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HI BEV

My thoughts on Las Vegas:

advantage 1: closer to Aus (and in my case, China) than the east coast of the US.  You may even get a direct flight!  Although expect a stopover in LA.

advantage 2: it is either first or second (I don't remember offhand) on the Case-Schiller list for greatest price declines, and ditto for the RealtyTrac list of highest foreclosures (I do remember than Miami was just below LV on these lists).

advantage 3: you can get a good looking unit in the price range you're talking of (ie. something that you would feel "proud" to be the owner of)

So why didn't I go to LV?

I was scared off simply by the fact the city is entirely dependent on tourism, and has too much excess housing supply, which made me worried about finding tenants.  This fear was re-inforced by a blog I read written by a European man (Swiss, I think) who bought an REO in LV but still hadn't rented it out during his most recent posts (about 6 months after buying).

I also preferred Miami because of the lifestyle potential should I end up living here.

Best of luck
Steve

THOUGHTS ON REO PURCHASING

Each day I wake up wondering whether I'll hear back concerning the REO SFH with waterfrontage that I put in a bid on 7 days ago.

Here's a breakdown of how it all took place.

The REO was put on the market on 30 Oct, for $224.9K

It was the very first home I viewed (I saw it on 1 Nov), and I knew it was special, simply because of the water access (ie. place to moor a yacht)

For the rest of that day I viewed all 9 other homes for sale within a 1km radius.  All were REOs, all asking 300K upwards, and incomparable to my dream home (the reason houses here are expensive is because we're on an island, just a few blocks from the beach)

The next day I offered $281K cash.

The following day we received an e-mail from the agent representing the bank, saying that "today is your final chance to improve your offer if you wish to, because bidding closes at 5pm"

For the last 5 days I've just been waiting for news.  The only news received so far was an e-mail 2 days ago, from the listing agent, sent to all parties who made offers, saying "thanks for your offers, we've sent them all to the bank, so don't phone us or e-mail us unless you haven't heard back from us 7 days from now"

There's certainly no point trying to phone them, because their phone goes straight to voicemail. 

I'm relating this story now to give you all an idea of what it's like when trying to buy REOs.  The banks behave like arrogant pricks, the listing agents behave like arrogant pricks, and we, the buyers, are left in limbo without any information. 

I've asked several agents how long it normally takes to hear back regarding REOs, and the answer is that there is no rule of thumb, but expect to wait at least 10 days.

This makes coming to the US on a rushed REO buying trip very difficult.

As I sit here, nursing my frustration, I'm beginning to wonder whether I shouldn't consider seeing some Regular Sales (ie. owners selling, not banks).

Apparently, if you want to have an even worse wait, try to buy a short sale.  You have to wait anywhere from 3 months to a year!

HI ZITA

I think coming in March is a very wise choice.

The weather will still be nice (up until about early May, after which it'll be too hot).

REOs will probably hit the market in greater numbers at that time.

It gives you enough time to prepare properly.

And don't worry about a turnaround happening any time soon.  For anyone reading this forum, if you're overly obsessing about US property and are frustrated at your current immobility/ability to come here yourself and do some buying, my advice is to just relax.  The US isn't going anywhere, and US prices aren't going to go up for some time yet.

There are still serious systemic problems in this economy.  People in the US are still living beyond their means, jobs are still being lost to China, and there are still a hell of a lot of people waiting to have their homes foreclosed upon.  Only through extended economic pain (like they are experiencing now) will Americans finally begin to start thinking about possibly taking the steps towards initiating the very hard economic and political policies required to repair this once-great country.

So there might be some small upward momentum in the property market starting as early as next year (simply due to prices having fallen too much), but there isn't going to be any remarkable upward trend until the country figures out what its new role in the global economy is going to be.

I think it would take so little to fix the US economy, but they have created a culture that is not conducive to rational behaviour.  There's no stoicism (like there was in the 40s and 50s), there's no understanding that doing what's good for the group will ultimately benefit oneself, as the whole group rises together.  There's only obsession with oneself.  Every time I see someone on TV here come up with a decent plan about how to reduce the debt, or reduce job losses to China, some selfish corporation or group will stand up and scream about why it shouldn't be done (eg. Wallmart shouting about why the US shouldn't press China to float the RMB, since they're scared US companies in China will be picked upon).

