We are doing various seminars during Money Smart Week.

If you missed the Short Sale Webinar, you can view it here:

Program Highlights:

Can be used by investors
Conventional financing (less strict than government loans)
Can combine the purchase and renovation or current liability and renovation into one loan.
Required investment based off total cost (acquisition/balance + rehab)
20% down for 1 unit
25% down for 2-4 units
Can be used on high-rise condos (203k’s can’t)
Loan sizes up to the conforming limits for your area
Can be used to close on homes deemed “non-financeable”
Cash-out Investor Rehab loans allowed (with appropriate seasoning*)
Rates 1-1.5% above current market as opposed to hard money lending
Only six months PITI reserves required on subject property
Can fund in all fifty states

A few examples of projects that would be ok:
1) $50,000 cash purchase and a rehab for $150,000 immediately after on a four unit. We would use the equity from the cash as the required investment and the rest would be financed.
2) $10,000 purchase with $140,000 in rehab on a condo (30k down required @ 20%)
3) Free and clear property where renovations already began but funds were running low. Cash-out can recoup initial costs and still take funds out to renovate.

Information provided by:

Rob Weber
Home Mortgage Consultant
Renovation Specialist
Wells Fargo Home Mortgage
511 W North Avenue
Chicago, IL 60610
312.274.4136 Office
847.404.7006 Cell
866.512.0551 Fax
Rob.Weber@wellsfargo.com
www.robweber.com

In the midst of the mortgage meltdown, Fannie Mae changed it guidelines limiting investors to a maximum of four mortgages.  This limitation affected many investors’ ability to secure financing with reasonable pricing.  However, it seems that Fannie Mae has had a change of heart. 

Effective March 1, 2009, the four mortgage limited is being lifted.  As stated in the February Announcement, “Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors.  Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation’s housing system.”  The new limit will be increased to a maximum of ten mortgages. 

This financing tool is only for the experienced, responsible investor.  A 720 minimum credit score is required, including 25% down on 1-unit purchases and 30% down on 2-4 unit purchases.  In addition, the reserve requirements are even more stringent.  If the borrower owns one to four financed properties (including the subject property), the borrower must have six months reserves for the subject property and two months reserves for each of the other financed properties.  If the borrower owns five to ten financed properties (including the subject property), the borrower must have six month reserves for the subject property and six month reserves for each of the other financed properties. 

It is important to note, that Fannie Mae has also expanded the definition of reserves.  Normally reserves are measured by the number of months of principal, interest, taxes and insurance (PITI) payments that a borrower could make with personal financial assets.  This definition has been expanded to include all components of the monthly housing expense:
PITI, ground rent, special assessments, owner’s association dues (excluding utility charges for individual units), cooperative corporation fees (less the pro rata share of the master utility charges for servicing individual units), and any subordinate financing payments on mortgages the property secures. 

The last guideline to address is the Multistate 1-4 Family Rider.  This rider is required for closing of all mortgage loans secured by an investment property.  The rider authorizes the transfer of rents and revenues to the lender in the case of default. 

I must admit, that as a mortgage professional, it was music to my ears to hear and read about Fannie Mae’s new policy updates.  I know many investors that were bound by the four mortgage limit who are now excited about the opportunities that exist in the market place.  If you are an investor or have been thinking about investing in real estate, now is the time to take action.  Pick up the phone and call an experienced loan originator to help you get started.

________________________________________________________________
About the Author:
AC, the Mortgage Closer, is a licensed loan originator in the Chicagoland area. For more information, visit her website at www.ownsomethingtoday.com or her blog at www.realmoneytalks.net.

Common Sense Isn’t So Common

I wrote an article back on September 24th for InvestWithPassion.com, before the $700 billion Plan (TARP) was approved - which essentially layed out the reason why we needed it and what the potential consequences were without it. (very informative article, you should read it). Shortly thereafter, the plan was approved and it seemed we were heading in the right direction. I don’t think anyone believed that the plan would immediately fix all the problems with the economy, however it was intended to be a start.

According to Neel Kashkari, Assistant Secretary of Treasury, the funds were to be used in the following areas:

Mortgage-backed securities purchase program: Identify which troubled assets to purchase, from whom to buy them and which purchase mechanism will best meet the policy objectives.

Whole loan purchase program: Identify which types of whole residential mortgage loans to purchase first, how to value them, and which purchase mechanism will best meet the policy objectives.

