Jared Pomranky ~ Detroit Foreclosures

In Detroit real estate right now we’re seeing reduced inventories of foreclosed properties, increased bidding on the remaining foreclosure properties, and an increased price paid for these houses. That sounds like a turnaround to me, doesn’t it? We’ve hit bottom and we’re moving ahead. Expect housing prices to increase and for Detroit real estate to be getting better now. or… should we actually look at what might have caused this?

There are actually a couple of key events that happened in February 2009 and they both have to do with bad policy. In Detroit we had Sheriff Evans institute a foreclosure moratorium for Wayne County and we also had all of the large mortgage lenders including Fannie Mae and Freddie Mac agree to suspend foreclosures. On the surface these seemed like very reasonable and humane acts. If you dig further, you’ll find that all it did was give false hope and will probably lead to a longer down market.

As Jeremy stated back in February when discussing the Foreclosure Moratorium in Wayne County,

I have a significant amount of experience with short sales and loan modifications and it has been my experience that most people are not capable of making any considerable payments towards their mortgage. Most people have had something catastrophic happen that stopped them from being able to pay their mortgage. There is no loan modification program in the world that fixes a lost job, divorce, or death in the family. Often their debt to income ratio is so poor that a foreclosure now is better than a loan modification that ends up in foreclosure in the near future.

Furthermore,

If we stop foreclosing on houses and we know that most of the loan modifications will be unsuccessful resulting in more foreclosures; we in essence dammed a river. When the moratorium is over, we will have a flood of foreclosures further wiping out property values and creating even more problems.

This is no longer speculation, it is fact. We have seen foreclosures go down and we have seen prices increase on these foreclosures. But wait. Look at the graph below from RealtyTrac. It shows foreclosure filings decreasing quite a bit until May of 2009. What happened in April to make foreclosure filings spike so high in May? Yes, both the national and local foreclosure moratoriums were lifted.

You might ask why we’re still seeing a decrease of foreclosure inventory and an increase in prices. In Michigan we have a 6 month right of redemption on houses. What that means is that once a mortgage company has foreclosed on a house, the lender has to wait 6 months before they can take ownership of the house, put it on their books, and get it listed with an REO agent. Given that it takes the lender a month to foreclose on the property after the filing, we’re looking at a minimum time of 7 months until they can get the property listed. In all reality, we’re probably looking more like 8-9 months for a bank in Michigan from foreclosure filing to being listed.

When lenders decided in April to lift the foreclosure moratorium and start foreclosing again, they had a huge back log of foreclosure filings that they had put on hold and every other property that had come along since then that needed to be foreclosed on. That’s when the time line started. Looking out 7-9 months from that date and we’re looking at November 2009 to January 2010 for the flood of foreclosures coming on the market. Right during the slowest time of year for real estate in Michigan.

What this is going to do is flood the market with an oversupply of foreclosure properties. Using simple supply and demand rules, if demand stays the same and supply increases, prices will fall. Is this all bad? Definitely not. It’s a necessary correction in the market from the false bottom that was created. It also brings a tremendous opportunity for those that are ready to take advantage of it. I have been buying houses in Detroit steadily this year and I will continue even though I’m buying less houses because of the prices right now. All that it’s going to mean for me and the investors that I work with is the opportunity to purchase more properties at excellent prices.

Of course there will be doom and gloom spread in the national media outlets about the fall in prices in Detroit and the average person will think the world is going to end but two things will remain the same. 1. Investors will still be identifying opportunity and making great money and 2. there will still be many retail sales (as there are today) that will help keep the non-foreclosure market from dipping too much. With Detroit rental markets and first time home buyer programs being stronger than ever, this is definitely the best time to start or to continue investing in Detroit real estate.

Successfully Yours,
Jared Pomranky
Detroit Real Estate Listings
Free report on Detroit investment properties

I’m sure you’ve heard from someone that you need to pay it forward. What does this really mean though and why am I talking about it in a real estate and business blog? Well paying it forward is a great philosophy for your personal life and relationships and it’s even better for your business relationships.

