Vacant residential lots are looking better and better to real estate investors. The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand.

“The country needs 1.2 million new units for the next 10 years just because of population growth,” says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. “[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant.”

Beginning Feb. 1, the Federal Housing Administration will provide mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days. The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.

Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.

FHA’s change “is going to be absolutely terrific” for first-time home buyers hoping to take advantage of the tax credit, says Bobby Taylor, an associate with Coldwell Banker Mountain West Real Estate in Salem, Ore.

The wealthier the investor, the more money they plan to put in real estate compared to the amount they have earmarked for stocks and bonds, according to Barclays Plc global survey. Investors believe real estate will yield better returns.

Twice as many people with more than $800,000 to invest plan to increase their investment in commercial and residential property compared to those who plan to reduce it, Barclay’s study reported.

Overall, investment in real estate among wealthy individuals is set to rise to 30 percent of the average portfolio from 28 percent now, according to the survey. That excludes properties used as a principal residence.

Forbes housing reporter and analyst Francesca Levy makes some thought-provoking predictions in the latest issue of the magazine.

She predicts:

* Real estate will be an attractive investment strategy in 2010 with wealthy investors devoting an increasing segment of their portfolios to it.
* Loan modifications will result in more people who should probably be facing foreclosure slipping deeper into debt.
* Cities like Omaha, Neb., and Buffalo, N.Y., which avoided the housing bubble and most of the bust, will be models for cities trying to avoid another bubble.
* Financial troubles in Dubai will ripple through the U.S. luxury market, creating energy in a market that has been stagnant.

Falling prices for real estate and the declining value of the dollar are luring investors from all over the world to purchase properties for as little as half what they might have paid four years ago.

“This could be a once-in-a-generation opportunity for real estate investment,” says Arthur Wong, whose Calgary, Alberta-based U.S. Real Estate Fund has invested $5 million in properties in the U.S. Southwest and plans to buy millions more.

Buyers from countries like Brazil, Canada, France, and the Netherlands, whose currencies are particularly strong against the dollar, are spending millions on luxury condos in New York City, Las Vegas, and Miami. Foreign buyers also find the warm climates of California, Texas, and Arizona attractive.

Peter Zalewski, a principal with Miami-based Condo Vultures, says he has sold foreign condo buyers seven bulk deals in downtown Miami alone, with investors coming from Argentina, Canada, Colombia, Italy, Norway, and Venezuela.

It’s no surprise that buyers are looking for a bargain but now even more people are gaining interest in the growing foreclosure market. According to Trulia.com and RealtyTrac, a recent survey shows that 55 percent of U.S. adults are at least somewhat likely to consider a foreclosed home when buying real estate. That’s a nearly 10 percent increase from November 2008.

However, many buyers are a bit leery of foreclosures because approximately 85 percent said they can’t identify negative aspects of the properties. That figure also rose by 5 percent from the last quarter of 2008. Among the top concerns are hidden costs, a risky process, and further de-valuing of the foreclosed property. Buying a foreclosure doesn’t have to be a scary and unknown process if you take the right precautions. Inspect before you buy is a good motto for any real estate transaction but even more so with a home that has been foreclosed and possibly sitting vacant for long periods of time.

“A lot of the foreclosures that I have inspected have had fires, usually due to the heating equipment. And it’s predominantly because somebody just wasn’t taking care of the equipment—not because they were trying to set the house on fire because they were upset—it’s just poor maintenance,” says Frank Schulte-Ladbeck, a home inspector based in Houston, Texas.

He says the trouble with foreclosures is what happens to the homes during the foreclosure process. “People who are getting into the point where they’re going toward foreclosure usually don’t have money for maintenance,” says Schulte-Ladbeck. Consequently, sometimes important housing needs are let go or, potentially worse, the former homeowners unsuccessfully attempt to do their own repairs.

“You see weird plumbing or wiring set-ups that can sometimes really cause a problem down the road, like with the electrical [system] causing fires or the plumbing causing leaks,” says Schulte-Ladbeck.

Another big concern is when the previous homeowners used various items in the home as replacement for something that had broken. Schulte-Ladbeck says because homeowners who are facing foreclosure frequently cannot afford to fix something in the home, they go without it but that can cause more problems. “I saw one [foreclosure] home, that didn’t have any heating so they were using their fireplace but they weren’t using the fireplace correctly—they had closed the damper and it was allowing the smoke to get into the room. So there was all this smoke damage inside.” How about that terrible smell? Many buyers think it’s only due to mold. But Schulte-Ladbeck says it could be a different cause as was the case with a townhouse he recently inspected. “The water out of the bathrooms had drained out the P-Traps [the pipe that is under sinks and contains water] so you started getting a really awful sewage smell in the house. A lot of people associate that with mold but it’s actually the P-Trap which prevents the [noxious sewer gas] from backing up into your house. When a foreclosed home is sitting for six months or a year, that water will dry up. So then you need to pour water back into that drain to clear away the smell,” says Schulte-Ladbeck.

