Jeremy Brandt

House Swapping - Valuable Service or Waste of Time?

I recently spoke with SmartMoney magazine about all the home swapping web sites that have come out of nowhere over the past 6 months. 

These sites have received an incredible amount of publicity on national TV, in newspapers and throughout the web.  The pitch is this - if you can't sell your house, why not trade with someone else in another market that also can't sell their home.  The stars align and you can trade homes without having to worry about selling on the open market.

No question these sites are making easy money.  One claims over 40,000 listings at $20 a pop ($800,000 in revenue in less than a year).  Most of these sites also sell your information to real estate agents, mortgage brokers, foreclosure "rescue" companies and the like creating another lucrative revenue stream.

The question is: Is anyone actually swapping houses?

By my estimates, much less than 1% of people who contact these sites ever "swap houses" with someone else. 

None of the home swapping companies will release how many houses are actually swapped - and with good reason.  If swappers knew that they had almost no chance of a successful transaction, they wouldn't pay the $20 or more to one of these companies.

Just thinking through the logistics of what has to happen for a swap to be successful makes it clear that very few (if any) transactions are completing.

If your home will not sell on the open market (listing with a real estate agent), and a discount property buyer won't purchase it, the likelihood of finding someone that is in a market you want to move to, and has a house you would like, and is in your price range, that also wants to move to your market, and likes your house, and your house is in their price range - is minuscule at best.  If you ever do find a match, the real work of getting financed and the logistics of closing begins.

Distressed home sellers have a number of viable options in this market, swapping houses is not one of them.

USA Today Housing Roundtable - Just Walk Away?

I had the opportunity recently to participate in a USA Today roundtable on the housing market .  It was a great way to share some of my thoughts on investing, foreclosures and what home owners should do given the current housing market.  I was surrounded by some very smart people from various industries.

One of the questions posed by the reporter was "What if you can't pay your mortgage, yet can't sell your home for enough to pay off your mortgage? Should you mail in your keys and walk away?" 

Unfortunately, one of the supposed "experts" actually suggested this is a perfectly rational choice for many people -

People should consider the risk to their credit rating vs. how much they can save. In some cases, walking away might be a perfectly rational choice. People may owe $500,000 on a home that is now worth $300,000. You (might be able to buy a much cheaper) home across the street and put $200,000 in your pocket. That might be worth the risk to your credit rating. Furthermore, since this is happening on a very large scale, my guess is that plenty of lenders will still be happy to issue loans in a couple of years to people who walked away.

I am amazed that this continues to be the opinion held by some in our community.  Home owners need to take personal responsibility and try to work things out with their lender.  "Just walk away" is the head-in-the-sand type of attitude that got many home owners in the place they are in.

If you are a home owner facing foreclosure, the very first thing you need to do is call your lender, be up front about your situation, and try to work out a payment plan.  Most lenders are very willing to work with you.

If you can't work something out with your lender and you have some time, list your home at a discount with a real estate agent.  Find someone who is very experienced with short sales, be sure they have closed successfully on at least 2 or 3 as the listing agent.

If time is short, call a reputable real estate investor in your local market.  Experienced investors can purchase your home quickly and prevent a foreclosure on your credit report.

1-800-CashOffer on CNBC

Today, CNBC focused all day on the "Home Front"; interviews and topics related to the real estate market and foreclosures. 1-800-CashOffer and our customers received some great coverage.

You can view the segment here: 1-800-CashOffer on CNBC

CNBC Interview

Last Friday CNBC interviewed me on the state of the real estate market as it relates to investors, foreclosures, short sales, and a few other things.  They also spoke with one of our great investors in the Philadelphia area who was able to talk in more detail about what he is doing with short sales, and how the market is for him.

In short, I said that now is a great time for residential real estate investors.  It is separating the serious business-minded investors from the "seminar junkies" who have been following a formula to buy (flip) houses, and don't know what to do as the market shifts.

For the serious business person, you must change with the times, constantly re-evaluate your strategy, and not get complacent with what works today - because it likely won't work tomorrow.

With the glut of inexperienced investors being churned out by afternoon TV shows, late night infomercials, and "real estate gurus" - I believe the market shift is a welcome sight for most experienced investors.

