However, in many “bubble markets” that once saw new investors quitting their jobs and “flipping properties,” adjustable rate interest mortages are rising, and they are all lowering their rental rates to outcompete each other.

This seems to be the case in Palm Beach, where rents declined 0.5% in the second quarter. “In Florida, so many apartment buildings were converted to condos over the course of the housing boom that there’s now a large shadow inventory, or shadow market [of condos being rented out],”  (Source: Business Week; July 18, 2007)

However, if rents keep rising and prices keep falling (and the NAR says the national median existing-home price will slip 1.4% this year, to $218,800), fearful buyers could slowly become bargain hunters. Investors: would you like to see the 10 cities where Business Week says rents are rising the fastest? Click here.

Interested in investing in areas where rents are still low but rising? Business Week Magazing has outlines the biggest metro areas with the lowest rental rates which have rising trends.

According to a July 20th article, “The real estate slump is compounding an ongoing structural downturn afflicting the industry as readers and advertisers migrate to the Internet and other media.”

The article goes on to say, “Other publishers are struggling, too: Media General Inc. on Thursday reported a 75 percent drop in profits, due in part to real estate troubles at its Florida paper. Dow Jones & Co. reported a 27 percent decline in earnings, although much of that was due to restructuring and stock-compensation costs.”

The article goes on to say, “Other publishers are struggling, too: Media General Inc. on Thursday reported a 75 percent drop in profits, due in part to real estate troubles at its Florida paper. Dow Jones & Co. reported a 27 percent decline in earnings, although much of that was due to restructuring and stock-compensation costs.”

“The downturn mainly reflected a significant drop in ad sales, especially at McClatchy’s California and Florida papers. Nearly three-quarters of the drop in ad revenue came from those two states, which are suffering from real estate woes. Real estate advertising was down 32 percent in California and Florida, causing a spillover effect that depressed other ad categories. “

Meanwhile, online advertising revenues are up at most of the nation’s newspapers. Does this mean that buyers are no longer reading classified ads? Well, they are reading them online, that is why the advertisers are moving to that forum.

 One great advantage to accessing real estate ads online is the ability to search by keyword, for example “forclosure,” “fsbo,” or “motivated seller.”

Another advantage to utilization of online media for real estate marketing is it’s interactivity. Links can be shared, websites can be accessed in real time, the buyer can travel directly to your property portfolio, see photos/videos of your property, etc. 

It is becoming more and more important for real estate professionals to be able to keep up with this move to online media. They need to be flexable in harnessing it, showcasing listings through it, and advertising to out of state markets on it.

In the context of nationwide ”leveling off” in real estate sales, ability to communicate to buyers, sellers, and property owners through their home computers can significantly make the difference between the number of days on the market it can take to go under contract.  

Left, Lucie Thompson; right, Robert Bradley

PLAYING THE ANGLES Lucie Thompson, an agent at the Corcoran Group in Palm Beach, Fla., photographed a house on Jupiter Island, left. The company later hired a professional photographer, Robert Brantley, to shoot the same house. The results, right, speak for themselves.

The above photos and captions are reprinted from The New York Times article, “Making Every Pixel Count.” It reports, “In real estate, a picture can be worth more than a thousand words. Much, much more. When selling properties online, agents and Web designers say that the pictures buyers see of houses and apartments for sale are often the first — and sometimes the only — chance for a seller to make a good impression. Less-than-flattering pictures can turn buyers off and lead to lonely open houses.”

Indeed,

“Good photos will grab people’s attention and help you sell a home,” said Jacky Teplitzky, an executive vice president of Prudential Douglas Elliman Real Estate in New York. “Bad pictures will absolutely give you trouble, because you won’t have any calls on it, and nobody will come to see it.”

Eighty percent of people across the country who bought a new home last year used the Internet while house hunting, and they rated photographs as the most useful tool in their search, according to a survey of buyers and sellers by the National Association of Realtors. The survey also found that 24 percent of home buyers got their first glimpses of their new homes on the Web, up from a mere 2 percent in 1997.

In many cases, it is the agents themselves who are snapping the pictures and posting them on the agency Web site. Because of this, it is important that sellers choosing an agent know who will take and pay for the pictures and whether a professional photographer is available.

“It’s so important to have photos that are professionally presented,” said Rosalind Clarke, a senior sales associate with the Corcoran Group in Palm Beach, Fla.

She added that she uses only pictures taken by professional photographers, because “if things look shoddy or unprofessional, not only are buyers going to find the property unappealing, they’re going to associate you with being shoddy and unprofessional.”

But there is little point in having good photographs or beautifully written prose describing a home if you don’t have a Web site that is easy to find and easy to use — and this holds true whether you’re using a broker who will list your home on an agency Web site or you’re trying to sell your home yourself and are creating your own Web site or listing your home on a site like Craigslist.

According to a recent study by the National Association of Realtors, the biggest declines were in Florida — Sarasota-Bradenton (down 18 percent),  Palm Bay-Melbourne (17 percent) and Cape Coral-Fort Myers (11.7 percent). The declines in prices were especially steep for condominiums.

