Back to flat fee listing

Well, I've gone back to flat fee listing services on both my houses for sale after wasting 2 months with a full service Realtor. The first Realtor was totally unprofessional while the second just wasn't interested in selling the property. At least that is the impression he gave me.

For my wholesale house I am using a new service called IggysHouse which has no charge at all (most flat fee listing services charge $300-$700 for their service). The flat fee listing service that I had for my more expensive rehab is going to give me the balance of my listing time at no charge, but I expect there will be a renewal fee.

I'm also considering a rent to own option for the rehab house. The main problem is that it will give me a big negative cash flow and leave me with a house still unsold next fall if they renters don't buy. I feel I am in lose-lose situation with this house at this point. There are no good options.

• refinance and rent - drops payment $300 per month but lose another $4k upfront and still lose money if I rent it
• drop price under $200k per Realtor recommendation- lose money (already spent over $201k and rising $2300 per month). Unknown how long it will take to sell at this price.
• rent to own - lose probably $800 per month for next year and hope buyer gets financing. Only 30-50% chance of that, so I most likely will have the house vacant again next fall

I had convinced my wife to invest in real estate this year so that she did not have to get a job. I was sure we could make $20k. Looks like I will lose at least $20k this year with no end in sight.

Realtors aren't so great

I've kicked myself for not putting my houses with a professional Realtor, but now realize a Realtor is not a panacea.

I've had my rehab house with a Realtor for 50 days now and here are the results:

• 2 showings
• no flyer box despite repeated requests
• one open house last Sunday without my agent - no advertisements were made at all for the open house, no signs were put up in advance, no mention in the MLS and it was only open 1 hour. Not surprisingly only 4 people showed up
• no magazine advertisements.

I chose the top agency in this area and asked for a top agent. I got garbage. Last night I fired the agent and demanded the #1 seller or else I was going to change agencies.

I was getting 10-15 showings a week when I was doing FSBO using just street signs. I read all this great hype about what agents can do but don't see it.

Maybe I should kick myself instead for using an agent

Rent to Own (Lease-Purchase) Real Estate

I've been struggling lately to sell 2 of the properties that I purchased this year. One a fixer-upper wholesale flip hasn't had a bite for 6 months, the other is a nice rehab that I am trying to sell at the upper end of it's neighborhood price range. The first property is in Buffalo, the second within a mile of Buffalo.

The first house that I purchased for investment in this area was a 1.5 story brick cape in the town of Lancaster. Lancaster is the fastest growing suburb of Buffalo. We purchased the house for $80k. The basement was full of water and it had sat on the market for nearly a year. We spent about $19k rehabbing it with about $8k going to drain tile. Since our cash flow was very tight I couldn't let it sit on the market for long, I decided to try to sell it as a lease-purchase.

I had learned about lease purchase primarily from a course I purchased through Ken Preuss. For this property I put up one sign in front that said "Rent to Own". This sign generated over 500 calls last year and we quickly leased the property to a family. Rental rates are quite low here and a typical home rents for ~$900 per month. We were able to get $1050 and a $2500 non-refundable option payment. The lease agreement specified that the tenants pay the first $200 of repairs, so my maintenance for last year was $0 and the property generated a positive cash flow of $300 per month.

The tenants took care of the property and actually made improvements (installed a new bath room floor and a nice ceiling fan in the kitchen) at their own cost. In the end they decided to buy another house and have moved out leaving me with their option money. We put our "Rent to Own" sign out again 2 weeks ago and were again flooded with calls. This year we have a $3000 option payment and raised the rent to $1075. The option amount is for a sales price of $139k and we give the tenants $500 rent credit towards a down payment if they pay by the first. We quickly found another tenant.

For a rental property this method really seems to work well. The advantages:

• the rent we get is about 20% above current market rates
• the rent credits really motivate the tenants to pay on time (I used to have to chase tenants down in my previous days as a land lord)
• the upfront money we get seems to motivate the tenants to take care of the property
• we don't have to worry about the nitpicking small maintenance items that used to get me out of bed at 2 am
• the selling price is higher than what I think I would get by putting the property on the market

The one disadvantage has been that I cannot get my equity out of the property, although I was able to recover all of my down payment and rehab costs by getting a HELOC type loan on the property.

