The Time is Right, The Price is Right!

The stagnant real estate market is finally starting to see some light at the end of the tunnel. Since the beginning of the year, inventory levels have started to go down and the government's intervention is showing some signs that the stimulus bill is working.

In Mesa, Tempe, Scottsdale, and Chandler, prices for 2-4 unit complexes have gone down to as low as $39,000 for a duplex to $65,000 for a fourplex, both in Mesa. You combine these prices with record-low interest rates and you've got yourself a lot of investors starting to aggressively snatch up these bargains.

One thing I'm now experiencing is many multiple-offer situations in transactions, something that was unheard of last year. Many of the investors I talk to have said, "with these prices, I can get instant positive cashflows on multi-unit properties." This is something that rarely happened on transactions in the past few years where many buyers was banking on making money on price appreciations while losing money every month.

To Illustrate My Point, Let's Look At An Example

For illustration purposes, let's keep the math simple. The median price for a fourplex in Mesa is $141,000 and let's assume no down-payment. Your mortgage payment would be approximately $840.00 at an interest rate of 6%. With an average rent in Mesa for approximately $600.00 per unit, that totals $2,400 total rent per month. Let's throw in about $500 per month in operating expenses and you still come out with an estimated $1,000 positive cashflow per month.

* $140,000 - Median price for a fourplex in Mesa and amount financed

* $2,400.00 - Total monthly rent revenue at an average of $600/unit

* $840.00 - Estimated monthly payment at 6.00%

* $500.00 - Monthly operating expenses

* $1,000.00 - Monthly positive cashflow, monthly net profit!!!

It's no wonder many investors are buying aggresively now! And this is not even the best scenario. I'm seeing even better cashflows stemming from:

* All-cash offers (no mortgage payment)

* Sales prices even lower than that (fourplexes as low as $65,000)

* Good property management demands higher rents and low maintenance

Where Are These Troperties Coming From? Banks!

Many of these properties are foreclosed and are bank-owned properties. Ok, I know what you're thinking! The moment you open the door, you're going to find wholes on the walls, missing appliances, ripped-out cabinets, etc. Right? Wrong! Surprisingly they are not in bad shape!

Normally when someone loses the home they live in to foreclosure, the owner feels anger and feels like destroying the home. It's understandable since they are emotionally attached to the home. However, in investment properties, the owners are not living in the property, they are not emotionally attached to the property, and see it as a business decision gone wrong. Therefore, when the tenants move out, the usually leave the unit in pretty good condition. This leaves the new owner with minimal work to do on their new investment and usually requires only cosmetic repairs.

Another Reason Why Bank-Owned Properties Are Good Buys Right Now

Banks don't want to keep these properties on their books. It looks bad to their investors. Therefore, they have an urgent need to sell them. Usually, a bank will responde to your offer in about 3-5 business days. They will respond to your offer with their addendums basically telling you they are selling the property "as-is" and have no knowledge of anything with the property. After that, it's a pretty smooth transaction - get your inspections and financing taken care of, and done deal!

Compare that to the other type of transaction - the Short Sale. In this case, you submitt an offer to the bank and expect to wait approximately 2-5 months to get a response. By which time the property has depreciated and lost more of its value.

It's no wonder that bank-owned properties account for more than half of the transactions currently in escrow!

Have We Hit The Bottom?

In my opinion, not quite. But we're pretty close. These values can't go down that much further. However, I think this is the best time to buy since competition for bargains is getting more competitive, thus the drop in inventory. In my recent transactions, we've faced multiple-offer situations where the bank has countered for "highest and best" offers. This means if you really want that property, you begin to raise your offer or take your chances of losing it. Then you have to look for another and begin the bidding again.

In any case, there is a massive real estate clearance sale going on out there right now.  What are you waiting for?  The time is right, the prices are right!  I'll help you find them!

