Chris McLaughlin

Real Estate News & Commentary by Chris McLaughlin, April 16, 2009
http://www.shortsalesriches.com/welcome.html

--------

No money, no credit - but an honest desire to succeed?

That's all it takes to get into the lucrative business of

finding and flipping short sale properties. We've had

people go from zero to six figures in less than six months!

See if there're any spots left for this webinar tonight where

we explain it all Thursday @ 8:30 PM ET, 5:30 PM PST:

http://www.shortsalesriches.com/welcome.html

---------

Loan modification program starts

The Treasury Department announced that the first six participants to sign up for President Obama's loan modification program are JPMorgan Chase, which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo, $2.9 billion; and Citigroup, $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million. A statement issued by Wells Fargo said, "We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership." Left unsaid is the fact that now the second wave of foreclosures will begin, as banks decide which loans are worth trying to save and which are not.

Details of the loan modification program

Only loans where the cost of the foreclosure would be higher than the cost of modification will qualify. The modification plan calls for the bank to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and the government would then kick in money to bring payments down to 31% of income. Mortgage servicers (banks and mortgage companies) can also reduce the loan balance to achieve these affordability levels, and the government will share in the cost of the reduction, up to the amount the servicer would have received if it had reduced the interest rates.

Treasury will not provide subsidies to reduce rates to levels below 2%. In addition to subsidizing the interest rates, servicers will use Treasury funding to pay for incentives for themselves, homeowners, and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind. Homeowners will even get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals. "We're confident we'll have enough money," said Treasury spokesman Andrew Williams. Of course you will...if you run out, you'll just print more, right?

Housing starts down

The US Commerce Department said housing starts fell 10.8 percent to a seasonally adjusted annual rate of 510,000 units, the second lowest on records dating back to 1959, from February's 572,000 units. Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto, said, "While the situation in housing and in the labor markets is not necessarily deteriorating, it's clear that there is no real sign of recovery whatsoever...taken together, both releases will put a damp on the nascent optimism we've seen in the markets in the past couple of weeks." Analysts had expected an annual rate of 540,000 units for March.

JPMorgan beats expectations

JPMorgan Chase said its net income for the first quarter was $2.1 billion, or 40 cents a share. This was down 10% from a year ago, but still beat expectations. According to Thomson Reuters, analysts were only anticipating a profit of $1.38 billion, or 32 cents a share. The strong investment banking performance was driven by a revenue surge in its fixed income division, but Chase's credit card division reported a net loss of $547 million, down from a profit of $609 million a year ago. The bank cited a sizable increase in allowances for loan losses and higher charge-offs, or loans the company doesn't think are collectable. CEO Jamie Dimon expressed interest in paying back TARP funds, and unlike Gold Sacs, says Morgan can pay them back without issuing stock. After what some call Goldman Sac's accounting sleight of hand, and KBW's downgrading of Wells Fargo, it will pay to watch the details in this reporting.

Initial jobless claims slow, but joblessness at a record high

The U.S. Department of Labor says initial jobless claims dropped to 610,000 in the week ended April 11, but a record 6 million-plus continued to file unemployment claims during the week ended April 4, the most recent week for which data are available. That's up 172,000 from the prior week's revised tally of 5.85 million. John Lonski, chief economist for Moody's Investors Service, said he puts more of his focus on the continuing claims number: "That tells you that things are getting worse and we're going to see another rise in the unemployment rate, and that's not good news." He's right of course; a sinking ship doesn't stop sinking just because its rate of descent slows down. The job market is one of the most important foundations of the economy, and one of the greatest causes for concern.

Now on to our real estate investing education section...

Understanding Volatility Versus Risk in Short Sale Investments

One of the most common mistakes made by novice and veteran short sale investors alike is to confuse volatility versus risk. Unlike the stock and bond market where the principle can go to zero, real estate always retains some type of inherent value. To put it another way, when dealing with stocks and bonds what goes up must come down..and when it does it can drop to zero never to return again. On the other hand, real estate can go down but rarely drops to zero. Companies can and do go out of business. Real estate is still standing. Even if the structure is totally eliminated the value of the raw land beneath remains.

