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Is It Too Late To Invest In Pierce County Real Estate?

Blackstone Homes’ subsidiary Invitation Homes, American Homes for Rent, and FREO Washington are three large institutional investors scooping up a significant share of the vacant foreclosed homes in Pierce County, Washington. The purchases that these companies are making might artificially inflate local home prices, say some. Others believe that the area is poised for a housing price comeback.

Blackstone Homes and the other corporate investors that are purchasing large numbers of homes claim that they are in the business to serve as a long-term landlords, but local experts are skeptical. They think that the institutional investors are really planning to wait for prices to rise a bit before dumping the houses for a tidy net profit, according to Kathleen Cooper’s article in the real estate section of the Tacoma News Tribune on October 27, 2013 “This is no different from institutional investors being bullish in other commodities,” says Jody McNamer, a Gig Harbor-based real estate investor who has focused on the South Puget Sound region for 20 years. “They run those commodities up and dump their holdings after they make their profits. And little guys are all, um, what happened?”

Business Meeting depicted by The Law Offices of James H. MaGee, Washington Bankruptcy Attorney

Are big investors bidding Pierce County real estate prices up?


What does this mean for the rest of us?

It could signal that these well-informed corporate investors are confident that the Pierce County housing market is likely at its price low point now, and that they expect prices and rents to rise soon. If the big corporate investors are correct, then it means that those pondering whether to buy a home can trust that some well-informed corporate investors also believe that now is a good time to buy.

How many houses are these big investment companies purchasing? Between September 2012 and October 2013, almost 1,000 homes were purchased by Invitation Homes, American Homes for Rent, and FREO Washington. There are also additional regional and local companies making investment purchases, so at least 1 in 12 homes purchased in Pierce County over the past year was purchased by a big investor.

Some people think that these institutional big investors have miscalculated and are skewing the market upwards, and that the temporary upswing in housing prices will decline again once the big investors quit pumping money into local purchases. The skeptics could point out that the median home price in Pierce County peaked at $285,000 in August 2007, then plummeted to about $160,000 in February 2012. Since big firms moved into the area as early as October 2012 to buy homes, the median price has risen to $220,000 as of September 2013. These naysayers could claim that housing prices are moving up too fast, given the otherwise generally flat or low-growth local and national economies.

Substantial numbers of purchases by large real estate investment firms are being made all over the country. In Washington, investors are concentrating on properties in Snohomish, King and Pierce counties, according to the Tacoma News Tribune. Is the present house price increase another housing price “mini-bubble”, or are these price increases here to stay? Only time will tell.

So, What Can I Do To Prepare To Invest In Pierce County Real Estate?

If you want to buy a home, but you either have rocky credit or perhaps you had a your home foreclosed upon in the recent Great Recession, then preparing to buy another home soon to avoid potential steep increases in housing prices could be timely. In some cases, filing bankruptcy is a prudent step towards eventual home ownership. Bankruptcy can eradicate debt and improve your debt to income ratio, making it clear to home mortgage lenders that you do not owe any further debts and you are a safe bet for a new home loan.

You or someone you know may want to turn over a new leaf, and get started towards a brighter financial future now. Call us at (253) 383-1001, or contact us through the form on our web site, in order to schedule a free, no obligation, personal consultation with me. During our meeting, I will listen to your situation, examine your options with you, and explain how and why bankruptcy may be the right choice for you. Don’t wait; stop procrastinating! Act now to regain your peace of mind right away.

Cities Weigh Use of “Eminent Domain” Powers to Help Underwater Homeowners

City of North Las Vegas city hall
Richmond, California is considering helping its underwater homeowners. Underwater homeowners are those who owe more on their homes than the homes are presently worth.

The proposal would involve the city using its powers of “eminent domain”. This power is usually employed to take property away from an owner—while paying the fair present market value for the property—in order to use the property for some public good or use, such as the widening of a highway or the establishment of a park.

Richmond proposes to seize the underwater homes by paying the mortgage lender the fair market value of the parcel, which in these cases would result in the mortgage holder receiving far less than the mortgage balance.

