Since March, first-time home buyers have been beating a retreat from the housing market, with only 39% of all home purchases in July coming from this target demographic (down 48% from March of this year)[1].

While most analysts credit the precipitous drop to the expiration of the tax credit, a number of media outlets have also been publicizing many public officials’ “new” opinions on homeownership, including that maybe it should no longer be considered the investment that it once was. Campbell Surveys, a real estate market analytics company, predicts that by fall first-time home buyer activity could be as low as 30%, placing a downward pressure on home prices.

Do you think that the federal government should reinstate the tax credit, or is this plunge something that we just have to get through? Should home ownership still be a goal for the “average” American?

Thank you for reading! Your comments and questions are welcomed below.

While monthly default rates on primary mortgages declined in July, secondary mortgage defaults started to climb[1]. Interestingly, second mortgage defaults are still lower than primary defaults, at a rate of 2.8 percent, but they are on the rise since in June they were 2.4 percent. Primary mortgage default rates fell a tenth of a percent from 3.3 to 3.2. While both types of defaults had, prior to last month, been declining slowly but steadily in recent months in many parts of the country, the data is too location-specific to make a general statement about the national housing market. For example, New York’s default rate rose last month to 6.99 percent, while Miami’s default rate has fallen in the past year by 46.21 percent.

Overall, the declining default rates for primary mortgages seem like good news. However, it seems like it might be a little early to pop the champagne. Do you think that these widely variable rates can really be used to track the progress of the housing market?

Thank you for reading! Your comments and questions are welcomed below.

Although buyers are still reluctant to make serious moves in today’s markets, the continued availability of record low interest rates is drawing some of them “into the open.” In fact, refinancing applications are up nearly 5.7 percent over the week prior, and new mortgage loan applications have risen 4.9 percent in the same time period. When seasonal adjustments are made, this is a 26 percent improvement over a month ago[1].

Are these low interest rates prompting you or your clients to move into purchasing more properties?

Thank you for reading! Your comments and questions are welcomed below.

The state of Florida has clarified its requirements on loan origination licensing, stating that “supervised underwriters” do not need to get state approval for their activities as long as they are supervised and perform “clerical or support duties at the direction of and subject to the supervision of a State-licensed loan originator or a registered loan originator”[1].

This does not mean, the Office of Financial Regulation (OFR) pointed out, that independent contractors (including many real estate investors) do not need to be certified. If those contractors offer in any way to negotiate the terms of existing or new mortgages, then they must still be certified. However, this does seem to lend some flexibility to many investors who might be able to work under the “supervision” of a broker when handling creative financing. The OFR did not address this in its clarification, and of course you should consult your attorney about your particular situation.

Do you think it is fair that real estate investors using creative financing might need to be certified loan officers before they can legally negotiate their deals?

Thank you for reading! Your comments and questions are welcomed below.

At this point, it seems fairly safe to assume that just about everyone knows that if someone sends you a check to cash via Craigslist and asks that you send a portion of the money back, you should really wait to wire the cash until that check clears your bank. However, it may be a little less well-known that if you are putting your home up for sale, you might want to periodically check the Craigslist rental listings in your area to make sure that someone is not trying to rent it out instead.

Sound crazy? It does to a lot of people – right up to the point where the new renters show up on the doorstep, ready to move in with a lease and a receipt for a security deposit they’ll never see again. In some cases, the people claiming to be landlords actually decline sales offers, posing as “owners” who have changed their minds but would be happy to rent. In one case, the entire property description was pulled directly from the online sales listing posted by the real estate agent legitimately engaged in trying to market the property[1].

With the terrible reputation that Craigslist is garnering for itself as a hotbed for real estate scams, some people actually are moving away from using the online classifieds’ listings to market their homes. Do you use Craigslist to look for deals, and would you consider doing a deal you found on this site?

Thank you for reading! Your comments and questions are welcomed below.

According to the National Association of Homebuilders and the Wells Fargo Housing Opportunity Index, 72.3 percent of all “new and existing homes” that were sold in April through June of 2010 fell into the “affordable” range for families earning an income of $64,400, the national median income[1]. The report indicates that this high level of affordability is due to the historic lows of interest rates along with stabilizing home prices and a rebounding economy. Interestingly, before 2009, the home affordability indices never reached 70 percent, which is ironic since it seems that fewer people than ever are finding themselves in a position to purchase a home these days.

Do you think that this number indicates a rebounding economy and stabilizing housing market, or do you think the measures used for this report could be out of date?  The problem with these statistics is that sales data do not agree.  One would think that higher affordability would translate into brisk rates of sale.  But that certainly isn’t the case.