This brings us to an important difference between volatility and risk. Risk involves loss. True loss of the type that wipes away fortunes over night. A company is here today but gone tomorrow...along with it the stocks, bonds and investments that represent a lifetime of work. Volatility is different. Volatility means prices can go up and down then up again. It is a function of time - not absolutes. Wait long enough and the inherent value of the land itself will retain some type of value. It might rise, it might fall. It might rise relative to the work able to be performed on it or it might fall related to the value of the interest rate used to finance it...but in all cases the volatility is relative. The land does not cease to exist.

Today there are two types of investors - those seeking a return of their capital and those still seeking a return on their capital. In large part, the difference has to do with where they have decided to invest their cash. Those that follow a traditional investment strategy (buy and hold stocks, bonds, treasury bills and keep some cash on hand for an emergency) are watching in utter dismay as they watch some of the biggest business concerns in the nation - indeed the world - drop to a fraction of their former value while others may simple cease to exist. The risk is very real and leaves traditional investors few options rather than attempting to park their cash into ‘safe' federal treasury bills in an attempt to preserve their capital.

On the other hand, short sale investors are still indeed seeking actual returns on their capital - not merely a return of capital. While most are able to turn relatively quick profits, even those that made an early mistake are comforted by the fact that the long term risk is relatively minor...if in fact, even existent. While the price of a home and land may be volatile and subject to increase or decrease over any given period of time...it is equally likely to remain in existence. Unlike financial instruments where absolute loss is a very real concern, hard assets like real estate are primarily a function of time. The inherent value eventually returns.

Consider a worst case scenario for each of the following investments:

Stocks/Bonds: Worst case = cease to exist. Value drops to zero and unable to sell.

Cash: Worst case = cease to exist. Value drops to zero. Unable to spend (ie, confederate dollars).

Real Estate: Worst Case - price drops. Still can rent, sell, owner finance, plant crops or otherwise retain some form of value. Price never drops to zero as land retains an inherent value depending upon use, natural resources and other productivity.

See you at the top!

Chris McLaughlin

P.S.

Don't miss our webinar Thursday at 8:30 PM EST, 5:30 PM PST:

http://www.youtube.com/shortsalesriches

P.P.S.:

Check out one of the ShortSalesRiches students holding himself as well as us accountable to whether the system truly works! Go here now to

watch the videos from John Michailids:

and

http://www.willjohnmakeit.com

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com
http://www.sixfigurebpo.com *************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market...
http://www.shortsalesriches.com/blog

*************************************************

About the author:

Chris McLaughlin is widely known as America's top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid flipping of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties

* Owner and Supervising Broker of one of Florida's
largest Real Estate firms, running 4 different
offices, supporting nearly 450 agents, uniquely
positioning him to help thousands of investors
make money in the biggest market opportunity ever!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* On twitter: http://twitter.com/mclaughlinchris
* On facebook:

http://www.facebook.com/addfriend.php?id=709199143

---

Wall Street Journal Says Banks to Ramp Up Foreclosures

04-15-09

Wall Street Journal Says Banks to Ramp Up Foreclosures

Real Estate News & Commentary by Chris McLaughlin, April 15, 2009
http://www.shortsalesriches.com/welcome.html

--------

No money, no credit - but an honest desire to succeed?

That's all it takes to get into the lucrative business of

finding and flipping short sale properties. We've had

people go from zero to six figures in less than six months!

See if there're any spots left for this webinar tonight where

we explain it all Thursday @ 8:30 PM ET, 5:30 PM PST:

http://www.shortsalesriches.com/welcome.html

---------

Foreclosures rising again

In a front page above-the-fold article today, the Wall Street Journal reported what we mentioned the other day - that some of the largest mortgage companies in the US are stepping up foreclosures on delinquent homeowners. Companies had temporarily halted foreclosing on borrowers as they waited for the details of the Obama administration's housing rescue plan and changes in state laws, but are now moving the backlog through the foreclosure process. The resulting increase in the supply of foreclosed homes could further depress home prices and put additional pressure on bank earnings as troubled loans are written off. Of course, now that some of these institutions have received bailouts, are we in for another round of congressional pillorying because mortgage companies have the audacity to want their lenders to pay their bills?

