Better Than the Stock Market?

[Don Clark]

8) There is a growing trend in my market. My market right now is a sellers market, values are increasing. The trend now is to refinance your newly built home after you have owned it, in some cases, as little as 6 months. I am being asked to do appraisal on homes where no data yet exist in the public records for the subject and comparables, they are so new. In some case the market value, in some neighborhoods, has increased 10-20% in as little as a year. heck, I may just have to get in on the band wagon. Now ehere is that number to call for the "get rich with no money down" books and tapes that splains how to do that :twisted:

Just imagine, I could make more money doing that than doing appraisal. Reminds me of a sales managers exhorations when I first got into real estate. He always encoyuraged us to do some "farming" of certain housing areas. He called it our "acre of diamonds". For me it turned out to be a mud hole of nickles :lol: But, now I am beginning to see diamonds.

Don

 

[Dee Dee]

Don,

That type of market has been going on in the Denver area for about 5 years now, but has slowed down dramatically in the past 8 months or so.
Homeowners who have been counting on those cash-out refi's to make ends meet are finding themselves unable to continue doing so because the value increases aren't as great as they used to be. End result is that they have little equity and have to put their homes on the market or lose them to foreclosure if they can't sell soon enough. Now lenders in this area are getting VERY picky about doing refi's for people who are habitual about it, looking very closely at the homeowners assets outside of their home equity to see if they have anything to fall back on should the market continue to slow and lay-offs continue.

One of my friends who is also an appraiser finally decided to jump into the game you speak of a little less than a year ago (which was too late), with little money down and then she intended to sell out immediately for a profit. Guess what...it didn't happen, and she soon figured out that many of the other "homeowners" buying into the same subdivisions that she was were other people playing the same game (mostly realtors). It was cheaper to back out of the deal and lose their small downpayment than end up with a house that would sell for close to what they had signed the builder's contract for. That left a glut of homes with buyers that had backed out and the builders are selling them at discounted prices just to keep the ball rolling in their development. Trust me, the builders won't tell you about THOSE sales when you're asking them for comps. And like you said, it won't show up in public records. My friend had to scramble to find renters who would sign leases, and she's hoping that a year from now she might come out of it with a little bit of a profit.

I guess the point I'm trying to make is that you have to beware of a false market that is artifically inflated by too many 'investors' trying to turn a quick profit. Check closely to see if a large number of the resales that show up on MLS turn out to be realtors turning over their own homes, then know that the red flags are up if this is the case. If you step into the game at the wrong time you could get burned...it's happening here.