The concept does have it's limitations. For starters,we are at the upper end of the rental market here and I don't think I could do this for my Cheektowaga home. I would need to rent that one for $2000 per month just to break even and I have never seen any houses advertised for that rate here (although there must be some available through re-lo offices of local Realtors). Preuss also talks about getting $5k to $10k as option money, but that is too high for our area. $3000 seems about right. The rent and option money really drops the number of qualified people significantly (95% self-eliminate when they find out the terms) at the price range I am charging.

The courses I have taken talk about focusing on "bread and butter" homes. It seems that this house is such a house for our area. The other 2 are either too highly priced for their location or the location is so bad no one wants them. Modifying my house buying criteria might help me turn a very negative year around next year.

Selling My Fixer Upper - Real estate turns sour

I purchased a fixer upper using a short sale in February thinking I could make several thousand dollars. I initially priced the house at $25k FSBO and was probably too greedy. I had an interested buyer the first month but would not reduce my price sufficiently for him to bite.

After a couple of months I put the property on the MLS using a flat fee listing service. I got one bite from a NYC investor and thought we had an agreement to sell at $17k. But she backed out.

Last week I tried listing the house on EBay with a starting bid of $12,700. But I had no bids. Tomorrow I will list with a full service Realtor. The main problem is that local Realtors charge a minimum of $3000 commission. I bought the house for $5k but with closing cost, attorney fees, back taxes and ongoing tax and clean out I have $11k into this property. My dream of making several thousand dollars profit has been eliminated and I am just hoping to break even now.

Unfortunately, this past weekend a drive-by shooting occurred one block away with 2 people dying and several more injured, so I am not too optimistic about selling.

I got into real estate last year so that my wife could stay home, but with neither of the houses selling after 7 months, she has been forced to find work. Our other 2 properties are vacant which drains $3500 per month from us. A few more months of this situation and we will start facing the fate of the people that we have been buying from.

9/11 - Not a Tragedy

Much is being written today about the "tragedy" that occurred 6 years ago on 9/11. I can remember clearly the morning of that day while visiting my parents in Massachusetts. A friend had just rang the door bell and told us an airplane had accidentally hit the World Trade Center. We turned on the TV in time to see the second plane dive into the other tower. At that moment I knew this was no accident and hence not a tragedy, but an act of War.

Today some 40% of the population is in total denial about the threat of Islamo-fascism. And an equal number thinks that the attacks were an inside job. These people are so demented that they overlook basic science (how is steel made?, what is modulus?) and cling to hatred of President Bush over all reason.

But, like Hitler, the threats from Bin Laden and Ahmadinejad are real and to be taken seriously at our own peril. Some point to the fact that we have not been attacked since 9/11 as "proof" that this is not real. The facts are that Al Qaeda has not attacked us because they can't. Our offensive and defensive campaigns have neutralized much of their capability. However, if they see an opening, they will attack again.

And there-in lies the problem. The left is so intent on bringing down opposing views that they are willing to do whatever it takes to bring another attack on the US. The ad in the NY Times (General Betray US) is one of the most despicable, treasonous things I have seen in my lifetime.

During the McCarthy hearings, the Senator was asked "Do you no sense of decency?". This ended McCarthys credibility. Moveon.org and DailyKos have gone way beyond decency and literally make me ill.

The one fact that those who oppose this fight fail to realize is that we are dealing with evil. Evil cannot be ignored, only defeated.

Foreclosure auctions

I attended my first foreclosure auction this morning. I had bought some houses before foreclosure earlier this year but have never been to an actual auction. After I saw a real estate transaction for the first house I tried to do a short sale on (which sold for $26k after I had tried to buy for $47k by negotiating with 2 banks that did not bid at the sale), I decided to attend an auction.

This was for the nicest property yet that I have tried to buy using short sale techniques. The home is in my area where houses typically sell for $110/sq for (this was a 2500 sq ft home). I had negotiated a deal with the second mortgagee to take $12k for their $30k note, but decided not to follow through when the payoff of the first changed from my estimate of $203k to $212k. The home needs a little work and the owner is intransigent (so it will take some doing to get him out). I figured the home is worth ~$215k.