Be looking for the CNBC segment sometime later this week!

CNBC Blog Post on 1-800-CashOffer

Short Sale Basics

1-800-CashOffer & Credibility

It is true that the best ideas are sometimes driven by necessity!

We recently launched a company called 1-800-CashOffer because we saw a huge unmet need in the marketplace. 

Residential real estate investors serve a very important function in the real estate economy.  By purchasing, fixing up and selling property that is in disrepair they improve neighborhoods, increase property values, and provide an outlet for property that would otherwise sit vacant.  They purchase homes going into foreclosure and both save a person’s credit in a tough situation and provide an outlet for the bank to quickly sell the property (banks do not want to foreclose, they do so because they have to).

Unfortunately, because of the actions of a few un-educated, un-professional, and un-scrupulous investors that have gone to a get-rich-quick seminar – the industry has started to get a black eye.  The increased rate of mortgage fraud some so-called investors have been involved in has not helped any.

1-800-CashOffer was created so that scrupulous, honest investors that have the ability to purchase a home for cash and close quickly, can operate under a national reputable brand that consumers can trust.

Home sellers can feel confident that they will be treated right and that the real estate investor is experienced and will follow through on their commitments.

We have combined 1-800-CashOffer with our “Certified Professional Homebuyer” program that certifies an investors experience level and ability to purchase a home quickly for cash, in addition to holding them to a higher standard of ethics.

Real Estate Auction - Dallas Penthouse

Some friends are auctioning a luxury penthouse in downtown Dallas tomorrow.  This will be an absolute auction, so there are no minimums and no reserve price.  If you would like to observe the auction or join in and bid here are the details:

Preview: 6/14 from 4 - 6pm
Auction: 6/15 at 10:30am
Location: In the penthouse being auctioned, at 1505 Elm Street, Dallas, TX.
Details: 10% deposit required on day of sale if you are the winning bidder
Auction Web Site: Higgenbotham Auctions

Property Details:
•  8,000± total s.f.
•  6,097± s.f. living area; 1,902± s.f. balcony
•  Living area could be increased to 10,000± s.f. by the addition of a second floor “loft”
•  17th floor location
•  Shell condition; interior ready for custom design to your own specs
•  Penthouse owner-controlled express elevator service
•  Spacious balcony with dramatic views
•  6 parking spaces
•  25’± ceilings
•  16’± tall windows
•  270º downtown view

This Penthouse receives full access to the
building amenities, including:

•  24-hour resident and guest valet parking
•  24-hour door concierge and security
•  Rooftop pool garden, dog run & private party pavilions with gas grills
•  Fitness center w/ commercial equipment, yoga area, free weights and machines
•  Private massage room for residents’ use and brand new spa and changing area
•  Moroccan-styled party lounge with kitchen & billiard room
•  Movie theater with huge screen, HD projector and entertainment area
•  Climate-controlled wine vault & dining area with complementary individual wine lockers for each residence
•  Deeded individual storage room on same floor as residence
•  High-speed elevators with dedicated services and move-in elevator

HUD Anti-Flipping Laws

Wednesday the U.S. Department of Housing and Urban Development ruled that homes sold within 90 days of purchase will not be eligible for FHA financing.

The rule will go into effect July 9 and homes sold between 91 and 180 days after purchase will require additional documentation if the sales price is 100% or more of the previous purchase price.

This is another example of a government entity attempting to regulate an industry without understanding the core issues, much like the recent lease option law in Texas.  Preventing a home owner from easily selling their house within 6 months of purchase does nothing to protect the potential buyer, and certainly won't stop fraud.

Flipping refers to selling a house quickly after purchase for any reason and is in no way illegal.

If HUD wants to stop mortgage fraud (which is their stated intent), they should crack down on mortgage brokers and appraisers that act in collusion to provide an appraised value of a property that is more then it is actually worth.  As long as an appraisal is legitimate and reasonable, there should be no problem providing FHA financing on a property.

The most ridiculous part of this ruling is that HUD itself is exempt, along with Fannie Mae, Freddie Mac, and housing agencies.  "Do as I say, Not as I do".

