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The 20% Quagmire

Anchor Loans — Mon, 24 Oct 2011 13:49:09 GMT

Whatever happened to that bout over the 20% down payment proposal for a qualified residential mortgage (QRM) standard for homebuyers? It has been quiet on the front of that war which broke out in Congress and the real estate community six months ago in March 2011, but the proposal has not departed the scene entirely (and neither has the quibbling over it).

The 20% down payment proposal is currently under review for the approximately 12,000 comments which were submitted in response to the legislation. While proposal advocates prudently argue demanding a 20% down payment standard from homebuyers will reduce the risk of default and foreclosure, opponents cautiously maintain the plan will barricade Americans from purchasing homes and thus stress an already distressed housing market. Down payment standards did not cause the real estate crisis, the opponents say, but rather the shortsighted underwriting standards of lenders are to blame.

Considering the pace of review and the impasse to agreement over the plan, a 20% down payment standard will not likely take effect until 2013 (that is assuming it does not lose its way by then). In the meantime, homebuyers are learning to save for that expected down payment requirement of 20%.

The squabble over mandating a down payment standard on homebuyers illustrates a paradigm shift in public attitudes towards savings and debt which took place after 1990. To put it simply, Americans used to save more, and now they save less – a lot less, but more than in the mid-2000s.

While personal savings rates were around 8-10% in the 40 years before 1990, it dropped to nearly 0% during the Millennium Boom. Only with the beaten consumer confidence of the recession has the savings rate crawled to 4%.

Why the change? Well, in the days of quick credit and easy money, saving money was not perceived as a necessary priority to homeownership, especially when lenders were putting home mortgage loans out on the market and requiring a 0% down payment or even cash back. It took a Lesser Depression to push Americans to saving again. However as indicated by the regulatory stall, defiance towards dictating a down payment standard to control the gamble of excessive leveraging remains repulsive and near un-American to some.

The opponents of the QRM plan are correct in saying irresponsible lender underwriting played a primary role in the housing crisis (a noteworthy observation which brought forth the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010). But down payment standards are inherent to underwriting, and thus cannot be ignored if we are to reform the mortgage lending practice. 20% down will not instantaneously defibrillate home sales volume, but it will start feeding long-lasting and healthy nutrients into an economic recovery.

Brokers and agents can affect change in this paradigm shift by counseling homebuyers and touting a return to the prudent fundamentals of savings and debt ratios. You don’t need to be an economist to understand the value of putting cash on the barrelhead, but being a musician might help.

Article by First Tuesday Journal Online

Buy a Home, Get a U.S. Visa, Senators Propose

Anchor Loans — Fri, 21 Oct 2011 12:58:00 GMT

Two Senators have come up with a plan to boost the moribund U.S. housing market: Give residence visas to foreigners who spend at least $500,000 to buy a home in the U.S.

A report in The Wall Street Journal says Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah) are preparing to introduce the idea as part of a larger package of immigration measures. The idea is to help make up for the lack of American buyers in the housing market, according to the report.

The Journal notes that foreigners now account for a growing share of the homes purchased in South Florida, Southern California, Arizona and other hard-hit housing markets.

“Chinese and Canadian buyers, among others, are taking advantage not only of big declines in U.S. home prices and reduced competition from Americans but also of favorable foreign exchange rates,” the paper said.

The plan aims to fuel this demand by offering visas to any foreigners making “a cash investment of at least $500,000 on residential real-estate — a single-family house, condo or townhouse,” the Journal reported.

“Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out,” the paper added.

Article by msnbc.com

What You Need to Know About Flipping Houses

Anchor Loans — Thu, 20 Oct 2011 14:00:00 GMT

You come home from a long day at work and while channel surfing, you come across a show in which guys are buying run-down houses, fixing them up and reselling them for huge profits before the first mortgage payment is due.

Wow. What's more, they claim they make as much money on this one house as you have in the last year.

They don't look or sound any smarter than you are and they're raking in the cash. You start crunching numbers and before you know it, you're thinking about a career change.

Before you quit your day job, can we talk?

It's not as easy as it looks on TV. The price run-up of the past few years led thousands of people to reach the same conclusion you have. There is a boatload of competition out there, which means that the obvious deals are gone in a heartbeat. The pros will tell you that they make their money on the front end by buying properties for at least 30% below market value. Finding those houses takes time and once you find them, you'll need to move fast. And no matter what the late-night gurus say about doing this with no money down, it hardly ever works that way. That means you'll need access to cash to do the deal, not to mention the rehab.

Dream catchers
"The masses believe in the dream that's been promised to them, that they'll be making a fortune in the next six months," says Manuel Iraola, president of Miami-based Homekeys.net, an online real estate company. "They don't have the basic know-how. If it were as easy as they make it seem, 286 million people would be flipping real estate."

Richard C. Davis, owner of Charleston-based Trademark Properties, and creator and star of A&E's reality show, "Flip This House" says no one can watch his show and get the impression that this is an easy way to make a living.

"In our original video, we had a warning," Davis says. "'Do not try this at home. It's for trained professionals. You will lose money.' I got two guys following me around with a camera. There are no scripts. If I lose $100,000, you see it."

While he understands the desire of people to get in on the action, he doesn't have a lot of sympathy for people who don't want to invest the time that's needed to learn the business.

"Right now, you have people jumping in on frenzy and it will bankrupt a lot of Joes and Susies who have no business doing this," he says. "I mean, my wife is a doctor, you don't see me going out doing heart surgery."

Here's the catch
What's there to learn? Atlanta-based financial adviser Bill Kring wishes people understood that they need to have adequate savings in place to pay the bills while money is flying out the door for cabinetry, plumbers and plants.

"If you don't close in 30 days, they keep your money," he says. "Then you need more cash to carry the house, the insurance, the utilities and the maintenance. You won't get a contractor to renovate a house for no money. People go to trade shows and buy these books and tapes on how to buy a house with no money down. I've never seen someone actually do that."

Working against you
Another reason that access to cash is so important is that you'll probably need to hold on to the house for at least three months because of Federal Housing Administration (FHA) anti-flipping regulations. Houses sold less than 90 days after they were purchased aren't eligible for FHA mortgage insurance; those sold between 91 and 180 days are OK but require an additional, independent appraisal to make sure the sales price is justified.

What that means for you as the owner is additional carrying costs. Every day you own the house costs you money in interest, utilities, taxes and insurance.

