The Decision of Indecision

When you open a newspaper or any type of magazine, what do you see or read about? The key words today are Global Markets, Credits Crisis, Recession, Depression, Bail Out, The Big Three, Car Czar, Oversight, Failure, Housing Crisis, Obama’s Plan, and Fraud. Based on what we read, a normal person would dig a hole, crawl in, and wait for the sunshine of a new beginning…the decision of indecision.

The fact that our nation’s T-Bills continue to sell for record lows proves the point that there is very little competition for security within our financial markets and that there is still a huge amount of money in the marketplace. If there was a stable sector with some perceived value worth investing in, the money would flow to that sector, creating more competition for the T-Bill and the rate would increase. What does this say to the experienced real estate investor? Opportunity!

Indecision can best be described by what is happening in the housing market. Do you sell? Do you buy? Do you rent in the hope that your value will come back and you can sell at a later date with a minimal loss? I live in a low-socioeconomic area of Texas and while our foreclosures are minimal, we are experiencing a market of indecision. The local lenders are seeing their rules change on a daily basis while the commercial side is still offering rate swaps to create a fixed rate. The great indecision lies within the underbellies of the lending institutions.

To further define what I mean, I would like to tell you of a transaction that I was told about by a friend of mine, a local Realtor. This Realtor has a client who wanted to purchase a specific foreclosed home that is owned by a major lending institution. The Realtor took an executed contract for the foreclosed home to the Lender’s office and was told that the new buyer had to qualify prior to making an offer or closing on the sale for the foreclosed home. The Realtor took the Client to the local lending office for the Seller and was told that they were too busy to worry about pre-qualifying. The Buyer went to another major lending institution and was qualified for the financing required for the purchase of the foreclosed home. The Realtor took that loan commitment for the home to the Seller (Lender), assuming they were ready to close on the home. But instead, the Seller told them that the Buyer must first qualify with their lending department prior to closing. Frustrated, the Realtor took the client back to the Seller’s lending office and was told that the fee to qualify the Buyer was $425.00. The Realtor explained that her client did not want to incur any additional expenses in the purchase of this home since she had been qualified by another lender and was ready to close. The lending officer for the Seller told the Realtor and the Client that she did not work for free and to “have a nice day.” The Realtor went back to the local office of the Seller and explained the situation to no avail. Consequently, the Realtor was forced to sell the Client another home due to the indecision of the Seller and the lender’s underwriting guidelines. New rules within our markets are creating indecision. The norm is not the norm and you should not take anything as status-quo.

To turn indecision into decision, you need to look for the opportunities within this marketplace and act. Remember, you are the local expert so trust your skills. Look to the stock market as many of the stock prices are showing low PEs and are at about 50 percent of historical values. If you want to start a new business and you live in a populated market, I would suggest starting a business that removes the personal belongings of the previous owners and cleans the homes and businesses that have been foreclosed on. Also, investing in foreclosed homes will continue to be the mainstay for many investors who look to participate in the market. Explore new structures such as buying for cash (greater discount) and refinance at later date. In my opinion, there is still another level or two of foreclosures in the housing market, so be careful, as we are only about 40 percent into the decline of the housing market. Learn how to syndicate debt or other obligations that will create benefits in the future. If you are a developer, you will need a huge source of cash, or the ability to understand what and how the Lenders in your market will participate. The indecision within the financial markets is enhanced by the insecurity of the retailers, the bankruptcies within the retailers, the store closures and increased discounts being advertised during the holiday buying season.

Each market is different. Each lender is different. Every deal is different. Decision or indecision — it’s your choice.

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