Then the city would recoup its payoff to the mortgage holder who received the payoff by “selling” the parcel to the homeowner at 15-20% more than what the city paid the mortgage holder in the eminent domain proceeding.
The transaction would be completed when the homeowner secured financing to buy their property back from the city by paying 15-20% more than what the city paid for the property in the eminent domain proceeding. The 15-20% differential would be split between the city and an investment group called Mortgage Resolution Partners both to compensate the city for its troubles and to make a tidy profit for Mortgage Resolution Partners (MRP).

If Richmond follows up on the proposal, then it will be the first in the nation to use its power to seize private property as a means of addressing lingering fallout from the foreclosure crisis.

Sensing an issue, Wells Fargo and Deutsche Bank, acting on behalf of investors who hold homeowner loans in the form of mortgage-backed securities, filed suit. The banks contend that the plan is an illegal scheme to reap windfall profits for Mortgage Resolution Partners, while the city of Richmond takes a small cut as its “fee for renting out its eminent domain powers.”

However, U.S. District Court Judge Charles Breyer of San Francisco tossed out the lawsuit, saying it was premature because Richmond was only investigating the proposal and had not yet moved to use its powers of eminent domain to seize any property.

As quoted by Hudson Sangree of The Sacramento Bee, Richmond mayor Gayle McLaughlin says that the city must step in because the banks that contributed to the crisis haven’t acted to help communities recover, “These bankers have caused so much harm; a lot of them should be sitting in jail,” says McLaughlin, a Green Party member.

The city may be considering that as more and more houses are abandoned, it is losing its population of owners dwelling in their own homes as investors scoop up the homes and turn them into rentals.

Another city, North Las Vegas, Nevada considered a similar proposal from Mortgage Resolution Partners, as reported in the public policy blog of the American Enterprise Institute. The North Las Vegas, Nevada city council voted in June 2013 to enter into a 60-day advisory services agreement with Mortgage Resolution Partners. The idea was to consult with MRP over the next two months on how the process might work.

City elections in June may have changed the balance of power on the city council, leading to the rejection of the proposal. Two of those bullish about the proposal—former Mayor Shari Buck and term-limited Councilman Robert Eliason—both departed after June’s election, leaving Anita Wood and Pamela Goynes-Brown as the only two sitting council members to vote in favor of the proposal’s reintroduction this week.

By the date of a council meeting in early September, both council members had backed away from the effort, according to a story in the Las Vegas Review-Journal. Anita Wood commented on her change of heart in the story.

“There are still a lot of questions,” she said. “There are still issues over whether tax abatements will continue after the end of this year at the federal level. There are legal proceedings in the state of California that still need to be resolved and I think they need to be resolved in California, or at the federal level, before the City of North Las Vegas gets involved in this.”

To date, I am not aware of any Washington cities considering this proposal. Stay tuned…

Title Insurance – what does it do? – be cautious if you purchase a foreclosed home to fix up

The NY Times’ Ron Lieber assembled an important article for anyone thinking of buying and then dumping money into a foreclosed home to fix it up either to live in, rent out, or to try to “flip”.

The crux is that if the foreclosure was upset due to “foreclosuregate” or “robosigner” issues – your maximum recovery might be what you paid for the home – and you could not recovery your repair or improvement costs.

Now, to date, I am not aware of alot of foreclosed homes being returned to people who lost them in some flawed foreclosure process. Usually, the foreclosure was for lack of payments and the foreclosed individual is unlikely to want to begin making payments on the old “under water” mortgage.

However, recognize that your “title insurance” only gives you what you paid for the home if your ownership and title to the home is somehow threatened by litigation.

Mr. Lieber: “While homeowners … may ahve title insurance, it generally covers them only for the purchase price of the home. When you buy a home out of foreclosure, however, it often needs a lot of work. ‘If I bought it at $200,000 and it’s a steal but I had to gut it and sink $100,000 more in, my recovery is limited if there is a problem,’ said Matthew Weidner, a lawyer in St. Petersburg, Fla.”

Mr. Lieber’s October 9, 2010, NY Times article (section B1 “Business Day”) is a “must read” for those investing in realty: