“Short Sale” is going to be the buzzword of the new decade. In the first half of the new millennium we saw real estate profit in the hundreds of millions come and we saw it go. We saw employees with 40k salaries making 100k in real estate; we saw an in-flux of previously-only-late-night real estate gurus buying prime-time slots between the Simpsons & LA Law. I think I knew at least fifteen people who owned second homes in places that made no sense: five people who hated snow owned properties in Wyoming, Telluride, and Salt Lake; five people who hated the heat & sunshine owned properties smack in the desert here in Scottsdale, Arizona; three more people owned second homes two blocks down from where they lived, two people who couldn’t swim owned waterfront property and one person actually forgot which city & state he had actually bought his second home in!

Now here we are entering the new decade and boy how the world has changed. We now see foreclosures at an all time high. We see home values plummeting nationwide We see people who used to make six figures by June now scraping by at 30k a year if they’re lucky; high unemployment rates and lower pay rates; even yesterday’s CEO’s are now taking your lunch order.

Foreclosures are winning the race in the real estate notoriety department right now and right behind them is the elusive, slippery “Short Sale”. Although not everyone quite understands how a short sale works, or how it benefits the average consumer, or the differences in short sales by lender or state, almost everyone has probably heard the word by now. 2011 and beyond will be the “Decade of the Short Sale” and here are 10 reasons why:

