Minnesota Real Estate Investors Association, Inc.

On Friday September 2, 2011, the federal government sued 17 big banks for selling mortgage-backed securities to Fannie Mae and Freddie Mac after those securities turned toxic.  This is just another example of the underling disease infecting this country.

In the 90’s, the federal government was pushing banks to make it more affordable to first-time home buyers and lower income families to qualify for a mortgage to promote their American Dream agenda of everyone in America owning a home.  At first the banks pushed back and said this was a bad idea, because a good percentage of the borrowers would never be able to pay the loans back.

The federal government, in their infinite wisdom cr
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Let me start out by saying that I generally try and stay away from political comments. I prefer to stay on topic and discuss the facts, but this time I have no choice but to comment on politics. This latest round of political games has my blood boiling and I can’t hold back any longer.

Congress just passed another $1 billion dollar emergency homeowners relief fund. You can read all about it on MarketWatch, here is the link: www.marketwatch.com.

Were shall I start?

I guess I will start out with the phrase “emergency homeowners relief”. Emergency, really??? The emergency was almost two years ago when they pasted the TARP funds to help, if you remember, homeowners and bail out the banks and financial institutions, but once the TARP funds were approved by congress, they decided it would be better to just buy stocks in the companies they chose to keep solvent. It didn’t seem to be that much of an emergency to congress in 2008, otherwise they would have spent that money on what they told us was the reason in the first place to pass the TARP funds. I think the only reason it is an emergency right now, is because the midterm elections are in 4 months.

So now that we understand the congressional definition of an “Emergency” we can then start to talk about the facts. They are as follows:  
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Since real estate values have plummeted, Subject-To deals have been harder to do because most of the time, the mortgage balance from the seller is higher than the property values creating a situation that if we took over the sellers property and started making payments on their existing mortgages, then we would end up with a property that we could not make cash flow or even resell without having to pay down the mortgages ourselves.

While some lenders were accepting short sales, most lenders were waiting for their bail out from the government. Since that never happened, some lenders have been more susceptible to short sales. While short sales have been our only way to deal with over leveraged properties, we were forced to resell the properties to pay off the short sale. Which meant that Sub2 deals were not taking place which is why according to the National Association of Realtors®, about 50% of all transactions in the 4th Quarter of 2008 were either Foreclosures or Short Sale.

According to Bloomberg “ Citigroup Inc.’s agreement to back legislation that lets bankruptcy judges cut mortgage rates for at-ris
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As prices drop, foreclosures go up and interest rates fall, there has never been a better time to buy. Whether you are an investor or a first time home buyer, now is the time to buy. So why are most people just sitting on the fence? According to the Minneapolis Association of Realtors the median sales price fell to $175,000, that’s down 19.2 percent from the same time last year and the lowest November showing since 2001.

With all the bail outs and market uncertainty, buyers are waiting to see how low prices will drop. Meanwhile those buyers still need housing which is making for a strong rental market.

Buyers are willing to Lease with the Option to Buy, but they are not willing to put down a lot of money for fear of property values dropping even further and losing their non refundable option consideration because they have opted to not exercise their option to buy.

These market conditions are creating an artificially low price. I believe that once the credit market settles down, real estate values will stabilize and maybe even increase slightly right away. The only question is, when will this happen? I can't answer that, but I do know that now is a great time to buy and hold. Properties at these prices are cash flowing very well today, so why wait to see where prices will stop falling and pass up one all that cash flow and depreciation to someone is going to get, so it might as well be you.

We know that the Emergency Economic Stabilization Act of 2008 otherwise known as the $700 Billion dollar bailout bill was never intended to buy up the defaulted loans that the banks are holding onto, right?  And we also know that the bailout bill has increased to several trillion dollars, that’s Trillion with a “T”.  But what about the bad loans on the banks books, wasn’t that the purpose of the bailout bill in the first place?  Well yes, originally it was.  Do you remember the original 3 page bailout bill that President George Bush proposed, but was voted down?  The finally bailout bill that was passed one week later was 450 pages long and they must have excluded the 3 original pages which was supposed to direct the bailout to buy up all those bad notes that the banks were holding.

It boggles the mind to see what is happening with all that money that we the tax payer is going to have to pay for, for many generations to come.  There is a few extremely large banks getting the money, but they aren’t even using it to cover the bad debt that they have on the books, they are using it to buy other banks with very little bad debt.  Basically what we are doing with the money right now is giving it to the biggest financial institutions and telling them to use that money to buy smaller companies that weren’t reckl
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This is my first ever blog post, but what better time to start one then right now.  We have had a very interesting year featuring a myriad of different twists and turns.  When we started out the year, we basically knew where we were headed and by the end of the year, no one knew which way to turn next.   Every day something new happens and I have had so many thoughts and concerns that I decided it was time to start writing and share them with you on a regular basis.  I want your comments and feed back as we take on the golden era of real estate investing.

I am actually very excited about the real estate market that we find ourselves in right now.  Many of us have been saying that this is one of the best times in our lifetimes to be an investor, and the closer we get to the end of the year, the more real that statement becomes.  The government keeps stepping in to bail out everyone except the ones who actually need the bail out.  While that may seem cynical, it has presented us with even more opportunities and the longer the government tries to figure out what to do, more confusion ling
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