Archive for August, 2009

This heading is a typical “theme” throughout the country! There are several reasons for this and I think we can all pick a few top issues for this. But, that is like rewinding a bad scene in a movie and watching it over and over again. I men
a what’s the point? And now the options for these distressed homeowners are showing themselves “true” to their options. Country Wide has a problem with doing a loan modifications (a paltry 10-15% success rate) and their investors (lender) flips out becuase it was not approved by them, and now this opens more issues in the future with other banks offering these modifications. See the article: http://www.nytimes.com/2009/08/20/business/20bofa.html

So this will certainly open a can of worms that will change the landscape for other lenders willing to do these loan mods which in return falls back on the property owner to handle what to do next. The options are tightening up and trying a Short Sale my be the best alternative before losing it to foreclosure. I have a list of options that the lender offers and why a short sale may be the best option and you get get more information at:
www.help-me-shortsales.com

Keep it short,
Mike Knows Short Sales

Ok, family here it is. My first blog posting on the Mike Knows Short Sales blog. The last two years are have truly been an experience. From the reality of the market shift and the choices to change my real estate bsuines, to the situation of learning how to survive in this market. I am proud to say that I am anointed to be a short sale expert. I have learned from the best and have placed this in my business to generate a way to help sellers and income. After learning the hard way on how to adapt in this market I can honestly say that I know what I am talking about. In order to be in expert means you have to had the experience, and to have had the experience means you have had to learn it first hand. You will get the flat out benefit of this strategy and this business…from an anointed Short Sale Expert.

Mike Knows

Do you know your defensive interval ratio? Most novice short sale investors don’t’ have a clue what this even refers to while veteran investors have probably already rattled off their ratio. If you aren’t the accounting type don’t worry – a defensive interval ratio Is really quite simple. It’s the level of liquidity that reflects the ability of your business to meet current debt obligations. Plain and simple – how prepared are you to withstand a little period of insecurity? It’s a good number to know and something to keep an eye on in order to preserve your spending power and look good at the bank.

How to Calculate

Calculating the defensive interval ratio is easy; simple use the following formula to plug in your own numbers:

Defensive assets (anything you can sell or access when in need including money owed to you by others)/Projected daily operational expenditures – noncash charges

For example, let’s assume you have cash on hand of $50,000, access to bonds in $25,000 and expect to receive another $25,000 from debts, deals and other income for a total of $100,000. Your daily cost of sales, operating expenses and other income requirements amount to $1,000 per day giving you a projected daily expenditure of 100 days

How to Use

Keep an eye on both your personal and business defensive interval ratio. As a rule of thumb, more is better but it is possible to have too much cash sitting on the sidelines. Financial managers and short-term creditors pay special attention to defensive interval ratios so they are of particular interest to those seeking OPM or outside funding for quick cash deals or other relatively short term transactions.

Personal – Strive for at least a 90 day defensive interval ratio up to whatever makes you happy.

Professional – Calculate independently of your personal ratio. 30 days is a solid score but anything above 180 days tends to work against you by reflecting an overly cautious investing style with money sitting on the sidelines. Put the money to work in order to demonstrate your ability to formulate solid returns and mitigate risk. If you are unable to find appropriate investment instruments due to a relatively minor sum of money, try pooling it with others or use it as collateral when approaching deeper pockets than your own. In either case, show that you know and understand the concept behind the approach.

Research – Finally, take time to perform your own research with potential partners and others prior to sealing any deal. Obtain a quick look at their position before lending money or going into a partnership with anyone. Looks can be deceiving especially when it comes to elusive ideas like short sales.

Make sure they have the staying power requires to become equitable partners rather than a burden which weighs you down in the long run.

The American Clean Energy and Security Act was recently passed by the House of Representatives Committee on Energy & Commerce. The legislation, introduced by Congressmen Henry Waxman and Ed Markey, proposes to tackle climate changes by reducing greenhouse gas emissions. Oil companies, when they refine oil in the U.S., would have to buy allowances for carbon dioxide spewed from their plants and from vehicles when motorists use their fuel. Instead of refining oil in the U.S. if oil companies import oil, they would need to buy permits only for emissions from motor vehicles and not for emission from their plants. Oil companies say this would favor oil imports rather than production in the U.S.

ConocoPhillips Chief Executive Officer Jim Mulva said: “It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment.” Roger Ihne, a consultant at Deloitte Consulting, believes that about 2 million barrels of daily U.S. refining capacity will shut down because carbon costs will be several times the operating profits for some plants. Some analysts believe that the saber rattling by the oil companies is with an aim to get concessions from the government to offset increased costs on account of compliance with carbon legislation. John Coequyt, a lobbyist with the Sierra Club, an environmental organization, said: “The strategic value of this is pretty obvious. They want to qualify for rebates under the competitiveness test, which of course they do not.”

Fritz Henderson, chief executive of General Motors (GM), has said that the company needs to get out of the bankruptcy court as soon as possible in order to prevent many of its suppliers from going out of business. “Many of GM’s suppliers are already in the midst of a severe liquidity crisis, which has only been exacerbated by the current shutdown of certain GM production facilities,” Henderson said.

At stake are thousands of jobs in supplier companies. GM has shut 11 of its plants for close to 3 weeks in order to cut production and slash inventory. GM filed for bankruptcy on June 1 and is awaiting court approval to sell its assets to a reorganized company. According to the Motor & Equipment Manufacturers Association, at least 15 auto parts suppliers including Visteon Corp, Metaldyne Corp and Noble International Ltd., have either filed for bankruptcy or had their assets seized by creditors in 2009. Henderson said the company’s plan to resume operations at some plants by July 13 could be hit if the court does not approve GM’s asset sale.

