Real Estate is changing

Much has been written about the changes coming to the real estate industry as a result of the slowing market. But aside from the possibilities of a handful fewer brokerages, what you’ll see at the end of this lull likely will look quite a bit like what you saw at the beginning.

Maybe it shouldn’t be that way. But that’s the way things seem to turn out.

This is the time when there should be a premium on training, but many of the brokerages who will look most attractive to new agents (read: higher splits of the commission) offer limited training. Here’s a hint … if your broker doesn’t offer a class where you go through the contract line by line, find one who does. The contract is your lifeblood and that of your clients, and if you don’t know it you and they are better off with you not being in business.

This is the time when there should be a premium on mentoring, but most of the mentoring programs are financially weighted heavily in favor of the brokers, chasing many agents off to seemingly greener pastures.

This is the time when pricing should be the key consideration for sellers. But the influx of new agents blinded by dollar signs and oblivious to the market realities means sellers always will be able to find an agent for their listing regardless of the price.

This is the time when many observers believe technology and the Internet will put enough pressure on real estate commissions to drive down what agents charge, whatever amount that may be. But the reality is commissions likely will rise as only a smaller segment of the agent population proves able to successfully sell a home. The idea of disintermediation loses some of its sway in a slower market, where it’s not enough to plant a sign in your front yard and wait for the buyers to come.

When there were more transactions taking place, formal training often could give way (to some degree, at least) to on-the-job learning. But it’s all but impossible to gain the needed skills and maintain those skills with one transaction every few months. And experience has shown few agents make the effort to extend themselves and stay current on changes in the market.

There’s a fanciful notion that the slower market will clear out all the marginal agents - those with little ability, little motivative, little knowledge, etc. And true, many agents who entered the market in 2004 now are seeking full-time employment elsewhere (assuming they didn’t get their license to practice real estate part-time on the side.)

But the ranks keep refilling like sharks’ teeth … another row of brand new agents stands ready to start writing checks as those in front of them fall out of the industry. The supply of those ready to make their fortunes as real estate agents is nearly endless.

If anything changes, it will be a return to the historic failure rates of new agents. It’s often said 90% of new agents never make it through their first year. That figure dropped back in 2005 when even Tobey could have sold a house without my assistance, assuming he had passed the licensing exams.

These days, however, many who enter soon will realize they likely shouldn’t have done so.

Has real estate really gone down that much?

The Keys News reports from Florida. “It took nearly an hour, but only a few minutes were needed Saturday for auctioneers to sell four residential properties and three commercial buildings. With less than 100 attendees at the auction, those in chairs seemed outnumbered by the agents moving around the room trying to generate bids.”

“A 2,000-square-foot home on Terry Lane sold for $800,000 and a 1,400-square-foot Terry Lane home sold for $500,000. In both cases, the bids were closed without any action from the crowd. Because of this, two similar properties on Terry Lane weren’t offered up for auction.”

“‘We didn’t feel like we were near where we could be, it was a disappointment,’ auction founder Ben Anderson said.”

“‘Has real estate really gone down that much?’ auctioneer Chris Camp asked after no one bid on a Third Street triplex that started out and sold for $600,000. ‘Yes,’ someone in the crowd retorted.”

“Anderson attributes buyers’ hesitation to the concern that the market hasn’t yet bottomed out. ‘It’s a buyers market and everything is shifting and changing,’ Anderson said, adding that buyers have ‘gotten off the bus.’”

“‘They’re going to walk around the block before they get back on,’ he said.”

The Montgomery Advertiser. “Colonial BancGroup Inc. has lent $6.4 billion for construction projects, five times the average for banks nationwide. Colonial lends money mostly to local homebuilders well known to loan officers, according to analyst Robert S. Patten.”

“Since 2000, Colonial has bought six Florida banks with assets of $3.5 billion. A seventh acquisition of a $1 billion-asset bank is pending. Many of the deals looked wise at the time because Florida’s economy was sizzling and home values were soaring.”

“Today, a Florida real estate bank must deal with plummeting sales and a growing list of abandoned projects, giving credence to the experts who told the Wall Street Journal that the state ‘is undergoing one of its worst housing recessions ever.’”

“‘Given that Colonial sees itself as primarily a real estate bank, they’re vulnerable,’ said Richard X. Bove, of specialty investment bank Punk Ziegel & Co.”

“Bove said the damage to banks with extensive Florida franchises has yet to show up in their financials. ‘Wait till next quarter,’ Bove said. ‘It’s not just Colonial. A lot of banks are going to have trouble. They’re all in a difficult environment right now.’”

The Sun Sentinel. “If home ownership is the American dream, the scene that plays out every week in Room 385 of the Broward County Courthouse is the American nightmare. ‘Case No. 06-19776,’ intoned the auctioneer, a foreclosure clerk named Barbara Pendergrass.”

“Near the back, Earl Lawrence leafed through his thick black binder and looked up the property, a small townhouse in Tamarac. Bought for $65,500 in September 2000, a foreclosure judgment for debts totaling $188,000 last December.”

