Chad Church

Being from a high volume REO listing office, and focussing on buyer and seller representation of REO properties, my phone is constantly ringing with calls from out of state investors who know a good thing, when they see it. I maen where else in this country, today, can you spend under 100k, and pick up a 4 unit building that has a $2,400 dollar a month rent roll. It's almost unheard of.

My phone also rings with calls from out of state investors who have the right idea, but not neccessarily the right product. The Investors who think they may have a jump on the game, and have a fair amount of cash in hand, and got the inside track on wholesale deals have started chiming in now too, and if you ask me, the new is not so good.

About 2 months ago, I received a call from a couple of guys out of New York. They had recently purchased one of my REO properties I had listed in Verona, PA., and had done so in a wholesale purchase which included multiple properties. My asset management company, themselves, were still not aware that the property had been sold off. The guys informed me of the details of the sale, and I came to find out that they had purchased a few properties here in PA. My listing had initially come out on the market in the 40s, which I knew was way too high for what it was. (So much for completing actual value BPO's.) Eventually, the property settled in at the price it would have sold for 6 mos earlier, at 20k, but by this time the property had such shelf life, it was stale, so over the next couple of months, we recieved offers, which were countered, and rejected until the price got down to where, had the initial offers had been accepted, the bank would have made more money, or at least as much as I had contiplated during my initial BPO.

Long story, boring, the Wholesale investors picked the property up for just under 10k, and had high hopes that the property was worth 40k. NOT! And how do I know this, because what I did not tell you was that while we were marketing the propety at 20k, we did go under contract for a hot minute with a young spry twentysomething guy, who wanted to live the rehab dream... or nightmare, as it sometimes is. There were some issues with the property that were beyond his area of expertise, and after 3 days, he dropped out of the contract, and the deal crashed.

So for this particular property, and the functionality of this lesson, let's call our baseline 15k; That's what the property is worth in "as is" condition. If these investors spent 9k on it, after averaging out what they paid for the lot, and picking it up as a "deal," and then they try to sell it at 20k, "as is," and they get the offer of, let's be genorous and say 17k, after they pay a sometimes typical total minimum commisssion, of say $2,500, as a corporate entity, or $4000 as an individual, or an LLC, they will be looking at having netted between $13,500, to $11,000. There are some other incodental fees, and costs involved there too, deflating the gain that much more.

I suppose, if you are buying 50, or 100 houses at a whack, the numbers might add up decently enough to make sense, but what I fear is that these toxic assets end up being purchased by the guy, or gal who is playing with their retirement, and jumps in head first, buying these properties off of BPO values which through their previous exposure in the marketplace, have proven to be over valued.

This brings me to the conversation I had with a woman out of California, who had the sense enough to call me first, and pick my brain, asking, "what would you say (property X, Y Z, A, and B) are worth?" I told her, and she was able to avoid what could have proved to be a very expensive mistake. Sure, there may be somebody else out there, who will say, "Yeah, I can get you that BPO value for that house, and maybe they can... after 12 mos. but by that time, just how much have you really made or lost???

Just as I'm blogging, the phone rings with another company who wholesale REO properties. Interesting conversation, lots of inventory, and really nice rep. on the phone. Possibly some real good deals too, but I need to do a little more research, and come to a better understanding of how they work, before I pass any judgement, good or bad, on them.

In the meantime, Buyer Beware! Nobody wants to say where, or how they're getting their deals. Addresses are held close to the heart, like Grandma's diamond broach, and lips are as tight as sardines packed in a can, and that's fine, but before you jump into this business, you best talk with somebody who can at least give you a rough idea of what you may, or may not be buying, because when things are too good to be true, sniff around a bit. They may smell a little fishy too.

My old Broker, Jan Bronstine, in Denver, CO. once told me, If it walks like a duck, and quacks like a duck, be damned sure, it's a duck!

First-time homebuyers must close before 12/1/09 to be eligible for government tax credit

The President signed into law the American Recovery and Reinvestment Act of 2009. A major feature of this legislation provides for an $8,000 federal tax credit* for qualified first-time homebuyers.

Eligibility:

• First-time homebuyers defined as a buyer (and buyer's spouse) who has not owned a home in the past three years
• Income: Full amount of credit available for individuals with an adjusted gross income of no more than $75,000 ($150,000 on a joint return)
• Purchase of the home must close before December 1, 2009

And now, Fifth Third is topping this historic opportunity with a special .125% mortgage rate discount** that could save your customers thousands of dollars in interest when they buy a home. But this offer is only for a limited time, so they must act soon.

For information on the American Recovery and Reinvestment Act of 2009 tax credit, visit: www.ustreas.gov.

*Tax credit is $8,000 or 10% of the purchase price, whichever is less. If the home is sold within three years of purchase, the credit will be reversed. Consult a tax advisor for specific program details and tax advice.

Dear Friends-

I try to keep readers updated with the happenings in the local REO market, so in an attempt to be as current as possible, here's the latest news I have from good sources.

While many of us in the REO business thought that there would be a crush of properties entering the market in July, the previous information must not have been too good. Apparently because of the moratorium being stretched out, and the Pittsburgh market not being overrun with foreclosures like the rest of the country, over the past 3 months, the most active time in the real estate market, investors, and individuals have consumed the vast majority of the good deals that were out there. This is just the principle of supply and demand.

The level of frustration I am seeing with buyers on a daily basis is huge! Myself, I have written multiple offers over the past few weeks, and it is almost always a matter of going to a property that has been on the market for an extended period of time, only to find out when you bring the offer in, the listing agent says, "Bring your highest, and best, we're in a multiple offer situation." Not only has the competition begun to look like a battle between two old ladies in Filines Basement, the end result is properties in areas like Penn Hills, where three months ago, you could have found a $20,000 three bedroom, you now have to battle it out to get the property at 30k, and you can forget about picking something up in areas like Lawernceville for the 30k you may have been able to pay five months ago.