According to the Commerce Department, the nation’s gross domestic product contracted at a 5.5% annual rate in the first quarter of this year, as against 6.3% in the fourth quarter of last year. Economists believe that the economy is contracting at about 2% this quarter. “The economic data we’ve seen so far for the second quarter suggest the preliminary number for the second quarter will show a modest decline, maybe half the rate we saw in the first quarter,” said Gary Thayer, senior economist with Wells Fargo Advisors.

Despite the good news, economists are worried about unemployment not showing any signs of sustained reduction. This week, the Labor Department said jobless claims for last week jumped unexpectedly by 15,000 to a seasonally-adjusted total of 627,000. Continued claims, which denote the number of workers still on jobless rolls after an initial week of claims, rose 29,000 to 6.738 million in the week ended June 13, the latest period for which the data was published. “We still firmly believe that the underlying trends in claims is downwards, but it is slow and uneven,” says Ian Shepherdson, chief U.S. economist for High Frequency Economics.

The Commerce Department says personal income in May rose 1.4%, the biggest gain so far in the year. The rise in income didn’t translate fully into spending. Consumer spending rose only 0.3% in May, a rise for the first time in the last 3 months while savings rate jumped to 6.9%, the highest since December 1993. “Consumers are starting to return to malls to spend a little more as they think we’re through the worst,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi.

Analysts believe a sustained recovery in consumer spending is likely only after unemployment eases. “The recession is ending. Still, purchases are likely to be modest until the job losses ease and companies start hiring,” said Rupkey. Increasing job losses led to 0.1% drop in salaries in May. Retailers believe consumer spending will not rise to any significant extent in the near-term. David Dillon, Chief Executive Officer of Kroger Company, a grocery chain, said: “Shoppers remain cautious in this economy, and we do not anticipate that changing anytime soon.”

Experts believe that the current level of housing inventory has to come down for the industry to get into a phase of sustained recovery. Short sale transactions offer a win-win-win situation to buyers, sellers, and lenders, and help clear the housing inventory available for sale. While short sales have risen in the last year or so, experts believe that banks are still not fully prepared to approve the transactions in a timely manner. Rick Shargo, vice president of marketing at RealtyTrac, said: “Interminable delays of six weeks to three months are not uncommon, or banks rejecting a 20% discount at short-sale only to ultimately take the property back and market it at 40 or 50% lower.”

Banks have to report their mortgage assets on a mark-to-market basis, and any sale at a price lower than the value in their books will mean a reduction in their reported profits. Bankers also complain that some buyers take advantage of the current situation, and demand a price which is way below the market price. Walter Molony, spokesman for the National Association of Realtors, said: “Short sales have taken far too long. The faster you clear off this excess inventory the faster you can stabilize home prices.”

Which is better when it comes to short sales- Cooperation or Competition?  The fact of the matter is this; the most successful investors know how to do both. Unfortunately, the majority of people tend to fall heavily into one or the other. They key is to understand what your natural tendency is toward then take steps to deliberately seek out the other complimentary side. Find out how you rank by taking this cooperation versus competition quiz:

Using a scale from 1 – 5 rank yourself on each of the following:

1 = Strongly Disagree. 5 = Strongly Agree.

1. Get in my way and you will pay for it.
2. Force is the most effective way to persuade someone or something.
3. Retaliation or retribution is justified.
4. It is unwise to trust many/most people.
5. Treating people with kindness is a sign of weakness.
6. The means justify the ends….sometimes people will get hurt.
7. Winning is more important than how the game is played.
8. Success is not optional – no matter what the cost.
9. Second chances are for suckers. Burn me once…but never twice.
10. The game should be played like your life depends upon it.
11. People need to get along with others.
12. I like to help others.
13. Your loss is my loss.
14. True strength is knowing how to take a hit then get back up again.
15. The journey – not the destination – is what is important.
16. Teamwork is the best method.
17. Success without helping others is meaningless.
18. Everyone needs a second chance sometime.
19. Children should be taught to turn the other cheek and forgive early in life.
20. The Golden Rule is an imperative to success in life.

How to interpret your results:

Add up all your points for items 1-10.

Put your total here:

Add up all your points for items 11-20.

Put total here:

Those that score higher for 1-10 are primarily competitive in nature. Those that score higher in items 11-20 are primarily cooperative in nature. The goal is to become balanced in both areas. If you are too competitive, seek out a softer side that allows others to win as well. By meeting their needs you increase your own odds at success and satisfaction. For those that are highly cooperative, seek out ways to challenge your growth and don’t be afraid to enjoy winning. You work hard for it and deserve it.

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See you at the top!

The Homeland Investment Act of 2004 allowed a one-time tax break on repatriation of foreign earnings by U.S. multinationals, if the money was used for specified investments in the United States. The law specifically forbids companies from using the money for paying dividends and buying back shares. Firms responded to this law by repatriating about $300 billion from foreign affiliates and taking advantage of the tax break. But was the money used for investments in building plants or research and development – the purpose of the tax break? Not quite. About 92% of it went to shareholders, mostly in the form of increased share buybacks and the rest through increased dividends. In a report titled “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” Dhammika Dharmapala, a law professor at the University of Illinois; C. Fritz Foley, an associate professor of finance at Harvard Business School; and Kristin J. Forbes, a professor of economics at the Massachusetts Institute of Technology, said, “Repatriations did not lead to an increase in domestic investment, employment or R.& D., even for the firms that lobbied for the tax holiday stating these intentions.” However, since repatriations did happen and were used to pay shareholders, the report said shareholders may have reinvested them or used them for consumption. “Either of these activities could have an effect on U.S. growth, investment and employment,” said the report.