If you're taking out a mortgage to buy the house, talk to your banker about pre-payment penalties. "We make money when people hold loans; we lose money when they pre-pay," says St. Petersburg, Fla.-based banker Mark Dannenmiller. A typical pre-payment penalty, he says, is 80% of the balance of the first mortgage, times the interest rate, divided by 2. So, if you borrow $100,000 and get a mortgage for 5.75%, your pre-payment penalty would be $2,300 ($80,000 times 5.75%, divided by 2).

Dannenmiller's advice to individuals who are considering going full-time is to keep your job, make a little bit of money and pay yourself back, building up your cash reserves.

"Hopefully, by the fifth or sixth house, you don't need me anymore and you're buying houses for cash. That's important because as soon as you (quit) your job, you can't get a loan."

To Joseph Patton, getting cash is the easy part. The hard part is finding the properties to buy.

"These properties are not for sale through Realtors and they're barely available through auctions," says Patton, who buys primarily in Philadelphia. "(Finding them) is very time-intensive. You have to be out there on the street. It's almost banging on doors ... It's not an insider's game but you need to put in time to build the network."

The taxman cometh
One other point to consider: As far as the IRS is concerned, buying and selling real estate as an investment strategy and doing it as a business are two very different things. If you buy a house, fix it up and resell it while you're working another full-time job that provides the bulk of your income, that's an investment and the proceeds will be taxed as short-term capital gains (if you own it for a year or less) or long-term capital gains (if you own it for more than a year). A short-term capital gain is taxed at the same rate as your ordinary income. A long-term capital gain currently is taxed at 15% of the gain.

But if you're doing it year-round and it pretty much pays all your bills, that's a business and the IRS might consider you a dealer-trader, says Los Angeles-based CPA and tax attorney Bill Abrams. Then your gain will be taxed as ordinary income no matter how long you own it, the real estate taxes and interest will be regarded as an expense and you'll have to pay self-employment tax of 15.3%.

Professional Services

Plus, you won't be able to take advantage of IRS section 1031 like-kind exchanges, which can help with taxes when you have a property that sells for substantially more than you paid for it. Only property that's held as an investment qualifies for this tax break; while the tax code doesn't specify a time frame, the rule of thumb supported by case law is that you need to hold it for at least a year to qualify.

Right place, right time
So, does it make any sense at all to do this? For the right people and the right reasons, sure. Detroit-based real estate broker and investor Ralph R. Roberts tells people to learn everything they can about the industry and don't consider making it a career until they've made double the amount of money in a year that they do in their current job.

"One person I went to high school with bought a house every year for 30 years," Roberts says. "He's flipped about 10 of them. Now he's building a mammoth house. But he never did it to get rich; he did it to have financial independence. You can't go into it for the hype. You do it for financial security down the road."

If that's your plan, maybe you don't need to quit your day job after all. It's possible, although often exhausting, to moonlight as a flipper, says New York-based real estate attorney Neil Garfinkel.

"I know plenty of guys who do two, three, four houses a year, keep their health insurance and do this on the side," he says. "Many times, they can double their salary."

And that's all you really wanted to hear, isn't it?

Investor Facts

Anchor Loans — Mon, 17 Oct 2011 17:02:00 GMT

What LTV ratio does Anchor Loans offer?

Loans generally do not exceed a 65% loan-to-value ratio of the property to be acquired. This amount can include the purchase price, property rehabilitation costs, and closing costs.

What interest rate do you offer?

Interest rates generally fall between 11.0% -13.0% depending upon the type of property

How long does it take to receive funding?

Though Anchor Loans can review and approve qualified loans in as little as two days for rush deals, most deals take approximately five days. Loans can also be funded in as quickly as two days, but the normal expected funding time is one to two weeks.

What kind of properties does Anchor fund?

Anchor Loans can fund all types of non-owner occupied properties that meet our qualifications. This includes single family residences, duplexes, triplexes, quadraplexes, apartments and other commercial properties. Anchor Loans does not fund owner-occupied properties.

How do I apply?

Our online application is available 24-hours by clicking on the link in the left hand column. You are also welcome to call (310) 395-0010 to schedule an appointment to speak with an Account Executive.

How is Anchor Loans licensed?

Anchor Loans, Inc. is a licensed California real estate broker and California Finance Lender. Loans will be made or arranged pursuant to one of these lending licenses or the California finance lenders licenses held by Anchor’s affiliate mortgage funds, Anchor Fund, LLC and Access Investment, LLC.

3 Real Estate Bargains to Look For

Anchor Loans — Wed, 12 Oct 2011 14:13:00 GMT

Don’t count on it too often, but every now and then there’s a great deal out there waiting to be picked up and sold for a great profit. There area number of ways to find these bargains, and there's a great deal of profit to be made if you’re able to spot these opportunities quickly and act on them.

REO Purchases

REO sales are a great way to find a discount, if the price is right. Oftentimes a bank will hold onto a house for years waiting to unload it at a price above or at market value, but eventually the price must come down to ensure a sale. Making sure you’re getting a good deal is important, so research the property and surrounding area. You’ll want an inspection of the home, because nothing can ruin an investors day like finding severe plumbing problems or a damaged foundation after a deal is made. Take note of the surrounding location and if the neighborhood shows the sure signs of area increasing in value.

Foreclosure Auctions

Foreclosure auctions are a great way to get a property cheap (again, if the price is right), but when a deal can’t be found as easily, it doesn’t hurt to do a bit of research.

To find foreclosure properties, you can go down to the county courthouse and search through records free of charge. Granted, this could take quite some time, even with the help of a courthouse employee, so another solution is to subscribe to a service that does all the of the research for you. Foreclosuresfreesearch.com offers a free 7-day trial where you can browse foreclosure properties in your area.

Once you’ve found a property, why wait for the auction? You can find the owners in the yellow pages, or even knock on their doors, and offer to help them out of their financial burden. Most investors prefer to distance themselves from this method, so placing ads in newspapers advertising your interest in foreclosed or nearly foreclosed properties is a possible solution. Also, e-mail lists, newsletters, and postcards all work as well, and with the increasing use of social media, why not Tweet about your interest in foreclosure properties?

Rehab Properties

Rehab investments are another great deal you can come upon and turn for a handsome profit. However, there’s no way around extensive research and property scouting to find the best bargain. Many run-down properties in need of repair may not be foreclosed and will therefore not be listed at courthouses.

It’s best to first scout out a good area that will increase in value or at least remain stable during the duration of your renovation. The next step is to simply scout out the neighborhood with your notebook and camera, looking out for the classic signs of potential rehabs (i.e. broken windows, uncut grass, damaged roof, etc.). If you think you’ve found a possible candidate, write down the location, snap a few photos, and jot down some notes on the house’s condition.