There were 2 auctions this morning. The first was a property in the next town that was owed $112k. Bidding was furious and ended at $191k. I figured that the property I was interested on would have an equal interest.

However, there were only 3 of us interested and I did not even bid. The second lien holder had sent a young scruffy man to bid on the house and he had announced that he was going to bid $240k. So no one bid on the house. Obviously, no one believes that it is worth $250k at this point. I was the only one who had been inside the house and knew the condition.

I've sent a note to the second lien holder and offered to buy it at $217k. They are a West Coast investment group that bought the note from a major bank. Obviously, they have a distorted view of real estate and especially are unfamiliar with this market. This will be an interesting one to watch. I think that they will lose their lunch on this house. I have yet to work on a foreclosure where the bank did not lose more money by going through with the foreclosure rather than accepting my offer.

People (investors) often don't know when to cut their losses. It's probably the hardest thing to do is sell when you are going to lose money. I have faced the same dilemma with stocks. Bought $50k of my company stock at $66 per share, watched it go to $84 per share and then drop to $38 per share. It took me 5 years to sell it at $48 per share and still today it sits at $46. I missed a great stock run-up holding on to a loser due to an unwillingness to take a loss. It's hard to admit a mistake.

Saving over $456k on cars

Consumer Reports wrote how y0u can save $31K by buying a car and driving it for at least 200k miles. Many people are looking at ways to save nickles and dimes while ignoring a potential windfall by buying and maintaining their cars correctly. Most people look at cars as too costly or feel a need to get rid of them when they reach 100k miles.

This is really an outdated view of the quality of today's cars and reflects thinking from the 60's. Some say "they don't build them like they used to". Well thank God for that. Today's cars are vastly superior to what was built in the 60's and 70's. Most cars today can easily go 200k miles and many probably 300k. Most cars today need only minimal maintenance before 100k miles (like oil changes). I think all cars can go over 100k without a tune-up which is a big switch from the days I bought my first car. I have written here and here about how I save money on cars.

Of the dozen cars I have owned I have only had 2 that I sold before they had 200k miles - a 92 Ford Club wagon and a 98 Dodge Intrepid. I would have kept the Intrepid. It was in great shape, I loved the design and when it was running, it ran very well. Unfortunately, it had 3 sudden electronic failures while I was travelling several hundred miles from home and it cost me ~$3k each time to have it fixed since I had to rent a car, travel home and then drive back to pick it up. So I unloaded it mostly out of frustration. The Ford was just a poorly built vehicle.

So how do I save more than $31K on a car? I only buy cars with at least 90k miles on them. So I avoid the following costs:

• I pay cash (I buy on Ebay), so I have no interest charges (saves $10k per Consumer Reports)
• I buy after the car is nearly completely depreciated. So I pay $4k Vs $30k. If I only keep my used vehicle 7 years, I pay $8k to compare with the CR example - a savings of $22k over 15 years
  
• I don't carry fire, theft or collision ( I pay less than $500 a year for liability coverage on my 2 vehicles - this saves $1000 a year (that's $15k in CR's example)
• By maintaining my vehicles I avoid costly breakdowns (e.g. changing the timing belt)

I also use synthetic motor oil, which I believe substantially reduces engine wear (and improves gas mileage). The biggest obstacle to keeping a car here is rust (they use a lot of salt on the roads in Buffalo!)

The best (and cheapest to maintain) cars I have had were Honda's, Toyota's and Cadillac's. My 2 Chevy Ventures have also done well. I think the Honda could have gone 500k miles.

Based on the CR example of saving$31k, I save an additional $45k over the 15 year example period for a total of $76k. So if you are the average family that has 2 cars for 45 years that is a savings of $456k that you can bank for retirement. This is big money. Maybe you can afford to splurge on a couple of Latte's to reward yourself and stop clipping coupons.

Update:
Is my math right? Some question it.

First, I am assuming Consumer Reports math is right. If so, that's $93,000 of savings per car over the 45 year period that is my base case (your working years). The average American family has 2 cars simultaneously during that time so that's $186,000 in savings based on CR.

Second, Consumer Reports states that you pay $10,000 in interest per car, so if you pay cash for a used car you will save another $20,000 every 15 years. As cars get more expensive and people finance them for longer periods this will go up. For the 45 year period that's $60,000 in savings. So we are up to $246,000 in savings.