 “You have two kinds of weakness here: there is the traditional economic-driven weakness in parts of the Midwest, and there is the bubble-bursting weakness,” said Jan Hatzius, chief United States economist at Goldman Sachs. “That’s what is bringing down the national home price appreciation rate.”

Sales increased in six states — Alaska, Mississippi, Kentucky, Texas, Arkansas and Illinois — and were flat in Utah. The Realtors did not have enough data on sales in Idaho, New Hampshire and Vermont.

In addition to weaker sales and declining prices, the number of homes on the market has been climbing. That suggests, economists say, that prices may have to fall further for sales to pick up and the overall housing market to recover. In the fourth quarter, the vacancy rate for owner-occupied homes was 2.7 percent, up from 2 percent a year before and the highest it has been since the Census Bureau started compiling the data in 1956.

“That means we have got a while before this thing fully adjusts,” said Edward Leamer, an economist at the University of California, Los Angeles. Mr. Leamer noted that individual sellers often preferred to wait rather than cut the price to a level that would be agreeable to most buyers.

Somewhere in the middle is the rising and direct need for real estate marketing.

Now a class action lawsuit been filed which contends units were not substantially completed within two years, as required in the contracts. According to this July 12, 2007 article by the Miami Herald, the developer’s law firm, Greenberg Traurig, responded with letters that said the two years is subject to legally defendable delays – in this case general construction delays in South Florida and materials and labor shortages.

An increasing number of buyers nationwide, many in South Florida and the Gulf Coast, are scrutinizing contracts to see if they can get out of deals as the residential market cools. Law firms are gearing up teams of attorneys to deal with the litigation.

“It is a growing problem that I expect will persist for at least the next three years,” said Jack McCabe, CEO of Deerfield Beach-based McCabe Research & Consulting. “It will be interesting to see if the courts will rule that delays in materials or shortages of labor rank like hurricanes as an act of God for developers who have run over their contractual two-year construction deadline.”

chlesinger said the current craze over canceling condo contracts is a byproduct of “a miscalculation of the Miami boom.” According to the suit, pre-construction units sold within 48 hours in May 2004. About 700 people were on a waiting list for units.

Meanwhile,  this July 3rd article in the Orlando Sentinel reports that foreclosure rates in Lake county have quadrupled.  Actually, the article reports a 24 percent increase in new home sales, but also comments that may not happen again anytime soon, even though prices are still rising on lakefront property.

Condos are expected to become most troubled Central Florida to area to watch.  Quoting local property appraiser Bill Donegan, the article reports, “Next year, eight major condominium projects will come on line, but condo prices could suffer. The condo market is one that I think that you’re going to see somewhat of a price break because so many were bought by investors,” Donegan said. “People said: ‘I’ll buy it and flip it tomorrow.’ So many of them bought it and they can’t flip it.”

Overall the news for Central Florida underscored a trend that began in about 2005, when high insurance and unbridled property taxes curbed buyers’ appetite for coastal properties.

Unfortunately, the law is vague about what “material and adverse” means, creating confusion among buyers and developers. In a July 6 ruling, a Palm Beach County judge  sought to clarify the law for the first time.

Changes in a condo’s proposed budget can be a big issue for buyers facing sky-high insurance increases. If a buyer shows evidence the rise in costs “outweigh the buyer’s financial capabilities . . . the buyer should be able to void the agreement,” the Judge wrote.

The process caused confusion because some deals quickly fell through with several of the high bidders. Those houses ended up being auctioned off again and again, until the auctioneer found bidders who were financially qualified to purchase the homes and had brought sufficient down payment funds.

More auctions are expected to be held later this summer and fall. 

So here are some bidding tips for first-time buyers, seasoned real estate investors and everyone else who is considering buying a home at auction:

RESEARCH HOME VALUES — It’s definitely a buyer’s market and everything’s on sale right now. To determine a home’s value don’t rely on what homes sold for in the past because prices have been falling very quickly. Current asking prices often are substantially less than previous sales prices for identical homes.  

REMEMBER BUYER’S PREMIUM — Most home auctions charge the winning bidders a “buyer’s premium” that typically can add 5 percent to the cost of a home. That premium usually goes to the company that organizes the auction.

DON’T OVERBID — It can be easy to get caught up in the excitement of competing to buy a home. Auctioneers are good at getting buyers to up their bids. Set your limit and don’t get swept away by the moment, because you may find yourself bidding more than the property is worth.

By the time the 5percent buyer’s premium was paid, many of last Modesto’s auction prices were full-market value, agreed Jason Rivers of Rivers Realty, who also was at the event. “Those buyers didn’t get any better deals than you can find right now with regular houses listed for sale,” Rivers said. He is representing banks that have foreclosed on about 20 properties, he said, and those sellers are offering good deals.