On A Personal Note

I have recently started training again for another marathon. I will be running the P.F. Chang's Rock 'n' Roll Marathon in Phoenix January 17, 2010. As part of my training, I will be running the Armed Services YMCA Mud Run in Camp Pendleton on October 17, 2009. The race will raise money that "benefits all programs and services offered to Camp Pendleton military personnel and their families at low or no cost, by the Armed Services YMCA." Click here for the link

Thanks for reading!

Manny Carrillo

REALTOR®

SJ Fowler / GMAC Real Estate

4015 S. McClintock Dr., Ste. 110

Tempe, AZ 85282

480.338.3062 - Direct

www.mannycarrillo.com

MLS Property Search!

Fannie Mae Raises Loan Limits for Investors!

During the latter part of last year, Fannie Mae put a limit as to how many mortgage loans you were able to have. That limit was set to four loans, meaning that if you already had four mortgage loans and wanted a 5th to buy another investment property, you were out of luck.

One of the reasons Fannie Mae put this limit was to prevent investors from over-extending themselves like many did over the past few years since it was easy of them to simply walk away from their investment properties. This caused many banks to lose an obscene amount of money and one of the reasons they have tightened credit during the past few months.

This created a huge problem for many investors wanting to take advantage of current low rates and low prices to increase their real estate portfolio. Therefore, many had to find other sources for financing, including using their own money or using hard-money lenders.

Now they realized that many investors are starting to buy properties again, this time at bargain prices. Then you add all-time low rates and they've got themselves tremendous purchasing power.

In an effort to loosen credit again and stimulate the economy, the National Association of Realtors (NAR) lobbied and urged Fannie Mae to raise those limits. And they have! As of March 1, 2009, the limit has been raised to 10 loans. The restriction applies to the total number of loans, not just to the loans sold to Fannie Mae.

However, as expected they did set up stricter requirements to qualify. Here are a few:
*FICO Credit Score of 720+
*High Reserve Requirements (vary per block of units owned)
*75% LTV (Loan to Value Ratio) or 25% down
*No history of bankruptcy or foreclosure within the last 7 years
*If investor is already over the 4 properties, refi LTV is 70%
*No delinquencies by the borrower on any loan within the past 12 months

This is definitely a step in the right direction and a sign that financials institutions are starting to loan money again!!!

How will this affect you?
With interest rates and home prices being as low as they are, many investors are now going to be able to buy more properties, which might include homes in your neighborhood. That's good news because the longer a foreclosed home (or any home for that matter) sits on the market for sale, the more it drags your home value down. This will make properties more liquid and hopefully stabilize home values.

On a personal note, my Alma Mater, CSUN has made it into the NCAA Basketball Tournament. Go Madators!


Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
MLS Property Search!

What The New Stimulus Plan Means to You

This past Tuesday, President Barack Obama introduced an aggressive new plan to stimulate the economy, including helping many homeowners deal with the housing market. This is what I will be focusing on in the next few minutes. The plan is to be effective on March 4, 2008 and therefore, we won't know the exact specifications and guidelines as to who will qualify, how much aid they will receive, and how long it will take to trickle down to the actual homeowner.

First off, a few highlights of the plan:
*To help borrowers who owe more than 80% of their home's value refinance. Current lending guidelines make this very difficult and the new program will allow homeowners reduce their monthly payments.
*Give banks and servicers incentives for modifying mortgages to those who are still current. Many banks today require homeowners be behind before modifying their mortgage.
*Allowing judges to make mortgages eligible for modifications while active in bankruptcy. This is currently not allowed.
*Allowing more Treasury-backing for mortgages so that Freddie Mac and Fannie Mae can back more mortgages, thus making them eligible for assistance. The new plan allows only Freddie/Fannie-backed loans to be eligible for assistance.

Second: let me be frank about how much assistance will actually be available. The $75 billion that is being given to banks in the form of aid is a very small amount of money when you stack it up to the volume of mortgage debt out there. Meaning that not everyone will get a piece of the pie - there just isn't enough money available to help every homeowner requesting assistance.

