patrick.net

Why do we need a new thread on investing 101 ? THIS IS THE THREAD !

Great stuff guys. Thanks a ton for sharing these tips, strategies to complete strangers ! Sometimes even friends don't disclose all the tricks they know.

Why do we need a new thread on investing 101 ? THIS IS THE THREAD !

Actually, we need more contributing moderators here. 90% of the threads here are posted by the same 4 people: myself, Peter P , Randy H (who's now busy with his own site), Surfer-X & SQT. Occasionally, there a few others contribute (San Francisco RENTER, brightc, matt_walsh, Girgl, etc.) but it's not enough --yet.

We need new moderators with fresh perspectives/experiences. If 10% of regular posters contribute one thread a month, that's still a big improvement over today.

Harm, what is the normal lag time between your blog news and when Fox News runs the story? The other media outlets never run this stuff and Fox is behind you by about 3 to 4 days on average by my count. Any idea?

Wow, Bap33, I had no idea that Fox News was tracking this or any other bubble blogs. Is Rupert Murdoch a Patrick.net lurker? ;-)

Harm,

I e-mailed Patrick so I should get a reply here shortly. Negotiating 101 huh? I actually got my start doing collections for my old man when he ran a counter top business in Western Springs, IL. There's a trial by fire.

I contributed one once ;>

HARM,

Don't you already have the power to promote moderators? I think you might.

It sounds a lot smarter coming from Randy H:

One simple, non-speculative way to benefit as the market crashes is to buy a home. As prices come down, and sellers start to panic, you have the maximum leverage as a buyer. ***

***I wouldn’t try to time the absolute bottom of the market. My reasoning is that you have more buyer-negotiating power on the way down than on the way back up. For most regular folks negotiating has more of an effect on their outcomes than ultra-precise-timing.

The Farklese translation:

I’m going to wait and watch and shop for value. I know my next home could drop a bit after I buy, but I’ll own it a long, long time.

Thanks, tsusiat. Sorry if I missed anyone --all are encouraged to post, even if you can only do so on an occasional basis. Fyi: If you currently post annonymously, you'll have to register(login) before you can request thread authoring/moderating rights.

Randy H, you may be right. Forgot about our new "spam & troll-quashing" powers ;-). Will have to look into that.

DinOR/George,

If Patrick doesn't get back to you today, let me know. It looks like Randy H, myself SQT & Peter P now have rights to promote you to author level.
Make sure you register first: http://patrick.net/wp/wp-register.php

DinOr says:

A big part of closing (no matter what side of the transaction you’re on) is to let the other party have some dignity!

I completely agree. Unless it's a trustee's sale you have to get the seller to say "yes." They won't do that unless they see something in it for themselves.

A lawyer I knew told me that Art of negotiating is to take the other lawyer in the back room, bend him over the table, and then he's thanking you on the way out.

I think this thread already got hijacked back in to the "Time to Buy" thread.

Or maybe it's the "How to Buy Thread."

It all sounds quite Trollish. Surfer-X, save us.

"one of the internets most infamous housing bubble sites"

Are we? How do we rate? I mean overall. I won't stop until we are the standard by which all other bubble believers are measured!

DinOR, if you Google "housing bubble" today, we are the #1 hit.

Hmm... maybe Rupert Murdoch DOES read this site.... 8O

HARM,

You know something? You're right! It's leverage time baby!

I won't get semantical about whether a home is an "investment." It's definitely an investment of time and money.

The thing about "investing" in a home is that each piece of RE is unique. A home is not a fungible commodity. Investing in a particular painting or sculpture is an apt analogy. That's why the courts can order specific performance when a home seller breaches the contract. If you dishonor a contract to sell corn, the buyer's remedy is just money damages--the difference between the contract price and the going rate for that commodity at the time of sale. If you can prove that an RE seller breached his contract you may have a remedy in equity to compel the sale.

That's also why shopping and negotiating is so important. And why the role of macroeconomics--the direction of the market in general--plays a lesser role. As long as you have a good sense of the comparable value of the house you buy, and you buy it for a good value, you can get near "the bottom." You are not timing the market, you're timing the market for that unique house.

Now, Surfer-X shield your eyes, that's also why a qualified and honest real estate broker may be worth the "investment" in his fee. Buying RE is tricky. Sure, Zillow is cool. But I wouldn't buy anything in a strange market without a local expert, and a lot of professional help. I nearly screwed the pooch on my own sale by not recording the transfer of my sole ownership to my wife before closing (to get the full $500). My real estate agent/CPA saved me a lot more than the 6%.