Thank you for reading! Your comments and questions are welcomed below.

According to the La Times, professional investors are flocking to California in record numbers to buy large quantities of foreclosed homes at distressed prices. In the article, the reporter speculates that this movement could be due in large part to the fact that there are “sparse investment opportunities elsewhere”[1].

While this analysis may or may not be particularly astute, it is a documented fact that professional buying (that is, investors who are buying using large amounts of money and investing in large quantities of property at once, also known as bulk REO investing) has surged in the past few years, while investors tapping a 401K or a line of equity in their own homes have declined in numbers. While this type of professional investor involvement is “spark[ing] a nascent housing recovery in Southern California because investors have cut significantly into the glut of foreclosed properties,” is it true that they are forcing the “smaller fry” out?

It certainly could be, but if so, this is due to lack of information rather than being outplayed on an investing field. Many investors do not realize that you do not need your own millions or billions to invest in large volumes of property and therefore could be “bowing out” in the face of larger real estate investing ventures. It is important not to demonize the big players, but it is also vital to your investing success that you not allow yourself to fade out in the face of new investing strategies, but rather turn those strategies to your advantage.

Do you think it is accurate to say that professional real estate investors are squeezing out the amateurs?

Thank you for reading! Your comments and questions are welcomed below.

A little more than a third of all real estate investment trusts (REITs) are focusing their investments in green buildings, reports the Wall Street Journal[1]. While currently no REITs have an official stance on green building and green real estate, based on current trends it appears that real estate investors would prefer energy efficient buildings when possible, possibly because green building is a fairly new phenomenon and even though the real estate market is “fairly frozen,” as the Director of the Initiative for Responsible Investment at Harvard described it, it is possible to benchmark this type of properties performance.

In some cases REITs are constructing new buildings entirely in accord with new green regulations as determined by the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEEDS) rating system, and even more are looking to renovate existing properties that they own to make them greener than they are presently. This is viewed as a good use of investment money because greener buildings indicate greater sustainability of investment.

Are you focusing on green buildings in your portfolio? If so, is it out of personal preference or investment strategy?

Thank you for reading! Your comments and questions are welcomed below.

Although 2010 appeared to be the beginning of a rise in investor and homeowner confidence in the housing market, new numbers from Rasmussen indicate that short-term confidence in the U.S. housing market is right back where it started at the beginning of the year, with only 18 percent of homeowners expecting the value of their homes to rise in the next year. In fact, 28 percent of homeowners actually are expecting their home’s value to decline in the next year.

On the brighter side, 41 percent still believe that their home will have increased in value by the time 5 more years roll around, but even that is down from last month’s 45 percent[1]. While this is not necessarily stellar news for much of anyone in the housing market, it could give real estate investors something of an edge since homeowners may be less likely to keep “holding out” on their distressed properties and start working creatively to sell them or find some other solution outside the conventional methods of home buying and selling.

Do you think that this decrease in confidence will impact your ability to invest successfully?

Thank you for reading! Your comments and questions are welcomed below.

The other day we discussed some reasons that seller financing can be very attractive for real estate investors, and also reviewed some things that you will need to be sure are included in your seller-financing contract before the deal is done. As you can imagine, in some ways seller financing is more complicated than traditional financing for both the buyer and the seller, since terms and conditions that would normally be established by the lender and pretty much set in stone if you want the loan are far more flexible under seller financing conditions.

As a result of this, if you plan on doing a deal using seller financing, you will definitely need to do your due diligence. A one part of that due diligence will be researching other loans on the property. It may be that you have elected to purchase or sell a property with existing liens. This can get complicated, and having a lien against a property may ultimately prevent the deal from happening. However, in some cases these liens can be worked out. If you discover an additional lien on the property, you immediately need to determine if and how that lien could ever become the primary lien on the property, which would essentially mean that whoever holds that lien could foreclose on the property and take it – possibly without paying off your lien!

A common example of this type of lien is a tax lien. These liens are nearly always primary on a home, and the holder of a tax lien can often foreclose on a property for the amount of their lien and take possession of the property without paying your lien. This is why mortgage companies usually will take care of delinquent tax liens; they essentially lose their collateral if they do not. So make sure that however you write your note that there is no way that you can lose your collateral should your lien become subordinate to another.

Note: Of course, you cannot fight tax law, and if the property taxes go unpaid that lien will supersede yours. This is part of being a lender, and you can work with your attorney to figure out the best way to deal with this issue. Many lenders work the property taxes into the mortgage, and you may wish to do the same.

Have you ever lost a property due to an overlooked debt?

Thank you for reading! Your comments and questions are welcomed below.