Mortgage applications fall

The Mortgage Bankers Association (MBA) released its weekly Market Composite Index (MCI), a measure of mortgage loan application volume, announcing a decrease of 11.0 percent to 1113.2, on a seasonally adjusted basis from 1250.6 one week earlier. On an unadjusted basis, the Index still decreased 10.9 percent compared with the previous week and increased 45.6 percent compared with the same week one year earlier. The Refinance Index decreased 10.9 percent to 6071.7 from 6813.5 the previous week and the seasonally adjusted Purchase Index decreased 11.3 percent to 264.1 from 297.7 one week earlier. The Conventional Purchase Index decreased 13.5 percent while the Government Purchase Index (largely FHA) decreased 7.7 percent. The refinance share of mortgage activity decreased to 77.8 percent of total applications from 77.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 1.5 percent of total applications from the previous week. Admittedly, the MBA doesn't count Easter/Passover holiday, but this wouldn't likely have the same impact on it as it did on the Consumer Price Index, which also fell in March.

Meanwhile, what are mortgage rates doing?

During the prior five-week run in applications, average 30-year mortgage rates sank by as much as a half percentage point before starting to trend up again. In the week ended April 10, the average rate for fixed-rate 30-year mortgages dipped to 4.70 percent from 4.73 percent the prior week. It hit an all-time low of 4.61 percent two weeks ago, the MBA said, stimulating a rush of refinancing by people trying to cut costs. New home purchases had lagged, but were still higher over the past five weeks. Analysts speculate that the Federal Reserve's pledge to buy up to $1.45 trillion in mortgage-related securities and $300 billion of U.S. Treasuries this year may drop rates even lower. After all, the Fed is only about one-quarter of the way through these purchase programs, and the Treasury is also consistently buying mortgage bonds each month. Nancy Vanden Houten, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey, confirms the obvious: ""We think the Fed and Treasury buying programs have produced mortgage rates that are significantly lower than they would have been otherwise."

CPI falls

Economists surveyed by Briefing.com had forecast a 0.1% rise in the Consumer Price Index (CPI) - the Labor Department's key measure of inflation - but it declined 0.1% in March - its first annual decline since 1955. Most of the fall was energy and food, which both fell on weak demand in March, and the so-called "core-CPI" which eliminates energy and food, rose 0.2% in March in addition to a rise of 0.2% the month before. Core CPI has risen 1.8% over the past year, but much of THAT rise was in tobacco and smoking products, which rose in price ahead of a federal tax hike (all smokers must be "the rich" I guess?) . This came one day after the government announced that the Producer Price Index (PPI), a measure of prices paid at the wholesale level, fell more than expected last month.

States get on the stimulus bandwagon

The $8000 tax credit the federal government is offering as part of the stimulus package isn't enough for some people. It doesn't help people who don't have the money for a down-payment, so some states are talking about offering an $8,000 loan to home buyers before they close on the condition that they repay the loans as soon as they get their federal tax credits. Missouri has already adopted the idea, and the New York State Builders Association is lobbying the State of New York Mortgage Agency to adopt a similar strategy. Gregory Brown, an assistant vice president for government affairs at the National Association of Home Builders, says, "A lot of states are trying to get through the technical aspects of this. I feel very confident they'll find a way to make it work." Of course it doesn't require government to come up with ideas like this, no matter what the current Democratic Administration thinks. Some home builders are taking matters into their own hands, offering programs that purchase the tax credit from borrowers prior to closing. Why not let the businesses who reap the rewards take the risks instead of taxpayers? That's what business is all about...isn't it? Or has that all changed these days?

Now on to our real estate investing education section...

Critical Short Sale Oversights

Have you ever wondered why some short sale investors tend to make a strong start only to stagnate later while others go on to grow a modest beginning into a major fortune? The answer might surprise you. Contrary to popular opinion, successful short sale investors are not smarter than their peers nor do they start with huge cash reserves; in fact, the main distinguishing characteristic could be their lack of any notable variations as a group. Plain and simple - they are just like everyone else with the exception that they tend to avoid a few critical short sale oversights that plague less profitable investors.

Following the Trends. Novice investors are at a disadvantage since they have not yet developed enough perspective that allows them to invest contrary to the crowd - savvy short sale investors make it a priority to work with a mentor or other successful group early in their investment career. It is often a make or break decision that allows even novice investors to gain the insight needed early in their career to take it to the next level.

Take Away - Get a mentor sooner not later.

Failure to Establish Target Profits. There is an old saying essentially stating "if you don't know where you are going anywhere will do". The same applies to short sale investing. Successful short sale investors have profit targets established prior to ever making an offer. They also have a bit of wiggle room and a contingency plan in place to grapple with the eventual emergency...ie, they plan for the unexpected.

Take Away - Know where you are going. Have a plan. Work it. Have an exit strategy. Have an emergency/contingency plan...then make an offer.