Sometimes finding a property owner can be tricky, but the surest way to find the owner, besides illegally peeking at their mail, is to once again go down to your local courthouse and find out who pays the property taxes (this also free information available to the public). Contact the owner once you’ve found him or her, and offer to purchase the property. Once a deal is struck (possibly with the assistance of a real estate attorney), seek financing and begin repairs! Be sure you know what you’re getting yourself into, because a drawn out renovation can cost you not only your time, but also a great deal in loan interest. Rehabbing properties takes work and dedication, but fortunes have been made solely on flipping houses.

Article by Josh Lunetta

10 Ways to Beat the Real Estate Crisis

Anchor Loans — Mon, 10 Oct 2011 17:39:00 GMT

This article provides tips for building your brokerage practice and creating personal wealth during real estate’s enduring bumpy plateau recovery.

Why it’s still considered tough out there

Uncertain about the future of California real estate? It’s no wonder. Bipolar reports from industry pundits proclaim a recovery in one month, and in the next the feared double-dip — with little guidance to distinguish the two myopic extremes.

A large reason for the uncertainty out there is the still-present confusion between the recent Great Recession (which has passed) and financial crisis (which has not passed) and the recessions of decades past. The causes behind this current real estate crisis are more fundamentally devastating than those of a simple Federal Reserve (Fed)-engineered recessionary market slowdown.
In truth, what real estate (and the national economy as a whole) is experiencing is closer to a Lesser Depression, replete with joblessness. Without jobs to fuel recovery, it will take more than the typical hunker-down-and-ride-out-the-recession mentality to survive while the real estate market gets back on its feet.

Whether we Californians want to admit it or not, the U.S. has effectively opted for a long, drawn-out recovery similar to those experienced by Japan and Mexico following their respective financial crises some two decades ago. The Fed, being unable to marshal other assistance from a highly-factionalized Congress, has been the sole source of assistance to an ailing housing market via its use of monetary policy – printing a trillion mortgage dollars – to induce spending and borrowing. This is the closest we’ll get to a housing bailout – and it is performed through the most unwilling of proxies: big lenders.

It will take more than the typical hunker-down-and-ride-out-the-recession mentality to survive while the real estate market gets back on its feet.

On the one hand, the lure of low (nominal) interest rates and low asset prices has its takers (bargain-hunters don’t pass up sales!). On the other hand, as soon as these market improvements in fundamentals occurs, they are hampered by insufficient job growth and lack of demographic demand which ushers in the next month’s receding numbers and prices.

It’s not the tidy relief we’re all looking for, but the pattern revealed in these past three years of constant ups and downs does provide certainty: it’s going to be a bumpy plateau recovery on through 2016.

Count on more ups, and more downs. Also count on one of these downs to likely be formally characterized as the double-dip recession that has been wildly bandied about in the press, sometimes pictured as a dead cat bounce. We’ll just tell you up front now: it’s already happened in California housing prices. Prices took a brief skip upwards from 2008 lows, and back down at the end of 2010 into mid-2011.

Expect prices to remain at or slightly lower than their 2011 levels through the next few years as the larger economy continues to meander through its troubles, poorly guided by short-sighted political squabbling and shadowed by increasing economic tensions abroad.

True grit

California’s real estate market is due for at least one interim recession in the coming years before it fully emerges from the effects of the financial crisis. To survive, real estate brokers and agents must figure out how to make a living with this economic certainty in mind. Guidance on how to do so is scarce.

The blind optimism and aimless social networking prescribed by the real estate trade union fills time making one look busy, but effects nothing while the seed corn of personal savings held by agents is being consumed. Political bodies sparring for rank will make noise about economic recovery, but election-year bombast rarely translates into results until things get really bad (for the constituency, anyway).

To those real estate professionals who wish to stay in the market as a career, it’s time to circle the wagons and wrestle up your gumption. Here are a few practical tips to build up your business while the real estate market slouches towards recovery.

A checklist for doing well in the recovery

1. Build up cash reserves. Don’t get caught up in the commodity hoopla — commodities are good for protecting value when there is danger of inflation, but inflation is never the battle we fight in a financial crisis. Core inflation has been hovering steady around 2% or lower for the last several years, and though it will be allowed to go up once a sustainable recovery is in process, the Fed will hardly allow inflation to become an issue after having resuscitating the economy at such great cost to our population in lost earnings, opportunities and wealth.
Inflation hawks wage a continuous war against the 14% inflation of the ‘79-’80 recession, falling under the same misconception that many misguided financial prognosticators do in thinking the dangers of this Lesser Depression are the same as those posed by a recession. It bears repeating: we are in a financial crisis, not a recession which long ago ended. Thus, the current conditions are closer to the ’36-’38 conditions following the Great Depression, in which jobs were scarce and cash was scarcer, commanding the market.

2. Cut expenses. Go over your business (and personal!) expenses carefully. Cut what you don’t need, and pare down what you do need to the bare minimum to conserve your cash. Get what you can for free — the rules governing the old real estate supply-side paradigm don’t apply during a buyer’s market (get more listings), so try breaking them and give alternatives a try. Build a contingency budget as Plan B at 20% less than you spent this past year.
This is advice to give, as well as practice. Counsel negative equity homeowner-clients to exercise their put options and abandon their underwater properties, called black-hole assets. Not only is this sound advice for your clients, but it also clears the path for real estate transactions in the future when those same clients have passed their no-borrowing “penalty” periods. This counseling sets client interim conduct and future expectations, when properly managed.

3. Know your area. Which areas have the best schools and what civic and community amenities are available to the residents? Are medical, banking, civic and cultural facilities available? Back up your deals with facts about your area of influence – use online resources to map the amenities. Plan your business in these core areas away from the periphery — bedroom communities far from the desired conveniences atrophy more quickly during times of economic turbulence.

4. Know your clients. Find out which demographics drive your market. Are your clients likely to be Baby Boomers looking to relocate to senior communities, or newly-formed Generation Y (Gen Y) households looking to rent, or ready to become first-time homebuyers? Is the trend in your region for the population to get older or younger? Gathering this information ahead of time will give you an advantage when you spot these demographics finally hitting the market.