Newsfreak
It is my understanding that both agents actually represent the seller's interests...even if its a buyers agent. This is the myth of the buyers agent...they're still there to SELL. It's illegal to do something that could 'kill the deal'....correct me if I'm wrong....I'm not an authority.

Skibum

I will just refer you to the congressional transcripts:

Surfer-X: "Mr. Farkley, please tell teh members of this committe, are you now or have you ever been a Troll?"

Farkely: "On the advice of counsel I refuse to answer."

Surfer-X: “Mr. Farkley, please tell teh members of this committe, are you now or have you ever been a Troll?”

Troll: You have done enough. Have you no sense of decency sir, at long last? Have you left no sense of decency?

Astrid:

Absolutely right. I hold no brief for price-fixing.

The difference between "investing" in art and real estate is that everybody thinks they understand real estate.

Lunch is over. That was delicious, thanks. Time to go work for the Man.

that’s also why a qualified and honest real estate broker may be worth the “investment” in his fee.

In california the person you mention is currently in the Bahamas with Santa Claus, Elvis, Jimmy Hoffa, The Easter Bunny, and....... Jim Morrison.

They also must disclose all offers to the sellers, even if they find them insulting.

Really? :D

Rand H.:

Thanks for the info.

I'm thinking maybe buying the worst house on the best street, fixing it up, and settle for a few grand profit, i.e. $10-$20K a pop.

Do one every two months wouldn't be too bad, no?

Think it's doable in a sinking/sunk market?

Garth Farkley,

Sorry if the title of my thread "Time to Buy" was a bit provocative. My intention was to get people thinking about their own personal decision scenario. I personally think we've seen the macro peak and that macro sentiment has turned.

But, as the bubble deflates real-estate will become more and more local and there will be lots of "wild west" (thanks George) type of stuff going on. This means some neighborhoods will stagnate, some will bump up and down wildly, some will drop like a rock. It won't be so much of a balloon deflating (which does so pretty evenly), but more like a giant tin-foil ball being crushed (very lumpy).

Given all of that, each person's individual decision about when to buy will be different. People with lots of HaHas -- like those who sold recently (of which I fully disclose my own position) -- may wish to buy before the bottom since they can go in with lots of equity, reasonable fixed payments, and a hope of having their pick of homes that were out of reach a year ago. Others will want or need to wait until closer to the bottom. Some will want to wait until it's passed the bottom and shows signs of heading back up (Zephyr posited such a formula, but he's a RE investor/landlord).

Almost everyone who reads this blog is here because they want to buy not because they want to sit around and cheer the death of US real-estate (but I'm sure we have at least one who would love to see all US RE nationalized...)

Giant ball of tin foil beig crushed

Interesting analogy

Michael Holliday,

I’m thinking maybe buying the worst house on the best street, fixing it up, and settle for a few grand profit, i.e. $10-$20K a pop.

Think it’s doable in a sinking/sunk market?

People have historically succeeded doing that, and some will even in this market. The real test will be whether you have a visceral understanding of the neighborhood & market you do the rehabs in. I think your numbers are off (for CA anyway). You'd need to operate at a scale 10X that to make it worth while. Even then, the risk is enormous unless you're a craftsman already with the tools, knowledge, and passion to do home repairs and rehabs.

I picture the guy who owns a local construction company, has tools and supplier relationships, makes a good living doing commercial building already, maybe serves on the city council with his grade school buddy the realtor(tm) Mayor, and then does a few of these plays during the year in the neighborhood he grew up in. That might work. Flippers, not a chance. They'll get destroyed.

nomadtoons2,

Where do you live again? You and need to do some serious "dumpster diving" together! ;-) Seriously, your list just amazes me. I've seen people throw out perfectly serviceable stuff, but nothing anywhere near as nice as items you listed. Maybe the key is to focus only on super-rich neighborhoods.

and many don’t even need the logisitical help with contracts, etc., especially with a good RE attorney.

This raises a good point. If I can't trust my own Realtor to negotiate in my best interest and present me with accurate unbiased market information (and under the current system I certainly can't), then wouldn't I (as buyer) always want to retain a RE attorney --working solely for me-- to draft my offer, review contingencies, counter-offers, final sales contract, etc.?

Has anyone out there ever retained a RE attorney for this purpose?