Most Expensive Zip Codes

Forbes reports on the Most Expensive Zip Codes in the US.

The most expensive?  11962 in Sagaponack, NY with an average home sales price of $2.7M!

                                       

Rank	ZIP Code	Location	County	State	2005 Median Sale Price ($)
1	11962	Sagaponack	Suffolk	NY	2,787,500
2	92067	Rancho Santa Fe	San Diego	CA	2,445,000
3	92662	Newport Beach	Orange	CA	2,397,500
4	94528	Diablo	Contra Costa	CA	2,266,000
5	94957	Ross	Marin	CA	2,247,500
6	11976	Water Mill	Suffolk	NY	2,150,000
7	93108	Santa Barbara	Santa Barbara	CA	2,050,000
8	90402	Santa Monica	Los Angeles	CA	2,005,000
9	92661	Newport Beach	Orange	CA	1,996,500
10	33109	Miami Beach	Miami-Dade	FL	1,942,500

Here is the rest of the list

See also What type of Home $1m Buys you

Home Sales Up in March

From ABC News:

Two reports released this week suggest that March was a solid month for the U.S. housing market, an unexpected turnaround for a housing market that had slowed down.

The National Association of Realtors reported that existing homes sold at a seasonally adjusted annual pace of 6.92 million units in March, up from February's pace but below the year-ago level.

The Census Bureau said new home sales showed surprising strength as well. Buyers scooped up new homes at a seasonally adjusted annual pace of 1.213 million units — 13.8 percent higher than in February.

Both reports outdid analysts' expectations.

Wasn't the housing market supposed to be slowing down? Yes, analysts have been talking about an expected slowdown for the past year.

It's said that as interest rates go up, buyer interest wanes. Freddie Mac said the interest rate on a 30-year fixed-rate mortgage was 6.32 percent, 0.39 percent higher than a year ago. So where's the slowdown?

If you dig into the reports, though, you will begin to see signs of a weaker market.

Median prices for both new and existing homes were flat, or down in March. The median price for existing homes was $218,000 last month — same as in February. New homes saw the median price drop $15,700 to $224,200 during March as builders began to cut prices to get rid of inventory.

"New home sales sprang back to life like a vampire in a cheap horror flick," said economist Bob Brusca. "And like that zombie in the movies, housing really is dead. Don't let all that twitching fool you."

Analysts suggested that inventories — the number of new and existing homes for sale — are at multiyear highs, and that's a sure sign that the market is slowing on the demand side.

At this point, the country could sell new and existing homes for five-and-a-half months without adding a single new "For Sale" sign. That's a level we haven't seen in more than seven years.

Undervalued Investment Areas

CNN/Money ranks the most over and under valued areas for real estate in the country.  8 of the top 10 most undervalued areas are in Texas.

                                                                                                                                                                             

Killeen	TX	$98,100	-12.20%
Abilene	TX	$69,900	-12.40%
Beaumont	TX	$72,200	-12.70%
Memphis	TN-MS-AR	$105,800	-13.00%
Montgomery	AL	$103,000	-13.40%
Houston	TX	$107,900	-16.50%
Fort Worth	TX	$105,500	-17.30%
El Paso	TX	$88,900	-17.90%
Dallas	TX	$127,900	-18.50%
College Station-Bryan	TX	$94,400	-22.70%

For those of you who invest nationwide, Texas is looking very attractive!

The most OVER-valued areas in the US (again according to CNN/Money) are:

                                                                                                                                                                                               

Metro	State	Median price	% over/ undervalued
Naples	FL	$367,100	96.30%
Merced	CA	$287,000	86.20%
Salinas	CA	$611,200	83.80%
Stockton	CA	$339,800	79.50%
Madera	CA	$290,100	77.00%
Santa Barbara	CA	$638,000	76.70%
Port St. Lucie-Fort Pierce	FL	$233,900	75.00%
Riverside-San Bernardino	CA	$320,600	72.90%
Modesto	CA	$317,500	72.30%
Medford	OR	$268,400	69.70%

Looks like the smart money is moving out of the coastal states of California and Florida!