5. Jobs, jobs, jobs. If you represent commercial clients, do your homework. Look at the labor pool available in the area. Does your region have the type and quantity of workers to provide a company with the working force it needs? What industries are prevalent in your community, and are they experiencing growth, or declining? Even if you’re in single family residence (SFR) sales or residential property management, bone up on what’s going on in the commercial real estate market around you — knowing what industries will be laying roots gives you a heads up to who you will be catering to in the future. Introduce yourself to human resources department personnel.
Knowing what industries will be laying roots gives you a heads up to who you will be catering to in the future.

6. Stay active in the local government. Local governments committed to business-friendly practices and real estate development reap long-term benefits for brokers and builders. Communities do not stand still; they change or decline. Attracting commercial enterprises creates jobs, which is crucial to how quickly a community enters and moves beyond a real estate recovery. Lobbying councilmen for business incentives may require a short-term sacrifice, but it builds community hubs in which workers – and thus, homeowners and brokers who work in SFR and commercial real estate – can thrive. No community today exists without there having first been a visionary — a developer and his builders.

7. Keep a high profile. Use the lull in the market to make changes for the future by pushing for laws to stabilize facets of the real estate industry that cause trouble – mortgage lender resistance to carryback financing, subject-to sales and not-in-my-backyard groups (NIMBYs) fighting innovation and construction and other marketplace conservatives. Keep your name in the mind of clients by holding events and canvassing for their business. Practice your actual social networking skills with potential clients to forge relationships with influential families and businesses and keep your ear to the ground for sounds of possible deals.

8. Learn how to invest in real estate. Market real estate investments to all your moneyed clients, and acquire real estate interests and trust deed notes yourself to make money as a principal when investors shift from the stock market to real estate. It will happen after a financial crisis, just as it did after our last one ended in 1944. Invest for five years or more starting now, and advise others to do the same. Make sure you have ownership experience and know how to market a potential income property to attract investors. Think real estate syndication, options to buy, carryback sales transactions; get out of the all-cash-and-no-carry box the past decades have put you in.

9. Talk up interest rates and low prices. Homebuyers may be skittish when it comes to “timing the market” as their default mentality is to wait for the herd to move, but income investors are out there taking tentative steps as they look into building their real estate portfolios. Nominal interest rates may even fall further in the next few years as the Fed continues to push the 10-year Treasury downwards to tease out growth in the economy; either way, the next few years will be ripe for investors to come in and take advantage of historically-low nominal interest rates and prices.
These two economic conditions will not coexist for long. Distinguish with your clients and your fellow agents that while a market may be bad for one side — the sellers— there are deals to be had on the other side — the buyers. Present the data you’ve accumulated in researching your area (see tips above) and make a pitch for certain areas and properties; the more centrally-located, the better the results. Think offers and proximity to City Hall.
10. Are you a sales agent? Look into becoming a broker. This investment in yourself reaps you more of the fees you generate, greater independence and better personal marketability. Try saying, “I’m a broker!”

What are you doing to position yourself for the real estate recovery – let us know!

Article by First Tuesday Journal Online

Valuing Your Real Estate Investment Property

Anchor Loans — Fri, 07 Oct 2011 17:32:00 GMT

From a quantitative perspective, investing in real estate is somewhat like investing in stocks. In order to profit in real estate investments, investors must determine the value of the properties they buy and make educated guesses about how much profit these investments will generate, whether through property appreciation, rental income or a combination of both.Equity valuation is typically conducted through two basic methodologies: absolute value and relative value. The same is true for property assessment. Discounting future net operating income (NOI) by the appropriate discount rate for real estate is similar to discounted cash flow (DCF) valuations for stock, while integrating the gross income modifier model in real estate is comparable to relative value valuations with stocks. Here we'll take a look at how to valuate a real estate property using these methods.

Comparable Equity Valuations
Absolute valuations models determine the present value of future incoming cash flows in order to obtain the intrinsic value of a share; the most common methods are dividend discount models and discounted cash flow techniques. On the other hand, relative value methods suggest that two comparable securities should be similarly priced according to their earnings. Ratios such as price-to-earnings and price-to-sales are compared to other intra-industry companies to determine whether a stock is under or over-valued. As in equity valuation, real estate valuation analysis should implement both procedures in order to determine a range of possible values.

Calculating a Real Estate Property's Net Operating Income

Where:

NOI - net operating income
r- Required rate of return on real estate assets
g- Growth rate of NOI
R- Capitalization rate (r-g)

The net operating income reflects the earnings that the property will generate after factoring in operating expenses but before the deduction of taxes and interest payments. Prior to deducting expenses, the total revenue gained from the investment must be determined. Expected rental revenue can initially be forecasted based on comparable properties in the area. By doing the proper market research, an investor can determine what prices tenants are being charged in the area and assume that similar per-square-foot rents can be applied to this property. Forecasted increases in rents are accounted for in the growth rate within the formula.

Since high vacancy rates are a potential threat to real estate investment returns, either a sensitivity analysis or realistic conservative estimates should be used to determine the forgone income if the asset is not utilized at full capacity.

Operating expenses include those that are directly incurred through the day-to-day operations of the building such as property insurance, management fees, maintenance fees and utility costs. Note that depreciation is not included in the total expense calculation. The net operating income of a real estate property is similar to the EBITDA of a corporation.

Determining the appropriate discount rate is somewhat more complicated than calculating the WACC of a firm. Although there are different ways to obtain the capitalization rate, a common approach is the build-up method. Starting with the interest rate, add the appropriate liquidity premium, recapture premium and risk premium. The liquidity premium arises due to the illiquid nature of real estate, the recapture premium accounts for net land appreciation, while the risk premium reveals the overall risk exposure of the real estate market.

Discounting the net operating income from a real estate investment by the market capitalization rate is analogous to discounting a future dividend stream by the appropriate required rate of return, adjusted for dividend growth. Equity investors familiar with dividend growth models should immediately see the resemblance. (The DDM is one of the most foundational of financial theories, but it's only as good as its assumptions.)

Finding a Property's Income-Generating Capacity

The gross income multiplier approach is a relative valuation method that is based on the underlying assumption that properties in the same area will be valued proportionally to the gross income that they help generate. As the name implies, gross income is the total income before the deduction of any operating expenses. However, vacancy rates must be forecasted in order to obtain an accurate gross income estimate.

For example, if a real estate investor purchases a 100,000 square foot building, based on comparable property data he may determine that the average gross monthly income per square foot in the neighborhood is $10. Although the investor may initially assume that the gross annual income is $12 million ($10*12 months*100,000 sq. feet), there are likely to be some vacant units in the building at any given time. Assuming that there is a 10% vacancy rate, the gross annual income would be $10.8 million ($12m *90%). A similar approach is applied to the net operating income approach as well.

