Broker's RoundTable Notes 7

Broker's RoundTable Notes 7 by Bill Roberts

We had another meeting of the San Diego chapter of The Mike Watson Institute Broker's RoundTable last night.

As usual, we had about twenty-five serious real estate investors in attendance. Membership is comprised of students of Mike Watson from various disciplines within real estate. We have real estate agents, mortgage brokers, appraisers, contractors, architects, title reps, and investors among others.

The first order of business is a discussion of market conditions. Last night this was very lively. We discussed what is happening in the capital markets. Basically, underwriting criteria is being loosened up but jumbo loans for investors are still problematic. One area of lending is encouraging however: single close loans for construction seem to be back in force. CountryWide is jumping into this business with a 90% loan-to-cost product with no payments during construction. But Wachovia's wholesale division still has an 80%LTV based on the after-built value. It seems that this probably translates into a 100% loan.

Then the conversation turned to foreclosures and what this means to the future of the real estate market. Word is that foreclosures will probably reach their peak in the middle of '08. But the banks are holding some of these REOs off the market in an effort to "staunch" the bleeding. How well this will work is anybody's guess, but they seem to be very serious about getting a good price for any house they have to take back.

It seems Wells Fargo and other big banks would prefer to just foreclose than try to do a workout or approve a short sale.

There is a real question what the effect of a foreclosure will have on a person's ability to get another home loan. My guess is that when the capital markets get back to normal, they will once again be looking for ways to make more loans. Two or three years will be enough time to erase the effect of the foreclosure.

Right now however, the rental market is hot. Some of our condo projects will be built out but treated as apartments. When the real estate market heats up, then these units can be sold. Another benefit of this strategy is the two year liability builders have for unseen defects. We are not going to sue ourselves for defects.

One project one of our teams has going is a lot split in Poway. This is a very nice house on an acre lot. It was right in the fire area. As part of the project the team cleared a lot of brush from the lot for $3,000.00. The fire burned 25 houses in this area but didn't get this one. It seems that the brush clearing saved the house. Because all the "landscaping" was burned, they received $28,000.00 from the insurance company. That money will go toward landscaping the way they wanted to do anyway.

We discussed commercial condominiums in San Diego. It seems there just aren't enough. Food for thought.

The meeting was adjourned for networking.

If you are interested in joining a real estate investment PowerTeam call me. Bill Roberts (619) 244-4610.