About Humble's Atascocita

I'm sure most of you have seen this already, but for those who miseed it.

The news was a little grim about the jobs market, as continuing jobless claims rose more than expected. The Department of Labor reported that those who are continuing to claim unemployment rose by 101,000 to 4.61 million, which was well above most analysts' expectation of 4.5 million. It also marks the highest level of jobless claims since November 1982.

President elect Barack Obama warned today that a "bad situation could become dramatically worse" if Congress does not approve his upcoming stimulus package. President elect Obama did have some positive comments: "The very fact that this crisis is largely of our own making means that it is not beyond our ability to solve," he stated.

New FHA Guidelines Make Short Sales Easier than Ever. As if increased minimum wage laws and ultra-low interest rates weren't good enough, short sale investors will be downright delirious to learn about changes to FHA laws set to begin in 2009. On December 24th, 2008 the Department of Housing and Urban Development (HUD) released "Mortgage Letter 2008-43" this is a powerful boon to every short sale investor in the nation.

Here are the major changes coming soon to a FHA/HUD foreclosure near you!

1. Elimination of the clause calling for 63 percent or greater property appraisal versus debt. Now properties can appraise at any value and still be eligible for the program.

2. Increased Net. Instead of the former 82 percent net based upon appraisal value the new limits will be 88 percent if sold with 30 days, 86 percent if sold within 60 days and 84 percent thereafter.

3. Increased Closing Costs on Short Sales. Although not a lot - FHA will now allow up to 1 percent of closing costs rather than the former zero.

4. Increased Seller Incentives. Again, although not a lot this will at least allow sellers a reasonable down payment toward a rental home by putting up to $1,000 in their pocket at closing.

5. Increased Lien Allocations. Junior liens up to $2,500 are now allowed - just one more tool that helps sweeten the pot for short sale investors interested in pursuing FHA/HUD homes.

6. Removal of Repair Limitations. This is one change that could potentially add up to thousands depending upon the required maintenance on the home. This opens the doors to many homes that would otherwise be ignored due to excessive damage.

7. Exceptions to Non-Owner Occupant Requirements. This is on a case by case basis but opens to the door to rental properties formerly excluded from the program.

Charles Gardner

Short Sale Investor

Home prices posted an 18% drop for October of last year, the biggest drop ever since the Standard & Poor's/Case-Shiller 20 city housing index was created. The 10-city index fared a bit worse, dropping 19.1%. And three areas really got wacked: Phoenix dropped 33%, Las Vegas slid 32%, and San Francisco declined 31%.

Consumer Confidence Index dropped 38 in December from a revised 44.7 in November. The low number surprised economists: a survey of 62 number crunches estimated that the reading would come in around 45.

But in good news for consumers, General Motors announced that it would once again offer zero percent financing for the next several weeks. This comes on the heels of the announcement that GMAC, its financing arm, was approved as a bank, therefore eligible to tap into $5 billion of the $700 billion of TARP funds. Now on to Short Sale investing!

Short sale investors interested in obtaining the lowest possible price should learn to turn the tables on rapid rate increases by discounting hedonic pricing models to their benefit. Hedonic pricing essentially works like this; instead of calculating the increase in a price of a home as inflationary, the "upgrades" and other enhanced "quality" measures are calculated independent of the base price of the home.

While this is a valid method of taking quality improvements into account especially during periods of economic growth, it does little to account for increased "liabilities" during periods of economic or financial contraction.

Let's demonstrate by using a basic example; Buyer A and Buyer B both purchased 3 bedrooms, 2 bath homes on 1/3 acre lots with city utilities. Each home is 1500 sq. feet living area and is 3 years of age. Home A is a "bare bones" affordable housing model with laminate counter-tops, inexpensive carpet and off the shelf fixtures throughout. Standard bathtub, windows, doors and other items were used. The cost of the home was $100 per square foot or roughly $150,000 plus the price of the lot. Buyer B also purchased a home of the same size but with granite countertops, imported Italian tile, upgraded windows and custom features throughout. Upgraded appliances, a large in-ground pool, whirlpool spa tubs and other upgrades resulted in a cost of $300 per square foot or a selling price of $450,000 plus the price of the lot.

