Here are broad points that you should know about:
1. To find out whether you qualify for the bailout, check your financial statements and do the math. Under the current proposal, you'll only qualify if your monthly payments are at least 38% of your income. Some people may have an incentive to quit their jobs, or at least dump their second job, to hit this threshold, because this bailout can be valuable.
Taxpayers and your mortgage lender will share the costs of lowering your payments to 31% of your income. That may mean interest rates as low as 2%. Or you may get the principal reduced. And if you pay your mortgage on time, the taxpayers will pay off as much as $1,000 of your loan each year for five years. For someone on $50,000 a year, this could be worth $4,500 a year, tax free. Those whose mortgage payments are less than 38% of their income get no help.
2. If you are a responsible homeowner but are locked out of the refi market because the housing collapse wiped out your equity, you may benefit from the new refi assistance. The government will help you refinance your mortgage if you owe between 80% and 105% of your home's value. Zillow, the real estate information company, estimates that 14.8 million homeowners may qualify. The problems? Only those with mortgages owned by Fannie Mae or Freddie Mac get cut in. And the proposal excludes many homeowners in the worst-hit areas, like Florida, Nevada, Arizona and California, where homes prices have plummeted far below the level of many mortgages. Nationally, Zillow estimates 14.1 million homes are actually worth too little, in relation to their mortgages, to qualify.
3. Anyone who hopes to qualify for either program should start gathering their paperwork now. You'll need proof of current income and assets, and those seeking refinancing help should get a handle on their home's current value. But Josh Denney of the Mortgage Bankers' Association says you should wait until March 4 before contacting your mortgage lender or servicer. That's when more details on the plan are due.
4. Many renters have been kicked out of their homes because deadbeat landlords walked away from their loans, leaving the banks to foreclose. If you're in that boat, good news: The administration is about to offer $1.5 billion in relocation and other forms of assistance. Yet again, more details will be revealed in March.
5. Middle class taxpayers should take a look at one $8,000 freebie. Anyone who hasn't owned a home for at least three years is entitled to a helpful tax credit, for up to 10% of the cost, up to $8,000, if they buy a home this year. That won't go far in NYC, but it will in the cheaper parts of the country. (Oklahoma ho!) You might also take a look at burst bubble territories, from Florida to Arizona. There's a lot of very cheap property around. It's a refundable credit – so if you don't pay $8,000 in taxes, or indeed any taxes at all, you get the rest as a check. Those with higher incomes are out of luck – the credit phases out above a modified adjusted gross income of $75,000, or twice that if you file jointly.
6. Living in an expensive home in San Francisco or New York and missing out on the refi boom? Good news. The government just raised the "conforming loan" limits to $729,750 from $625,500, so those with more expensive properties can get in. Good deal. There are 30-year conforming loans out there for about 5% or so.
7. This is a good time to get some double glazing, insulation, and other energy-efficient home improvements. The stimulus package gives a tax credit of up to $1,500, covering 30% of the costs.
8. And if grandma is looking for a reverse mortgage, the limits for reverse mortgages backed by the Federal Housing Administration have been raised to $625,000 from $417,000. The financial crisis has left the FHA as the main player in the market of reverse mortgages, which allow older homeowners to tap the equity in their home for living expenses.
by Brett Arends at brett.arends@wsj.com
Friday, April 24, 2009
Thursday, February 19, 2009
Realtors® Support Aid to Troubled Homeowners
WASHINGTON (February 18, 2009) – Preventing foreclosures is critical for the nation’s economic recovery, and the National Association of Realtors® commends the Obama administration’s plan to help millions of homeowners who are at risk of losing their homes. “When people lose homes to foreclosure, our communities, the housing market and our economy all suffer,” said NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “The administration’s proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values and move the country closer to an economic recovery.”