Cut Losses. Sooner or later everyone makes a mistake. Savvy short sale investors deal with the cold hard reality and cut their losses as soon as possible rather than digging a deeper hole by trying to wait it out, fix the problem or otherwise spend more time and money on old deals gone bad rather than move forward.

Take Away - Set a stop-gap order and cut your losses. Regroup and plan for the future rather than looking to the past.

Failure to take Draw Downs. Short sales are a lot of fun If you allow them to be. Any investment strategy requires discipline but it also entails taking some money out now and recognition that not every deal is a winner.

Take Away - Don't be afraid to take a few draw downs now and then. Decide in advance when and how much is acceptable to your personal portfolio then actually simply go for it!

Failure to Take Meaningful Risk. You have heard it time and time again; don't risk more than you can afford to lose. Few people ever contemplate the flip side of that statement - don't bother to invest in something without a meaningful return. Failure to invest at a meaningful level is one of the biggest reasons people fail to find the time or money to continue...it simply doesn't provide an adequate change of lifestyle or promise for the future to warrant the current sacrifice. Successful short sale investors have a clear indication of what level of investment is both safe but meaningful enough to warrant their attention. Attend to your bottom line in a way that will be meaningful today and tomorrow.

See you at the top!

Chris McLaughlin

P.S.

Don't miss our webinar Thursday at 8:30 PM EST, 5:30 PM PST:

http://www.youtube.com/shortsalesriches

P.P.S.:

Check out one of the ShortSalesRiches students holding himself as well as us accountable to whether the system truly works! Go here now to

watch the videos from John Michailids:

and

http://www.willjohnmakeit.com

*************************************************

About the author:

Chris McLaughlin is widely known as America's top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid flipping of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* On twitter: http://twitter.com/mclaughlinchris
* On facebook:

http://www.facebook.com/addfriend.php?id=709199143

---

The Role of Lady Luck, Real Life Lessons and Learning in Short Sales

04-15-09

https://www2.gotomeeting.com/register/247184123

The Role of Lady Luck, Real Life Lessons and Learning in Short Sales

Real Estate News & Commentary by Chris McLaughlin, April 14, 2009
http://www.shortsalesriches.com/welcome.html

--------

No money, no credit - but an honest desire to succeed?

That's all it takes to get into the lucrative business of

finding and flipping short sale properties. We've had

people go from zero to six figures in less than six months!

See if there're any spots left for this webinar tonight where

we explain it all tonight @ 8:30 PM ET, 5:30 PM PST:

---------

Retail sales fall

The US Commerce Department said total retail sales fell 1.1% last month, even though Economists surveyed by Briefing.com had been expecting an increase of 0.3% in March, compared with February's revised gain of 0.3%. Even without auto sales included, sales fell a surprising 0.9% compared to a revised 1% increase in the measure for February. February ex-auto sales were originally reported to have increased 0.7%. Scott Hoyt, senior director of consumer economics for Moody's Economy.com said economists are surprised: improving sales both in January and February "gave us reason to believe that retail sales were starting to head in a positive direction...we're not sure yet how much of the [sales] weakness is real and how much is based on the Easter shift. There are still lots of weights on consumer spending. The housing market is still weak and we're losing 600,000 or more jobs every month."

Deflation?

The Producer Price Index (PPI), which tracks the changes in selling prices for domestic producers, decreased 1.2% last month - more than expected. A consensus estimate of economists surveyed by Briefing.com had forecast that the index would remain flat on the month. The main driver pushing down the PPI number was the decrease in food and energy prices. The index that measures energy prices plunged 5.5% in March, on the heels of a 1.3% increase in energy prices in February and a 3.7% increase in January. Applying a bit of lipstick to the pig, Anika Khan, economist at Wachovia Economics says, "This report does not put us firmly in the deflation camp. This was a huge drop, clearly, but one month does not necessarily make a trend. What it does tell us is that inflation is not a near-term worry." That sounds to me a bit like the captain on a sinking ship pointing out that he won't have to worry about low flying aircraft anymore.

Economy bottoming out this year?

White House adviser Christina Romer said today that the economy will probably bottom out this year, when the stimulus package starts to kick in: "That stimulus package has just started. We expect it as we go through to 2009 and 2010 to be a big job creator." Asked if she fears a double-dip recession, in which the economy seems to recover after the first dip only to fall again, she said "in terms of the double dip I very much have the sense that policy has been really good in this downturn." I have no idea what that means, and I doubt she does either, but it sounds like a slippery way of saying "if it works, give us the credit, but if it doesn't, it ain't our fault." This stimulus package may be a big job creator and it may not, but I don't see a lot of value added jobs coming out of it, do you?