“‘They borrowed themselves right out of a home,’ said Lawrence, of Hollywood, a real estate investor who has been coming to the public auctions for 25 years.”

“There were no bids on the Tamarac townhouse Thursday, apart from the minimum $100 that the foreclosing bank made to formally seize the property.”

“The real estate market has become so uncertain, and the debts racked up on these properties so high, even the vultures aren’t nibbling. ‘Would you buy a property for $420,000 if you could only sell it for $400,000?’ said Adnan Kabbara of Weston, a developer and contractor who has bought homes at auction for four years.”

“Properties that would have attracted a bidding war a year or two ago, when the real estate market was soaring, now stay with the lenders. The banks sell them through major national real estate firms, more frequently at a loss.”

“‘The party’s over,’ said Lawrence.”

“With more loans and homes skidding off the rails, the crowd in Room 385 isn’t going to thin anytime soon. As the auctioneer worked through the stack of folders on Thursday, investor John Derynda groaned that he should have brought lunch.”

“‘Two months from now,’ he said, ‘it’s only going to be worse.’”

“A few years ago, condo-hotels practically sold themselves. With real estate prices marching upward, the idea of owning a condo unit on the beach and covering some of the expenses through hotel rental payments seemed irresistible.”

“‘We weren’t salespeople, we were order takers,’ recalled Joel Greene, president of North Miami-based Condo Hotel Center.”

“Today, the market has sobered up. Condos aren’t selling and condo-hotels are caught in the same downdraft. In West Palm Beach, plans for The Harrick, a 138-unit condo-hotel at Lakeview Avenue and South Dixie Highway are on hold. ‘We’re redesigning it as a hotel,’ said developer David Gostfand. ‘The condo market is a little quiet at the moment.’”

“About 1,250 condo-hotel units have been opened in the past two years in Broward and Palm Beach counties, with another 2,500 units approved or under construction. That’s a small number compared with the 15,500 units proposed for Orlando or the 32,800 going up in Las Vegas.”

“Condo-hotel units that sold for $650 a square foot in the late 1990s are offered at $1,200 to $1,400 a square foot now. ‘The big question is with all these projects coming along at one time, are there enough luxury buyers?’ said (consultant) Jack McCabe.”

“Some developers concede that buyers must get a low price per square foot to have any hope of a return on their investment. Jim Clarke plans to begin construction on Clarkes Hotel, a 92-unit condo hotel in downtown West Palm Beach, within 60 days. ‘We’re virtually sold out, but our prices are low,’ said Clarke, who estimated an average unit costs $375,000.”

“Clarke cites a rule of thumb among hotel developers that to be profitable rooms should rent for a tenth of 1 percent of their building cost. If a buyer acquires a unit for $500,000, that translates to room rates of $500 a night.”

“‘That’s kind of hard to sustain down here,’ Clarke said.”

How will foreclosure rates effect flipping houses?

Real estate investing has changed since the closing of several lower tier banks. What will that do for people interested in getting into investing in real estate? It will definitely make it harder to cash out on a flip or rehab. I have used several B C and D credit banks like Freemont. I used Freemont several times and losing their special programs will make it much harder to get my houses financed, especially in the lower priced housing market. What can we do as investors to combat the tighter underwriting of the banks and mortgage companies that are left? The best way to work around the new rules is to offer lease purchase options or owner financing. Both of these options will allow you to get the house moved, but you will not be able to get your back end money without putting permanent financing on your investment property. I recommend trying a 2 or 3 year lease purchase. Please read my article on lease purchase options for more

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Buy and Hold?

lot of people these days are preaching about the buying and holding method of gaining wealth with real estate. There indeed may come a time in your life or business when youll want to hang on to a piece of property, although youll only be interested in keeping certain types of property. If youre just starting out, flipping a house may be an ideal way to get started.

Basically, there are three ways that you can flip a house, although each one has its own terms, motivation, and type of property. The first method is known as retailing. What this means, is that you buy a house in bad shape, do the repairs to fix it up, then turn around and sell it. There are a variety of houses in need of repairs out there, and several ways that you can quickly flip a house to net profit. All you need to know are the techniques that will get you the most money in the least amount of time.

The second way you can flip a house is though wholesaling. Wholesaling involves finding a home for sale then flipping it to an investor for a fast, yet small profit. To do this, youll need to know the real estate investors in your area, the types of homes that flip the best, and how to fund your property so you can flip it to them. If you live in a big area or a city, youll find that using the wholesaling method of flipping houses is actually easier to accomplish.

The third way to flip a house is by assigning the purchase. Using this method, youll commit to buy the house. Instead of closing the deal yourself, youll assign it to a real estate investor - of course for a small fee. The investor will take the contract over and close the purchase themselves - flipping the house. This can be very profitable, especially if you invest in the right home. You dont need to have your contract worded any special way to be legal, although you will need to determine the assignment fee.