President Obama’s $75 billion Homeowner Affordability and Stability Plan would help struggling homeowners by providing incentives to lenders, servicers, mortgage holders and borrowers to help modify mortgage loans. The U.S. Treasury Department will be issuing uniform guidelines in two weeks. Consistent with NAR’s recommendations, financial institutions receiving assistance must agree to follow the guidelines. Under another element of the program, Fannie Mae and Freddie Mac will help make monthly payments more affordable for 4 to 5 million homeowners by refinancing mortgages with loans that these entities own or guarantee. Finally, the plan provides more support for Fannie Mae and Freddie Mac, which will in turn help keep mortgage rates low for all buyers and could lead to even lower rates.
NAR called for improved foreclosure mitigation as part of its overall housing recovery plan in late 2008 and welcomes this initiative. The association supports the administration’s goals to reduce mortgage payments for millions of Americans, avoiding financial crises for families and communities. “Realtors® build communities, and in today’s challenging environment, helping neighbors in need is what we all need to do. A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth and stability, and we are eager to see these measures implemented,” said McMillan. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Tuesday, January 6, 2009
It May Be Time to Think About Buying a House
Don't Miss a Golden Age for First-Time Buyers
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.
Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.
Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.
If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.
But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.
As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.
This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.
Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.
When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.
Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.
You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.
John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.
While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”
For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.
Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.
“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
By Ron Lieber for the New York Times
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.
Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.
Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.
If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.
But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.
As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.
This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.
Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.
When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.
Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.
You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.
John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.
While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”
For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.
Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.
“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
By Ron Lieber for the New York Times
2009 Could Be Better Than You Think!
Why focus on the negative? Here are five good reasons why 2009 could, if you make the most of it, be good for your financial health.
1 This will be a good year to invest in stocks.
No one can tell you exactly when or where the market will bottom. But most business-cycle experts agree that the bottom will be found sometime this year, and that it probably won't be too far below where the market is today.
So a smart strategy will be to put some money in the market today, and keep doing it over the course of the year. If you're still shaken over massive losses from last year, this may be hard advice to swallow. But the biggest mistake you can make as an investor is to ride the market down, lose faith, pull out and miss the upturn.
Even in the Great Depression, the market bottomed out in 1932, with the Dow Jones Industrial Average at 41, down from a peak of 381 in 1929. By 1937, it had climbed back to a respectable 194. That didn't make investors whole. But for those who stayed in, it certainly soothed the wounds.
2 It will be a good year to invest in real estate.
This one's a bit trickier, since real-estate prices are "sticky" on the downside. Homeowners don't like to admit that the value of their pride and joy has fallen by 30%. So they'll put their house on the market at an inflated price and hope some fool will bite.
I was at a Vermont ski resort last month and noticed this oddity: Brand-new condominiums were selling at a price considerably below those of second-hand condos of roughly equal size and location. The reason? I assume it's because the resort owners have a better sense of the market's real value than the average person, still desperate to recoup a bad investment.
But here's the thing: Fixed-rate mortgages are already at historic lows, and the government is going to use every tool in its bag to get them lower over the course of the year. So if you find a piece of property you want, if the seller is willing to recognize how far the market has truly fallen, and if you have good credit -- three big ifs -- you can benefit from a once-in-a-lifetime double bonus of low prices and low interest rates.
This strategy requires some patience. Just as real-estate prices don't fall as precipitously as the stock market, they don't rise as rapidly, either. You may have to wait a decade to reap the full benefits.
3 Americans will learn to live within their means.
Around our house, the crisis is already having a salutary effect. Our teenagers suddenly seem to understand that unlimited dinners out with friends aren't a birthright, and that blue jeans don't have to carry triple-digit price tags.
Multiply that by 300 million, and you have a nation that has rediscovered that you can't spend what you don't earn. Houses are no longer ATMs, and credit cards no longer come with each day's mail.
That sudden realization, of course, is what's causing the economy to swoon. But this reckoning was inevitable, so it's best to get on with it. Let's hope these lessons last for decades.