1. HAFA Program (Home Affordable Foreclosure Alternative) - The HAFA program (or as I have sometimes un-affectionately referred to it, the HAHAHAHA program) is the governments’ idea of “helping”. I admit that when the program works it is fantastic and I’m here to tout it’s benefits not it’s shortcomings. If you qualify for the HAFA program you can be in a world of short sale heaven: Relocation costs paid to you (yes, get paid to do a short sale!), quick response time by your lender(s), and an agreement from your lender not to pursue you afterwards for any deficiency. A great program, with excellent benefits, if you qualify. Not everyone does but this should be your first question to your real estate agent: “Do you know what the HAFA program is and do you think I’ll qualify?”
2. Loan Modification Failures - Millions were promised help and favorable loan modification terms, almost as many million were let down. The staggering stat is that of the lucky ones who did qualify for a loan modification, fifty percent of them will fail the program in the first six months. This however will work nicely in the favor of the short sale – with so many people not qualifying for a loan modification but still willing to work with their lenders this will mean an increase in the number of people willing to short sell their properties and will hopefully in turn motivate the lenders to staff up their short sale department. Maybe they can spend a Tuesday moving desks from the loan modification floor to the short sale floor…that’s my suggestion, take it or leave it.
3. Realtor Agent Experts – Although this one can go both ways, I’m confident that it will benefit the consumer. When short sales first became prevalent most real estate agents shied away from them; afraid of the unknown, afraid of the lenders, afraid of the dreaded “short sale”. Now that they have become such a huge part of the marketplace agents have either had to leave real estate altogether or have been forced to learn about the process. Many agents have taken it upon themselves to become true specialists in this field and have taken multiple classes, found lots of clients with upside-down mortgages, and have now negotiated many short sales and can be considered an expert. Some agents however have nodded on and off through a forty-five minute intro course, printed out a certificate from their I-Phone, and have taken to the streets as “Shirley Short Sale”, ready to blindly lead the blind off the cliff. Find yourself a true expert with experience, knowledge, and a track record and avoid the Shirley Short Sale Agents at all costs.
4. Lender Changes - The lenders, banks, servicers, investors, etc. have all learned that these types of transactions are not going away. Like ‘em, love ‘em, or hate ‘em, these entities have been forced to deal with them by the thousands or even hundreds of thousands. One bank we deal with frequently used to have four people in their short sale department back in the mid 2000’s. Yes, four. They now employ over 3,000. Although the lenders will continue to be overwhelmed and overworked they at least have some sort of structure and departments in place to at least attempt to deal with your needs. There’s hope that when you sit on hold for two hours, get transferred six times, and have eight people give you ten different answers to the same question that at least half of those people will work in the department as opposed to pretending they have no idea what you’re talking about!
5. Neighbors Have Taken a “Chill Pill” - Neighbors were a big problem in the beginning of this era. When everyone on the block paid $500,000 for their homes the assumption was no one wanted to be that guy who sold for $350,000. People short selling their home didn’t ever want their neighbor to know and avoided contact with them at all costs. Leave the house a bit earlier than normal, come home at dark, don’t answer the door. Lawns everywhere went overgrown because people didn’t want to chance cutting their grass and having their neighbor corner them! In 2011 it will be different – for many people this is not only a smart financial decision (and who doesn’t like to brag to the neighbors/family/associates about smart financial choices) but now after a few years in this market the stigma of being upside down is gone. The decline is housing values is so pervasive that even those “responsible” buyers who put 20% down are way underwater. Here in the local Arizona, Phoenix – Scottsdale real estate market home values have declined 50%. So unless your neighbors bought before the height of the market or put more than that fifty percent down then they too are in the same boat as you.
6. Real Estate Market Conditions – The real estate market will always exist and will be different nationally, regionally, locally. Underwater mortgage numbers may be higher in California, Nevada, and here in Arizona than in Connecticut, Kentucky, or Kansas but the national real estate market will affect us all. The national real estate market is not favoring very well and the outlook into at least 2011 is not very bright. We hope for the best but with the current economy in its poor state, high unemployment rates, and lack of consumer confidence home values will continue to sputter. “Appreciation” is a word of the past and a word of the possibly-distant-future, not a word of the present. Some areas will thrive more than others and we all hope for a sooner-than-later recovery but the facts remain that a turnaround in the national real estate economy is going to take a while. In that time short sales and foreclosures will dominate many local & regional markets which will in turn affect the national real estate market.
7. Taxes – The Mortgage Debt Relief Act of 2007 brought about tax relief to those doing a short sale or a foreclosure on their primary residence. The Economic Stabilization Act of 2008 extended this tax relief to the year 2012. Some restrictions apply, check with your CPA to be sure you qualify, but the majority of people who do a short sale on a primary residence through 2012 may be absolved of all tax liability. Hopefully as 2012 draws to a close we’ll see this extended but until then this window is only open for a specific period of time and that time is now!
8. Attorneys Versed in Short Sales & Foreclosures - Along with real estate agents, many attorneys are now well educated in the real estate & foreclosure laws of their practicing states. Many attorneys now offer free or discounted consultations, teach seminars, and some even help Realtors negotiate these types of deals. Attorneys are no longer just those guys in expensive suits with the goofy commercials every 5 minutes, they’ve become mainstream, personable, and affordable! Just like agents, not all attorneys know what they’re doing so be sure to ask around, get referrals from trusted sources, and don’t be afraid to get a second or third opinion.
9. Mainstream & Morality – Professional real estate agents & attorneys do not coerce, entice, or force people to short sell their home. This is a business decision made by a client as to what’s in their best interest. Some people need to move because of financial hardship. Some people are forced to relocate and can’t sell their home otherwise. Others have unexpected medical bills, family issues like divorce or separation, or were tricked into some ridiculous interest rate that has now doubled or tripled. These people can put food on the table or they can pay their mortgage. What’s it gonna be? Well, if it’s the former then there are only a few options and foreclosure and short sale are two of them. People have become more knowledgeable of the process and as the idea and concept becomes less foreign the average homeowner can make a much more informed decision. Foreclosures usually benefit no one while a selling your home can benefit all parties involved, especially the lenders. Don’t believe that? Call your lender and tell them you are planning to stop paying your payments and I’ll bet somewhere along the way they tell you to attempt a short sale. In most cases, anything but a foreclosure!
10. A Chance To Move On – This is not the end, it’s a new beginning! Sticking your head in the sand and waiting for someone to come along and dig you out is not a good idea. Maybe a short sale isn’t the answer; maybe it’s a loan modification. Maybe you turn your home into a rental. Or maybe a foreclosure may be best. Maybe you even make the decision to stop watching the news, stop reading the paper, and stop reading these “Top 10 Reason” lists and you decide to stick it out for the long haul. No matter what you decide follow these steps and you can succeed: Acknowledge the situation you are in, explore all your options, discuss your situation with the right professionals, make an informed decision, stick to it, have a backup plan just in case, and go out and live your life without stress or burden. A wiser man than me once said; “I have been given a finite amount of heartbeats and I don’t plan on wasting even one”.

