Market News & Commentary Compliments of My Friend Chris McLaughlin of ShortSalesRiches.Com

Market News & Commentary by Chris McLaughlin


The Presidential candidates both fell over each other today trying to see which one could be the most bipartisan. Democratic nominee Barrack Obama called Republican nominee John McCain offering to issue a joint statement on the proposed Bailout plan. McCain then beat Obama to the punch a few minutes after the phone conversation and announced to the media that he was all for a joint statement, while also suggesting that the debate this Friday be delayed so that they could work together on the economic problem the country faces. "It has become clear that no consensus has developed to support the administration's proposal," McCain stated. "I do not believe that the plan on the table will pass as it currently stands, and we are running out of time." McCain said he would return to Washington this Thursday to focus on putting a deal together. No word yet on Obama's plans.

In real estate news, the National Association of Realtors (NAR) announced that national home sales dropped 15% in August from the year ago period and the median price declined 9.5% to $203,100. There was a 2.2% decline for the August over July period. Lawrence Yun, NAR chief economist, noted that interest rates rose in August from July, but the recent bailout of Fannie and Freddie has led to a significant drop in interest rates, which should help housing affordability.

"However, home sales will be constrained without a freer flow of credit into the mortgage market. The faster that happens, the sooner we'll see a broad stabilization in home prices that in turn will help the economy recover," Yun said.

Now for our educational tidbit today ... we're going to focus on things that show up at the last minute when doing short sales...

When it comes to short sales, there are a few lions and tigers and bears for the buyers to be aware of but with a little planning and preparation you will have nothing to fear. In fact, use this quick checklist to stay alert to potential profits while walking away from common pitfalls that trip the unsuspecting.

1. Taxes. Taxes come in all shapes and sizes when it comes to short sales, bankruptcy and foreclosure; from property taxes to Federal Income tax liens, the property may be encumbered by a variety of taxes which could impact the deal. While property taxes are relatively easy to deal with, large Federal income tax liens may not be worth the hassle and headache required to clear the property, although we have done several where the US Treasury was willing to do a lien release (and partial lien release). Do your homework to determine the viability of the project and be sure to set aside funds to cover any taxes that become your responsibility with the transfer of the property.

2. Liens. Make no assumptions when it comes to liens; even brand new homes may have mechanics liens from builders or developers that failed to pay sub-contractors. Homeowners may have contracted improvements or work ranging from simple repairs to full blown upgrades. Other common liens include HOA fees, utility assessments, etc... Liens often become the responsibility of the buyer so take time to investigate potential liens when negotiating for the purchase price of the home. And I can tell you one thing about HOAs: they are a pain! Think about it: these typically are retirees with way too much time on their hands. They will spend $2,000 in legal fees putting a lien on a property for a $350 lien. I've seen it time and again. Recently we faced a situation where the HOA wanted to charge $200 for a payoff letter that would be given to our title company. I always advise my clients that if they are able, PLEASE STAY CURRENT on HOA fees, they are more trouble than they are wo
rth when it comes to eliminating them at closing.

3. Permits. Improper work permits, zoning violations and other irregularities have resulted in higher than anticipated expenses for more than one buyer; understand what work was done, by whom and in accordance to what standards before making an offer. Work performed without proper permits or out of accordance to modern building standards should be considered a liability rather than an asset in today's competitive market.

4. Easements & Restrictions. Know what you are buying before making an offer. Although it sounds simple enough, irregular parcels, easements and other restrictions can be tough to track down especially in rural areas or when property was transferred within a family. Homeowners associations frequently place restrictions on the use or transfer or property which may also impact your plans - take time to understand what is and isn't allowed before making an offer.

5. HELOC's, 2nd's and Other. Distressed homeowners may have Home Equity Lines of Credit, 2nd or even 3rd mortgages plus a host of other potential liabilities that could impact the deal. Make a point of understanding - and explaining - how each is likely to impact the outcome of the deal for you and the current owner. Not only is it the right thing to do but it also increases the likelihood of a successful closure. I know of one sad situation where a homeowner was unable to make their first payment but had enough to make their payment on the 2nd. Not understanding the priorities of lien, the homeowner stayed current on their 2nd mortgage but not on their first! It is important that you NEVER tell any client to not make their payments, but in a situation like the one described you can explain lien priority and the client can draw their own conclusions.

More tomorrow...

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

P.S.: Did you hear about our amazing Webinar that we're doing tomorrow night at 9 PM ET (6PM PST)? It is f.ree of charge to you! Nathan Jurewicz and I will be live on the web explaining the Top 5 Traps to Short Sales Investing, and we'll have some new information that you won't want to miss out on. We only have room for 20 more seats, so if you're interested please go now to: https://www2.gotomeeting.com/register/798484502

P.P.S.: Have you thought about building an investor-focused short sales business? There's never been a better time. Go now to http://www.shortsalesriches.com/html and take action today! Call me on my cell at (863) 698-6592 if you have any questions. Call anytime.