Nearly six years ago, I was introduced to the perils of Mortgage and Real Estate Fraud. It was as sobering an introduction to yet another form of crime as I had ever seen. I’d heard of scams where senior citizens were duped by unscrupulous operators, but I never imagined there were highly sophisticated and systematic criminal rings whose sole purpose it was to defraud lenders or consumers. It’s getting worse.

Fast-forward to today and recent news from Bloomberg tells us that the FBI has assigned 150 agents to work on over 1300 mortgage fraud cases. The Bureau appears to ready to slug it out against perpetrators of fraud. Where this type of fraud occurs en masse, by the way, home values usually go down. The reason is that the homes are dumped back on the market after foreclosure process has occurred and it creates excess supply that lowers prices. These are things buyers and sellers need to know.

The FBI  recently reported that the top 10 hot spots for mortgage fraud were Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado and Minnesota. Other states that have been "significantly affected" by mortgage fraud are Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey and Connecticut. That’s 20 states and most of the largest in the country.
What this means to buyers is that you have to look at more than just Listings and recently closed sales. You need to understand foreclosures, flipping activity, a property’s history and market trends. You can’t afford not to know. “I didn’t know” just isn’t a valid excuse because the information is out there and available. Uncovering potential risk factors can save you from making a wrong decision that you’ll have to live with a long time and you may well lose money in real estate if you aren’t informed.
Real estate agents should also heed this call to “discover” potential risks on behalf of your client. You may delay a deal closing, but you will likely have a client for years to come if you help them avoid risky areas. Even if they go ahead and buy in a risky area, the reports will help them negotiate and they will have knowledge of what they are getting into with the purchase. Try www.homesmartreports.com  to discover a means to avoid risk.

Home values have taken a beating as we all know but the end of that downturn is getting closer. Sales volumes increased in April and May’s sales news isn’t far away from release. The value decline has begun to decrease which it must do before values can turn around.

To agents, this means you need to give your clients more and better information upon which to base their decisions. There are a lot of people who want in but they want to make their decisions based on better facts. Give them more than sales data upon which to make their call. Let them know what foreclosure activity is like and also the stability of the market.

Consumers are smart and can navigate a tough market provided you give them enough good data to review. People are buying cars in this tough economy and doing more research before doing so. A home cost about ten times the price of a car so you ought to give the more House Facts.

To Hell with Price, what’s the VALUE of that house? We obsess about home prices, when we should really obsess about home VALUE. So what’s the difference? When pricing a home, nearly everyone focuses on sales comparables. Those who are a little more informed also look at current listings when working on pricing a home. That’s usually where in ends with price estimation most of the time.

When valuing a home, sales comps and current listings are very useful but you need to understand the local market under-currents. By also knowing the foreclosure activity, the flipping activity, the market trends and individual property foreclosure history you will understand underlying market conditions.

There’s a good analogy to be gained from ocean beaches; swimming between the green flags with lifeguards around is generally as safe an area as you’ll find. If you swim near a red flag, there is a strong possibility of a riptide that could carry you out to sea or underwater. So it is with real estate. If you don’t pay attention to everything going on, including foreclosure and flipping activity, you could find yourself underwater in your investment property or home in a hurry.

A HomeRisk Report from www.homesmartreports.com will help you avoid real estate riptides.

I have bought and sold real estate in the past and would consider myself a fairly knowledgeable investor. Over this last weekend, however, I decided to “walk the walk” of real estate investors who are GENUINELY in the game of finding good opportunities in this market. I learned a great deal in the process and had a list of 30 REO properties around Southern California all available at discounted rates through a few lenders. The more you buy from them, the greater the discount by the way.

Seeing that many properties in a day is a grind and to make matters worse, the temperature was over 100 degrees everywhere I went. What a day, so bring lots of water when you go out looking! Here are some stats.