The best thing you can do if you’re considering a foreclosure is to have it inspected. Just make sure that the property is ready to be inspected or you could be doing yourself a huge disservice. “The one thing that I really suggest to buyers is that a lot of times they have me go in and inspect the foreclosure when it’s still winterized which means that all the power is off, the gas has been turned off, and the water has been turned off. But there’s just no real way to properly check the home to see if something has gone wrong without those things being on.” “Have everything turned on because that’s when you might start seeing things that are wrong like leaks and electrical problems. You could see problems with the heater or the water heater, ovens or cook tops that use natural gas,” says Schulte-Ladbeck.

Seeing is believing and, with inspections, the only way to know for sure is to have everything operating in order to gain the most knowledge about what things will need repairing.

Purchases of houses for investment purposes continued to be among the strongest segments of the real estate market last year — and accounted for more than one out of five of all home sales in 2008.

That’s a key finding of the latest annual study on second homes and investment purchases conducted by the National Association of Realtors.

The investor market share last year was 21 percent, the same as the year before, but down several points from the height of the housing boom in 2005 when it hit an all-time record of 28 percent.

Second homes and vacation property purchases, on the other hand, dropped last year to just 9 percent of the total market, down from 14 percent in 2006 and 12 percent in 2007.

What sort of properties were investors buying for rentals? Two out of three were detached single family units last year, while 22 percent were condos or duplexes. Eight percent were attached townhouses or rowhouses.

Investors kept their purchases pretty close to their home base — following the long-standing rule — “invest where you know the local market best.” Fifty four percent of all investment houses were located within 20 miles of the investor’s own home, and roughly two out of three were within 50 miles.

Investors also opted for considerably lower priced properties last year. The median sale price of a rental unit in 2008 was $108,000, according to the Realtors study. That compares with a $196,000 median for primary residences and $150,000 for second home and vacation properties.

During the boom years, by contrast, investors tended to buy much higher priced units, a median of $189.000 in 2004 compared with a median of $204,000 for vacation units.

Given last year’s credit crunch, more investors apparently avoided banks and mortgages altogether. Forty two percent paid all cash for their purchases, versus just 15 percent of buyers of primary residences and 31 percent of vacation home buyers.

Far larger numbers of investors bought their units in distress situations — one out of six was a foreclosure or trustees sale — which is no surprise given the huge numbers of R-E-O and auctions that dominated many local markets.

So what did the typical investor look like last year? They tend to be older — with a median age of 47 years compared with 37 for primary residence buyers.

But interestingly, they were not wealthier than other buyers. In fact, second and vacation home buyers had higher median household incomes — $97,000 – compared with $85,000 for investors.

Investors looking to acquire houses through short sales just might be in for some good news.

One of the largest holders of second liens in the U.S., the Bank of America, says it’s relaxing its policy on payoffs connected with short sales.

That’s important because large banks have been major impediments standing in the way of thousands of short sales, demanding money for home equity lines and second mortgages that would otherwise be worthless if the short sale property went to foreclosure.

Bank of America had been among the least cooperative of all banks in agreeing to short sale payoff terms, according to industry critics.

The company’s policy was blunt: Pay us 10 percent of what the homeowners owed on the equity line balance or second mortgage, or we won’t sign off on the short sale, which is necessary for the deal to go through.

Now the bank has adopted what spokesman Terry Francisco told Realty Times is “a less arbitrary, more rational” policy.

“What we’re saying (to short sale proposals) is — give us an opportunity to participate and gain at least some of the savings” that will go to the first lien holder — the primary lender on the property — by avoiding the high expenses and losses of a foreclosure, according to Francisco.

Bank of America is now asking for five percent of the sale proceeds on the short sale, net of realty commissions, closing and other costs.

The bank believes that should open the door to more successful transactions, as well as more fruitful negotiations with buyers and sellers to avoid foreclosures.

But not all short sale market experts are convinced that’s the case. Raffi Tal, CEO of Los Angeles-based I-Short Sale, Inc., one of the largest players in the field, says Bank of America’s new policy “will still jeopardize” many short sales that involve its second liens.

The bank’s previous 10 percent policy meant they’d demand $20,000 on a $200, 000 equity line balance, or they wouldn’t bless the deal. But their new policy still means “they want $15,000 if the net proceeds are $300,000″ on a short sale, Tal told Realty Times — even though the economic value of their holding may in fact be zero.