The next step in assessing the value of the real estate property is to determine the gross income multiplier. This can be achieved if one has access to historical sales data. Looking at the sales price of comparable properties and dividing that value by the gross annual income that they generated will produce the average multiplier for the region.

This type of valuation approach is similar to using comparable transactions or multiples to value a stock. Many analysts will forecast the earnings of a company and multiply the EPS figure by the P/E ratio of the industry. Real estate valuation can be conducted through similar measures. (Learn how to put one of the top equity analysis tools to work for you.

Roadblocks to Real Estate Valuation
Both of these real estate valuation methods seem relatively simple. However, in practice, determining the value of an income-generating property using these calculations is fairly complicated. First of all, obtaining the required information regarding all of the formula inputs such as net operating income, the premiums included in the capitalization rate and comparable sales data may prove to be extremely time consuming and challenging. Secondly, these valuation models do not properly factor in possible major changes in the real estate market such as a credit crisis or real estate boom. As a result, further analysis must be conducted to forecast and factor in the possible impact of changing economic variables.

Because the property markets are less liquid than the stock market, sometimes it is difficult to obtain the necessary information to make a fully informed investment decision. That said, due to the large capital investment typically required to purchase a large development, this complicated analysis can produce a large payoff if it leads to the discovery of an undervalued property (similar to equity investing). Thus, taking the time to research the required inputs is well worth the time and energy.

The Bottom Line
Real estate valuation is often based on similar strategies to equity analysis. Other methods, in addition to the discounted net operating income and gross income multiplier approach, are also frequently used. Some industry experts, for example, have an active working knowledge of city migration and development patterns. As a result, they are able to determine which local areas are most likely to experience the fastest rate of appreciation. Whichever approach one decides to use, the most important indicator of its success is how well it is researched. (Learn how to filter out the noise of the market place in order to find a solid way of determine a company's value.

Article from Investopedia.com

Client Tesimonials

Anchor Loans — Thu, 06 Oct 2011 17:30:00 GMT

Take a look at these testimonials from actual Anchor Customers.

Marc L., Investor:

“I have been in the lending business for over 30 years. The principals at Anchor Loans are the very best in the business. The due diligence that they perform is perfect. I have been investing with Anchor Loans from the day they started in business and the founder Jeff Lipton has done everything possible to make every loan a winner. The integrity of the owners is 100%. Everyone at Anchor spends the time to do the work to underwrite the loans. Thank you for taking responsibility with all of my funds.”

Brian G., Investor:

“For over 11 years, I have invested both in the Investment fund of trust deeds managed by Anchor Loans, and in dozens of individual trust deeds handled by Anchor. In all cases, I have always received (at minimum) the full rate of interest that I expected without loss of any principal. Anchor Loans has always honored, in a timely fashion, all of their promises regarding redemption of funds. Quite unusual in today's world, Anchor Loans is a company which combines very high ethical practices along with extreme diligence, competence, and professionalism in concern for and protection of their investors' best interests. The staff has always been a pleasure to deal with, and I like the fact that a helpful human being always answers the phone instead of an answering message. I highly recommend Anchor Loans as a great company to do business with. Anyone considering investing with Anchor Loans is welcome to contact me at (702) 385-4638 if they wish to ask me any questions regarding these investment experiences.”

Rob K., Investor:

"Anchor Loans has been a pleasure to work with. Everyone I have spoken to in their organization has been extremely professional and efficient. They have without exception followed through on their promises and have met my expectations".

Erik S., Investor:

“I discovered Anchor Loans through my friendship with Dan Harrington and have invested in Anchor for over 11 years. I have received great returns and have great faith and trust in the way they operate. They work hard, have great integrity and communication is always immediate. I have recommended Anchor to many of my closest friends and relatives, something I am normally very reluctant to do.”

Charlotte W., Investor:

“I have been investing with Anchor Loans & in Access Investment since June 1999, and I am very satisfied. The rate of return is better than any other investment in my portfolio and I feel these notes are safe, conservative investment, because they have a very short duration and are collateralized with real estate. I promptly receive all documents and I receive accurate statements. The owners and managers of the company are of the highest integrity. For these reasons I have advised friends, family members and business associates to invest with Anchor Loans.”

A Guide to Flipping Houses

Anchor Loans — Wed, 05 Oct 2011 17:16:00 GMT

Although Best House Flip is an overarching guide to flipping houses, this section –working on a flip– is really the guts of house flipping because it involves both strategic and manual work. Once you’ve purchased a flip property and done some creative real estate investing, it's wise to determine a target market, make forward-thinking decisions about what you want to accomplish, set your budget and survey the various material and purchase options.

Without a clear indication of your target market, your property makeover could be sub-par due to lack of direction. Alternatively, if you know the demographics and psychographics of whom you’re renovating for, working on flip can be much more focused process.

Once you know who you're flipping for, it’s time to make strategic decisions about which projects to undertake and which to leave. Some of these decisions will be rooted in the needs and wants of your target, and others will be made according to your budget. This aspect of flipping is similar to shopping, you could buy everything you like in a store, (assuming you have a gold credit card) but it’s better for your financial health and end goal to be selective about what you choose to buy…or renovate.

Now that you’re in the mindset of making strategic decisions, it’s time to set your budget. The budget will become your guidepost. Setting a budget is essential to realizing your initial ROI results and will keep you accountable.

Knowing what material and service-oriented purchase options you have at your fingertips could mean a massive savings in your makeover budget. For example, you could buy everything at retail price, or you could find liquidation sales, auctions, wholesale buys or the like. What you choose to pay and where you choose to shop can assist in the 'wow factor', for example, like getting granite countertops for the price of laminate countertops.

Be selective and know what you’re up against. Making the right decisions when it comes to working on your flip is a major factor in house-flipping success.

Article via BestHouseFlip.com

Boomers bust open doors to real estate investment era

Anchor Loans — Mon, 03 Oct 2011 13:50:49 GMT

Although the financial crisis and Great Recession delayed the retirement of many of the Baby Boomer generation, it remains a demographic certainty that the Baby Boomers will indeed retire throughout the next twenty years. The real estate repercussions of this massive exodus of Baby Boomers from active employment have been discussed for good reason by first tuesday on multiple occasions.

