Tuesday, November 25, 2008

A Thanksgiving Prayer

Thank you Father for the blessings you've given this day.

Help us to remember, Thou has shown us the way.

And give us strength to help those in need.

Never letting us forget, Thy merciful deeds.

Keep us in Thy tender loving care.

Save us, O Lord, when we are in despair!

Give us grace as we walk through life.

Inspire us to seek our brothers amid the strife.

Victory in Thee will be our guiding star.

In courage we march not caring how far.

Now we ask for the most important thing.

Grant us salvation to escape death's sting.

Copyright by Jim Smith

Friday, November 7, 2008

The Foreclosure Myth...

Now this might be a little longer than usual but well worth reading...

The hot topic today in real estate is foreclosures. The question is, are they a good deal and should I buy? First of all, the vast majority of foreclosures are happening in California, Florida and other high profile markets. The foreclosure market in Alabama is relatively benign, containing only a fraction of the foreclosures in the above mentioned markets. This is because Alabama did not experience the false appreciation created by speculators and sub prime lending. We were not overbuilt. Therefore, we are not over supplied. Our markets are still relatively in balance.

So, are they a good deal and should I buy a foreclosure? There are always good opportunities in the market, whether it is a foreclosure or a traditionally marketed property. Most foreclosures, however, are not the great deal they are portrayed. The reason being is the properties are being foreclosed because the purchasers of the properties are walking away from the mortgages. The issue is not that these people can’t afford their mortgage payment. Instead, it is that their property is not worth what they paid for it, due to false appreciation and overbuilding. Example: A purchaser in California pays $500,000 for a house and borrows $550,000, which is another story. Three years ago, the same home sold for $250,000 causing 100% appreciation in just three years. That is false appreciation and is unsustainable. Over the years, sustainable appreciation is typically 10% or less per year. That being the case, the $250,000 house bought three years ago would realistically be worth no more than $325,000 today or $175,000 less than the mortgage amount. Note: Quarterly appreciation in Alabama for the last 17 years has been between 1% and 9%.

What the above example means is with the property being worth $325,000 or less, the purchaser feels it is a better decision to walk away. This allows them to work towards restoring their credit rating in only 2 or 3 years instead of taking many years and paying interest before the principal is reduced to the actual value of the property. The banks foreclose on the false value, leaving the prospective foreclosure purchaser thinking they have a bargain at $400,000. In fact, they have just overpaid by at least $75,000. Condition can also be a major problem in foreclosed properties as they are typically gutted and abused, creating additional expense.

The fact of the matter is, if you are a real bargain hunter, you are probably better off looking for a home that was purchased 10 or more years ago. A home that was purchased a decade or so ago, will have significant and real equity. Assuming the sellers are motivated, (i.e. death, divorce, job transfer, etc.), they can sell at a discounted price and still accomplish the goals set when deciding to sell the property.

The bottom line is: Do not fall for the term foreclosure. More times than others, a foreclosure is not the deal you think it is. In fact, it is just the opposite. Whether shopping for a foreclosed property or not, as a professional I can help you make good decisions. I am able to do a market analysis on any property to determine if it is fairly priced or over priced. We can help you negotiate the price and terms and navigate you through the confusing mortgage market. Contrary to media reports, mortgage money is plentiful and interest rates are extremely low. I will make an appointment for you to meet with a reliable and honest in-house mortgage banker. He will give you professional advice in helping you choose the best loan for your needs. We are proud to say that ERA Mortgage did not participate in sub-prime lending.
Should you have any questions about foreclosures or real estate in general, please feel free to contact me at staceym@era-king.com