Who is it that leaves sinking ships again?

CEOs are leaping off the ship in record numbers, according to new data from Challenger, Gray & Christmas. 1,484 CEOs headed for the exits in 2008 -- which works out to an average of six every business day, the most since Challenger first began the survey in 1999. "CEOs are under intense pressure," says John Challenger, CEO of Challenger, Gray, in just a bit of an understatement. While high profile firings make the news, Challenger's research shows that resignation was by far the biggest reason for an empty corner office this year, with 623 either retiring or "stepping down." CNN speculates that while some of the resignations are probably veiled firings, it also may be that a lot of CEOs just don't know how to deal with the economic downturn and just want out. CNN cites a report on the economy from consulting firm BCG, called "Collateral Damage":

"In a study in early December 2008 of about 60 major companies worldwide - long after the creation of TARP and the clear collapse in consumer confidence, mind you -- more than half of the companies had not made any significant changes to their strategic plans. On average, they were assuming no more than a 5% reduction in volume in a year that was already shaping up to be disastrous. "What is striking," the report reads, "is that, outside of the construction and auto industries, many companies are assuming that the crisis will have a very modest impact in 2009."

Now on to our real estate investing education section...

The Role of Lady Luck, Real Life Lessons and Learning in Short Sales

There are three types of investors in every market segment; those with true knowledge and know-how, those with the wisdom to recognize what they don't know and make it a priority to learn from others and those that get lucky once in awhile. Learning how to distinguish one from another is the key to true, lasting success.

Let's face it, more often than not lady luck is often responsible for the majority of profits - and losses. Research indicates a few interesting trends about human nature; most people tend to attribute positive results to their own keen knowledge and know-how while blaming negative results to "luck". In fact, both positive and negative outcomes are equally represented by "luck" including some larger than life fortunes. So, how can a new short sale investor determine if their mentor is truly knowledgeable versus just lucky? Start with these simple clues:

Repeat Results. Luck is just another word for probability - in any given scenario some outcomes are more likely than others. Anyone can get lucky once in awhile but that isn't the same as true knowledge. Think of it like buying a lottery ticket; the probability is x that you will win some type of prize. Sometimes the jackpot is huge and life-changing while other times it is modest. While it might be tempting to think of the jack-pot winner as possessing some type of specialized insight the fact is, they just got lucky. Following the lead of luck rarely yields the same results twice. Savvy short sale investors should search for mentors with a proven - repeated - track record of success.

Investing in Success. True investors rarely shy away from investing in their own success. They clearly understand the risk/reward ratio and constantly use calculations to support their moves and positions in the market. This is not the same as taking unwarranted risk - instead, they have learned to invest in their own success by carefully analyzing each situation and taking proactive steps to maximize outcome and results. The result is a trend toward growth. Look for mentors that are growing their business not downsizing...especially during tough economic times.

They Have a System - Not Secrets. Nearly every successful business prospect of modern history is built on a system - not secrets. That is not to say the system itself doesn't contain proprietary information but it is not the core of the business strategy. Everything from Henry Ford building a better automobile to Google's infamous algorithms demonstrates the importance of a system. Even the success of the fast food industry center around consistent results due to the systematic routine of building the same eating experience and locking in the same prices throughout the nation. Systems can be reproduced - secrets lose their value once shared. Search for short sale mentors with a proven system rather than elusive secrets.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don't miss our webinar Tuesday at 8:30 PM EST, 5:30 PM PST:

https://www2.gotomeeting.com/register/247184123

P.P.S.:

Check out one of the ShortSalesRiches students holding himself as well as us accountable to whether the system truly works! Go here now to

watch the videos from John Michailids:

http://www.youtube.com/shortsalesriches

and

http://www.willjohnmakeit.com

*************************************************

About the author:

Chris McLaughlin is widely known as America's top
Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid flipping of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* On twitter: http://twitter.com/mclaughlinchris
* On facebook:

http://www.facebook.com/addfriend.php?id=709199143

---

Black Friday Gives Hope to Retailers ... and Economy

11-28-08

http://www.shortsalesricheswebinar.com

Mid-Day Market News & Commentary by Chris McLaughlin, November 28, 2008
http://www.shortsalesriches.com/welcome.html

------
Retail stores on Black Friday aren't the only places you can go to get a great deal! If you watch this amazing video ... about an hour into it you'll find out a way you can save, too! The feedback from those who watch this video is nothing short of AWESOME. It features an investor we'll name Mr. X who is making more money now than ever before! Go now to see it!