The current economic order may have worked well for the West from the 1980s up to 2008, but there was no strong China to compete with.  China is the sole cause of all the economic uncertainty in the world right now.  China is the reason Aus property prices are sky high.  China is the cause of the US property bubble (China bought all that cheap US debt, which made its way into the property market).  China is the reason for the 10% unemployment in the US (ie. the disappearance of the US manufacturing industry), and China is the cause of US trade deficits, since Americans are addicted to cheap Chinese products.

I am not blaming China for being predatory, since they have only being playing a part in the game created by the greedy and selfish West, a game called globalization.  From the 1800s until recently, globalization has benefited the West, not the Third World.  The West got to rip all of the Third World's resources out of the ground and bring it back cheaply to drive Western factories, and then sell those products back to Third World citizens, who remained enslaved to the West due to their own governments being too corrupt and inept to protect their citizens.

Only a few non-Western countries were able to figure out the rules of this globalization game, and to get in on the action: Taiwan, Japan, Singapore, Korea, Hong Kong, Botswana (sold its diamonds and redistributed the wealth, instead of hoarding it for the political elite).  But since these countries were all relatively small (the biggest being Japan, and I remember how nerve-wracked the US was back in the 80s during the rise of Japan), so they were by-and-large just welcomed to the party, and given seats at the far end of the table, so long as they knew their place.

So, for the past 200 plus years, globalization has been a wonderful game invented and propagated by the West, because they always won, not because they were as smart as they thought they were, but because the competition was pathetic.

But along came China, stealthily growing in economic clout, but keeping as low a profile as possible.  But since 2008 it has become obvious that there'll be only one winner in the globalization games of the next 30 years (basically until Chinese workers become middle class and aren't prepared to slave away in factories for a pittance).

So what the West needs to do is backtrack on its past 200 year game-plan.  They need to rethink globalization, not necessarily by abandoning it altogether, but by figuring out how to tweak the system in their favor.

I can think of a number of ways, eg.

1. Let Asians buy green-cards (with, let's say, a $500 000 input of cash into the US – either by buying property or investing in a business).  You'd be shocked to know just how many people there are in China with half a million dollars cash to spare.

2. Force the Chinese government to fully open up the economy to foreign investment (especially the media).  That way the American news channels can start brainwashing Chinese consumers as to why McDonalds is so good for you, and communist dictatorships aren't.

3. Force the Chinese RMB to be floated.

4. Force the Chinese stock markets to be opened to foreigners.  What would then happen is that rogue international traders would create bubbles, which they can then pop at their own whim, sucking trillions back to the West, and leaving economic and political upheaval in their wake.

Because China knows that the above ideas would be disastrous for the Chinese economy, and may lead to the downfall of the Communist Party, they'll never allow it.  Ie. this is the part of globalization that they are rejecting.  Fine.  Then the West has every right to backtrack from it's globalization path, and reinstate protectionist barriers. 

This will scare the hell out of the Chinese, since there'll be nobody to buy their factory-made products, so they'll suddenly come back to the table and be willing to discuss opening up their markets much faster.  This won't stop the ultimate rise of China, but at least it will give the Western economies a much-needed boost during the next 3 decades.

US society reminds me of kids at an unsupervised birthday party, where everyone is on a sugar-rush, throwing plates and ripping down the curtains.  They know they're going to get into huge trouble when the parents come home, but they just can't help themselves.  A bit like Lord Of The Flies.

I'm not saying I'm not a bull on US property in the long run.  I'm just saying that the current woes being experienced in the US have been decades in the making, and they finally exploded into a huge crisis in 2008, creating the greatest downtown since the Great Depression.  It's likely that the US will figure its way out of this current maelstrom sooner or later, but I'd say later rather than sooner.

In the last few days I've learnt a bit more about the Miami property market, and the more I learn the more I know how much more there is to learn.

My agent introduced me to the top-selling agent in her office, so I sat down to have a chat with him.  What I was most interested in finding out from him was how long I'll need to wait to hear back about my REO dream home offer.