Harm,
I live over in Alameda, and seriosuly- people throw away TONS of things here. The diffrence between here and say- berkeley or Oakland is that in berkeley, there's a lot of students that live there. Anything that gets thrown out that's good- it usually gets grabbed. I can recall guys in old trucks that drove around after the students moved out, just loading up on the stuff. here in Alameda, it's all old and rich people. So there it sits, and nobody picks it up. I also have the ability to fix almost everything. Like the lawn mower. It's a 2004 MTD 6 Horsepower, self propelled unit with a rear bag. It was on the side of the street with " free" on it. I pulled the rope, and it did start, but smoked like hell. I worked on small engines for my part time job in TN. I know the engine, a Overhead valve Briggs engine has a very low exhaust port, meaning when people sharpen the blade, the large muffler gets filled with oil, which makes it smoke like crazy, hence making the owner think they blew it up. I've picked up 3 or 4 of these and can get them completely cleaned up and resold on CL for $100-150 bucks.
Basically, people buy things more like solid items that can never fail or else they throw them in the trash. Everything is repairable, and that's howI usually find this stuff. Just very slightly broken or in need of some basic cosmetic cleaning, etc.

Randy H,

Provocative is good. You know I'm a Randolfe fan.

I just don't know any markup code for tongue in cheek. I'm only trying to lampoon the avid troll witch-hunters.

I mean I'm not coming out the closet or anything. Troll-curious, maybe. Troll, never.

astrid Says:

"fatwallet.com has several really long threads about RE investing and that’s definitely the theme. The more successful investors always advise others to skip the realtor and go directly to a seasoned RE attorney."

Successful real estate guys will often go directly to the seller and try and make a deal without a real estate agent (If you are a successful investor you have a letter of intent and purchase agreement that you are familiar with and don't need an attorney unless there are some strange title issues).

When a real estate agent has an exclusive listing on a property successful investors will work with the listing agent NOT a buyers agent. If I have a $2mm listing I make $120K if I find the buyer and only $60K if I split the fee with a buyers agent. Listing agents do everything in their power to make sure investors represented by buyers agents never buy a single property...

Hello,
So. San Hosebag inventory making big strides this week; currently much higher than the peak last fall. Driving around town with eyes open seems to confirm this.

Also, noticing some re-listings after (possibly) falling out of escrow...seems to be happening more with the cheapest of the cheap properties.

Ditto in East Bay - Alameda & Contra Costa approaching 8800 active listings.

Ditto in south bay in general too. 400K - 500K places used to be hot cakes but now they are getting stale. The low end is getting squeezed by the rate hikes.

Mountain View and Palo Alto appear to be holding up for now, although they are still softer than last spring.

I just checked the rates. A jumbo 30YR FRM with 20% down and 0 point is now near or above 6.5%. It seems that it is no longer possible to do 100% financing cheaply any more.

Many people are still saying that interest rate is at historical low. They fail to understand that a "small" increase from 6% to 6.6% is a 10% interest payment hike.

I am not surprised that Voodoo-financing-dependent low-end units are getting pressured recently.

And my Realtor friend said that some of her entry level clients are being offered loans at 7.5 to 8%. I am assuming these are fixed.

Sounds about right, even for people with very good credit, if the downpayment is small.

SJ_Jim

Here's the scoop on Sacramento metro area inventory:

http://sacramentohousingbubble.blogspot.com/

Not sure if I marked this as a link, or even if that's allowed.

I can't vouch for his numbers but this guy obviously puts work into his page. The recent top was 12,000+ on or about Nov.15. It's getting close again as of 4/5/06.

Is there anything like this kind of hard data for the BA? Our opinions are all interesting, sure. But opinions are like a**holes, everybody has one.

BTW, this Sacto blog has many topical articles, and the commentary is well written. The focus is obvious:

http://www.sacramentolanding.blogspot.com/

He also lists lots of related links.

If posting these links is taboo please let me know. I'm not trying to step on anyone's toes. I gather that Patrick is not in a competitive mode here.

I find that amazing, in itself. What is he, like the Linus Torvalds of the Bubble or something?

HARM
Yes, I hired a real estate attorney on the second house I ever bought. I bought from owner, negotiated the price myself(It was about 50K below market.)and hired an attorney to do the contract. Escrow does the rest...as far as telling you what papers need to be in by when. Between an attorney and a good escrow agent, there is little need for the realtor.