In addition to the direct impact of the wave of Baby Boomers looking to sell their single family residences (SFRs) in California’s suburbs, also called the periphery, and continue the movement to our cities for a healthy dose of urban amenities, Baby Boomer retirement will have a secondary, but no less important impact on real estate investments. The stock market’s loss is real estate’s gain

The prime age for building wealth in the risky stock market coincides with the prime earning years of an individual’s life. This makes sense: any financial shocks experienced by a downward turn in the stock market can be borne with relative ease when one has a steady income and time to wait out its recovery. As Baby Boomers grew into the peak savings and investment ages of 35-59 in 1981-2000, the stock market prices and earnings consequently jumped — a simple function of supply (limited availability of stocks) and demand (increasing amounts of disposable income).

However, as individuals approach retirement, their risk tolerance instinctively decreases since they have fewer working years to recover money lost due to a risky investment gone bad. Consequently, their interest in braving the volatility of the stock market to build wealth wanes. This timeline of risk tolerance throughout an individual’s life is a time-tested and predictable measure of how robust stock market growth will be.

And therein lies the proverbial rub. As they retire, Baby Boomers will dissave by taking much of their wealth out of the stock market and spending it. By the same supply and demand rules which boosted stock prices when Baby Boomers poured their savings into the stock market to save for retirement, the growth of and return (resale profits) on stock market investments will weaken as Baby Boomers dissave in the 2010-2025 period.

Furthermore, since this impact is a foregone conclusion, Wall Street has somewhat built the Baby Boomer exodus into current stock prices. Thus, even before the actual impact of Baby Boomer dissavings sucks money out of the stock market, the projected impact is already putting downward pressure on stock prices, which with company earnings are collectively aggregated in the P/E ratio for comparative analysis.

When Generation Y (Gen Y) look around for ways of growing their retirement nest eggs, they will find conditions in the stock market ill-suited to meet their investment needs.

Even in spite of the personally bitter postponement of retirement forced on Baby Boomers by the financial crisis, the next 15-20 years – peaking around 2020 – will still see gradual Baby Boomer retirement sapping the stock market of its vitality and long-term wealth-building potential. When Generation Y (Gen Y), the children of the Baby Boomers, reach their already-stunted professional strides and look around for ways of growing their retirement nest eggs, they will likely find conditions in the stock market and its management ill-suited to meet their investment needs.

Gen Y’s alternatives to the stock and bond markets are few: either deposit savings (which will bear near non-investment returns with banks currently in a general state of insolvency) or real estate.

Shifting to long-term real estate investment

Fortunes, it is generally noted, are made by steps taken during times of economic distress. California’s real estate market is no exception to this rule: as the stock market becomes increasingly less profitable, Gen Y investors will branch out and seek the inflation hedge provided by income properties situated close to strengthening population centers. The years remaining in this decade will be a prime period to invest in real estate positions.

Brokers and agents who plan to handle transactions for income property investors must explain away two particularly prevalent misconceptions held by fledgling investors:

the distinction between homeownership and real estate investment; and
the diametric differences between short-term and long-term investing.

Many beginning real estate investors will approach acquiring real estate income properties from the same standpoint as they do when buying a home. Their first instinct is to purchase property when the herd purchases (as happened during the Millennium Boom buying frenzy), which is precisely the wrong time to purchase any property – be it shelter or investment.

Further, first-time investors often erroneously transfer their bundle of emotions devoid of number crunching that go with homeownership to real estate investment. For example, when the typical homeowner purchases his home, he makes an implicit sacrifice – the opportunity cost of putting his money elsewhere – to financially anchor himself to his home. Further, he exchanges the mobility allowed by rented shelter for the perceived stability of owning shelter – homeownership.

As constantly happens, the shock of a lost job or the need to relocate to further a career (and income) puts financial pressure on the homeowner to sell his home, all the while crossing his fingers in hopes he will find a buyer at a price high enough to recoup the hard-earned, after-tax money buried in his home.

These emotional risks pushing decisions by a potential homeowner when faced with the idea of having to sell at the mercy of a “bad” market are misguidedly imputed to income property investments. This inapposite comparison is especially pronounced for first-time income property investors who typically try their hand at SFR income property investment, or who use the quixotic example of the ill-informed (and sometimes lucky) speculator as their model of real estate investing behavior.

In reality, long-term income property investors, also known as buy-to-let investors, have no emotional attachment to a property, no need to concern themselves with what will happen should they need to relocate their personal residence for any reason. At the time of acquisition, they merely do the math on whether an investment (in a property’s income and expenses) will return annual earnings sufficient in amount and nature to justify its purchase for the long-term – “long-term” being the operative phrase. Income property, it must be understood, is a collectible; the family home, not.

In for the long haul

Stock market investments are by nature a product of herd mentality, subject to short-term jolts and shocks representative of (often) ill-informed human reactions to momentum (even gossip) but not data. Wealth is quickly built, and quickly lost in a frenetic need to keep above water — a risky game, at best.

Income property, it must be understood, is a collectible; the family home, not.

The durability of buy-to-let real estate investment, on the other hand, is dependent on time-tested real estate fundamentals. Based on these fundamentals, the price paid for an investment property is:

the present value of its future flow of net income, coupled with predicted growth in price by inflation and appreciation for profit over the long-term; and
anchored by a “recession proof” location for weathering both the booms and busts of the inevitably recurring real estate cycle.

Unlike in a family shelter, which is subject to the employment conditions of the homeowner, income property need not be sold until the owner is ready to cash out at retirement. Should the timing not be favorable for selling when an investor is ready to dissave, he can collect rents on the property until the real estate cycle comes around to favor sellers.

A centrally-located income property reaps the benefits of stable, more recession-proof rental income. Unlike volatile stock prices and spikes in SFR prices following real estate bubbles, residential rents in the desirable urban core adjust according to the rate of consumer inflation (as do the payroll receipts of employees) and remain on a relatively constant trajectory.

Residential rent from properties properly situated in other than periphery locations runs very close to the equilibrium trend lines for consumer inflation over long periods of time — something a homeowner cannot take advantage of since they simply buy and sell subject to the cyclical violence of booms and busts existing when they must sell. These “wipesaw” financial conditions are not of concern to investors of rentals as investor expectations are tied to rents, not the price of a property once they have made the decision to buy.

Syndication smarts

As a result of our current depressed economic conditions due to the financial crisis, housing bust and Great Recession, the base of investors — both new and experienced — in the coming real estate investment era will be wary of putting down large sums of money in individual investments, or simply without the means to do so.