Unfortunately, as the economy begins to stagnate items originally deemed highly desirable quickly become undesirable as the cost of maintenance and repairs outpaces the ability of homeowners to sustain these items. This is where short sale investors are likely to reap major benefits. Deep discounts of common upgrades or former enhancements are possible by keeping these rules of thumb in mind:

1. If it requires high maintenance it is a liability and should be deeply discounted. In-ground pools are a prime example. Not only do they increase electric bills when heating but cleaning supplies and maintenance contracts can easily cost $100-$250 per month. Items that require regular out of pocket costs should be deeply discounted as potential liabilities for a property. Aggressive pricing estimates would deduct the cost of repairs, maintenance and even potential removal of the item.

2. If it requires minimal maintenance but adds no additional value it should be discounted by comparing a standard pricing model. For instance, those beautiful granite countertops don't save money or increase functionality to the home therefore they are of no more "real" value when selling than laminate or less expensive alternatives.

Make a point of going through the home and putting together a comprehensive replacement price list based upon standard "off the shelf" alternatives for all items that do not activity save money or represent major buying incentives in the new economy.

As 2008 closes and short sale investors look to 2009 the question on everyone's mind is whether or not the economy will continue its downward spiral or experience a recovery.

Despite the considerable abundance of doom and gloom reporting in the media, there are a few bright spots that aren't receiving the full attention deserved. Short sale investors searching for a silver lining in an otherwise cloudy economic environment would do well to focus on these current trends:

1. $40 per gallon oil and $1.65 per average gasoline. How low will it go and how long it will last is subject to debate but one thing is certain; those who rely upon gasoline and oil are experiencing a bit of much needed relief in the form of lower prices.

2. Low Mortgage Rates & Dropping LIBOR Rates. The cost of money is cheap - not just inexpensive but downright cheap. Make no mistake about it, real interest rates are the lowest in decades and make it less expensive than ever to borrow money to build a short sale empire. It is possible to buy more house for less money while simultaneously spending less on taxes and insurance. It's a win-win-win situation for those with the courage to buy when others are selling.

3. Huge Fiscal Stimulus. Coming soon to a federal budget near you is a huge fiscal stimulus package destined to become one of the largest in history. Bridges, roads, hospitals, schools, utilities and other mega-projects are slated to spur the economic growth needed to jump-start the economy. Whether you believe the stimulus package will work or worsen the long term economy, one thing is certain; those workers will need affordable and convenient housing for long term projects. Short sale investors would do well to make a mental note of future road plans, schools and other large building projects in the target areas of interest. Whether you buy low and sell high or wait for the path of progress to reach you, it is a position of strength rather than weakness.

4. Long Term Lag-Times. The global decline in commodities and other tangible assets will eventually lead to long term shortages with tremendous upside profit potential for short sale investors. Remember, there is a lag time between the supply and demand which will result in high demand and low supply once the economy stabilizes. Everything from basic building materials to mineral rights, timber and even natural gas holdings will be impacted. Savvy short sale buyers would do well to realize the long term potential inherent in their holdings.

5. More Renters. Foreclosures aren't over...in fact, due to legislative restrictions on the number of "bad loans" and tangible assets a bank may have on the books at any given point in time, the current bail-out simply provided the liquidity required for banks to prepare for the 2nd stage of the growing mortgage meltdown. Most experts agree that what began as a sub-prime mess is expanding into ARM's, low/no Doc loans and even prime mortgages in response to rising unemployment, falling stocks and bonds plus a plethora of other economic problems hit the average homeowner.

To keep up with how the economy is affecting short sale investing sign up for our information at http://www.shortsaleriches.com

See you on the other side!

Charles

GMAC Financial Services got a huge Christmas present this week when the Federal Reserve approved its application to become a bank holding company, thereby enabling it to tap into $700 billion of TARP rescue funds. Not only will GMAC be able to tap into the bank stabilizing funds, it will also be able to borrow from the Fed's discount window for virtually no interest.

Did you see these pretty cool amazon.com holiday facts they released:

* Amazon.com sold enough "Breaking Dawn" books that stacked end to end they would reach the summit of Mt. Everest eight times.

* During the period from Nov. 15 - Dec. 10, Amazon sold one copy of Microsoft Office Home and Student 2007 every 2.5 minutes.