This is what he had to say:

Never get personally attached to a particular property, and never assume you'll get it.  There are way too many factors at play in each individual case, and these are all out of your control.

He listened to me giving a description of the property I'd put an offer on, how much I'd bid, and the feedback from the bank's listing agent.  He immediately pointed out "Your greatest enemy is the bank's listing agent".  I asked him to explain, so he told me this story:

He had a cash buyer from overseas, interested in a beautiful REO beachfront apartment listed for $550,000 by the bank.  His client put in an offer for $570K.  After a few days the listing agent contacted him to ask him if that was his "highest and best".  This often is agent-speak for "there is more than one person interested in this property".  So his client upped the offer to $590K.  Next day he gets asked again "is this your highest and best?"  This went on for over a week until his client went up to $660K, and then refused to go any higher.  The bidding was then closed, and the next day the apartment was sold to somebody else for $665K.

While it's hard to know exactly what happened in this case, this is his explanation:

The listing agents for an REO only get a small commission for selling the REO (let's say $1,000).  But the buyer's agent gets 3% which in the above case is $19K.

Therefore, the listing agent will do everything possible to find a buyer through one of her own contacts, Ie. through one of her friends or colleagues.  For example, if she knows her colleague has a rich client, and she believes the property is a good deal, she'll phone that agent, and the agent will phone the client, telling them there's a great deal and that he'll have the inside info during the bidding.

Throughout the bidding process the listing agent tells her colleague's client all the highest bids, so that he's assured of winning the bidding if he just offers a few thousand more.

After the deal is sealed, the listing agent gets her 1K, plus a big gift from her colleague's 19K commission, and everyone is happy, except for all the outside bidders who just got cheated.

The reason this problem persists is because even the banks are happy with the system.  Without this cheating, in the above situation the bank would only have made about $570K, but instead they got $665K.

I'm wracking my brains about how to get around this fraud.  I can only think:

A. Try to choose as your agent somebody who works for a huge agency that gets to list a lot of REOs.

B. As soon as you see an REO listing that you want to bid on, try to contact that listing agent yourself (without your agent's knowledge).  That way, she can introduce a colleague of hers to be your agent.

While it's a bit depressing to discover the market is often rigged, it's also refreshing to know that once you fully understand the game, you could become a successful player yourself.

Until such times, I do not think it's a good idea for me to be advising anybody regarding purchasing in Miami.  I'm still just a little fish lost in a big pond. 

Interesting day I'm having.

I just found out that I didn't get my dream waterfront REO.

I hate conspiracy theories, but it seems to me there's more than a 50% chance I've been taken for a ride on this one.

My suspicions have come simply from the fact that the listing agent representing the bank has been absolutely unapproachable from the very beginning, which made me believe that I have been bidding against a buyer of her own finding.

I offered $281K cash last week (Wednesday, I think) and early the next morning my agent gets an e-mail saying we're closing the bidding today.

What I think happened is that the listing agent already had a buyer set up (for maybe 250K, already higher than the 224.9K asking price) but when my offer came in she thought "damn, now my client will have to pay even higher, in cash, so I better close the bidding before we get an even higher offer of 300K plus).

I think what we'll ultimately see is that the home will sell for about 285K.  If so, then I'm 90% sure there was cheating in the bidding.  However, if it sells for 300K or above, then there probably wasn't.

Since, on this first trip, my only goal was to buy a SFH near the sea, and since not a single SFH REO near the sea has come on the market since my dream home on 30 October, I'm getting a little fed up.

Also, my 2 year old son is sick, and I have my suspicions it might be related to my absence (he also got sick 3 months ago when he was separated from his mother during the birth of his baby sister).

Anyway, today I started thinking about going back to China early, so I called the car rental company to let them know I'd be returning the car a week early. 

They told me that it'll cost me about $600 extra to do so!!!!!

Why?  Because I rented for a month, and was quoted a monthly rental rate (only $675).  If I want to return it after only 3 weeks, then I'll be charged a weekly rental rate ($450 per week).

I said, "Can't I just park it in your lot and get on the plane, and you guys just ignore it until the 25th?"