Furthermore, a lot of the assistance is being given in the form of funding for new programs, repair and maintenance for buildings, building and rehabilitating low-income housing, helping communities buy and rehabilitate foreclosed and vacant homes, removal of lead-based paint, among others. So as you can see, not all of the money will be available to help homeowners directly with their mortgage.

Who Will Qualify & Who Is It For?
Not just because you own a home will make you eligible for assistance. So who will be eligible?
*If you owe more than 80% of your home's value but no more than 105% (including closing costs) and haven't been able to refinance due to this.
*If your mortgage is backed by Freddie Mac or Fannie Mae. Call your bank to find out.
*If your current mortgage rate is higher than the market rate (check out BankRate to check current mortgage rates).
*If you currently have an Adjustable Rate Mortgage (ARM), this will help you refinance into a 15- or 30-year fixed.
*If you occupy your property as your primary residence.

Who Won't Qualify & Who Is It NOT For?
*If you're trying to reduce the amount of your mortgage balance.
*Requesting assistance for an investment home, 2nd home, or vacation home (the bank will verify). However, if you live on a duplex, triplex, or fourplex but live in one of the units, you will be eligible.
*If you are requesting assistance on a 2nd mortgage. Only 1st mortgages qualify.

Like I mentioned earlier, many details are still to come. In the mean time, here are some very good websites to visit it to get more information:
*CNN's Anderson Cooper's Q&A
*Financial Stability
*Department of Housing & Urban Development

Ultimately, your mortgage company will be the ultimate source of information when this plan takes effect on March 4, 2008.


Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
MLS Property Search!

Beware of Loan Modification and Foreclosure Assistance Companies

You will see their advertisements on TV or billboards from the freeway. Or maybe as you are listening to the radio or reading the paper. Perhaps your neighbor knows of one. I'm talking about companies that claim will help you modify your existing mortgage and lower your monthly payments.

Even though their services are in your best interests, many of them will charge you a very hefty fee for them. I've heard them charge as low as $600 for an initial consultation up to $4,000 for a the entire process! All this for something you can be doing all on your own!

They claim that they have a team of "expert negotiators" or attorneys that know the laws and loopholes so that they can lower your monthly payments and slash your mortgage balance in half. Although there is some truth to this, the majority of the time these are just sales and marketing tactics used to make you think that you have no chance you can do that on your own and that you "need" their expensive services.

In this industry, nothing saddens me more than to hear that families were taken advantage by a financial predator, and this is what prompted me to write this entry. What I hear the most is, "I paid XYZ Foreclosure Specialists $2,500 three months ago to modify my loan and I they won't call me back."

The process is rather simple and I'll explain why you as a homeowner is able to do this just as skillfully as they are. If you find that you need to modify your mortgage here's what you can expect and what you should do:

*Call your bank's Loss Mitigation Department and explain to them your hardship (loss of employment, hours at work cut, medical problems, maternity leave, etc.) and tell them you wish to apply for a loan modification. If you tell them you just want to get a lower payment or lower rate, they will simply tell you to refinance.

*The first thing your bank will want to know if your current financial situation is on a monthly basis (income coming in versus expenses going out). Have this information ready before you call.

*If possible, give the Loss Mitigation representative the financial information over the phone rather than requesting a financial package be sent out to you or faxing the information in. The reason for this is because faxing or mailing that information in will only result in unnecessary delays. This process will be different from bank to bank.

*If you qualify for assistance, your file will be given/assigned to a negotiator. This process will take anywhere from 30 days up to 2 months, depending on the bank.

*The negotiator will then get back to you with a proposal in the form of a loan modification, a forbearance, or a partial claim. If you agree, they will mail you the agreement which you need to sign to formally accept the terms.

That's it!

If you noticed, nowhere throughout this process was there ever any "negotiations" going on.