* The weight of all GPS devices sold from Black Friday through December equals the combined weight of 151 Mini Coopers.

* Amazon sold enough high-performance headphones that everyone attending the last three Super Bowls could grab a set and rock out.

* Amazon Grocery sold enough coffee to give each resident of the highly caffeinated city of Seattle a cup per day for two months.

* Amazon sold enough Casio G-Shock watches to outfit every Kanye West fan attending the 2008 Glow in the Dark Tour concert at Madison Square Garden, N.Y.

* Amazon sold enough Coldplay CDs that laid side by side they'd stretch from Seattle to Violet Hill (a street in London and the album's first single) and more than halfway back.

* Amazon sold enough Munchkin Mozart Magic Cubes to fill every seat in the Sydney Opera House five times over.

* Amazon sold enough Wild Planet Hyper Dash games that the total weight of sets sold is over 81,000 pounds -- almost the size of two 747 aircrafts.

* Amazon sold enough Spalding basketballs to fill three C-130 cargo planes.

The Misery Index and Short Sales Negotiations

The Misery index is derived from taking the unemployment rate and adding it to the rate of inflation to gauge the economic and social climate of the nation. The higher the misery index, the more negative and desperate the average consumer tends to become. The low was 2.9 percent in July of 1954 with the high reaching 21.9 in June of 1980. Today the misery index stands at 7.77 and rising as of the end of November 2008.

So, how should short sale investors use this information? Well, in a couple of ways. First of all, watch the macro trend. As the index increases so does the uncertainty of the average American consumer (and by proxy, business owners). Their spending habits tend to decrease and they often start to save for a rainy day. People, business owners and even banks in this stage tend to think it is short-term and less inclined to negotiate more than a minimal reduction.

Next, watch for a shift. The second stage takes place as momentum builds and the rate of change increases at a faster and faster pace. Uncertainty gives rise to outright fear as people begin to worry about their own job or financial future. Banks and business owners begin to think this could last longer than expected and begin to pad their own balance sheets for the long run. There is a decidedly motivated response to downsize unnecessary assets, overhead or other non-performing holdings.

Short sale investors will find these individuals and banks much more motivated especially if approaching with fast closing and minimal escape clauses. The emphasis of 90 percent (or more) of people will be a flight to "safety" during this stage as evidenced by the purchase of government bonds or other items that provide little to no real return.

The third and final stage is recuperation. Banks, investors and others realize the properties or other holdings were now over-sold and represent financially desirable long term investments.

There is a renewed interest in actual earnings due to the erosion of real earning power. Every short sale investor will do well to remember that earned income represents only a relatively modest allocation of most income over the long term few people can actually live entirely on their own earned income. At this point, the money tends to flood into tangible assets and commodities including oil, real estate, farm and agricultural lands or products, oil, minerals, natural gas and other related holdings resulting in rapidly rising prices...and profits for those with the foresight to buy during stage two.

Where are we today? Most experts agree we are now transitioning from stage one into stage two making this the perfect time to begin buying foreclosures and short sales in earnest. To keep track of where the misery index is heading, visit http://www.miseryindex.us/default-pda.asp at least quarterly. If you want to keep up with other trends in short sales and the economy sign up for our daily information at http://www.shortsaleriches.com

See you on the other side!

Charles Gardner

http://humble-homz.com

http://humblehomz-re-solutions.com/shortsale.aspx

Santa Claus and Mortgage Modification

We believe there is a Santa Claus! And he loves to represent buyers in foreclosure and make a ton of money. and then make sure you register for our upcoming Recession Proof Investing webinar! Click here

Mortgage applications continue to be on the rise given the low interest rate environment, and one prominent CEO signaled a turning point, according to the Wall Street Journal. Bank of America CEO Kenneth Lewis said that mid-2009 would be the stabilizing point for house prices, and the bank recently reassigned over 300 loan processors from the home equity division to the mortgage division.

The good joy was also at several other lending institutions. Loan applications were up 300% at Regions Bank, and applications at U.S. Bancorp surged from 11,000 to 30,000 in comparable period in December. Rates on a 30 year fixed mortgage now hover around 5%, representing the lowest level since reporting began in 1971.