The lenders represented that 93% of the properties were occupied by tenants. According to my observation, only 53% were occupied. That’s one the big values in a visual inspection. The properties ranged from fair condition to very good. None of them were in either poor or excellent condition with this group. 97% had a least two properties for sale around them within visual range, and about 50% of them had other vacant properties near them that were not on my list to see. So, be alert for other properties not on your search list as they may represent opportunity for you and it can affect valuation if too many properties are for sale in the area...

Prior to setting out on the inspection, I ran all of the properties through www.homesmartreports.com to determine a valuation and a risk or market strength score to try to weed out poor properties. I was able to find solid information on 29 of 30 properties. On one property, the address did not exist on that street! It’s either a transposed street number of fraud is involved! By the way, HomeSmart Reports can analyze an entire portfolio of property (hundreds or thousands at a time) and it can save you incredible hours in individual property look-up times. Don’t forget to put a value on YOUR TIME in this process!

Taking that information, I added a photo, assessment of exterior condition, landscape assessment (33% had dead landscaping), traffic volume (quiet, medium, busy) as it would affect value, occupancy and confirmed number of stories which HomeSmart had correctly so that future references could be made. I considered this analysis at least equal to a Broker Price Opinion as I am about to make an investment and I trust my own research. Plus, I was able to do it in a hard day’s work and I’m ready to act which I will do later today or tomorrow. Other people will have to wait longer and that should give me an advantage.

So, in the end, automated property research with HomeSmart Reports data helped me a great deal in weeding our very risky properties. Having a specific plan literally mapped out using Mapquest saved me a lot of driving time. I find that having gone through the process I am more motivated to get on with an offer since I don’t want all the research to be wasted and I expect to buy at least one house. I’ll get back to you all with how things came out if this is of interest to you. I’ll judge that by how many people comment on my little escapade.

By the way, for real estate agents with a good plan to show lenders for marketing their REO's, this whole thing represents a great opportunity.

How many people out there are still burying their heads in the sand and not acknowledging that with any real estate transaction there is risk? This is particularly true today. If you want to buy or sell a property today you had better understand that there is more to establishing value than looking at “sales comps” and “current listings” in your favorite MLS. MORE INFORMATION IS BETTER!

What buyers, sellers and real estate agents need to understand is that you need to have more and better information in preparation for doing a real estate deal. We have come into a time where we now know that foreclosures and flipping activity dramatically affects market conditions – especially in local communities. Better still, you now have the where-with-all to research way beyond price, or comps as they are known.

Sellers, you are where you are and you own that home. If you are selling, price it right. Buyers, you still have a choice as to whether you’re going to buy into and area. Look at history, look at foreclosure activity, look at flipping, look at overall market volatility in addition to price and you’ll be prepared to make the right decision. Sure, you’ve got to love the home you’re buying, but if you can’t sell it when you need to, you’ll come to hate what you used to love in that home.

Real estate agents, you owe it to your clients to get them into the right property with full disclosure. You do and you’ll have a long-time customer and many referrals. Do it wrong and you may get a one-time commission, but that will probably be the end of it with that client. www.homesmartreports can help you do it right, whoever you are. Have a look and learn about the real risks of foreclosure.

You may be making the biggest mistake of your life if you don’t really understand the underlying “value” in the area surrounding your home. Buying a home is an emotion driven event and it is a very exciting thing to do. However, when the reality of such a commitment begins to “hit home”, all kinds of doubt creeps into the picture. It doesn’t matter if you’ve bought one home, or three or four. In fact, the more experience you have in buying and selling the more you realize the importance of valuable information before you step up to a purchase.

In this uncertain market especially, you need to do more research, not less of it. So many mortgage lenders have “dumped” homes on the real estate market; there is an extraordinary amount of excess supply. It has caused prices to continue their downward spiral and forced sellers to sit tight or take a big hit on equity. So, when is a deal a good deal? You have to consider the history of an area not only in terms of price, but also in terms of negatives like foreclosure and flipping activity. Is the area in a state of negative appreciation?

Real estate agents need to inform their buyers about local conditions and sellers need to get realistic market data to price their homes properly. Market data goes way beyond sales comps and listed properties. You have to look at the downside trends. Neighborhoods don’t clean themselves up overnight. If an area has a tough history, that history doesn’t correct itself for years. Buyers need this knowledge going in a transaction. Sellers need to price their home right from the start.

