Dean Graziosi | Dean Graziosi Real Estate | Dean Graziosi Investment

Consumer confidence is one of the key indicators that investors always track.  For the past two years, consumer confidence has risen to surprising highs and fallen to desperate lows.  Every time there is a shift there is a reason why.

That’s the scary part.  Consumers are human.  They react to headlines, media and world events that really have very little affect on the overall marketplace.  Savvy investors not only watch consumer confidence but they analyze it.  In fact, the consumer confidence index published by the Department of Commerce affects every market from equities to currencies to commodities to real estate.  If you fancy yourself a real estate investor stay on top of this important index.  You will make many smart moves by staying on top of consumer confidence.

In July, the Certified Financial Planning Board of Standards released a survey through June 30^th, 2010.  The study revealed that consumers are worried about equity markets and currency markets.  The survey, which included more than 1,000 residences from all areas of the country and from all economic levels, indicated that 83 percent of those polled believed their finances would improve over the next six months.

These consumers believe that many sectors of the economy, including residential and commercial real estate, will also improve in the next twelve months.  Progress will be slow and delayed, but progress will be made.

Certain aspects of the June real estate market activity are surprising.  In Southern California’s six biggest counties, real estate sales increased by 7.2 percent in June compared to May.  In fact, activity in these counties was the highest since June 2006.

California trails Arizona and Florida in short sales and foreclosure activity.  Facts are facts.  More money was invested in Southern California last month than in the pat two years.  Additionally, more mortgages were written than in the last two years.

While this is not a complete endorsement, it certainly marks a trend worth watching.  Pick your investment area and follow the consumer confidence trail to short sale success. 

When the homeowner calls and has decided a short sale is the only alternative, the listing agent must move rapidly.  Time is of the essence.  The listing homeowner has agonized over this dilemma.  Either the house is headed for foreclosure or the seller has already received a Notice of Default.

Ensuring the success of a short sale is often about price.  Unfortunately for the seller, the short sale listing price is rarely reason for celebration.  After all, the short sale is predicated on financial hardship and shrinking market value.  The purpose of the short sale is to conclude a transaction that is acceptable to the lender before foreclosure becomes necessary.  The homeowner is attempting to sell the property for less than is owed and get out of the transaction with a semblance of credit and credibility.  Short sales are tough on the sellers and tough on the lender.

Pricing the short sale is about bringing five parties together in a compromise.  Shirt sale listing prices are not based upon fair market value.  The truth is that short sale prices are generally below market value.  The short sale listing price must appeal to five interested parties.

·                     The short sale bank – in explaining the listing price to the bank, the agent should use pending sales comparables.  By the time this transaction closes, those will be relevant.

·                     The buyer – short sale buyers do not expect to pay market value.  Short sale buyers are valued commodities.  They are also going to have to wait 90 days or more to close.  The price must motivate them.

·                     The buyer’s agent – short sales take longer than a conventional sale and the agents generally make less money.  The buyer’s agent will need to see this listing is a goof offer and a viable transaction.

·                     The buyer’s lender – the buyer’s lender will be using an appraiser.  Today’s lenders need appraiser that meet stringent lending requirements.  The price cannot be too low for the buyer’s lender.

·                     The seller - the seller will not be receiving any equity from this transaction.  However, the listing price must assure the seller that all obligations are satisfied and retired.

Experienced short sale agents know how to perform and how to arrive at the best price to achieve the seller’s goals.  It is a hard process but one that is saving many of today’s homeowners.

The real estate investor’s ability to bring the pieces of the short sale puzzle together can create big profits and windfalls for real estate balance sheets.  What investors are finding out is that short sales work.  In the midst of the world’s deepest recession and with more than 1,000,000 American homeowners suffering foreclosure in 2008, mortgage holders have changed their stance on previously unwelcome short sales.

The new climate is wide open for short sale acquisitions.  Banks have come to realize that foreclosure is the resolution of last resort.  The cost of maintaining foreclosed properties in a down market loaded with excessive supply and dwindling demand has led banks to negotiate with qualified investors.

These investors can reap big profits by buying low and turning properties over in a relatively short time or by renting the properties until market conditions improve.  The possibilities for profit are many.

The key to a successful short sale is to bring the vested parties together.  With more and more homeowners with secured debt exceeding the value of the property and with rising unemployment placing more and more Americans in default, short sale opportunities are abundant.

Banks are allowing these “underwater” homeowners more flexibility than ever before.  Today, banks are allowing short sales, often accepting less than they are owed in order to avoid ongoing maintenance.  The investor who works with the mortgage holder will usually find a ready, willing and able lender.

Meanwhile, the owner avoids foreclosure and is generally forgiven for the remaining indebtedness.  The homeowner’s credit may suffer but the damage is less than would result from foreclosure.  With the unemployment uncertainty plaguing the nation, short sales are often the lesser of necessary problems and can often provide win-win-win scenarios.