Meanwhile, mortgage modifications continue to fail. In the latest report by the Office of the Comptroller of the Currency, 37% of mortgages that were modified in the first quarter of 2008 were more than 60 days delinquent. And for those modified in just 3 months another 19% were also 60 days behind. One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months.

The implosion in modifications means two things: there will be a ton of short sales and REOs in 2009. Are you ready for them? Go here to make sure you're ready by watching our webinar.

Stock market investors are accustomed to using dollar cost averaging but the concept is relatively new to real estate and short sale investing. In part, this is due to the typical rise of real estate over time. Unlike stocks or bonds that tend to be highly volatile, real estate is usually quite steady and predictable over long periods of time. However, during periods of fluctuations and volatility, dollar cost averaging works exceedingly well for short sale investing.

Dollar cost averaging is an investment method where a constant amount is set aside to purchase whatever amount is available at that sum. So for example, when purchasing stocks an investor might decide to invest $5,000 per month rather than deciding to buy 100 shares per month. By emphasizing the dollar amount rather than number of shares, the investor will tend to purchase some shares at higher prices and some shares at lower prices with the eventual result of an "average" price per share taking place over time.

Real estate investors can do the same and not worry whether or not you are purchasing at the bottom of the market simply set aside a dollar amount which suits your budget to cover down payment, closing costs etc, then spend that amount of money rather than focusing only on the number of homes or properties purchased. What you will notice is that over time, the average price per property tends to drop creating a solid rate of return on your overall investment portfolio.

This modified dollar cost averaging method is a great way to demonstrate a total rate of return on your entire short sale investment portfolio when dealing with banks, lenders or loan officers especially if you are marginal on a specific property. It also assists in highlighting underperforming properties which can be quickly eliminated to increase the total performance of the portfolio as a whole. Simply eliminate the least profitable property and then re-evaluate your portfolio performance...you will often be surprised at how much impact one property can make on the entire performance.

Calculating dollar cost averaging for short sale investments is similar to that of stocks or bonds. Simply make a list of all real estate purchases and the total priced paid then divide by the total number of investments to obtain an average purchase price. Do the same for the selling price.

Alternatives include performing the same calculations including the selling price, average transactional costs associated with each property and even holding fees. Better yet, learn how to set-up a series of spreadsheets to automatically generate this information on each property throughout every stage. It is the perfect way to spot areas in need of improvement or where work (and profits) gets bogged down. If you notice a troublesome area, consider hiring an expert or teaming up with someone. It's a fast, simple and effective manner to showcase your real estate portfolio and demonstrate a positive track record when working with lenders or others. You might also want to check out ‘How to avoid the Top Five Traps in Short Sales Investing'.

Charles Gardner

http://humble-homz.com/benefits.aspx

Five Favorite Facebook Tips to Build Your Short Sale Empire

Whether you are a novice real estate agent or veteran short sale investor you probably realize the power and influence the Internet holds in building your success. With over 80 percent of buyers beginning their search online, the Internet is a vital tool that few can afford to ignore. However, when it comes to the use of social media applications, far fewer people understand how to put these powerful resources to use for more than just socializing. The fact is, with a little tweaking and adjusting, Facebook and other social media sites have the potential to provide powerful - and free- tools to help with your day to day business or investing needs.

Contrary to popular opinion, Facebook isn't just for teens (fourteens); here are some of the best business applications you can use to build your short sale empire:

1. Demographic Research. This little known Facebook nugget is a fun twist to standard demographic research. Find the Facebook "Insight Corner" to locate advertising information and find out how many people reside in a specific zip code or other identified demographic data.

2. Syndicate Yourself. Set up a Facebook page then import the RSS feed from your blog to the notes application and distribute to all your friends and associates.

3. Send Video Messages. Showcase homes, send out a video blast of recent news or simply make a personalized greeting. It's a simple, personalized and cost effective way to make a big impression with a small budget.

4. Collaborate. Combine Facebook with Google documents to collaborate in a secure environment. Share everything from text to excel spreadsheets with ease while tracking changes, making comments and sharing information.

5. Picture It! Use the mobile application to upload photographs from your cell phone automatically. It's a great way to capture information on prospective short sale properties on the spur of the moment or simply share information with others in real time.

Here's to us old fogies' learning how to effectively use Facebook and other social media including ActiveRain.

Charles Gardner

http://humble-homz.com/benefits.aspx