Insurance program: Establish a program to insure troubled assets (mortgage-backed securities and whole loans).

Equity purchase program: Design a standardized program to purchase equity in a broad array of financial institutions.

Homeownership preservation: When mortgages and mortgage-backed securities are purchased, every possible opportunity to help homeowners will be explored, including working with borrowers, counselors and servicers to keep people in their homes.

Executive compensation: The law sets out important requirements regarding executive compensation for firms that participate in the TARP - therefore define the requirements for financial institutions to participate in three possible scenarios: One, an auction purchase of troubled assets; two, a broad equity or direct purchase program; and three, a case of an intervention to prevent the impending failure of a systemically significant institution.

Compliance: The law establishes important oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with thorough reporting requirements.

Sounds like an overall solid plan with potential, right? Well, have you ever heard the term “bait and switch”? It is a term used frequently in the mortgage industry and it usually unfolds at the closing table. Clients (borrowers) are given acceptable fees/closing costs at the initial time of application, however when they get to the closing table (approximately 30 days later) those costs have increased considerably. Usually, because of the emotions involved in closing on the house, this change is overlooked (somtimes intentionally and other times unintentionally). This is an unethical way of doing business and many of my counterparts don’t see the problem operating as such. This is exactly what I believe Treasury Secretary Henry Paulson and the Kashkari team has done here. If you remember, Congress denied the bill several times partially because it did not include any relief for homeowners and it did not establish any restictions on “golden parachutes” for executives. And it was not moving at all until these issues were addressed - hence the final proposal laid out above.

Now in a recent press conference, Paulson states:

“As credit markets froze in mid-September, the Administration asked Congress for broad tools and flexibility to rescue the financial system. We asked for $700 billion to purchase troubled assets from financial institutions. At the time, we believed that would be the most effective means of getting credit flowing again. During the two weeks that Congress considered the legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets - our initial focus - would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.”

In other words, we changed our mind and absolutely none ($0) of the $700 billion will be going toward helping homeowners as originally agreed upon. Now it seems to me that he never had any intention of deviating from his orginal plan which did not include assisting homeowners. Instead, once he realized that the original plan was not going through, he decided on the old “bait and switch” technique. I don’t understand, well yes I do understand, why Paulson and his team feel they can start to repair the problems with the economy without addressing the foreclosures - one of the underlying reasons we are in this perdicament.

I remember, a couple of months ago my brother borrowed my vehicle and I ended up driving his for a couple of days. While his vehicle was in my possession, the battery died on me. I had the vehicle towed to a service station and was told the battery had been drained due a faulty alternator. Now I had no clue what he was talking about and asked “so can I just purchase a new battery and be on my way.” The mechanic advised that I could obtain a new battery and the car will probably run for a short period of time, however if the problem with alternator is not addressed - the new battery will eventually be drained also. Eventhough I know very little about cars what he told me made sense, common sense. So I had the alternator and the battery replaced and the car was and still is running fine…

So if we apply that analogy to the current economic situation, essentially Paulson and his boys are trying the replace the battery without addressing the problems with the alternator. Doesn’t it just make sense, as opposed to giving the banks money (”strengthen bank balance sheets”) that they help the homeowners in foreclosure that are causing the bank’s financial problems? Can’t they see that if they start with the homeowners - that this will eliminate the bad debt that the banks are holding and therefore addressing the root cause of their financial problems - common sense. I can remember years ago, my grandmother telling me - “common sense isn’t so common.” As I’ve grown older, I see this more and more in everyday life. Could it be that people sometimes allow greed and power to control their actions? Or maybe it is as Jim Cramer (whom I love) stated a couple of months ago - “THEY KNOW NOTHING!”

Watch Cramer - THEY KNOW NOTHING!!!

____________________________________
About the Author
AC Clinton, the Mortgage Closer, is the licensed loan originator, investor, author and entrepreneur. She believe’s that ownership of Real Estate, Stocks/Bonds, Business is the key to obtaining financial independence - Ownsomethingtoday.com.

I remember the day that Orlando and Aminah were married. I have always admired them because they are young, hardworking, educated, and they don’t care what the Joneses do because they are focused on their plan. Buying a home and creating sweat equity for themselves was also a part of the plan.

We have been in a contract on three different properties in Bronzeville and we went to the closing table once. Every property came with its own set of issues not to mention city liens that the City of Chicago wasn’t willing to subordinate first lien position on which is why we didn’t close.