4 President Obama will have a historic opportunity to reshape public policy.
Speaking at the Wall Street Journal's CEO conference in November, Mr. Obama's chief-of-staff-designate, Rahm Emanuel, said the words that have become his team's rallying cry for 2009: "You never want a serious crisis to go to waste. This crisis provides the opportunity for us to do things that you could not do before."
The Obama team is busily preparing a stimulus package that, when all is said and done, will total between $750 billion and $1 trillion -- far larger than any fiscal stimulus in the history of the world. And with the economy still sliding downward, it's a good bet few politicians will want to stand in the way.
That will give the new president an opportunity to do things his predecessors could only dream about. Roads will be rebuilt, schools will be refurbished, medical records will be computerized, and windmills will be constructed, all across the land.
Will some of that money be wasted? Of course. But the sums involved are so huge that there's a good chance someone, somewhere, will benefit.
5 Your (federal) taxes won't rise.
Never mind those campaign calls for higher taxes on the wealthiest Americans. Truth is, no politician is going to push for general tax increases in the midst of a severe recession.
You may wonder: How is the government going to pay for that trillion-dollar stimulus package? Or the multitrillion-dollar bailout of financial institutions, auto companies and anyone else sideswiped by the current crisis? Or the continued wars in Iraq and Afghanistan? Or the (still) rapidly rising cost of the baby boomers' retirement?
Well, that's the sweet secret of the current crisis. While the American people are learning to live within their means, the new American government has discovered an unlimited (for now) line of credit. The United States may have led the world into this crisis, but the world now seems more than willing to lend us unlimited amounts of money to lead the way out.
ENJOY THE NEW YEAR!
Taken from Alan Murray's Post in the Wall Street Journal online
1 This will be a good year to invest in stocks.
No one can tell you exactly when or where the market will bottom. But most business-cycle experts agree that the bottom will be found sometime this year, and that it probably won't be too far below where the market is today.
So a smart strategy will be to put some money in the market today, and keep doing it over the course of the year. If you're still shaken over massive losses from last year, this may be hard advice to swallow. But the biggest mistake you can make as an investor is to ride the market down, lose faith, pull out and miss the upturn.
Even in the Great Depression, the market bottomed out in 1932, with the Dow Jones Industrial Average at 41, down from a peak of 381 in 1929. By 1937, it had climbed back to a respectable 194. That didn't make investors whole. But for those who stayed in, it certainly soothed the wounds.
2 It will be a good year to invest in real estate.
This one's a bit trickier, since real-estate prices are "sticky" on the downside. Homeowners don't like to admit that the value of their pride and joy has fallen by 30%. So they'll put their house on the market at an inflated price and hope some fool will bite.
I was at a Vermont ski resort last month and noticed this oddity: Brand-new condominiums were selling at a price considerably below those of second-hand condos of roughly equal size and location. The reason? I assume it's because the resort owners have a better sense of the market's real value than the average person, still desperate to recoup a bad investment.
But here's the thing: Fixed-rate mortgages are already at historic lows, and the government is going to use every tool in its bag to get them lower over the course of the year. So if you find a piece of property you want, if the seller is willing to recognize how far the market has truly fallen, and if you have good credit -- three big ifs -- you can benefit from a once-in-a-lifetime double bonus of low prices and low interest rates.
This strategy requires some patience. Just as real-estate prices don't fall as precipitously as the stock market, they don't rise as rapidly, either. You may have to wait a decade to reap the full benefits.
3 Americans will learn to live within their means.
Around our house, the crisis is already having a salutary effect. Our teenagers suddenly seem to understand that unlimited dinners out with friends aren't a birthright, and that blue jeans don't have to carry triple-digit price tags.
Multiply that by 300 million, and you have a nation that has rediscovered that you can't spend what you don't earn. Houses are no longer ATMs, and credit cards no longer come with each day's mail.