This isn’t hard to do but you don’t see it all the time because people get a little bit of “what’s in it for me”. The premise of paying it forward is to do something helpful for someone or an organization without requiring any action by the receiver like payment or a reciprocal action. This seems a bit unnatural to some in the business field because they feel like it’s wasting their time. Nothing could be further from the truth!

When you do something for someone else without requiring a reciprocal action, you’re paying it forward and the benefits will become apparent. Business colleagues and clients will see you in a different light and lo and behold, guess what happens? Someone will remember the good things you’ve done and it will come back to you. There’s a trick here though. Somehow this law of “paying it forward” knows whether you’ve asked to be paid back up front or not. If you have, your payback won’t be quite as big. If you’ve truly paid it forward, it’s going to come back to you in a big way.

Think about this the next time you’re talking to colleagues, someone new in your field or when someone really needs your help…

So you didn’t think that I would talk about paying it forward and not give you an opportunity to do so, do you? Of course not. We have a great opportunity to do just that on Saturday July 18th with a great non-profit Motor City Blight Busters.

Meeting Time: 9:00 AM, Saturday July 18th
Meeting Location: Motor City Blight Busters parking lot, 17405 Lahser, Detroit

What are we doing?: We will either be knocking down a house or cleaning up a neighborhood!

What do you need to bring?: Blight Busters needs tools! There are thousands of volunteers a year that help Blight Busters in their mission and to continue letting them be effective, we need to have each person bring one of the following:

1. Sharp axes
2. Sledge hammers
3. Brooms (heavy duty)
4. Or a check for $20 made out to Blight Busters.

This is going to be a great event so make sure you put it on your calendar now!

Be a renegade,
Jared Pomranky

Detroit Real Estate analysis Detroit foreclosure search
Free Report on Detroit real estate "how to"

The biggest question I hear from people that are looking at Detroit for their real estate investments is the question about the oversupply of vacant houses. This then leads to the explanation of the basic principals of supply and demand that we all learned in Economics class. You remember, don’t you? The lower the supply of some item, the higher the demand will be and conversely the higher the supply of an item, the lower the demand. For example, Comerica Park where the Detroit Tigers play has a seating capacity of about 41,000. Demand is strong (especially on a Friday or Saturday night) so just think of what would happen to prices if they all of a sudden said they had to close half the seats and that only 20,000 seats were available. Given the law of supply and demand, we would see the prices go up, which brings me back to Detroit real estate.

Recent estimates have showed that there are 44,000 plus vacant houses in Detroit and these Detroit housing statistics show slightly higher (although notice the sharp decline in the past couple of months). That’s a lot of vacant houses. You may be asking with that many vacant houses, how can we ever hope to get the supply/demand ratio to a reasonable level and fill this supply. To answer that, we have to dig into the numbers.

In a recent conversation with Yianni Kopanakis of Motor City Blight Busters, we talked about the oversupply of houses. Yianni explained that fully half of the vacant houses in Detroit right now are beyond repair to both homeowner and investor alike. In other words, these houses are so far gone that no one wants them. I guess taking out 50% of the houses fixes part of the supply/demand issue. What about the other 50%?

For the other 50%, we need to look at who is buying and occupying these houses. We have either an investor that will purchase for rent or resale, a homeowner that will purchase retail (retail sales at decent prices are still occurring. Check out the Detroit Free Press list of sales for Detroit to see 10 of 24 homes sold for $75,000 or more week ending June 21st and 13 of 38 the week before), and renters. If you’ve been involved in real estate for very long, you quickly find that retail buyers (homeowners) and renters will just not accept a house that isn’t fixed up. In my experience and the experience of the non-profit Motor City Blight Busters, Yianni Kopanakis, and other real estate investors in Detroit that I have talked to, there are very few houses that we come across that need little to no work.

Where does this leave us now? We’re left with a lot of vacant houses that is comprised of mainly houses that need to be fixed up or torn down. Where does that leave the demand? If you’ve been investing in Detroit cash flow properties, you’ve noticed the increasing demand for quality rental properties. Our houses are getting rented faster for better prices because of the lack of supply of these quality rental houses. The same goes for first time home buyer houses.

