get the scoop on the market each time. Katerina
Interesting information Bill, thanks for sharing. I do work for a company that facilitates communication between borrowers in default and the lenders/servicers. These include many large lending institutions. Most are offering loan modification terms to borrowers in hopes of avoiding foreclosure. I am doing work throughout San Diego and Riverside counties. Most of these borrowers are ending up as short sales or foreclosures.
But I am encouraged by the proactivity of the banks to at least attempt to work out these issues. The borrowers for the most part are burying their heads in the sand waiting for the hammer to drop. And that is very unfortunate. Most of these people I have come in contact with seem perfectly content to just walk away and don't seem to have a care in the world! And that is the scariest part to me, the blatant disregard for their own financial well being and the way they flaunt the fact that they can just live in the home until they get evicted and then just walk away. I just don't get it.
Katerina, It's a two-way street. I give and I get. Thanks for stopping by.
Bill Roberts
Jason, its called coping. Everybody handles it differently. Thanks for commenting.
Bill Roberts