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You can find more information about short sales and foreclosure avoidance options at our Short Sale Home website.

Sean Bonini is a Real Estate Agent/Broker in Scottsdale Arizona specializing in short sales. He serves as the Managing Director of AzHomeHelp.com which is a company that helps homeowners avoid foreclosure.
Sean’s up-to-date Phoenix Real Estate blog also covers local and national news regarding the real estate & mortgage industries with a focus on helping homeowners in distressed mortgage situations.
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I often tell people that becoming a millionaire in the real estate business is an easy thing to accomplish. They usually give me a look of bewilderment. I say that you don’t have to understand every aspect of real estate in order to begin investing. The best thing to do is start with a basic buy-and-hold strategy purchasing whatever type of property you are capable of buying with as little money down as possible. How you buy something with as little money down as possible depends on your financial situation and what types of mortgages you’re capable of qualifying for. Since guidelines for mortgages and government intervention changes daily, it’s impossible for me to tell you the best way to do that. I can tell you how I did it for years using the all-money-down technique I described earlier in the book. But I’ll give you a quick refresher course below.

If you bought $100,000 house through conventional means, you may have to put 20 percent down is $20,000 plus closing costs that will cost you approximately $3000. In this example, you put $23,000 down to buy $100,000 investment property. Using the all-money-down technique, you would buy a $100,000 property for cash putting all $100,000 down plus the closing costs of $3000. At this point, you have $103,000 down on the property and you begin to invest an additional $5000 to fix the property up. You now have a total of $108,000 of your money into the property. You put the property up for rent and you find a good tenant, so now you’re empty investment property is a business making money and shows a profit. Now you go to the bank and you get the property appraised with the intention of doing a cash-out refinance. Because you fixed up the property and it’s a money-making business, the property appraises for $114,000. The bank is willing to lend you an 80 percent mortgage on the $114,000 appraisal giving you a mortgage of $91,200. You originally put down $103,000 and received back a mortgage for $91,200 making your out-of-pocket costs $11,800.

When using the all-money-down technique as compared to buying a property through conventional methods, you save $11,200. Now of course, you’re going to have a higher mortgage and less cash flow coming from the property, but you’re also going to have $11,200 to buy the next property with.

Sometimes the homes you buy are going to cost you $10,000 to buy; other times you’re going to break even on the deal. You might even be lucky enough to actually get paid to buy a house, which has happened to me once or twice. The goal was simply to just keep buying as many properties as possible until you build up a portfolio worth millions of dollars. You will make a profit from the cash flow, but most likely that’s going to go back and do things like repairs and vacancies in all the other issues that come up with real estate. If you do end up banking $10,000 during the year from the cash flow of your buildings, there is your down money to buy an additional property and expand your portfolio further.

I have constantly repeated that you’re not going to find the cash flow to be something of tremendous value to you. The cash flow will help pay for the necessary things and give you down money for future deals, but in the end you will work hard for very little money. The real surprise will come when you’ve ridden the cycle from bottom to top and created a gap between your portfolio’s value and the amount of mortgages that you owe for the building. Accruing equity in your buildings, you will slowly begin to see your net worth increasing as the years go on.

For example let’s just say you bought one property a year for five years valued at $100,000 a property. Since the five years that you bought the properties, values have gone up somewhat and the mortgages have gone down, and your net worth is the equity in between. As you begin to see this throughout your investing career, especially when the market is on the rise, it can be an exciting time.

Your expectations should be to live off of the income from your job while the profit from the rental property business is used to fuel its needs. You’ll usually get to a point somewhere when a real conflict will develop between your current career and your real estate investments. It’s hard to be in two places at once, and ultimately it will begin to catch up with you. For me this conflict was easily resolved since I only wanted to be doing real estate anyway, but if you love your day job and you plan to continue it through your life, you’re going to have to make some tough decisions. You could keep your day job, but someone is going to have to run your portfolio.

I maintain that getting a seven-figure net worth in equity strictly in your real estate holdings is not that difficult to do. I recommend you join real estate investment clubs and read as many books as you possibly can. As you begin to make investments, you’ll find friends in the businesses that relate to your industry such as people in the mortgage business. I recommend that you associate with as many of these people as possible so that your knowledge of the industry expands tremendously.