That sudden realization, of course, is what's causing the economy to swoon. But this reckoning was inevitable, so it's best to get on with it. Let's hope these lessons last for decades.
4 President Obama will have a historic opportunity to reshape public policy.
Speaking at the Wall Street Journal's CEO conference in November, Mr. Obama's chief-of-staff-designate, Rahm Emanuel, said the words that have become his team's rallying cry for 2009: "You never want a serious crisis to go to waste. This crisis provides the opportunity for us to do things that you could not do before."
The Obama team is busily preparing a stimulus package that, when all is said and done, will total between $750 billion and $1 trillion -- far larger than any fiscal stimulus in the history of the world. And with the economy still sliding downward, it's a good bet few politicians will want to stand in the way.
That will give the new president an opportunity to do things his predecessors could only dream about. Roads will be rebuilt, schools will be refurbished, medical records will be computerized, and windmills will be constructed, all across the land.
Will some of that money be wasted? Of course. But the sums involved are so huge that there's a good chance someone, somewhere, will benefit.
5 Your (federal) taxes won't rise.
Never mind those campaign calls for higher taxes on the wealthiest Americans. Truth is, no politician is going to push for general tax increases in the midst of a severe recession.
You may wonder: How is the government going to pay for that trillion-dollar stimulus package? Or the multitrillion-dollar bailout of financial institutions, auto companies and anyone else sideswiped by the current crisis? Or the continued wars in Iraq and Afghanistan? Or the (still) rapidly rising cost of the baby boomers' retirement?
Well, that's the sweet secret of the current crisis. While the American people are learning to live within their means, the new American government has discovered an unlimited (for now) line of credit. The United States may have led the world into this crisis, but the world now seems more than willing to lend us unlimited amounts of money to lead the way out.
ENJOY THE NEW YEAR!
Taken from Alan Murray's Post in the Wall Street Journal online
Positive Real Estate Changes in the Air
Legislation Aims to Shore Up Housing Industry
There’s no question that news in the real estate industry has taken on a negative tone in recent years, with the collapse of the sub-prime market and the resulting foreclosures, not to mention the continuing decline in home values — especially in Michigan, where the foreclosure crisis is coupled with job loss and the economy continues to flail.
The good news is federal, state and local officials have been working toward implementing a number of reforms to help stimulate both the housing market and the economy.
“There’s a rule of thumb that approximately 30 percent of the value of the purchase of a home, let’s say the home was purchased for $100,000, 30 percent over and above the purchase price is going to go into the economy, and that starts with the transaction itself,” said Nanci J. Rands, a Realtor with SKBK Sotheby’s and director of the Michigan Association of Realtors (MAR). “Money goes to pay the commissions, title insurance … movers, painters … the purchase of furniture — the list goes on and on and on. The purchase of the house is just the beginning — it begins the whole process … and has a good effect on the economy.”
The FHA has already implemented a number of improvements, including increasing loan amounts and offering more programs for first-time and low-income buyers; and banks and mortgage brokers have reverted back to traditional mortgages, tightening the reins on the types of loans offered and the amount needed for a down payment, and increasing credit score and income verification requirements.
“A lot of fly-by-night appraisers and brokers have already closed up shop,” said Kim Miller of Landmark Appraising, regarding the effect of more stringent lending standards.
“The sooner we eliminate risky lending due to fraud, the foreclosures will slow down. Although I don’t know what percentage of foreclosures are fraud related, one less foreclosure is good for this market. With the spring market under way, I see positive things in the future for our market,” said Mason Miller, assistant vice president of sales at Flagstar Bank, of the need to better regulate the housing industry.
While that’s a start, more needs to be done; however, there may be a light at the end of the tunnel, as new legislation to help shore up Michigan’s housing market and stave off fraud continues to be implemented, and industry professionals remain positive that the changes will be for the good — eventually.