No matter what the obstacle my clients never gave up on their vision. Ironically with every property there came huge price reductions. The first property they were willing to spend $255k, the second property $202k, and finally the one they bought was $162k and the sellers paid 6% towards their closing cost. That is a major savings.  My clients will have to wait several months before they can move in due to the renovations but they will make it through that hurdle as well.

The current market will make the next set of millionaires. You don’t want to kick yourself in the butt because you set on the fence.

Coffee or Not, the Bronzeville Coffee house has become my favorite spot to meet with clients and discuss the abundance of REO properties in the area which if managed properly can turn into gold mines. Why? The Bronzeville Coffee House you ask. Well it’s located in the heart of some of the most sought after Single Family Homes, Multi Unit Buildings, and Condo’s. I’ve never had a problem with parking, and the muffins and smoothies are delicious.

I don’t really go for the coffee but, I do buy something because I use their storefront as a regular meeting spot to discuss and show (Free Wi-Fi) what’s HOT-Foreclosures. I love the facts that with a little sweat equity my buyers are making out like bandits. They say it’s a depreciating market but my buyers are amassing a 100k (+) in equity once they complete the renovations on the numerous properties they are acquiring.

Next week we will close on yet another 203(k) loan where my first-time home buyers will have a 135k in equity after they convert a foreclosed three unit brownstone into their single family dream home. Talk about happy clients.

Looking to Buy or Sell in the Bronzeville, North Kenwood, Oakland, Grand Boulevard, Woodlawn, or Hyde Park area my team is here waiting to serve you. Now is an excellent time to buy.

Everyday, I receive phone calls and emails from REALTORS® inquiring about the delays in the contracts they’ve presented on properties in foreclosure or an REO. REALTORS® are grounded in the belief that “Time is of the Essence.” This philosophy simply means that REALTORS® and their clients will perform within a time limit specified by a contract or within a reasonable time if there isn’t a specific date for the performance outlined in the contract. I wish that this concept was followed by a world now inundated by loss mitigation specialists and asset managers. I do ask REALTORS® to use empathy and not judgment when dealing with lender employees because they are overwhelmed by the abundance of new foreclosure filings and the fact that some employees are already handling up to 1,200 files.

Real estate is a fast-paced world full of contracts, negotiations, and going to the closing table. Finally, REALTORS® can take a long lunch and a walk in the park because you might have to wait months just to get an executed contract.

To paint a realistic picture, I have a short sale listing that was submitted to the lender via fax and overnight mail on March 7. Three weeks had passed before the lender acknowledged receipt of the short sale package. The lender ordered two Broker’s Price Opinions and informed my client on April 22 that they wouldn’t pay for a survey, termite, zoning certification, water certification, or any outstanding water bills. My client, the attorney, and I have had weekly communications with the lender. On May 1, we received a counter-offer to the contract and the lender wanted a response on or before May 5 and they wanted the purchaser to close by May 31.

Representing the buyer doesn’t make for an easier transaction.  I love working with buyers, and I use the skills acquired through the ABR designation courses to attract buyers looking to purchase short sale and REO properties. Distressed properties often have deferred maintenance or have been vandalized. To ensure that clients can close according to the terms of the contract, it’s important to have them preapproved by a purchase-rehab lender.

Taking extra steps won’t guarantee you a smooth deal. One of my clients has been pre-approved and has saved her money to purchase a home where she wants to create sweat equity. We have submitted six contracts over the past two months. On March 22, we submitted a contract for a property in Englewood. I faxed the listing agent twice, emailed her four times, and called a half of dozen times. Six days after submitting the offer, we finally received word that there were other offers (cash) and that the listing agent was waiting on a response from the lender. Much to my dismay on April 21, I received a phone call from the listing agent who stated that the other deal didn’t work out and that she would send me the lender addendums. My client was livid because when we did receive the addendums on April 22, they stated that she needed to sign everything and submit with a cashiers check in 24 hours. She decided not to submit a new offer with the addendums because she felt like she was second choice and she and the lender were on an uneven playing field.