Expect to see a marked rise in group investments in the name of limited liability companies (LLCs), limited partnerships (LPs) or tenancies-in-common (TICs), known as real estate syndicates. In addition to the financial protection brought about by group investments (sharing losses, as well as profits), investors also reap the benefit of having a built-in property manager for-hire in the broker arranging the investment.

Not only does syndication make sense as a brokerage business — earning fees for arranging the deal as well as for the ongoing property management of the syndicated property — but brokers and agents who know how to form and manage group investments can accumulate great wealth since they share in the future of the investment. Learning how to find, control and market suitable investment properties gives brokers and agents a way of getting their foot in the door while the real estate market is still poised to make its recovery.

Brokers and agents must get the message out that real estate investment is a viable — even necessary — alternative to the stock market. The stigma of real estate as the lesser form of investment (an attitude inculcated by the abuses of every service provider in the real estate market during the Millennium Boom) needs to be dispelled while the stock market is in disarray.

The name of the game is diversification: no investment is one-size-fits all. So as Gen Y comes of age and begins to look around for sound ways of working their money, real estate professionals need to consider investment options which benefit their clients while at the same time nurturing their own practice and personal net worth. So learn how to work with income properties, and the return on your time, effort and talent will be solid for this and the coming decade.

Article by First Tuesday Journal Online

Top 25 Real Estate Factors

Anchor Loans — Fri, 30 Sep 2011 15:44:54 GMT

To see First Tuesday's Top 25 Real Estate Factors, click here

These are first tuesday?s observations and commentaries on the fundamentals controlling the analysis of real estate valuation from a price, time and location matrix, with thoughts on realistic expectations about the future use and occupancy of real estate owned or leased.

Such a review is challenging to write and to read. In producing the review, we are paying close attention to the application of long-lived real estate concepts to future transactions. This allows for an informed prediction of the future for real estate market participants such as brokers, agents, sellers, buyers, tenants, landlords, builders, and lenders.

As you are directly effected by the future of this industry, we ask you for your input on the consequences the 27 factors will have on current activities of brokers and their agents as we leave the seller?s market behind, activities ranging from client negotiations and contracting to escrow practices and lending.

We will be reviewing 27 factors and fundamentals which have historically affected real estate transactions. They have been categorized by whether their effect has:

    -a primary and initial impact on the industry;

    -a concurrent secondary influence on the industry;

    -a basis in population, monetary policy, or regulatory policy; or

    -a one-time shock effect.

On all subjects, the opinions of experts predicting the future are unreliable, giving no better advice on which of the two diametrically opposed opinions of the future is accurate than would the flip of a coin. On the other hand, the wisdom of the crowd with its collective knowledge has an 85% to 90% track record for accuracy.

Thus, the collective knowledge of a cross section of real estate brokers and agents who have been actively involved in real estate transactions will have an accuracy nearly double that of an opinion given by any self-described expert. The goal of this series is simple: we are aiming to get information from those in the fray so readers can better explore the impact of each factor of the list of 27, and use the information to help develop the course of their real estate activities in the California real estate market.

12 Investor Questions Answered

Anchor Loans — Thu, 29 Sep 2011 15:53:00 GMT

Who are the borrowers?

Anchor's borrowers are experienced businesses or business people that purchase fixer uppers (rehab properties) well below market value from banks, other lending institutions, estates, etc. for the express purpose of resale for a profit. They buy these houses or multiple unit buildings at a substantial discount, fix them up in a timely fashion and have an excellent marketing program for resale - usually in a time frame of about 8 months. Most of our borrowers obtain loans on a repeated basis - using Anchor as their primary source of real estate related acquisition financing.

Why does a borrower come to Anchor Mortgage instead of a bank?

Anchor reacts quickly to loan requests and can underwrite and process a loan in a matter of days unlike a bank that often takes between 45-90 days. In addition, the borrower may not be able to obtain a non-owner occupied property loan due to tightened banking lending policies.

Where are the properties located?

The properties that secure the investment are located in Southern California. Anchor Loans has evaluated over 10,000 properties in Southern California in its 12 year history and is very experienced in valuing properties in this geographical area.

What types of investment products can an investor purchase?

Investors can invest in Whole Loans and/or an interests in Anchor's Real Estate Mortgage Investment Fund (Anchor Fund, LLC) – Please refer to the Investment Products section.

What is the minimum investment for an investor?

For Whole Loans, the minimum is the dollar amount of the actual loan.
For Anchor Fund, LLC, the minimum investment is $15,000.

What rate of return does Anchor Loans offer?

Depending on the type investment selected, the current rate of return varies.

Whole Loan Purchases generate yields (net of loan servicing fees) that range from 9.50% - 11.00%.
For Anchor Fund, LLC, the 5 year return was 7.35% and the year-to-date return is 9.35%.*

Rate of return is variable and subject to change.

*Past performance does not guaranty future results.

What LTV (loan-to-value) ratio are the loans offered by Anchor Loans?

Anchor's loans generally do not exceed 65% of the value of the property securing the loan. Frequently, loans are available with loan-to-value (LTV) ratios of 55% or less.

Who collects the borrower's monthly payments?

Anchor Loans acts as the loan servicing agent on behalf of the investors. This includes collecting the monthly payments and distributing those payments to the investors.

How do I receive my investment return?

For Whole Loans, the investor receives monthly disbursements of the interest on the loan by either by check, wire or ACH (direct) deposit.

For Anchor Fund, LLC investments, the investor can choose to receive monthly disbursements (with the same choices as for whole loans) or have the income earned reinvested and compounded for growth.

Will I have access to my investment if I need to make a withdrawal?

For Whole Loan investments, your principle is not available for withdrawal until the loan pays off.

For investments in Anchor Fund, LLC, initially your invested capital may not be withdrawn for a period of 3 months. Thereafter, withdrawals are restricted by cash flow and other limitations set forth in the Fund's Offering Circular.

Can I invest my IRA or Pension Plan?

IRA, SEP IRA and Pension Plans are accepted.

How do I apply?

For Whole Loan Investments, call (310) 395-0010, ask for Investor Relations and request a Comprehensive Investor Packet. It will be mailed or e-mailed to you promptly and includes key information including the Investment Application.

Anchor Fund, LLC, shares are offered only through receipt of the Fund's Offering Circular. Call (310) 395-0010 and ask for Investor Relations to request a copy of the Fund's Offering Circular.

Tips for Buying and Selling Trust Deeds

Anchor Loans — Wed, 28 Sep 2011 16:16:00 GMT

Many people like the idea of making money from what they invest. It can be tricky though and the rate of return can be minimal. That is why many people are interested in trust deeds. The risk is low but the return can be several times what you invest in it. However, there are some essential things you need to understand before you jump into such investments. Learning the basics will help ensure you have the best chance of making money.