Bottom line for investors: If there’s a Bank of America second mortgage or credit line on the house you’re after in a short sale, work the new numbers. At least some of the time you might be surprised that the answer from the big bank is now ‘yes.’

And watch for other major banks to follow suit.

By Bob Hunt, National Association of Realtors

At their recent meeting in Orlando, Florida, directors of the National Association of Realtors® (NAR) gave formal approval to NAR’s Housing Stimulus Plan. The plan, to be submitted to Congress in its lame-duck session, is designed to end the free-fall of values in the housing market. It aims to do this by providing sufficient incentives to get potential buyers “off the fence.” The plan has four points.

(1) Make the current $7,500 first-time homebuyer tax credit available to all homebuyers and, also, eliminate its repayment provisions.

(2) Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent. Currently, those limits have been raised to $729,750, but those are due to be reduced to $625,000 in 2009.

(3) Use funds from the $700 billion rescue plan (a.k.a. “the bailout”) to institute a temporary (probably two-year) federal mortgage interest buy-down program to lower rates to 4.5% or lower for a thirty-year fixed rate mortgage. This would apply to homebuyers purchasing new or existing homes up to $1 million in price.

(4) Permanently ban banks from engaging in real estate brokerage and management.

The support for this plan did not come without some controversy and the offering of alternative programs. Most of this centered around the third point, the interest rate buy-down proposal. There were those who urged that the target rate be more like 3% rather than the “4.5%, or lower”. It was argued that this lower number reflected what would actually be needed to stimulate buyer activity in a meaningful way. Moreover, it was pointed out that it would be easier to start with a lower number and compromise upward, if necessary.

Others argued that a government-backed interest rate buy-down program should extend to all residential mortgage borrowing (e.g. refinances) and not just be applicable to purchase mortgage originations. Advocates of this point argued that, although the proposed NAR plan would certainly stimulate home buying, it did nothing to help those who were currently having serious difficulty making their present mortgage payments. They felt that any stimulus program also needed to help prevent foreclosures.

As proposed, NAR estimates that the stimulus plan would cost approximately $100 billion per year, “a small price to pay” said Dale Stinton, CEO of the organization, “to stop the hemorrhaging.” However, if the interest buy-down provision were extended to refinancing existing troubled mortgages, that cost could reach numbers in the trillions of dollars.

Charles McMillan, newly-inducted 2009 President of NAR, has already met with senior U.S. Treasury officials to discuss the four-point plan. According to an NAR news release, the plan was received positively. However, Treasury representatives said “their authority under the Emergency Economic Stabilization Act (EESA) to use rescue funds for that type of market intervention is unclear.”

The news release went on, “To move its proposal forward, NAR committed itself to communicating the value of the buydown to members of Congress and asking lawmakers to clarify – through legislation or other appropriate means – Treasury’s authority for the intervention on interest rates.” The effort has already begun. On November 13, NAR issued a “call to action” to its million-plus members asking them to contact their federal representatives in support of the plan. By now, thousands have responded.

NAR members who are unclear about how to contact their legislators and/or what to say to them should contact their local association of Realtors® for assistance. Non-Realtor® citizens should weigh in on this as well. The depressed housing market is a central element of our current financial debacle. Things aren’t going to be fixed until the housing market stabilizes. NAR’s four-point program gives some promise of accomplishing that.

The Titus Woman Ministry is a 501 (c)3 faith-based nonprofit organization dedicated to serve the community through the holistic development of women in need.

One of our primary goals is to construct and operate a homeless shelter for women and their children in the Waller area, with the intent of equipping the women to enter (or re-enter) mainstream society and become self-sustaining and providers for their children. This proposed shelter will be constructed in Waller County, Texas and will house families from all the surrounding communities.

We have opened a resale shop, name Grace & Mercy, on March 1, 2008. Funds obtained from sales of merchandise at the Grace & Mercy resale shop will help fund this project, we are asking for the support of your church and the community to make the vision a reality. Come out and buy our resale merchandise.

Any donations to this worthy cause will be appreciated.

The shop is called Grace & Mercy for it was God’s grace that gave us the vision and His mercy will allow us to carry it through. Can we count on you?

The resale shop wiill carry furniture, clothing (for the family), household goods, and much, much more. It is located at 71 Scroggins Lane Waller, Texas (off FM 1488 In the Held Store Mini Warehouses). The grand opening was March 1, 2008.

For further information and/or donations, contact Rosemary Butler @ 936-931-1726; 281-682-4177 or Carol O’Brien @) 281-302-S333 or Fern Poyser at 936.931.3344. Pass the word and support this God given vision. We thank you in advance for what you will do.