-----

From all the news accounts you'd now think they've been lying to us, as shoppers slammed retailers this morning and came out in droves to get deep discounts on holiday items. But many that were questioned by the media in lines were clear: they are spending a lot less this year. We'll have to wait a bit to hear from the credit card companies how many purchases were made ... but from the initial look of things it might not be as bad as everyone thought. We'll find out soon!

And the U.S. government isn't the only democracy not buying up banks. The Royal Bank of Scotland announced that the British government will take a 57.9% stake in the bank. The government provided nearly 15 billion pounds to the beleaguered bank, and is expected to invest another 5 billion pounds through a preferred stock sale.

Now on to our real estate investor education section ...

Big Government Leads to Big Cost: 40 Percent of the Cost of a Home Before Taxes!

Short sale investors and those sitting on the sidelines waiting for the "perfect time to buy" would do well to take notice of the current economic policies of the nation. For those that haven't yet noticed, "bail-outs" are big business...in fact, it seems nearly every big business in the nation is standing in line waiting for their share. The same goes for state and local districts throughout the nation as they scramble to compensate for lower spending and fewer taxes.

What many people forget is that sooner or later all the bills must be paid by someone; and that someone is typically the average citizen. The end result is always the same; "hidden taxes" in the form of fees, assessments and other costs that can drive up the price of a home even while the market rates remain more or less unchanged.

In former entries we have covered the impact of inflation and interest rates on the total cost of real estate with the conclusion that now is the right time to buy. If that wasn't enough to convince you take the plunge with short sale investing then consider this; state and local governments (not to mention federal) need to make up budget deficits any way possible. One of the most popular ways throughout the history of this nation is to increase the fees and other costs associated with building a new home. In fact, the cost of compliance often results in less - rather than more- affordable housing options for years to come. Here are just a few of the ‘hidden" taxes, assessments, fees and other expenses likely to increase faster than the rate of inflation in coming years:

•1. Increased time and cost of building permits. Longer lead times and complexity also results in increased cost to the builder and eventually the buyer.

•2. Updated building code requirements including new energy efficient and eco-friendly regulations that can add hundreds or even thousands of dollars to the cost of a home.

•3. Higher per square foot land/lot development including Higher impact fees.

•4. Mandatory infill policies.

•5. Higher property taxes.

•6. Reducing parking allotments.

•7. Increased per unit fees associated with lower density developments.

•8. Mandatory ADA/physical barrier compliance changes.

Lest you think these types of fees don't make a significant difference, recent research conducted by the University of Washington found housing regulations in Seattle added an average of $200,000 to the cost of the average home in the city between 1980 and 2006. During the same period of time, the cost of a home in Seattle went from $221,000 to $447,000...of which $200,000 was due to growth restrictions, impact fees, zoning regulations and development requirements. Ouch!

When Less is More and How to Make it Work for You

The federal Department of Housing and Urban Development (HUD) recently released new "zoning for affordability" guidelines for state and local governments throughout the nation. Every short sale investor should know and understand these recommendations, how it is likely to impact affordable housing and what it means for your investment portfolio.

Less is More

According to HUD, minimum lot size requirements used throughout the nation were originally an artifact of inexpensive land, wide open space and minimal density. In the modern economy not only is land expensive but the transportation cost, infrastructure requirements, indirect environmental and economic costs are adding up. Individuals, developers, local cities and the environment can no longer afford large lots like those used as former minimum lot requirements; official recommendations call for residential lots under 5,000 square feet (or roughly .11 of an acre) to be used for single family housing of the future.

The Trend

While the official new HUD residential lot recommendation for single family homes is 5,000 square feet or less some areas of the nation have already adopted even smaller lot ordinances. For example, Los Angeles adopted the "Small Lot Subdivision" ordinance which allows detached single family homes or townhouses to be build on units as small as 600 square feet without the typical liability and insurance costs associated with condominium projects. Seattle Washington has also passed a "Residential Small Lot" zoning district that allows single family homes to be built on lots measuring 2,500 square feet and San Antonio has followed-up with "R-3 Single Family Residential" zoning district of 3,000 square feet that do not require side-yard set-backs.