“I think some of it will help,” said Rands of the legislative measures being taken. “I think we’re starting to see glimmers of light. My overall opinion is Michigan is coming out, has begun to see improvement. It’s not over, though — but it’s looking more encouraging.”
In response to the whole sub-prime fiasco, local and state officials, as well as MAR and other real estate professionals, have already taken measures to improve matters, including the April 8 passage of the Principal Residence Exemption, Public Act 96, which will give homeowners who had to move and can’t sell their old house a tax break in that they can claim two principal residences as long as they meet certain requirements: The home must be on the market; it can’t be leased or used for commercial purposes; it must be for sale; and the homeowner must reside in Michigan.
“It’s meant to support the Michigan market — if they have a house here and moved out of state, then they’re not contributing to Michigan’s economy. It’s definitely made to be an incentive for people who choose to remain in the state,” said Rands.
New legislation to help clean up Michigan’s mortgage loan industry was also recently passed. The legislation, which was signed into effect April 3 as part of a 13-bill package — Senate bills 826-833 and House bills 5287-5291 — by Gov. Jennifer Granholm, is meant to protect consumers from real estate fraud and unfair lending practices by giving the Office of Financial and Insurance Service (OFIS) more authority to track mortgage loan officers.
“I believe this act is intended to clean our industry of unethical loan officers. This alone should help consumers regain their confidence in the mortgage market. … This is good and will also help our industry — an educated consumer forces loan officers to step up to the plate and do the right thing or get out of business,” said Miller.
The 13-bill package also stipulates mandatory background checks, strengthens licensing and education requirements for mortgage loan officers, and implements changes as to how appraisals are done to help stave off fraud.
“Many homeowners were appraised too high, and now they’re upside-down and can’t refinance, and they can’t pay their mortgage. … Certain appraisers would cave into lenders and increase a home’s value. This will make it so that appraisers have no direct contact with loan officers, which is good — a little late, but good,” said Miller, adding that homeowners should definitely look into having their homes re-appraised so that the state equalized value, or taxable value, of their home reflects the current market.
“Typically with property tax reviews, 50 percent are approved for reductions and 50 percent are told no; however, they can appeal to the tax tribunal. A tax tribunal may sound ominous, but it’s just a judge, an appraiser and you, and the judge only looks at the facts, unlike a city, which is looking to keep its tax base. … There’s been very good success with the tax tribunal,” said Miller, adding that recent amendments to the Tax Tribunal Act of 1973 should also help.
For more specific information on these acts, and more, visit www.legislature.mi.gov and click on the Public Acts (Signed Bills) link, or call the State Law Library at (517) 373-0630 with questions regarding legal matters.
By Christa BuchananC & G Staff Writer
There’s no question that news in the real estate industry has taken on a negative tone in recent years, with the collapse of the sub-prime market and the resulting foreclosures, not to mention the continuing decline in home values — especially in Michigan, where the foreclosure crisis is coupled with job loss and the economy continues to flail.
The good news is federal, state and local officials have been working toward implementing a number of reforms to help stimulate both the housing market and the economy.
“There’s a rule of thumb that approximately 30 percent of the value of the purchase of a home, let’s say the home was purchased for $100,000, 30 percent over and above the purchase price is going to go into the economy, and that starts with the transaction itself,” said Nanci J. Rands, a Realtor with SKBK Sotheby’s and director of the Michigan Association of Realtors (MAR). “Money goes to pay the commissions, title insurance … movers, painters … the purchase of furniture — the list goes on and on and on. The purchase of the house is just the beginning — it begins the whole process … and has a good effect on the economy.”
The FHA has already implemented a number of improvements, including increasing loan amounts and offering more programs for first-time and low-income buyers; and banks and mortgage brokers have reverted back to traditional mortgages, tightening the reins on the types of loans offered and the amount needed for a down payment, and increasing credit score and income verification requirements.