Third is purchase price. I assumed that you bought a new car for $30,000. I own a mini-van and a 4 door Toyota Camry. The van retails for $35,000 plus sales tax, while the Camry retails for $24,000 plus taxes (Sales taxes would add another $5k here in NY, but I''ll ignore that for now). On average, ~$30,000 in 2007. I purchased my van on EBay for $3500 and the Toyota for $4000 - no sales taxes. Now to get the same mileage, I'll probably have to buy 2 used cars rather than the one car CR uses in their 15 year example. So my savings over 15 years is ~$44,000. During the 45 year period the price of a new car will inflate much faster than the prices of used cars. But to be conservative I'll keep the differential the same. For the two cars I will own simultaneously, that's another savings of $132,000. Now my total savings is $378,000.

Fourth is savings on auto insurance. I never buy collision or theft insurance. But if you have a loan you must carry it. How much you pay for collision insurance depends on the type of vehicle you drive, where you live, your age, gender, driving record and even credit score. So, I am only guessing about the extra cost here. But for most people, I would guess the surcharge may be $1000 per year. This will also increase as cars get more expensive. But for my example, this is $45,000 in savings.

Total savings is now $423,000 over the typical way people buy cars. Will I pay more in maintenance. Maybe, but except for 2 cars that has not been the case. The only non-routine maintenance I did on my Honda Prelude was to replace a water pump which I drove over 250,000 miles!

Ebay Real Estate Auctions

I've been thinking about auctioning off my Buffalo property on Ebay Real Estate. It's been for sale for 7 months now. I had one offer for $17k from some woman in NYC but she failed to follow through. Otherwise I have not had many calls on the property for nearly 3 months now. I've been using a flat fee listing service but have found that it is not working. Advertising in the paper brings no calls (true for every property I've tried to sell). Using a full service Realtor will cost a minimum of $3000 commission and my margin is so small that I feel that is a poor choice. So what is there left to do to sell this property? I bought it for $5k but legal fees and closing costs as well as ongoing taxes and utilities have my total cost over $11k now.

I'm not sure Ebay is the right venue to sell, but feel my options are pretty limited at the moment. Do homes sell at a huge discount on Ebay? Don't know at the moment, so I think I will monitor the sales for a week or 2 before I decide. If any one that has used Ebay, I would like to hear comments.

Acadia National Park

I just came back from a week of camping at Acadia National Park in Maine. This is a park located on Mt Desert Island off the coast of Maine. My wife and I are ready to retire and move there we thought it so beautiful. But the necessities of putting 4 teenagers through college will delay that quite a while.

The park is awe-strikingly beautiful in every way. There are oceans, mountains and fresh water lakes as well as the quaint town of Bar Harbor. The park is loaded with great hiking trails which range from easy walks to steep cliff climbs, carriage roads (funded by John D Rockefeller) which are great for biking (even our dog ran nearly 20 miles along side us), the fresh water lakes provide a warm swim though the ocean was a brisk 55 degrees. The views from the tops of the mountains are some of the best I have ever seen.

We road biked quite a bit as well and saw some beautiful homes. There was also the first opportunity for all of us to go kayaking. Saw some seals and osprey during the trip. The weather was perfect all week. Best of all we survived with 4 teenagers.

I've been to few places that I would relocate too. Seattle being the other place with similar geography. The opportunity for outdoor activity really appeals to my wife and I. The hikes and bike trips we took were pretty strenuous for our daughters but my 2 sons enjoyed them. Now we just need to make enough money to afford to buy a home there.

Reflections on real estate ventures

I watched a show called "Property Ladder" this weekend. It was about a young man who was an IT professional. One day he decided to quit his job and become a full time property flipper. His only experience was that he had read some books and course material. He didn't seem to have any experience actually doing "hands-on" work. Needless to say it was a shock to his wife who became the sole wage earner.

He purchased a house and got some advice from a real estate expert (part of the show), which he proceeded to ignore. He was acting as a general contractor but failed to stay at the job site and the subs didn't show up and didn't do the work per code. (Since he wasn't employed, I wonder what the heck he did all day?) He had a time table of 4 weeks that stretched to 12 and he doubled his budget. Finally, he overpriced his home compared to nicer homes on the market.