READ THE FINE PRINT — Rules vary from auction to auction, so make sure you know what the contracts require before you bid.

For instance, many auctions allow sellers to reject very low bids. So even if you bid more than anyone else in the room, that doesn’t mean you’ve met the seller’s secret “reserve bid” price. Often sellers have a week or so to consider whether to accept your lower-than-expected offer. Sometimes they will make a counteroffer with a higher price.

LINE UP FINANCING — Often the highest bidders are required to hand over 5 percent of the purchase price immediately. Then they typically must be prepared to close escrow within 30 days. “That 30 days goes fast, so bidders should have their financing all lined up before they bid,” advised Crystal Wright, a spokeswoman for Hudson & Marshall, which is running the July 19 auction in Modesto.

Getting financing arranged in advance, Wright said, also may prevent people from bidding on property they aren’t qualified to buy.

TOUR PROPERTIES FIRST — Depending who’s running the auction, potential buyers may be able to tour the homes often or not at all before the bidding begins. Last month in Modesto, some of the homes auctioned off by the Real Estate Disposition Corp. still were occupied. So bidders weren’t able to go inside before the auction.

Homes facing foreclosure and put up for bid on the courthouse steps frequently also must be purchased without bidders getting inside.

The upcoming Hudson & Marshall auction, however, will open the homes from 1 to 3 p.m. July 14 and 15. Those homes can be toured at other times by arrangement with real estate agents.

“Don’t just bid on a property because you think the picture looks pretty,” Wright warned. The homes are “sold as is,” she said, so bidders should look closely before buying.

HIRE A HOME INSPECTOR — Foreclosed houses can have construction problems that inexperienced buyers may not spot, said Matthew Irion, owner of M.K.I. Home Inspections in Modesto.

“I’ve been doing some inspections on bank repossessions, and they’ve been in pretty bad shape,” Irion said. He’s seen walls kicked in, appliances removed and recyclable metals such as copper, steel and brass pulled out.

While damage is visible, Irion said other problems may be tougher for the untrained person to spot.

Example: Toxic mold hidden behind a fresh coat of paint.

“It’s easy to go into a bathroom and paint over past troubles,” Irion said. And even if a potential buyer sees mold, “there’s no way to tell just by looking whether it’s the type that’s toxic or just ordinary mildew.”

Irion said bidders would be wise to arrange for home inspections before committing themselves to buy.

CHECK FOR MELLO ROOS FEES — Many newer homes are in special taxing districts that require owners to pay additional property taxes each year.

Such Mello Roos fees or community service district fees can add thousands of dollars a year to the cost of a home.

BEWARE BUYING RENTAL HOMES — Few investors are able to buy homes, then immediately rent them out for a profit.

“The rental market is soft right now,” Elving said. “You have to offer very aggressive rental rates to get homes rented. If your price is above $1,000 (rent per month), you’re in trouble.”

Paula Leffler Zagaris, who runs Liberty Property Management, said rental homes should be considered long-term investments.

“Real estate is a great buy if you can hold onto it long enough,” Zagaris said. In the short term, however, investors should be prepared for a negative cash flow because rents likely won’t cover mortgage expenses.

“If you’re willing to offer the home at a fair market price and not try to gouge people, then you can find good tenants who will rent it,” she said.

FORGET FLIPPING — A couple of years ago, many investors made big bucks buying fixer-upper homes that needed relatively minor remodeling. After quickly making upgrades, they would resell the homes for far more than their expenses.

That’s called flipping a house, and it works great when the real estate market is hot.

Not now.

“Flipping is financial suicide now,” Elving warned.

That’s because buyers these days expect bargain prices, and they no longer have to pay extra for homes in great condition.

Lenders were the lone bidder at 94 percent of the auctions statewide in June, according to ForeclosureRadar’s statistics.

According to RealtyTrac, San Joaquin County, CA had the highest rate of homes in the process of being foreclosed, 1 in 103.

Merced County ranked second worst, with 1 in 121 homes in the foreclosure process.

And Stanislaus County ranked fourth worst, with 1 in 131 homes.

For California as a whole, 1 in 315 homes was in the foreclosure process.

The nationwide rate is 1 in 704 homes.

Traditionally, most homeowners who receive notices of default have been able to refinance their mortgages, catch up on payments or sell their houses before lenders force an auction.

But as home prices fall, mortgage lending requirements tighten and loan interest rates rise, avoiding foreclosure has become more difficult.

“Lenders are building a significant inventory (of repossessed homes),” O’Toole said. “Since Jan. 1, 2007, a total of 29,696 California properties have been returned to the lender for an astonishing total loan value of $12 billion. This is unprecedented.”

Give the real estate agents the credit, or the blame. They’re responsible for the photos, and not all of them seem to understand what’s at stake.” Click here for the full article, and remember Investor Details works with a trained network of photographers to offer reasonable prices for photography services, you keep all the photos and we can mount them on a CD-ROM, DVD Digital Brochure or Online Portfolio email file for you. Perfect feature for Open Houses!