“A lot of fly-by-night appraisers and brokers have already closed up shop,” said Kim Miller of Landmark Appraising, regarding the effect of more stringent lending standards.
“The sooner we eliminate risky lending due to fraud, the foreclosures will slow down. Although I don’t know what percentage of foreclosures are fraud related, one less foreclosure is good for this market. With the spring market under way, I see positive things in the future for our market,” said Mason Miller, assistant vice president of sales at Flagstar Bank, of the need to better regulate the housing industry.
While that’s a start, more needs to be done; however, there may be a light at the end of the tunnel, as new legislation to help shore up Michigan’s housing market and stave off fraud continues to be implemented, and industry professionals remain positive that the changes will be for the good — eventually.
“I think some of it will help,” said Rands of the legislative measures being taken. “I think we’re starting to see glimmers of light. My overall opinion is Michigan is coming out, has begun to see improvement. It’s not over, though — but it’s looking more encouraging.”
In response to the whole sub-prime fiasco, local and state officials, as well as MAR and other real estate professionals, have already taken measures to improve matters, including the April 8 passage of the Principal Residence Exemption, Public Act 96, which will give homeowners who had to move and can’t sell their old house a tax break in that they can claim two principal residences as long as they meet certain requirements: The home must be on the market; it can’t be leased or used for commercial purposes; it must be for sale; and the homeowner must reside in Michigan.
“It’s meant to support the Michigan market — if they have a house here and moved out of state, then they’re not contributing to Michigan’s economy. It’s definitely made to be an incentive for people who choose to remain in the state,” said Rands.
New legislation to help clean up Michigan’s mortgage loan industry was also recently passed. The legislation, which was signed into effect April 3 as part of a 13-bill package — Senate bills 826-833 and House bills 5287-5291 — by Gov. Jennifer Granholm, is meant to protect consumers from real estate fraud and unfair lending practices by giving the Office of Financial and Insurance Service (OFIS) more authority to track mortgage loan officers.
“I believe this act is intended to clean our industry of unethical loan officers. This alone should help consumers regain their confidence in the mortgage market. … This is good and will also help our industry — an educated consumer forces loan officers to step up to the plate and do the right thing or get out of business,” said Miller.
The 13-bill package also stipulates mandatory background checks, strengthens licensing and education requirements for mortgage loan officers, and implements changes as to how appraisals are done to help stave off fraud.
“Many homeowners were appraised too high, and now they’re upside-down and can’t refinance, and they can’t pay their mortgage. … Certain appraisers would cave into lenders and increase a home’s value. This will make it so that appraisers have no direct contact with loan officers, which is good — a little late, but good,” said Miller, adding that homeowners should definitely look into having their homes re-appraised so that the state equalized value, or taxable value, of their home reflects the current market.
“Typically with property tax reviews, 50 percent are approved for reductions and 50 percent are told no; however, they can appeal to the tax tribunal. A tax tribunal may sound ominous, but it’s just a judge, an appraiser and you, and the judge only looks at the facts, unlike a city, which is looking to keep its tax base. … There’s been very good success with the tax tribunal,” said Miller, adding that recent amendments to the Tax Tribunal Act of 1973 should also help.
For more specific information on these acts, and more, visit www.legislature.mi.gov and click on the Public Acts (Signed Bills) link, or call the State Law Library at (517) 373-0630 with questions regarding legal matters.
By Christa BuchananC & G Staff Writer
Tuesday, June 24, 2008
Housing Bubbles Collapse Inward
Housing Bubbles Collapse Inward
By David Stiff, Chief Economist, Fiserv Lending Solutions
Like housing demand, new home construction was also pushed outward in metro areas that experienced large price bubbles. As land prices soared, developers moved their projects to the urban fringe to keep their costs down. Furthermore, developers faced less regulation in these outlying, less densely-settled communities, where residential projects were welcomed by local governments looking to increase their tax bases.