This was the first of these shows (Like Flip this or that House) which showed how to screw up a job. It was refreshing to say the least and at least allowed me to feel that I wasn't as bad a screw up in the flipping business. But I have made some mistakes this year.

I purchased one house in Buffalo that I thought I could flip wholesale easily. The seller owed $71k and the bank gave it to me for $5k. What a great deal- right? Well, I had taken Don DeRosa's advice and agreed to pay all seller costs - like Title search, back fees, etc. In addition, my attorney way over charged me ($2500) for what services he did. So I ended up spending $10k to acquire the house. I overestimated what houses in the market would sell for and probably got a little too greedy, pricing the house at $25k. We've had one verbal offer of $17 which I accepted but otherwise the house has not been shown for 3 months now and been on the market for 6 months.

Lessons learned: Don't offer to pay seller costs and start off at a lower price.

A second house I purchased was in a nice neighborhood. I had estimated the cost to rehab was only going to be about $10k but I doubled that. After the snow melted, I could see the roof was no good and once the curtains removed saw that the windows needed to be replaced. My wife and I did all of the work (I even learned how to install replacement windows), so we didn't need to bear the expense of contractors. On the downside, all of the work doubled our timeline from 2 to 4 months. The main killer for this house has been the carrying costs. We bought the house subject to the existing mortgage rather than use hard money (otherwise, we'd have gone broke already). Still, at $2k per month, that's $12k of carrying costs eating into any profit we had hoped to make.

Lessons learned: I need to increase my budget for unexpected problems. In the Buffalo market I also need to budget for much longer holding periods. This is not LA.

We have also tried to market these houses either FSBO or through flat fee listing. Neither has worked and now I am listing with full service agents. I'm hoping that will make a difference..

On the plus side, I didn't quit my day job, so I can make the payments and we are not facing foreclosure. Since we know a lot and learned a lot we also have not been ripped off by contractors. I had a boiler replaced in one house and 3 contractors gave me $5k estimates. The fourth finally understood want I wanted done and did the job for $2500. I was also able to get a really good price on the roof by finding a roofing wholesale company that sold me materials as a contractor.

I will probably have to write this year off as a learning experience. I'm not sure I will turn a profit yet. But it could happen.

How Mortgages are funded

Wall Street has been roiling in turmoil due to the "crisis" in the sub-prime market. I ran across this article that describes how mortgage loans are funded and what the underlying problem is.

Seems there are 3 ways for a mortgage to get funded:

1. GSE's - these are government secured enterprises like Fannie Mae and Freddie Mac and Ginnie Mae. These loans are secured by the Federal government and are limited to $417k. Duplexes, tri-plexes and four-plexes have higher limits as does Alaska and Hawaii.
2. Portfolio lending- this is where banks lend money out of their deposits. These are typically ARMs' and have very specific underwriting criteria (i.e. they screen their borrowers very carefully)
3. Securitized mortgage pools - these are made up of a wide variety of loans and sold to Wall Street investors. These loans run the gamut from sub-prime to fixed to ARMs and are assessed for risk. This is where all of the problem area is at the moment. Investors are uncertain about the underlying equity of the real estate in these loan pools at the moment and so are not bidding on the loans. In the end it is what the Wall Street investors bid that determine interest rates of these loans.

So if you qualify under methods 1 or 2 above there is no crisis to speak of. It's when you need to get a loan from category 3 that there is a crisis. For people in expensive real estate markets this is the issue. For us in lower priced markets with good credit there is no problem getting loans. In fact, CountryWide (the largest lender with loads of problems trying to sell their category 3 loans) just approved me for a $200k, 5% down payment no doc loan. It took about 3 hours to approve.'

For many, this might be the best time to buy.

1998 not the hottest year

Global warming proponents have been preaching about how 1998 was the hottest year on record and the past 10 years include 5 of the hottest. Well...it turns out that is not true. 1934 was the hottest year and most of the years during the dust bowl round out the top 5 hottest years.

According to the new data published by NASA, 1998 is no longer the
hottest year ever. 1934 is.

