76 pages of expert real estate advice on everything you need to know to profit in the 2008 real estate market - available only online. Read an excerpt of the first chapter below... CHAPTER 1 YOUR OPPORTUNITIES IN FORECLOSURES "In 2007 there were more home foreclosures than in any of the previous 35 years. Estimates for 2008 are that there will be more foreclosures than ever before recorded in the United States since the Great Depression. 2009 also looks to be a banner foreclosure year. While all of these foreclosures are disasters for home owners and lenders, they are amazing opportunities for investors. Part of the reason is that large numbers of foreclosures on the market force the price of all residential real estate down. It’s simple supply and demand. For a relatively short window of opportunity, too many homes are available for too few buyers – the result, falling prices. For the first time since the turn of the century, it’s possible to now buy homes at a reasonable price. In many areas of the country, prices had so far outpaced incomes, that only the very well off could afford to buy. In California, for example, until recently, less than 14 percent of the population could afford to purchase the average priced home. Now, prices are coming down, largely because of the effect of foreclosures on the market. In some areas they have fallen 15 to 25 percent, and are continuing to drop. Of course, the real bargains in all of this are the foreclosure properties themselves some of which tend to be far below the market. Sellers, desperate to get out of their properties before the foreclosure process takes away their homes, are selling at bargain basement prices. Banks, flooded with foreclosures, are anxious to dump them at fire sale prices. And it’s all to the benefit of those relatively few savvy investors who see the opportunity. They are finding great deals, fixing them up, and then quickly flipping for profit or holding longer term for equity appreciation. IMPORTANT NOTE The investor actually plays an important and useful role in helping owners and lenders. (It was Shakespeare who wrote, “Not the ill wind that blows no man to good.”) It’s the investor who can bail out the owner who’s losing his home to foreclosure, and the lender who is losing interest on its money. A COLLAPSING MARKET OFFERS OPPORTUNITY The foreclosure debacle actually started back in 2005 when lenders discovered that the real estate boom was running out of steam. Prices had gone so high that most people couldn’t afford the mortgages necessary to purchase homes. This meant fewer mortgages, which meant less money and layoffs to lenders. So lenders loosened the strings attached to obtaining mortgages. They offered a variety of loan plans most of which had one thing in common – Borrowers could qualify at a “teaser” interest rate that was artificially low resulting in low monthly payments. The catch was that after 2 or 3 years, the teaser disappeared and the interest rate and payments shot up to market. That was frequently an increase of anywhere from 1/3 to as much as double(!) the former payments. Unfortunately, this subtle fact was not fully explained to many borrowers, particularly those who were getting “sub-prime” loans. The total number of these loans made to both sub-prime and prime borrowers is estimated to exceed 3 million mortgages nationwide. IMPORTANT FACT A sub-prime loan goes to a borrower who can’t qualify for a prime or top quality mortgage. That means that the interest rate and payment is already higher than for prime borrowers. Starting in 2007 many of these loans began resetting to higher interest rates. Suddenly faced with payments that jumped 33 to 100 percent, borrowers found they couldn’t pay. The effect was a wave of foreclosures, which was first noticed in the sub-prime market. Then, because these types of loan had also been offered to prime borrowers, it began appearing across the board. Suddenly homeowners of every ilk, faced with starkly higher payments, found they couldn’t make them. Of course, there were two escape hatches: One was that the borrowers could sell the home, thereby paying off the mortgage. They could then move onto other properties. The problem with this scenario is that the real estate boom had finally played itself out. Instead of continuing to rise, prices in most areas began to level off and then fall. Adding to the woes, the inventory of unsold houses exploded as more and more borrowers sought this escape route. Soon, many borrowers found that not only could they not sell, they were “upside down” – they owed more on their home than it was worth! This impacted the second escape hatch – refinancing. Ideally, a borrower with a low 2 or 3 year teaser could roll the loan over into a new mortgage with another teaser. This often had been initially put forth as an ultimate way out – keep rolling the loans over. However, once the borrower was upside-down, lenders refused to make new loans. The borrowers simply no longer had sufficient equity. Further, as the market deteriorated, lenders began tightening up the strings on new loans making it harder to refi even for borrowers who weren’t upside-down. The second escape hatch disappeared. And suddenly 3 million borrowers were facing foreclosure. At this point, everyone in the industry began running around pulling their hair out. AN INVESTOR OPPORTUNITY On the other hand, investors began sniffing the waters. Was there money to be made here? Even in a down market? Even with a huge inventory of unsold homes? Yes, indeed! The secret, of course, was..."
