Real Estate Mistakes

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Try to avoid these mistakes when buying real estate.

http://www.usatoday.com/money/econom...per-usat_x.htm

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Here's another article from the Wall Street Journal.

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Buyer's Remorse
Speculators Helped Fuel
Florida's Housing Boom
Slump in Chic Naples
Shows Market Perils;
Ms. Dresner's Auction
By MICHAEL CORKERY and JAMES R. HAGERTY
January 8, 2007; Page A1

NAPLES, Fla. -- In 2005, this once-sleepy retirement haven on Florida's west coast was arguably the hottest housing market in the country.

Builders held lotteries to determine who could purchase homes in new gated communities. In the older neighborhoods, buyers were snapping up modest ranch houses and cottages soon after they were listed for sale. The median home price more than doubled between 2000 and 2005, to about $482,400.

The frenzied run-up prompted economists at banking concern National City Corp. and the economic consulting firm Global Insight Inc. to label Naples "the most overvalued" housing market in the U.S. in the second quarter of 2005, a dubious honor it retains. Today, prices are dropping, the number of unsold homes on the market has swelled to more than twice the national average and investors are scrambling to unload their properties.

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Such a crescendo of activity might have prompted some to pull back. But plenty of investors, who purchased homes to rent or flip, continued to buy and sell through the height of the boom. One of them was Marjorie Dresner. The Canadian native believed that Naples, with its laid-back, balmy atmosphere, would long be an attractive market. A prolific investor, she purchased dozens of houses in recent years, many of them with a partner. One of them cost her $1.7 million.

...

In late October, Ms. Dresner tried auctioning off 28 of her properties, but some bids were as much as 40% lower than what she paid. One three-bedroom ranch house she purchased in July 2005 in the middle-class Lake Park neighborhood fetched a high bid of $400,000; Ms. Dresner and a partner paid $690,000 for the house, according to county records.

...

Ms. Dresner won't talk much about her investment experience, but prefers to focus on the positive. "I did very well in the beginning," she says. "I look at the overall picture. You don't just look at one year."

...

The Naples boom and bust also illustrates how some savvy investors can help rebalance markets, by coming back in and picking up the pieces left by previous investors. Indeed, some of the buyers who placed bids on Ms. Dresner's houses at the auction in October were other investors. One of them was Jerry Krecicki Jr. "It's all about timing," says Mr. Krecicki, a local real-estate investor and real-estate agent who believes the market will rebound.

..

Mr. Krecicki, 43, also decided to buy investment homes to build a retirement nest egg. His strategy was to rent out some homes and sell others to use the profits to buy more properties.

In October 2002, Mr. Krecicki and a partner bought their first investment property -- a three-bedroom, one-story house on 10th Avenue in Lake Park. They paid $200,000, using a mortgage loan secured by the equity in their primary residences, and spent $30,000 on renovations in hopes of selling it for a profit.

...

By 2004, investors were scouring every corner of Naples, including Lake Park. Although many of the homes were small and drab, they were built on spacious lots facing quiet streets adorned with palm trees and shrubbery. That caught the attention of home buyers willing to tear down the old homes and rebuild new, bigger homes or undertake substantial renovations.

Ms. Dresner also saw the potential in Lake Park. The Toronto native had been buying investment properties in and around Naples since 1999, Collier County records show.

Part of her strategy was to renovate the older houses or team up with builders to tear down and construct new homes. "Our objective was to renovate and transform neighborhoods," she says.

Mr. Krecicki says he met Ms. Dresner a few months after he sold her his home on 10th Avenue in Lake Park in September 2004 for $435,000, more than double what he paid for it.

After that deal, Mr. Krecicki served as her real-estate agent on multiple sales in Lake Park. Soon after homes went on the market, "Marjorie was on the top of my list" to call, he says.

Ms. Dresner bought several homes in and around Lake Park in 2004 and 2005, records show. She also bought houses in the pricier section of Naples, known as the Moorings.

Mr. Krecicki's business as a sales agent was booming. He says he closed $15 million in sales in 2005 up from $5 million in 2003. He also got more interested in properties for investment. He says he bought two more homes in Lake Park, including a duplex for $349,000, in April 2005.

Seven months after he bought the duplex, in October 2005, Mr. Krecicki sold it to Ms. Dresner and a partner for $621,000, county records show.

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Dona Steele, an artist, lives next to a three-bedroom ranch house that Ms. Dresner bought for $690,000 in July 2005. The house, which sits on a lake, sold for $275,000 in February 2001. "We were just laughing at these prices," Ms. Steele says. "I grew up here and it's out of control. This used to be a working-class neighborhood."

Ms. Dresner says she never bought a home for more than its appraised value. "The sellers can ask whatever, but it's up to the banks in how they appraise it," she says. "I never overpaid for anything."

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Ms. Dresner says she was growing tired of the burdens of being a landlord. Many of her properties were listed for sale in early 2006, but some were slow to move. In late October, she tried a new tactic and auctioned off the houses.

Mr. Krecicki says he went to the auction out of curiosity and jumped into the bidding when he saw the low prices. "After about two hours, a house came up for bid that I knew very well," Mr. Krecicki recounted in a monthly newsletter he distributes, called the Lake Park Journal.

...

They put up the highest bid, which was $275,000. It was the same house Mr. Krecicki and a partner sold to Ms. Dresner for $435,000. Given the huge price drop, "it would have been stupidity" not to bid, Mr. Krecicki says.

Many of the sales from the auction haven't closed yet. In many cases the top bids on Ms. Dresner's homes weren't high enough to pay off her lenders in full, says auctioneer Paul Drake. Ms. Dresner's lawyer says she has received additional offers on several houses since the auction, but that no sales have closed.

In the past month, both Countrywide Home Loans Inc. and the Bank of New York filed court papers in Collier County Circuit Court in Florida saying they are seeking to force a foreclosure sale on two properties owned by Ms. Dresner. Ms. Dresner says she isn't in financial difficulty.

Mr. Krecicki and a partner still own about a dozen homes that they are renting out. He says they have cash reserves to cover homes where expenses exceed the rental income. He says he feels badly that Ms. Dresner has had trouble selling her properties.

"This market downturn came out of nowhere, like a snowstorm," he says. "It surprised everybody, especially the people making mortgage payments."


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