Four of the top 10 years of US CONUS high temperature deviations are now from the 1930s: 1934, 1931, 1938 and 1939, while only 3 of the top 10 are from the last 10 years (1998, 2006, 1999). Several years (2000, 2002, 2003, 2004) fell well down the leaderboard, behind even 1900.
(World rankings of temperature are calculated separately.)

Of course, you won't be hearing about this during the leftest newscasts or in the NY Times any time soon. As a scientist I have been suspicious of the basic data collection that was used to gather the data. Turns out much of the measurement stations are not quite up to standards. Good measurements are the basis of good science and there are lots of examples where we have not started gathering good data to determine if global warming is real or not. Much of the world is relying on urban temperature measurement points that have substantial biases from urban heat.

More here. I didn't realize Mann was not a statistician, though I am not at all surprised based on my analysis of his work.

Real Estate Taxes in NY

I just read this post at pfblog regarding whether he can afford a $1M house in Seattle. He thinks that the Taxes and insurance for his million dollar home will be add $600 a month to his PITI payment.

Meanwhile I sit with a property in Cheektowaga NY with a property assessed at $163k and am paying $8k a year in taxes. Small wonder that it is difficult to sell.

Whatever dumb move you make financially, don't move to NY.

What I've learned after buying houses for 28 years

After graduating from college I rented for a year and since then have been buying single family homes with a spattering of duplexes, triplexes and one 6 unit building. My success rate has not been spectacular, more mediocre at best. In my mind my real estate ventures are heavily linked to my career choice. I majored in chemical engineering and was so enamored with working with one particular chemical company that I have intrinsically linked my real estate purchases to locations where my company provides work. And nearly all of those locations are away from growing metropolitan areas. I've also had the ability to watch my brothers (I have 6) locate to growing areas and prosper tremendously in their real estate purchases. So here is what I have learned:

1. Location is everything. If you are not living in a growing metropolitan area the chances of making a lot of money in real estate diminish exponentially. I lived in Parkersburg WV for 20 years and population declined by 25%. What happened to real estate demand? Certainly not the same as my brothers who live - near Boston, near DC, near Philly, near NYC and Charlotte. Values of properties in WV tanked for years and then was flat. I could buy property for $0.50 on the dollar but then couldn't sell it for half of what I'd paid. I'm living outside of Buffalo now and although some suburbs are growing slowly the population of this area is and has been in a steady decline. Admittedly, some suburbs have seen some 4-6% appreciation during my 9 years here as whites have fled the city, but Buffalo and it's closest suburbs are shrinking. I've never lived in one of America's fastest growing Suburbs.
2. Timing is crucial. There have been 2 major real estate booms during my life. In the early 80's interest rates dropped from 16% to ~7% and for most of the country real estate took off. But like the past 6 years, the boom was uneven throughout the country because location is everything. I watched my brother living near NYC rehab houses and make $100k in profit. I tried the same thing in WV and lost $100k. The key to timing in my mind is watching interest rates. During the past 6 years they trended downward towards the lowest on record and real estate boomed. When interest rates are rising real estate will not do well, when there is a long term downward trend, there are large opportunities for even the dumbest investor to make piles of cash.
3. Buying from desperate people is one way to off-set the above 2 trends. Many people make money in poor markets and against the trends. The main skill that they possess is the ability and patience to only buy from people who are facing foreclosure (this doesn't mean they are behind in payments, just that some circumstance in their lives will push them there eventually). This could be people going through divorce, job loss or transfer, heirs of property, medical problems, etc. Locating these people requires lots of patience and a willingness to alienate lots of Realtors and sellers by making low ball offers. Most people buy houses based on emotion and don't have the self-discipline to wait for the right deal. I have purchased 17 properties in my life and I can say that the majority (12) were purchased based on an emotional decision rather than the numbers.

A lot of home owners have made a lot of money buying in the right location and during the right time. I watch Flip This House and Flip That House and notice that they don't do shows in Buffalo, but only in growing areas. See this Forbes article on Best Places to Flip a Home. There is a reason for this - that's where people can make money and don't have to be too smart about how much their budget or timing.

I still am a strong advocate of using real estate as a strong component of building wealth. I just need to buy smarter to offset the location and timing factors. I won't be one of these people on TV flipping a house for $100k profit after going over budget by twice, but I believe I can make small profits that will get me closer to my goals of financial security.