A friend of mine who’s an intelligent guy took some of this advice and began moving quickly. In his first year, I think he bought two properties, but by his second year he was already doing $300,000 flips and buying multiunit investment properties with a partner that he has. First of all, I’m not a big fan of partnership for the deal size he was doing, and second, I think he was growing a little too fast. If he didn’t have a job, I wouldn’t have a problem with the speed of his growth, but because he had a well-paying job, I cautioned him not to move too fast. The second half of 2009 was a rough year for him as his $300,000 flip was not selling, and he’s already had to do two evictions. Carrying the mortgage and his $300,000 flip was expensive and was already causing some tension in his partnership. It’s not going to be all fun and games; as your portfolio grows, your problems grow with it and the workload grows.

Another thing I can say about the issues in the real estate business is that they seem to come in waves. Even when I owned dozens of homes, I would go six months where I wouldn’t need to change a doorknob and then all of a sudden all hell would break loose. I’d be dealing with an eviction, two vacancies, and apartments that were destroyed. When it rains it pours in the real estate business; at least that’s the way it worked out for me. I remember on two separate occasions during the summertime one year followed by the next summer a year later I was bombarded with all kinds of issues. In this business, you can’t let a vacant property sit and wait because you’re losing money every day it’s not rented. The process of getting it renovated and re-rented is the highest importance.

As bad as I make it sound, I think you’ll find it all to be worth it in the end. It seems that no matter how much money I made, I have learned in my career I never really save. As you earn more money, your lifestyle increases and you begin to upgrade your homes and cars to the point where your bills go right along with your salary. The real estate business is almost like a bank account you really can’t touch easily without selling a building, so it continues to grow and feed off of itself. It’s a terrific feeling when you realize that your $550,000 portfolio experienced a 10 percent increase in values in the last year and you’re up an additional $55,000.

I’m using the same principles today in the commercial arena buying larger buildings with similar strategies. I can’t buy a $3 million building with the technique, but there are many other things that can be worked out in the commercial world. Nowadays I use strategies that involve complex negotiations with the sellers where I convince them to carry paper or lease option the building. I can also borrow money from banks for commercial investments giving the bank that piece of real estate I am buying as collateral as well as existing pieces of real estate as collateral. I call it redundant collateralization and am seeing more and more of it every day from banks.

If you can go from broke to seven figures in one real estate cycle as I’ve suggested easily making yourself $1 million during your first real estate cycle, then just imagine what you can do in your second real estate cycle. I plan to be carrying a real estate portfolio with the value north of $10 million and have that portfolio under my control before the real estate market begins to show any gains. I expect the gains will begin to show sometime around 2013 or later. Can you imagine if you’re holding a $10 million portfolio and the real estate market goes up a meager five percentage points? It doesn’t matter how much money I made that year in income because as long as I can keep my business afloat I am up half a million dollars in equity in one year. If I’m ever lucky enough to see the crazy increases that we saw in 2005, can you imagine what it will feel like to see a 20 percent increase in values in one year when you’re holding a portfolio worth eight figures?

“Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat.” Theodore Roosevelt

Let’s dream about holding a portfolio worth $12 million when the market goes up 20 percent giving me a one-year tax free gain of $2,400,000. I believe that this is a realistic expectation for my second cycle of the real estate business. In the year 2025, I will be sixty years old. I feel certain that if I continue to just do what I’ve been doing my whole life, I surely should have a net worth of many millions of dollars strictly for my real estate holdings. I know of no other way to make money in these types of numbers as easily as I do in the real estate business. I don’t deny that other people have the means to make this kind of money or even more, but I am not familiar with those methods. I consider myself an expert on real estate, and I certainly feel as some of the things I’m talking about here will happen to me as long as I’m lucky enough to still be breathing when 2025 rolls around.

This is why I love the real estate business, and this is why I’m pumped every day to get out and keep it going because I can see my future is filled with bright and sunny days. I feel terrific about getting up in the morning and going to work, and when you have that kind of attitude, there’s no way you can fail. This morning I woke up at 5:30 a.m. and went to my office building to reorganize some equipment in our communication room. I’m spending some afternoon hours on a Sunday working on my book and feeling great about my possibilities. If you love what you do, you will be much happier and much more successful at whatever you try.