They said, "Sure, but they'll still charge me the extra $600!

Next shocker was trying to find out how to renew my expired US driver's license (probably a long shot, since I got the license back in 1989).  I was put on hold by the relevent department for over 20 minutes, by which time I gave up.  I then tried to make on appointment online, and got told the nearest slot is December 23 (just to make an enquiry)!

Fine.  I'll just do the test again, I thought.  So I phoned up to book the test, and discovered only permanent residents can get a driver's license in the US.

The reason I want a license is because I want to buy a car, and if you don't have a US license you will be charged sky-high insurance, even more than renting a car (or so I've read on the Lonely Planet forums on this topic).

Since I don't want any surprises when I leave, I also thought I'd check up on traffic fines (I haven't had any, but I've noticed there are cameras set up above many traffic lights).  I got told that you don't get your traffic fines until 3 months after you were photographed.  There is no online system (like in China, where the photo of the incident will appear online within 24 hours).  But in the US, they mail the fine to you after 3 months.  What about if you're a foreigner and don't have a US address and have already left?  The fine will be attached to your name, and when next you enter the country it will appear on the computer at immigration (according to the car-rental company). 

As if you don't already have enough to worry about when entering this country as a foreigner!  I still have very un-fond memories of being led away for questioning by US Immigration Cops for not applying online for a visa waiver.

As they say, "When it rains, it pours!"

As if losing my dream home wasn't enough, today my Chinese stocks crashed (the reason I'm heartbroken about my "dream home" is because I'm absolutely sure I could have sold this house within the next 5 years for 1 million dollars, so if I'd got it for $281K, spent 50K to put in a pool and spruce up the garden, and another 50K to renovate, I'd have made $619K for very little effort, and I'd have had an amazing waterfront vacation home to enjoy with my kids for 5 years).

But back to my stocks.

I own a lot of Shanghai B shares at present.  I've made no property purchases (except the apartment on Hainan Island where I currently live) in the past 2 years, so I've been gambling my money on the Chinese stock market.

I've made good returns until now, but last night (while I was asleep) panic hit the Chinese market (due mainly to the shocking inflation figure that just got released: over 4%).  So today I woke up $24K poorer.  Just what I needed.

I guess the only good thing about not getting my dream house is I don't need to sell any of these stocks at present (I was short of $50K, which I was going to raise by selling some of my stocks).

Since this is an investing forum, I thought I'd share some of my experience in the field of stock markets.

Here's how I do my investing (despite losing so much in the past 24 hours, I've actually turned into quite a good stock investor over the past few years, having had an horrendous lesson back in 2000/2001 when I lost ALL MY MONEY!):

I avidly read any financial news I can get my hands on, and try to get a broad understanding of global markets (even though I've only invested in the Taiwanese and Chinese markets over the past decade).  Since financial markets are so interconnected, you have to have a feel for world sentiment before taking any serious bets.

I also believe in group behaviour, and have incorporated it into my few simple stock-investing rules:

1. Don't buy too soon after the market has crashed (my mistake in 2000).  Ie. don't get caught by the Dead Cat Bounce, or Don't Try To Catch A Falling Knife

2. Buy when everyone is depressed.  Don't let this negative sentiment affect your logic.

3. Don't try to pick winners (this applies to me since I'm not a professional investor, and have no inside scoops on specific companies).  Just spread your money (and your risk) around.  For example, I bought $5K of every stock listed on the Shanghai B-share bourse, since there's no transparency in China, so there's no point trying to be smart.

4. When markets are rising, go with the flow.  The Trend Is Your Friend.  Herd Behaviour can make you a lot of money.

5. Get out when the market has surpassed all previous highs (and has surpassed your expectations for capital gains).  If your servants are putting their money into stocks, that's a sell signal.

Here's a graph of Shanghai B-shares:
http://www.bloomberg.com/apps/quote?ticker=SHBSHR:IND

Notice how it rocketed up about 40% since June this year, then crashed 6% yesterday (boo hoo).

What's going to happen next?  Ah, the million dollar question.  I have no idea, but am almost certain that some time within the next year it'll pass it's previous all-time high of 390.