C.O.S.N.O.P (Concentrate on Solutions Not on Problems), now is the time to revisit an old skill set (initial buyer and seller consultation) in order to have a successful transaction. First and foremost, set a realistic time frame for the buyer and the seller before entering into an executed contract. Commissions are negotiable and should be discussed with all parties. Listing agents need to discuss commission with all buyer agents prior to the exception of a contract because commission will be determined by the lender and not the homeowner with whom the REALTOR® has the listing agreement. Buyer agents should draft sales contracts that allow their buyers to cancel the contract if they haven’t received a response by a certain date or they have the right to rescind the offer. Remember, listing agents are waiting just like you. Short sales and REO aren’t for everyone but, patience will be the best skill set to develop if you plan on doing business in this new niche.
Marki Lemons, CRB, CRS, ABR, ABRM, CRMS, MBA, is a member of the C.A.R. Board of Directors and an instructor at the REALTORS® Real Estate School. She is a Certified Residential Broker with Rubloff.

Investors come in all shapes and sizes, whether you are a novice or an old seasoned professional you can always use the expertise of a Realtor^®. All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS^® can be called a REALTORS^®. We proudly display the REALTOR “^®” logo on our business card or other marketing and sales literature. REALTORS^® are committed to treat all parties to a transaction honestly. We owe our clients fiduciary responsibilities that include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care. REALTORS^® subscribe to a strict “Code of Ethics” and are expected to maintain a higher level of knowledge of the process of buying and selling real estate.

Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $250,000. If you had a $250,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $250,000 law suit, would you deal with it without the help of an attorney? Considering the fact that a Realtor^® is an asset would you want to take on the liabilities of doing it on your own, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR^®.

But if you’re still not convinced of the value of a REALTOR^®, here are a few more reasons to use one:

1. Your REALTOR^® can help you determine your buying power and plan for your investment. Lack of a plan is the biggest mistake we see new investors make. The first step is to develop a plan based on what you can afford and how long you can afford it. In today’s market, holding times have increased therefore a contingency plan must be in place in order to survive. If you give a REALTOR^® some basic information about your available savings, income and current debt, he or she can help you to develop a long term strategic plan to make your investments successful.

2. Your REALTOR^® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties. Realtors^® have the resources to target specific areas or property types to match the investor with a suitable property.

3. Your REALTOR^® can assist you in the selection process by providing objective information about each property.  Real estate isn’t easy.  Investors don’t make money because they pay too much for their properties. Agents who are REALTORS^® have access to a variety of informational resources. REALTORS^® can provide local community information on utilities, zoning. Schools, taxes, existing mortgages etc. There are two things you’ll want to know. First, will the property provide the environment I want for an investment? Second, will the property have resale value when I am ready to sell?

4. Your REALTOR^® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5. Your REALTOR^® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR^® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR^®, title company or attorney can help you resolve issues that might cause problems at a later date.

6. Your REALTOR^® can help you in understanding different financing options and in identifying qualified lenders. Numerous properties are in need of work. It is ideal for an investor to work with a purchase rehab lender to insure that the property can be financed.

7. Your REALTOR^® can guide you through the closing process and make sure everything flows together smoothly. Closing the deal always comes with some anxiety. A Realtor^® has experience in different situations and can always shed a positive light as to what is going on until the very end.

8. When selling your home, your REALTOR^® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors to getting your property sold for the best price, quickly and with minimum hassle.

9. Your REALTOR^® markets your property to other real estate agents and the public. Your REALTOR^® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR^® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR^® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc.

10. Your REALTOR^® can help close the sale of your home. A key to your success is building the right team of professionals. You need a good relationship with at least one Realtor^®. It is impossible to build a business as an investor if you’re spending all of your time sitting at an open house. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR^® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

Each day, the media is focusing on the struggling economy that is heavily influenced by the real estate/mortgage market.  Many people got caught up in over-inflated property values & bad or misappropriated mortgage products.  As a result, unfortunately many of them are losing their properties.  This is not only impacting homeowners, but many investors who jumped in head first.  We all understand that real estate investing carries some risks - yet at some levels, the risks can be calculated.  Not many rely on the crystal ball to predict their investment outcomes and those that get it, plan first.  Therefore, the story is a little different for savvy real estate investors in this market.  These investors understand the importance of education/knowledge, mentorships, planning and networking.   They understand that they shouldn’t try to do it all themselves to save money.  They understand the logistics, but work with the professionals to get true results.   They are ones that are able to go in now and take advantage of the “pennies on the dollar” deals.  They are the ones that will join “Millionaire Clubs” when the market heads back up.  Now is the time, this is the season.  Ask yourself - WILL YOU BE A PART OF THAT GROUP?