The CBS News Magazine did a piece last night on the foreclosure debacle in this country.  Much of the segment focused on Stockton, California.  The Denver real estate market was not mentioned.

I think we’re all getting accustomed to hearing about the sub-prime mortgage mess, but what I found interesting about last night’s report was the financial analyst who explained why this crisis is NOT simply an American crisis.  These sub-prime mortgages were packaged into mortgaged backed security packages and then sold (as part of a complex basket of securities) to financial institutions all around the world including unions, pension funds, national banks, etc.  Yes, national banks.  Meaning foreign countries are currently holding large chunks of this mess.  Meaning that if we head into a recession there is the real possibility that other countries may follow us to the extent that they hold these security packages sold to them by the big investment houses on Wall Street.  A frightening prospect indeed.

News this morning of BuySide Realty’s sister company Iggy’s House withdrawing its IPO.

Iggy’s House is a company that allows home sellers to put their home on the MLS for free. The problem with that model is that it is so bare bones that it leaves way too much to chance. I would not even classify Iggy’s House as a discount shop, I’d classify them as a fringe concept. Lots of home sellers resent Realtors for the fat paychecks they get for selling a home. Iggy seems like an attempt to capitalize on that feeling and offer sellers something of perceived value for nothing.

Our Denver real estate company is a discounter. Real-a-Save proudly offers discounted fees. But we don’t discount our service. On the buyer’s side we’ll take our clients on as many home tours as they need. We handle all the paperwork as well.

On the sellers side about the only thing that we don’t offer is open houses. Open houses are a great way to let your neighbors satisfy their curiosity and see what’s in your closet. They’re also a great way for rookie agents to TRY to pick up buyer clients. Have you ever walked into an open house and been accosted by the agent? Asked aggressively for your contact info, then hounded to let them show you some other homes in the area. Me too. That’s why we don’t do them.

The take away here is that you can come up with great sounding concepts but to be successful you have to get your hands dirty and spend time with your clients making sure each one is treated like royalty. Concepts alone don’t make money.

Imagine walking into your favorite restaurant and ordering your favorite meal.  Then, the waitress smiles at you and says, “Sure, no problem.  I’ll ask the chef.  He’ll let you know tomorrow if he thinks he can make your order.”

Well, that is exactly the situation when you deal with short sale properties and foreclosures.  The bank has decided to sell a home.  They put a sign out.  They list it on the MLS.  You make a reasonable offer.  Now they make you wait for a month or more for a response.

Is that hard to believe?  The Denver real estate market is saturated with short sales and foreclosures right now.  It seems like we always have a few of these deals pending.  And each and every time I will warn my clients that they are in for a long wait.  But each and every time it still shocks me that it takes more than a month to look at a number and say yes or no.  We’re currently well into our second month of waiting on a couple of deals we’re doing.

This is one area where the government actually has a more efficient model than the private sector.  If you put an offer in on a HUD owned property, then you can expect an answer in about a day.  Private bank?  You’re gonna wait 3-6 weeks for a response.

Yesterday was quite the day on the stock market. Down around 300 points, reporters are now tossing around the word “recession” like it’s a foregone conclusion. Even the Presidential race is taking on the economy as a more pressing issue than the war.

What does news like this mean for the Denver real estate market? I’m guessing that we have another 18 months of increasing inventory, flat to decreasing prices, and continued foreclosures and short sales.

The truth, however, is that people will always need to buy and sell houses for one reason or another. The possible economic downturn does not mean the bottom will fall out of our local real estate market, rather I believe it means more of what we’re currently seeing, for longer than we initially expected.

It may be a good time to get into the market if you are a real estate shopper looking for a home to live in (as opposed to invest in) then you will find lots of inventory with really good prices. My advice is that you should be buying for the 7-year range at a minimum.
This is important: unless you are a professional you should not be purchasing homes to fix and flip. I’m seeing a decrease in the number of first-time investors who want to give fixing a try. and I’m advising the first timers that I do speak with to rethink their plan entirely and to sit things out for now. There are, however, lots of professionals making a living fixing up homes and selling them. But these are pros. The ones I am seeing are small operations who do much of the work themselves, with low overhead and a realistic sales price and time frame as an exit strategy. You need to have cash on hand to sit on your fixed up house for a longer period of time than in years past. The ones who realize this and can keep ALL of their costs down are still making money in this climate.

But there is also disturbing evidence that investors continue to make the worst rookie mistake possible: running out of money. Not a month goes by where I don’t show at least a couple homes that are half-way fixed up. Possibly on their way to a short sale, evidently because the owners ran out of money right in the middle of a fixer.

If you are buying for the mid to long term then you will find a great market and many prime buying opportunities. But investing is another story. Like Aretha says- you better think. Think before you make a huge gamble in this market.