Change in Real Estate Selling Strategy

Well, I've given up on FSBO and flat fee listing services. I'm switching both my properties to full service agents this week I haven't gotten a single call in 3 months for my Buffalo property and not a single agent has brought a client to my Cheektowaga property. I've found a young ambitious agent to sell the later property. I'm hoping that she will have contacts with relocating people as well as get some agents into the house. I'm not sure why the Cheektowaga property hasn't sold yet (except for the $8k tax burden). As one woman said today during the open house "it's to die for".

Maybe in a hot market these other services will work, but in the two areas I have properties population is declining and real estate is not hot.

Credit Card Number Stolen Again

Got a call from my Master Card debit card company yesterday asking about charges I might have made. Seems like my number was pilfered somehow though I still have the card in my possession. This is the second time a number has been stolen from me.

A few years back I was driving through PA and bought gas. While waiting for the attendant to process the card (before the days of DIY at the pump, he motioned for me to come inside the station. The Discover Card agent was on the line and asked about purchased I had made. Seems someone was buying lots of high priced stuff in Chicago for me! Fortunately, Discover cancelled the card immediately and nothing ever showed up on my bill.

This time MC called me and asked if I had purchased anything from a Tent and Awning company for $1.39. (interestingly, I had ordered some camping equipment from another company). However, Tent and Awning was not someone I had dealt with. It turns out that this outfit puts through small, innocuous charges to see if the account is valid and once they confirm that, they make big charges. I might have looked at that $1.39 and never paid attention to it if it showed up on my statement. So, kudos to MC for picking this up.

This must be one heck of an ongoing battle between those creative types trying to steal others money and the CC companies trying to detect new schemes. Unfortunately, its costs us all money.

Real Estate Dilemma

Our real estate purchases have been stagnant since February when we purchased 2 houses on the same day. We spent the better part of 3 months rehabbing one of the houses while trying to flip the other wholesale. Neither house has sold and the nicer home is draining about $2000 a month cash from us.

So we have not been too aggressive in trying to buy more houses. We have had a couple of opportunities but just missed making an agreement with the banks. One was in Amherst which is a pretty nice area, so I had some regret that we did not get a better appraisal.

Now it looks like we have an opportunity to get a really nice house in the town that I live in. I know the values very well here and it is a high demand area, unlike the area where we own the other 2 houses. There are a couple of challenges to buying this house. Our financing does not allow us to buy properties over $150k and this house is going to go for about $220k (We have had it appraised at $268k, so that is not a problem). The rehab money we have doesn't allow us to live in the house either. So I will need to get conventional financing. My plan would be to rent out our current house and move into the other house.

The dilemma is that the down payment will use up all of our cash and there will not give us any cushion to pay the mortgages on the houses we are trying to sell. So we will have to exist purely on lines of credit until one of the 3 houses we have for sale is closed. This is a risky strategy but this new opportunity is the best house I have had the chance to buy. So what do I do? Live on faith that one of the houses will sell or pass up an excellent opportunity?

Update question: Why is this different from people that purchase a new home before they sell their old home? (I actually am against this practice, but....)

Harry Potter - The Spiritual Story

I've been traveling on business this week and have had the opportunity to devour the latest Harry Potter book The Deathly Hallows. I have been fortunate that my children were the right age to be interested in this book ( my oldest is Harry's age). I started reading the first book to them at bed time (it seems so long ago) and it's one of my fondest memories as a parent. My oldest (who struggles the most academically) has read each book several times.

I myself have enjoyed the whole series immensely. My favorite movie is the Lord of the Rings series. Although I have not read any of the LOTR books the movies are incredibly well made, but more importantly carry a great message. The triumph of good over evil, the importance of character and is loaded with Christian themes. LOTR replaced my previous favorite movie - The Sound of Music - which carried similar themes.

I categorized this post under "religion" which will surprise my atheistic colleagues who have read the series. After reading the 4th book of the Harry Potter I became convinced that Rowling was secretly creating a series like LOTR and Chronicles of Narnia. However, the crowd I associated with at that time (home shooling families) largely condemned the book as Satanic. After reading Looking for God in Harry Potter I realized the depth of Rowling's Christian themes and it was quite easy to predict how the series would end.

