What real estate scheme the government class in Washington D.C. quietly pushed? If you are buying and selling property for residential real estate investment in America, read on.
Perhaps you weren’t aware that in 2010 the Obama administration made it nearly impossible for any real estate investor to access, buy and resell residential property.
In short, the government has been doing all they can since President Obama took office to confiscate wealth through real estate. And make real estate investment impossible for the general public.
Here’s what they did.
Freddie Mac and Fannie Mae actually spent much time and resource (they have a $15M/year marketing budget) to approach the FBI and accuse real estate investors who buy distressed residential property as committing mortgage fraud; all falsified lies.
It had gotten so bad between 2009-2010 that a group of small business owners—using their own money to engage a professional Washington lobbyist—attempted to do what no one in the residential real estate investment community thought could be done.
No one thought it could be done because the lobbyist had a non-tax payer “shoestring” budget to work with in regards to this small group of investors; versus the mountain of a budget at Fannie/Freddie’s disposal (which is funded by tax-payers).
Major markets across the country are still showing negative appreciation values year-after-year; while the fact is Freddie, Fannie and the Government are insolvent with debt that can never be repaid.
What did “the little people” get back thanks to the distressed property coalition? Not everything, but it’s a great start. Here’s some examples that start on November 1st 2012.
1) 30 DAY RESALE RESTRICTION: if you buy a distressed residential property (a short sale for example), you cannot resell that property until the 31st day. It should be zero days. You should be able to sell a property any time after you buy it; not when the government tells you it’s okay to sell it.
The lobby effort was able to get the resale restriction down to 30 days for now. And so you know, the Obama administration created a 90-day resale restriction out-of-thin-air a few years ago (and in some cases imposed more than 90 days).
2) 31-90 DAY PROFIT RESTRICTION: if you buy a distressed property (a short sale for example) and you resell it for any reason in the 31st to 90th day, then you can only sell it for up to a 20% spread. (eg. buy for $100K — Sell for $120K).
In other words, if your “mark-up” is 20% or less, you can sell between days 31-90.
This becomes a huge problem for any real estate investment where the general contractor completes the work in a shorter time frame; and oftentimes construction costs are over 20%.
Somehow, the government feels the rehab construction costs are not part of the real estate investment costs. It seems absurd.
What if you buy a distressed property and your rehab team completes the renovation and is ready to resell the property in 61 days? No can do.
The Profit Restriction will not add your construction costs to your original purchase price (unless you can file for a waiver that allows it on that deal). Therefore, you will have to wait until the 91st day to sell.
You can imagine for a real estate investment group and general contractor that buys distressed property for fix-up and sale, how these excess hold times could potentially lead to big cash flow problems. Especially, if using a line-of-credit to operate with.
This and more has been happening since 2009. Would it be worse if the Distressed Property Coalition did not start their 2 year-long effort in 2010? Yes indeed.
President Obama was seeking to appoint a new head of FHFA (to replace Ed Demarco). President Obama was seeking to appoint a banking commissioner from North Carolina who is anti-investor.
Meanwhile, Ed Demarco is not necessarily interested in remaining with the FHFA; but the Senate has been keeping him there. Why so?
…Because FHFA head Ed Demarco has blocked the Principal Reduction Program.
Big government politicians are seeking the implementation of government controlled principal reduction programs and the use of eminent domain to change mortgage terms. Obviously, to benefit the Freddie and Fannie bailout. Ed Demarco is going against Freddie, Fannie and President Obama on these new government programs.
Notwithstanding the fact, that all these government programs have failed to spur any notable real estate recovery despite near 0% Fed interest rates and other manipulative tactics.
A small group of private investors in the Distressed Property Coalition (DPC) have provided Washington real world data on thousands of actual day-to-day real estate transactions. And reveal why real estate investment in the private sector is the best and least expensive way to correct the housing crisis.
NOTE: this real estate investment information is straight from the new program briefing that the attorneys, FHFA and the lobby effort created and is going into effect November 1st, 2012.
It took those efforts 2 years and over 100 meetings on Capitol Hill. And there is still a long road to regain your real estate freedom. But FHFA started taking note.
Prior to DPC, no group had ever presented this level of detail to the FHFA. All FHFA ever considered was what they were told by Freddie and Fannie. Ironically, Freddie and Fannie are failed and insolvent institutions.
There are many more standard points of agreement the coalition was able to contribute. For instance, how cases can better be handled where a soldier’s spouse is selling property for less than the amount owed on the mortgage (aka short sale) during a military relocation.
It may be important to remember that when a government issues programs or incentives, that it does so at the expense of the tax payer.
The same holds true when the government attempts to force a principal reduction program while, at the same time, manipulating new laws into existence to prohibit the general public from real estate investment.
Not surprisingly, these new regulations don’t apply to government sanctioned businesses buying HUD homes. In other words, government affiliated persons buying HUD homes are free to buy and resell property without the new resale restrictions. Conveniently, the Obama administration has purposely created real estate regulation that favors the government class.
The end result is exactly what we have been experiencing. A real estate recovery nightmare. The act of real estate investing went from being a common sense process, to an overcomplicated maze starting in 2009. Thanks to Obama administration.
You can check out the Distressed Property Coalition (DPC) summary as well.
If you are planning residential real estate investment, and the buying of distressed property, make sure to know the rules of the game.