If anything, they would take place on the last step, when the negotiator will give you the terms. However, most of those terms are non-negotiable because they are coming directly from the investor, who about half of the time happens to be another company other than your bank! Surprised?

Here's where the GSEs (Government-Sponsored Entities) come in. They are Freddie Mac, Fannie Mae, and Ginnie Mae. These three companies own about half of the mortgage debt in the country. And the bank who you thought was your mortgage holder is only acting as their servicer for them - and because they own the debt to your mortgage, they are the ones that decide what the terms are going to be, and are usually non-negotiable.

If your mortgage does happen to be owned by your bank, the terms will be easier to negotiate since the actual money belongs to the bank. But the overall process will be the same.

Now, going to one of these companies and paying them your hard-earned money (which is hard to come by if you're in need of having your mortgage modified anyway), the first thing they are going to do is take your financial information (step 2 above). They will then mail or fax that information in to your mortgage company and the rest of the process will be the same.

The relationship with these companies often delay the process. The first reason is that they are considered a third party and for privacy laws they will bank will need to have an "authorization to release information" from you, which will take anywhere from 2-3 business days up to two weeks for the bank to receive. Another reason is that these companies will have many other files they are working with and will often times not have enough time to follow-up with your case.

Of course there are always exceptions to this. There are legitimate companies out there that are really out there to help. These are often approved by HUD or the government to help home owners deal with this situation. To find them, check out HUD and Homeownership Preservation Foundation.

Whether you use one of these companies or you decide to do it on your own, I wish you the best of luck. And the best advice I can give you is to have perseverance. If you're thinking about doing a loan modification or are in the middle of one and need some advice, don't hesitate to call me. I will help guide you through this process.

One last word on this, what I just described above is the "normal" process. As always, there are always exceptions to the rule. If you've had a different experience, by all means share it with the rest of us.


Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
MLS Property Search!

When Someone Falls Behind of Their Mortgage

These days, unfortunately many people are facing a tough economic situation. And often, their biggest monthly liability is their mortgage payment. So what happens when someone falls behind on their mortgage?

Here's a choronological timeline of this process, which is foreclosure:

*1-4 payments behind: When a property owner starts missing their mortgage payments, they will initially gets calls from the collections department trying to collect the amount in arrears and possibly set up a repayment plan to bring the mortgage current. Letters warning of foreclosure will also be sent at this time.

*4+ payments behind: If the mortgage is still falling behind, the foreclosure process begins at this time. This is the legal process that the bank uses to take back the property for not making the mortgage payments. At this point, the bank's Loss Mitigation Department will try to work with the property owner to resolve the delinquency. Some of these options may include a loan modification, a partial claim, or a forbearance.

*The Sale Date: If nothing was able to be worked out with the bank's Loss Mitigation Department, the property is sold at auction to the highest bidder. If no one buys the property, it defaults back to the bank as a Bank-Owned property.

If you know of someone that is going through this difficult and emotional process, have them contact their bank directly and ask them the speak to the Loss Mitigation Department. Even though the name of the department may sound intimidating, the process is designed to be simple to help the property owner. More than likely, they will need to take their financial information over the phone to see if they qualify for assistance.

Beware of 3rd party companies that charge hundreds or even thousands of dollars for these services. I'll cover that in my blog next month.

Thanks for reading!


Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
MLS Property Search

About This Blog.....

Good morning,

One of my biggest frustrations is that I'm not able to converse with everyone all the time about real estate. Thus, I've decided to start a blog, a place where I can speak my mind and have you come and read my take about this turbulent real estate market.

My goal with this blog is to keep you updated with the latest and relevant real estate news including market trends and interest rate activity. But most importantly, putting that information into practical terms that make it relevant to how they affect you as a buyer, seller, renter, homeowner, and investor.

As always, your feedback is always welcomed along with any constructive criticism. My opinion and views in this blog may, and will differ from yours from time to time. Perhaps you can call me and we can share our views and learn from each other.


Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
MLS Property Search!