I don’t even consider the things that I did this morning or writing this book as work in the regular way people think of it. Obviously, it is work that I’m doing, but I don’t have a negative feeling about the word work or what it entails. I get a terrific sense of accomplishment from getting up in the morning and making things that happen furthering along my career each day in baby steps toward the ultimate goal of massive wealth accumulation. I hope that some of you reading this book will really grasp the things I’m talking about above. I feel that may be the most important message in the entire book.

Here’s an idea you should think about after you buy your first property. Make sure that you take some time after you bought it to really analyze what’s going to be involved in being a real estate landlord. If you like it or even love it, let’s get the party started, and if you don’t get out right now. If you’re going to proceed in the business just for the money but despise dealing with tenants and working on buildings, you really have to be careful and reconsider what you’re about to do. This business is not for wimps, and it takes a heck of a lot of guts to be a real estate investor. To get to the level that I have achieved, you may have to take half of your net worth and roll the dice on some large commercial building risking the twenty years of hard work on one deal. Until you go through that process, I can never truly explain to you what that will feel like. My name is Phil, and I’m addicted to real estate.

Phil Falcone is a Philadelphia area full-time real estate investor who started in the business at the age of 23, and whose portfolio today includes commercial offices, apartment buildings, and residential homes. As the owner of Falcone Real Estate Holding Corporation, he prides himself on his non-stop real estate focus and determination, his ability to be a great professional speaker, and on his fun, outside-the-box approach to real estate.

According to U.S. Commerce Department figures released this month, nationwide housing starts increased 0.3 percent to a seasonally adjusted annual rate of 610,000 units in September; which was due completely to a 4.4 percent gain in the single-family sector. Because of this slight increase in new home construction, the economic outlook is looking up for 2011. Many golf club and active adults communities are encouraged by this positive prediction as they introduce new plans and prices for 2011.

Builders Responding To Consumer Demand

Builders are carefully responding to the small improvement they are seeing in interest among potential home buyers. They are receiving more inquiries from potential customers and are cautiously excited about this renewed consumer interest. The golf club and gated community industry remains confident that their new plans for 2011 will bring even more potential residents to their communities.

Over the past several years as the real estate market has declined, builders have not sat idly by waiting for potential homebuyers to return. Many realized that they needed to hear from retirees about what kind of community they wanted to live in. By conducting market research and focus groups with their target audience, some builders got ahead of the game and are rolling out new plans and amenities that are more in line with their customers’ wants.

Plans From Award Winning Active Adults Communities

The active adults communities that are dipping their toes back into the market are those that have received design and marketing awards and have been featured in industry magazines. They are established communities that have withstood the lows of the real estate market.

Communities poised to do well releasing new plans offer detached and attached single-family homes priced from the $130s to $3000s. New floor plans offer various size options with one, two or even three bedrooms. These homes open the door to a fantastic active adult lifestyle. With multiple floor plans to choose from, many feature open flowing designs, sunny kitchens, and breakfast nooks, welcoming sun rooms and dining areas, cozy dens and master suites with breathtaking baths. Several plans allow for a lanai, which is great for quiet, relaxing afternoons or entertaining friends and family.

Communities With Golf Club & Amenities

Devoted golfers will feel right at home in active adults communities with private golf courses. Many communities house casual and formal restaurants in their golf club as well, and residents can also find everything for their golfing adventures at well-stocked pro shops. Additionally, men and women alike will be comfortable and find all the amenities they require at the locker facilities. Many clubs boast grand balconies overlooking the course, an aquatic driving range, practice chipping and putting greens.

Also found at many gated communities, residents can enjoy a spa and fitness center, ballroom, tennis and pickle ball courts, restaurants, and often even a community room and studios for a variety of arts and crafts.

Builders are taking advantage of the positive outlook on the nation’s real estate market by offering new plans and pricing for 2011. Retirees looking for a gated community with tons of amenities should take a look at what’s out there!

Chris Harman is a writer for Solivita, a premier gated community in Kissimmee Florida. Solivita, like many other active adults communities, is offering great new plans and prices for 2011.