So what's the good news, and is there any at all? Yes, there is good news. Values in the Pittsburgh area will rise again because of this, but if only for a short while before they stabilize again. This calls to mid the question of when will these values stabilize, and this leads me to my next tid bit of information.

I happen to have it on, what I think to be pretty good authority that the supply of REO properties should be increasing in late summer, or early fall. Two of the asset managers I work closely with have informed me that they are looking forward to a busy fall, at the end of the moratorium.

So let's take a look at the logistics in this equation. The foreclosure inventory is going to peak again at the time of year that the buyer pool slims up. Therefore there will again be more supply, and less demand. This should make the buying process a little less stressful, and competitive. And the good news then will be that stabilization in pricing of the REO inventory, so don't feel compelled right now to grab just anything off the shelf because it's there, and you fear there will be nothing later. There will be more inventory to choose from in a month or two, and the deals on these properties will really be at their best at the end of the fall, leading into the winter.

If you are interested in purchasing REO/Foreclosure properties, give me a jingle, and I'll be glad to speak with you about a strategy for pursuing these deals.

Keep It Precious!

Chad

Many people across the country have found Pittsburgh to be a great value in housing. The reason for this is quite simply, where else can you find a single family house for under 20k?

Well folks, the market is heating up, and has been heating up for the past two years. Two years ago, or even six months ago, it was easy to find a 20k property, even in some of the more desirable neighborhoods in "Da Burgh."

On a daily basis, I am on the MLS, searching comparable properties for comparison against the bank's REO properties. I am beginning to see a trend, and my clients are beginning to experience an anoying reality. Good REO properties are being snatched up quicker and quicker. Foe example, this time last year, there were multiple properties in this price range in areas, such as Lawrenceville, and Bloomfield. Currently, there is not one property under 20k in these two areas. Of course, much of this has been the result of the buzz about these areas, but frankly, it's even difficult to find many properties in this price range in neighborhoods like Penn Hills, where last year, there were buckets of properties under 20k.

If you are an investor, and you are dilly dallying around, waiting for the inventory in this price range to increase, you may only be fooling yourself. My advice is to keep a solid eye on the market, and when you see what appears to be a good deal, BITE!

With the G 20 coming, many more International buyers will be seeing the potential of our fine city, and they won't hesitate to make the move.

So what are the areas that look good for long term investment, with a cheap buy in? Penn Hills, Stanton Heights, Lawrenceville, Bloomfield, Morningside, East Liberty, and many say the Hill district with all that is going on as far as re-development there.

The usual suspects, such as Squirrel Hill, Regent Square, Highland Park, Shadyside, Friendship, and Oakland are always great buys, but you have to pay more, as these are areas in great demand. And as mentioned, the word is already out about Morningside, Lawrenceville, and Bloomfield.

Currently, I am developing an investor list for people who want to be on the pulse of the REO inventory as it hits the streets. if you are at all interested in being on that list, as many throughout the country seem to be, feel free to respond to this blog with your particulars, such as number of units, areas, bedrooms, and baths, and price point. When something becomes available, I will notify you, and if it looks like you are truly interested, I will go out to the property, preview it, and e-mail you pictures of the property. All I ask as that you be serious about your intentions, and my time. When you see a good deal in Pittsburgh, anymore you have to jump on it!

Hey REO Investors!

Sorry I have not been blogging for a minute here. I have been inundated with BPO work. For those of you who don't know what BPO means, the definition of BPO is Broker Price Opinion.

In preparation for pricing a property for the market, the asset management companies have real estate agents pull 3 comparable sold properties, and three comparable properties which are currently listed. Comparing those properties with the subject property, and making adjustments for square footage, lot size, beds, and baths, as well as condition of the property, gives us the adjusted value of the subject property. The asset management companies, who work for the bank to place their properties for sale with local Realtors, then, after 2 or 3 BPOs will come to a list price on that property, and assign it to a local REO Realtor. Sometime, there is an appraisal involved in this process as well, but with the volume of REO properties hitting the market these days, it's cheaper, and faster to have the agents do the price opinions, and go from there.

Anyhoo... I have been doing many BPOs in hopes of securing some real nice listings. I have also been working with the buyer population as well though. Last week I showed a 3500+ square foot, Brick, and Stucco Tri-plex in Dormont, PA to some people from California. Great deal at 99k! They hhaven't bit yet, but if they wait too long, it will be gone! This big ole' bird had 2 bedrooms in each unit. A newer roof, and all the original woodwork and stained glass was still untouched. It needs a small galley kitchen redo, and the boiler system needs repaired, but what a steal!

I also showed the same buyers a 9 unit Brick Turn of the Century building in Carrick. That is 8 residential units, 2 two bedrooms, 6 one bedrooms, and a retail space. Georgous building in need of a little love, but boy will that thing cash flow once it sees a little love. Exterior wise it's an architectual jewel, priced at 99k.

If you care to see either of these properties, as of today, they are still available, but they will go fast.. If you want pictures e-mailed to you, let me know. The time is now to get the deals, once the G-20 comes, you can mark my words, not only will investors be coming from California, Florida, Nevada, New York, New Jersey, and all the other states they are currently coming from, they will be coming from England, China, ect, ect. I'm already working with a client from Australia.

Until the next time, feel free to check in with questions, concerns, or house hunting, or selling needs.

P.S.

American Home Shield is now offering an REO home warranty product for $514.00. It is a great product to buy when you are purchasing an REO for more info on the product, shoot me a line, I'd be glad to tell you how it works!

Keep It Precious!

Chad Church