If youre looking to break into the real estate market and make big bucks, youll need to learn all about flipping houses. Flipping houses is very profitable, especially once you have learned the basics. The first and third methods are the best, although they will both take quite a bit of work on your part. Restoring homes isnt easy, and youll need to have a team qualified to handle any repairs. Assigning the purchase may be difficult when you first start out, although it will get easier with time. If you stay at it and do your best to make a profit - youll be an expert at flipping homes in no time at all.

Real Estate Investing Can Make You Rich

If you are going to get rich, you may have to give up everything you ever learned in school and from your parents and start from scratch. Now that's not a definite by any means. You may not have to start over. If someone along the line taught you, for instance that it doesn't actually take money to make money, then you may already be on the right track.

That's right. Robert Kiyosaki, author of the Rich Dad book series, said it exactly like this: It doesn't take money to make money. I often hear people say it takes money to make money. I disagree. We had no money when we started and we were also in debt. It also doesn't take a formal education.

He then mentioned Bill Gates as someone who never completed a college education. Which would you rather have, a collection of doctorates or Bill Gates' money?

What it does take, Kiyosaki says, is determination and a willingness to learn quickly. But you also have to know what to do with your talents and, most importantly, to know which part of the Cash Flow Quadrant to generate your income from.

The Cash Flow Quadrant is an icon taught to him by his best friend's father, a man to whom he refers in his books as his rich dad. It is an illustration of what his rich dad called the four different types of people in relation to money: Employees, the Self-employed, Businesspeople and Investors. Each quadrant comes with its own outlook on the world. The outlook of those in the B and I quadrants are the ones that help make them rich.

When Kiyosaki says you need to be willing to learn quickly, he doesn't mean go back to school to improve your job skills. He means you should learn about investing, preferably investing in real estate. The rich dad on whom he based his books was a real estate investor. You can get rich investing in real estate because everything else depends on it. At the beginning of his book Cash Flow Quadrant, he pointed out how so many of Hawaii's businesses were sitting atop real estate that his rich dad owned.

But he doesn't just mean you have to learn the nuts and bolts of investing. You do have to learn about those things, at least to the point that you are able to intelligently choose a professional to help you with your investments. But more importantly than that, you have to learn how to think like an investor, and possibly a bit like a business person too.

That is a far cry from thinking like a Self-employed person. According to Kiyosaki, a self-employed person is someone who owns a job, not a business. You don't own a true business, he said, unless you can leave it for a year and return to find it still making money for you. Businesspeople, he said, know better than to try to do everything themselves. In order to save time and money, they hire people to do the things they can't do or don't have time to do. That's why hiring a qualified real estate professional to guide you in your decisions can be a good investment in and of itself.

However you decide to do it, learning the nuts and bolts of real estate investing yourself or by hiring a qualified person to advise you, it is definitely time for you to move to the I quadrantthat is, if being rich is something you'd like to consider.

About the Author
Investment Property Specialist - Alex Anderson Connects Real Estate Investors With High-Quality Investment Properties. Get A Free Copy Of, "The Investor's Rental Guide"

What is a sandwitch deal?

This is a great way to make money in real estate especially if you do not have alot of money. The object of this type of deal is to find a motivated buyer and seller and place yourself in between. This is a very easy way to make alot of money with absolutely no risk. Here is an example of a sandwich deal. Find a motivated home owner who wants 100k (for example) for his home. Find out how much the home is worth on the market. If the house is worth 10% or more, make him the following offer: I will lease purchase the home from you, but you have to give me a break on the price and I cannot put anything down. If he says no and it is a good enough deal, try and work something out or just leave. If he says yes, get them to sign an assignable lease purchase agreement. Make sure it is assignable, because you now have the ability to lease the home to someone else or sell it for anything you want over the sale price. Now here is the best part, put a for sale or lease to own sign in the yard and find someone to put in the house. Make sure and get the owner to put in the lease when they will vacate (sooner the better) and do any small cheap touchups that will make it sell faster. I normally run ads in the paper that say something like Lease purchase in all areas. Now, how much do I make? I usually try and get 10% off the sellers price and ad 10% to my ask. That makes a 20% profit for doing very little work (no credit used and no risk) When i say there is no risk, that is not entirely true. You usually have about 30 to 45 days to get someone to give you an earnest money check to cover your first lease payment. There is a way to make more money in the long run, but less up front cash. Instead of selling the home, lease the house for 10% down and ad 20% to the sales price. Most people who lease to own never worry about the price of the home, just the payment. Give them a payment that makes you $100 or so dollars per month and wait for you payoff. Remember that only 20% or so will ever buy the house so you will be able to keep the downpayment they made and re lease the home when they leave. I try and save up a few months rent incase someone skips out on me. If you get 20 or thirty of these lpos going, you are making good money per month and you have zero liability for the house. Here are some items to always watch for:
Make sure you pay the house not directly to the lender (not original owner)
do not make any repairs to the house
make sure the lease contract is assignable
try and get as nice an area as possible
do not give the home owner any cash unless it is a great deal
have an amount you want to make on each deal or walk away.

how do i refinance my home

Do you have questions about refinancing your primary residence? This decision can be very important to your bottom line. A great way to start your investigation on refinancing is to look at a comparison site like http://www.lowratebroker.com