Short Sale Investors Take Note

As the trend toward affordability, reduced environmental impact and convenient commute times continues to increase short sale investors should anticipate state and local governments to adopt the HUD affordable zoning guidelines. As with all supply and demand economics, this trend is likely to result in several long term outcomes which will equate to cold-hard cash in your pocket:

•1. A premium on large lots. Although affordability takes precedent, many homeowners will still desire larger lots - especially those in convenient areas of town. Single families with children, those who enjoy gardening or other outdoor interests will continue to seek out larger lots within a short commute of major amenities.

•2. Potential for sub-dividing extra large existing lots. Single family residential lots well above the newly stated size may eventually be eligible for sub-dividing if they are located on the outskirts of town or other areas suitable for re-zoning.

Mortgage Rates Drop on News of Paulson Plan

11-26-08

http://www.shortsalesricheswebinar.com

Mid-Day Market News & Commentary by Chris McLaughlin, November 26, 2008
http://www.shortsalesriches.com/welcome.html

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The best webinar ever held that tells the truth about the government, the mortgage mess, the bailout, and just how you can profit. What's the best part? We interview Mr. X, a real estate investor that's never made this much money before! You gotta see this:

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Realtors and loan officers got some welcome news yesterday, after U.S. Treasury Secretary Hank Paulson announced that the government would buy $500 billion worth of mortgage securities from Freddie, Fannie, and Ginnie, representing about 10% of all outstanding securities. That news sent interest rates dramatically lower, with many borrowers locking in 5.5% 30 year fixed mortgages yesterday. Real estate agents and loan officers reported a spike in business as fence sitters starting buying and locking.

It should be noted that Paulson is NOT buying troubled loans, rather he is providing liquidity to a market that has been illiquid. The $500 billion purchase isn't seen as a "bail out" but it is seen as an investment by the Treasury in solid assets that aren't troubled. This is good news for the home buyer, as rates are incredibly low along with home prices. It truly is a great time to buy!

In other real estate news, the U.S. Department of Commerce announced that new home sales dropped to their lowest point in over 18 years. The median new home price dropped to $218,000, which was off 7% from the year ago period and was at a level equal to September 2004.

Now on to our real estate investor education section...

Understanding Lender Re-disclosure Requirements

As a short sale investor or other real estate pro, chances are you try to stay as up-to-date on legal and legislative happenings as possible but sometimes it is easier said than done. One area of confusion for many novice and veteran real estate pros concerns understanding lender re-disclosure requirements; specifically, when does the law require a lender to re-disclose a loan?

The applicable rules are covered under the Real Estate Settlement and Procedures Act which essentially breaks it down as follows:

A creditor must make a new disclosure...

•1. If the annual percentage rate (APR) is more than .125 of a percentage point greater than the original estimate for regular transactions (ie, prime loans) or greater than .25 of one percentage point for irregular transactions (ie, subprime loans).

•2. If any type of variable rate feature(s) were added to the terms.

•3. If the creditor feels is it necessary or advisable...ie, the creditor can make a new disclosure voluntarily for other reasons as long as certain conditions are met.

When a lender makes a re-disclosure certain terms must be met depending upon the extent of the new terms and their impact upon other terms in the original disclosure statements. It is typically the discretion of the lender whether or not to re-disclose all the terms or only the changes but they must be sure to provide complete and accurate information on the impact upon all changes.

Time Matters

Time is of the essence in nearly any real estate transaction including re-disclosure requirements. Re-disclosure must take place by the date of settlement - at the very latest - but it is suggested to take place earlier.

Real Life Application & a Quick Tip

To sum it up, short sale investors dealing with tightening lending standards and volatile banking officers may encounter unanticipated re-disclosure statements at the closing table with minimal recourse. Since buyers have the right to obtain a HUD1 Settlement statement one day in advance, make a habit of using this to additional time to review the paperwork and avoid unpleasant surprises at the closing. It's one small additional step to making sure your closing is as convenient and comfortable as possible during these tough economic times.

Happy Thanksgiving!

Wishing you and yours a wonderful holiday tomorrow,

Chris McLaughlin

P.S.:

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Don't miss it - everyone that has watched it says it is perhaps the most useful tool in understanding what's going on in the real estate market, and how to make money in today's environment.