Promissory Note

You need to have a solid understanding of what a promissory note is. This is a promise that is in writing with all parties involved. Basically it covers the agreement terms for repaying the money that was loaned. It discusses the:

    -loan amount or principal
    -interest rate
    -frequency of repayment or debt service
    -loan due date
    -any penalties for late payments

When a borrower gets the funds for property they wish to own, they have to sign such a promissory note. They need to take the time to read over every single part of it. Anything that isn?t understood needs to be explained before it is signed. After it is signed, the borrower has agreed to all of the outlined terms.

A promissory note will also include information about what will happen of all of those terms of the agreement aren?t met. For example there may be late charges when a payment is 10 days late. In many instances there are also penalties that apply when a borrower prepays in advance. In the promissory note, the lender (note holder) and the borrower are also identified - in black and white.

Obtaining a promissory note

Next you need to understand how such a promissory note is obtained. When you decide to invest in a trust deed then you either are lending the funds to the borrower or buying a promissory note that already exists. There are rates in place that can?t be exceeded with that process so that predatory lending can be reduced. The ceiling that exists can vary by location so make sure you are aware of the laws that are in place in your area.

It is important to pay very close attention to those guidelines and ceilings. Severe penalties can be initiated if you exceed them. Most of the time you can get yourself involved with a deed of trust through a broker. Keep in mind that you will have to compensate them for their efforts. They are referred to as mortgage loan brokers (MLB) and their rates will also vary by location as well.

Securing your investment

You definitely need to understand how your investment is secured. Your deed of trust is going to be filed and recorded with the property that the funds were used for as collateral. There is no backing by the FDIC and you need to be well aware of that before you decide to invest in any deed of trust. There is always a risk involved when you invest in trust deeds.
You need to make sure all of the necessary information is covered in that promissory note. Otherwise you risk not being able to get your money that you invested back, or any return on it. Too many people assume that deed trusts are FDIC backed, so this point is one that you need to fully understand.

The borrower (trustor), once agreeing to the deed of trust, will place the title to their property in the hands of that third party (trustee). The trustee will do so on behalf of the lender or note holder (beneficiary) and they have some power that they can execute due to their status in all of this. First, they have the right and obligation to reconvey that title to the borrower once all of the terms of the promissory note have been satisfied completely.

Should that not occur though, they have the right to sell the property which is what we know as foreclosure. This process involves selling that property to the highest bidder in order to successfully get that debt paid off. Sometimes the property won?t sell this way though because the opening bid isn?t sufficient enough to satisfy that debt. Even if it does sell though it may not be enough to cover the entire amount that is still owed on it.

There are quite a few variables that can affect that outcome. For example the type of foreclosure process that is followed, the type of loan that is involved, the value of the property in today?s economy, and the type of investment that was made towards it. This is where the big risk comes into play with trust deeds. You may not be able to recoup what you invested or make any profit from it at all if you have to foreclose on the property. For example, if your property does not get third party bids and you bid only a full credit bid in a non judicial foreclosure sale, you will only get to recoup the original property value.

Sometimes you will be able to get the courts to help you generate some of that income though. For example they can make a judgment that you are eligible for the difference from what you were owed and what you were able to sell the foreclosed property for. However, even with such a judgment in place it can be extremely difficult to get the money from the borrower if they have no means to repay it.

6 Questions from our Borrowers

Anchor Loans — Tue, 27 Sep 2011 16:26:00 GMT

What LTV ratio does Anchor Loans offer?
Loans generally do not exceed a 65% loan-to-value ratio of the property to be acquired. This amount can include the purchase price, property rehabilitation costs, and closing costs.

What interest rate do you offer?
Interest rates generally fall between 11.0% -13.0% depending upon the type of property and the borrower.

How long does it take to receive funding?
Though Anchor Loans can review and approve qualified loans in as little as two days for rush deals, most deals take approximately five days. Loans can also be funded in as quickly as two days, but the normal expected funding time is one to two weeks.

What kind of properties does Anchor fund?
Anchor Loans can fund all types of non-owner occupied properties that meet our qualifications. This includes single family residences, duplexes, triplexes, quadraplexes, apartments and other commercial properties. Anchor Loans does not fund owner-occupied properties.

How do I apply?
Our online application is available 24-hours by clicking on the link in the left hand column. You are also welcome to call (310) 395-0010 to schedule an appointment to speak with an Account Executive.

How is Anchor Loans licensed?
Anchor Loans, Inc. is a licensed California real estate broker and California Finance Lender. Loans will be made or arranged pursuant to one of these lending licenses or the California finance lenders licenses held by Anchor’s affiliate mortgage funds, Anchor Fund, LLC and Access Investment, LLC.

Foreclosures rise in August

Anchor Loans — Mon, 26 Sep 2011 13:13:10 GMT

Foreclosures are in the rise in many U.S. cities, giving investors a chance to pick up investment properties for very low costs. Check out this article from CNNMoney.com for more information on foreclosure rates:

Foreclosure filings rose in August, as more homebuyers fell behind on their mortgage payments.

Filings were up 7% compared to July, but were still 33% lower than they were a year ago -- marking the eleventh straight month of year-over-year declines, according to RealtyTrac, a leading online marketer of foreclosed properties.

According to the report, 228,098 homes in the U.S. received some kind of foreclosure filing in August. Default notices, which typically initiate the foreclosure process, surged more 33% from July. Foreclosure auctions and bank repossessions, which come later in the process, both fell slightly.

The increase in default notices may signal that lenders are starting to finally push through foreclosure paperwork that was previously delayed by the "robo-signing" controversy last fall, said RealtyTrac CEO James Saccacio.

"It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process," he said in a release.

The good news is that bank repossessions have been falling. Lenders repossessed 64,813 homes in August, a six-month low and a 37% decline after bank repossessions hit a peak in September last year.

Meanwhile, foreclosure auctions were scheduled for 84,405 homes, the lowest number in more than three years.

Not surprisingly, Nevada, California and Arizona housing markets continued to be the hardest hit by foreclosures.

Nevada has had the nation's highest foreclosure rate for more than four-and-a-half years now, and even though bank repossessions and auctions both fell in August, the state saw default notices increase 31%.

One in every 118 Nevada homes received a foreclosure filing in August.

California came in second place, with one in every 226 homes in foreclosure, and Arizona, with one in every 248 homes, was third.