Check out a few of the following websites to learn more.

www.homesmartreports.com
www.corelogic.com
www.firstam.com

It will help you get an idea about real market conditions and the data will be better support for your decisions.

We are nearer to the bottom of the real estate market than we were when 2008 started. Prices have gone down but interestingly, the number of homes that have sold has increased each month in 2008. Let me quickly point out that year-over-year, sales volume is still off if you compare quarter 1, 2007 against quarter 1, 2008. Still, prices are down, and we’re closer to the bottom of the market. Another way of looking at it is that homes are “on sale”.

When the market hits bottom, there will be an amazing rush to get in line to buy homes. Lenders will be overwhelmed with the volume of applications. Real estate agents will be in shorter supply because many have left the business due to these difficult times. Some homes will very likely be the target of multiple offers, and that will drive the prices of certain homes higher than they might normally go. Escrow periods will take longer as the real estate transaction “machine” begins to pick up speed. Interest rates may go up as confidence in the real estate market returns.

When these market factors begin to assert their presence, home prices will go up though maybe not as fast as in the previous upturn. Market forces will combine to drive prices higher than they are today. Instead of  buyers’ having their “pick of the litter” at an affordable price, they may well have to settle for less than they wanted or pay a higher price due to a multiple offer scenario.

Lenders have dumper homes on the market causing excess supply and the overall demand isn’t there due to this excess…yet. It will be eventually and buyers will have a tougher time getting the home they want, for the price they want. In my lifetime, there have several occasions when I’ve said to myself, “Why didn’t I buy that property when I could have?” If you can afford to buy, or if you are an real estate agent with a client who is on the fence, it’s time to get out the prodding stick and finalize a deal on the home of your dreams. As a buyer, you’ll be happy you did because the market will come back. As and agent, you’ll have the satisfaction of knowing you steered your client in the right direction at the right point in time.

As always, do your research and understand a home’s value by reviewing prices, trends and any underlying risks in the area around the home. www.homesmartreports is one place you can look for that information.

Bulk Real Estate Purchases are a hot ticket right now and you should be aware of them. With the flood of foreclosures hitting the market today, there is more “Supply” than there is “Demand”. Lenders have been nervous and are getting more so and they are dumping homes on the market. The excess supply has caused homes to sit longer on the market. Prices are going lower because of it though the rate of descent is moderating.

Larger investment companies or private funds are pooling their resources to purchase homes at a discounted rate, even below the current market…sometimes30-50% lower than the market. Believe it or, those bulk purchases still may not be a good deal because some homes are inflated to 3-4 times their value so even a 50% discount is no bargain.

I spoke with a pool investor yesterday who was given an opportunity by a lender to buy 85 homes for a seemingly low $3.5 million, or about $41,200 per home. He sent to pool to www.homesmartreports.com for review and found that in many cases the risks in the area we so considerable, the whole value of the REO pool of homes was laid open to question. The party passed on the purchase because the homes couldn’t be separated, they were spread across 20 sates and the management aspects would have been too challenging for this investor.

There are a few elements to consider here;

1) There are some very good real estate prices to be had if you have sufficient buying power.
2) Lenders are willing to deal on a larger scale if the can move many properties at once.
3) Even if you make an offer on an REP home and it is rejected, keep your eye on it as prices tend to get lowered by lenders as the feel more pressure to dispose of assets.
4) Even though it sounds like a good deal, invest a small amount to money on research to understand market strength or risk. HomeSmart is a company who can help you with that issue.
5) Have an “out” strategy. If you buy, either plan to hold property for a while, or if you intend to flip it, buy at a deep enough discount that you can take a smaller margin and still get out with a profit. Having a lender lined up who will help you with financing can give you the vehicle you need to make the transaction happen on both ends of the deal.

Know the value of a house by understanding Price, Risks and Trends in the local are by doing a little added research, especially in this market.