Although the previous 6 books hinted at Christian themes, the Deathly Hallows is the most overtly Christian. Harry is a Christ-like figure who (literally) carries a bit of evil with him. Consider:

• the prophecy of his birth
• the "cross" pulled from the frozen pond (and the baptism there)
  
• the "blood" he gave
• the themes of good Vs evil and the ultimate triumph of good
• the series begins and ends with the giving of ones life for another - a greater good that no man can give (even Dobby gets into the spirit)
  
• the resurrection theme
• the temptations Harry faced (power over death itself) and doubts (lies told about his mentor)
• the disciples that stick with Harry despite the prospect of death and the desertion of one disciple (i.e. Peter/Ron) as death approached
• an Armageddon battle of Good Vs Evil
• multiple quotes from scripture
• the Hallows is a Trinity symbol
• Dumbledore is a "Father" figure
• The place Harry and Dumbledore meet is "Kings Cross" - this is also the place where Harry was "born again" in book 1
  
• Peter, James, John and Harrys mother accompanying him into the forest
  
• the power of Love over death (why good wins and Snape is a good guy)

There are many, many more. In addition, Rowling takes aims at other evils such as Nazism and it was interesting to note that Home Schooling was banned when Voldemort took over. Some people take issue with witch craft but that is really just an allegory for technology which our generation has allowed to take over our lives.

Rowling initially was afraid that if people were aware of her Christian faith, she would give away too much of what's coming in the series. "If I talk too freely about that," she told a Canadian reporter, "I think the intelligent reader — whether ten [years old] or sixty — will be able to guess what is coming
in the books."”

Rowling's brilliance has been in writing a book that allowed millions of young people to be exposed to the basic tenants of Christianity without shoving it down their throat. In an age when the media and liberal elite don't believe in evil this is a heartening accomplishment.

Influencing Apraisals or appraising is a joke

I wrote earlier about how it might work to my advantage that I accompany appraisers when they do a BPO on a foreclosure. I thought I might be able to point out the flaws of a house and help keep the appraised price down. Well, I did it last week. Some commenter's warned that I might get in the appraisers face and it might work against me.

When the appraiser came last week I met him at the property and casually asked about how he was going to do comps and politely pointed out some flaws. As he left I told him I was not looking to re-finance and would like to see a lower price. He said simple that it was much easier to get a lower price and left it at that. I don't think I offended him at all or "got in his face".

I talked to the investor today and found out that the appraisal came in with a value of $104,000! I have estimated that this property was worth $250k after repair and offered $202k "as is". The appraisal cited replacing new cabinets for $30k(they were just installed 4 years ago) and $15k in electrical work (the basement lights don't work) as flaws. I don't know how he came up with but it didn't work to my favor (or his). The investor ordered another appraisal and they did a "drive-by" and came up with a value of $268k.

So the investor threw out the initial appraisal and will not pay them (can't say I blame them). Neither appraisal is correct in my estimate of what the house is really worth. The investor is going to put together a counter offer (I only offered him $2k for his $20k loan), but at least it may have put some doubt into his mind.

As for now the legal action has stopped on this house again (for the second time). The homeowner is determined to live there as long as possible without paying anything and is quite clever in delaying the auction.

Whether the commenter's were correct in telling me not to interfere is not really important here. The lesson is that appraising property is heavily influenced and so far from reality that it defies logic in many situations. Many blame the banks for the sub-prime mess, some blame the borrowers, but few have blamed the appraisers. Maybe it is time to focus on them.

Foreclosure Time Frames

Here's an interesting article that discusses the length of time it typically takes for a bank to foreclose on a property. I happen to live in New York which takes 12-19 months for a bank to foreclose. Add to that the time it takes to re-sell the property (especially here in the Buffalo market) and I think this would give me an advantage to getting more foreclosures. The New York Home Equity Theft Law probably doesn't hurt either. Knowing this, I may be able to get more leverage when negotiating short sales with banks.

Some states, like Alabama give owners only 30 days before they can lose their property. However, homeowners are given a long time to re-purchase the property with the buyer losing any money that was made in improvements. That would be a big loss for the investor. So I guess New York has at least one advantage over other states. On the other hand, lots of people in foreclosure here don't act on the foreclosure because they know that it takes so long.