This creates an incredible opportunity for the problem solving investor that wants to take the properties in the great areas that need some work and is willing to fix them up. The houses will rent well and through quality first time home buyer programs can even sell well. The demand for this limited supply is high. Also, through the City of Detroit demolition list and through non-profit organizations like Motor City Blight Busters, the properties that are beyond repair can be demolished and hauled away.

As with many answers and solutions to problems, it’s not always the surface answer that’s correct. Dig into the details and you’ll find the real answer.

Successfully Yours,
Jared Pomranky

Detroit foreclosure properties
Free Report on Detroit real estate "how to"

“Vision is the spectacular that inspires us to carry out the mundane.” ~ Chris Widener

Seven Steps to Success. I have to tell you, the title didn’t really catch my attention. How many times have we heard of someone’s steps to success or something similar that has been steps that have worked for them but rarely work for other people? I came across Chris Widener’s steps to success and they immediately stood out to me as high quality because it’s not specific steps for achieving success in real estate or specific steps to achieving success in running a factory. It’s steps towards being successful in whatever you’re doing and I’ve noticed many of the steps I have taken and they have been explained to me by other successful people. Below are steps to being successful:

1. Dream it – This is the first part that many people don’t get past. Dreaming about what could be and where we would like to be is part of human nature. Don’t limit yourself on these thoughts or stop dreaming by introducing negative thoughts or by placing artificial limits. Make your dream big and give yourself something to work towards!

2. Believe it – While many of us will think that our dreams are beyond our capabilities, you need to believe that it will happen. We do this by making our dreams and goals beyond what we are currently doing but still within the realm of being possible. If you’re 90 years old with arthritis and your dream is to run a 2:30 in the marathon, you’re dream isn’t in the realm of being possible. If you’re someone with no college education and you’re dream is to build a $50 Million company, now we’re talking. While this may be beyond what we can do right now, this is a plausible dream. Believe it!

3. See it – Picture yourself being successful. “See” yourself reaching your final goal and “see” yourself taking the steps to be successful. This is not the time to think about everything that can go wrong. Focus on the end goal and know that you will be there. By seeing yourself reach your goal, your mind already decides that this is what’s going to happen and it just accepts that you will take the steps to get there.

4. Tell it – Tell everyone you meet and everyone you know about what you are doing and what your dream is. If you keep it inside and don’t tell anyone about it, it’s a good chance that it’s not going to happen. By speaking out loud about what you’re doing and what your dream is, your dream becomes possible. Also, you will build accountability partners in everyone you talk to. When you start to feel that you can let your dream go, you will have all of the people that you told it to that you would be letting down and you’ll have people asking you about how it’s progressing. They will help make sure your dream doesn’t die.

5. Plan it – Every dream must take the form of a plan. If you fail to plan the steps you’ll take and the milestones that you’ll reach on the way to achieving your dream, your dream just won’t happen. Without proper planning, there are too many variables that will keep you from achieving your dream. Break your dream down into small goals, steps, and milestones that you can reach on the way.

6. Work it – This is the step that many people try to skip but there’s just really no way to move ahead without taking massive amounts of organized ACTION. Without this, you will never move ahead. Many people get into analysis paralysis where they spend all their time talking about what they’re going to do or analyzing what could go wrong but never get out there and actually work the plan that they have put into place. It seems like a simple concept that you actually have to go out and do something but many people don’t want to put themselves out there to far or don’t want to miss their favorite TV show to take action. Be the one that takes ACTION!

7. Enjoy it – Oddly enough there are plenty of people that just become workaholics in their quest to fulfill their dream. Make sure that while you’re working towards your dream that you reward yourself for accomplishments along the way, that you reward yourself heavily when you’re living your dream, and that you take the time to enjoy it!

The above steps to success were paraphrased from an article by Chris Widener on the same subject.

Be a Renegade,
Jared Pomranky

Detroit Real Estate market Detroit investment properties
Free Report on Detroit foreclosure investing "how to"
Detroit foreclosure analysis