Real estate speculators also boosted housing demand in fringe areas. Within bubble markets, most speculators purchased less expensive homes, based on the idea that first-time homebuyers would provide most of the demand for “flipped” properties. Speculative demand was also pushed outward because investors, although they only expected to hold their properties for a few months, needed to reduce their mortgage costs. For developers, speculators were a new source of demand for their product, so as the bubbles continued to expand, developments in outlying suburbs became even more profitable.
The trends that pushed housing demand toward distant suburbs and rural areas were not sustainable. Although housing in outlying areas was relatively less expensive, a few years of double-digit appreciation quickly made these homes unaffordable for most households, especially after the sub-prime mortgage crisis (which started in August 2007) shut down non-conventional lending. Speculators could only profit from flipping when prices were rapidly increasing. When prices stalled and started to fall in 2006, investor demand for residential properties evaporated, and many speculators left holding unsold properties were forced into foreclosure.
There is also some evidence that household preferences for larger homes may be shifting. In part, this is simply because of sharp increases in commuting costs. During the early years of the housing bubble (2003-2004), the average price of gasoline was US$ 1.70/gallon. Since then, gasoline prices have more than doubled (US$ 3.65/gallon in May 2008), which means that the out-of-pocket costs of commuting for auto drivers have increased by more than 100%. Higher energy prices have also increased heating and cooling expenses, making the monthly costs of owning larger homes jump relative to those for smaller homes.
Because of the reversal in trends that boosted demand for housing in outlying suburbs, since they peaked in 2005 and 2006, home prices have generally fallen more in towns and neighborhoods located farther away from urban centers. Figure 1 shows the change in single-family home prices from their peak until the second half of 2007 in 215 towns and neighborhoods in the Boston and Worcester, MA metro areas.* From its peak in September 2005 through the second half of 2007, the S&P/Case-Shiller index for the Boston metro area dropped by 7.3%. But within the metro area, the price declines have not been uniform – they have been more severe in towns and neighborhoods farther away from Boston’s Financial District (which has the largest concentration of workplaces in the metro area).
In Figure 2, a similar map for the Los Angeles and Oxnard, CA metro areas is displayed for 330 zip codes. Between September 2006 and the second half of 2007, single-family home prices in the Los Angeles metro area dropped by 8.9%, according to the S&P/Case-Shiller index. But, as in Boston, the decline in home prices from their peak has had a very distinct geographic pattern. In Los Angeles, this pattern is more complex because instead of having a single “downtown”, the metro area has more than one large concentration of workplaces.† Home prices have fallen less in neighborhoods near Los Angeles’ two largest employment centers – West Los Angeles and Downtown. Surprisingly, some of the region’s largest home price declines are clustered around another large employment center in Irvine/Orange. But, these two cities are at the epicenter of the sub-prime lending crisis. Irvine/Orange has an extreme concentration of mortgage lending companies, including a few sub-prime lenders that have declared bankruptcy (e.g., New Century Financial) and/or have laid-off many employees.
During market downturns, home prices fall the least in the most desirable areas of a metropolitan region. As housing affordability improves, home buyers who were previously priced out of their preferred towns and neighborhoods will be able purchase properties in these areas. So, even as overall sales volume drops, relatively stronger demand for housing will limit price declines in neighborhoods with shorter work commutes, better schools, and easier access to parks, recreation, and retail centers. Because of sharp increases in gasoline prices, living closer to work has become an even more important consideration in the location decisions of homebuyers. When combined with large inventories of unsold housing on the edges of urban areas, this shift in preferences will mean that prices for homes in outlying neighborhoods will continue their more rapid decline and will be slower to rebound when housing markets finally start to recover.
* These price changes are computed using single-family Case-Shiller indices for individual zip codes. Fiserv Lending Solutions calculates aggregate Case-Shiller indices for more than 3,500 zip codes and price-tier indices for more than 600 of these zip codes.
† Giuliano, G., C. Redfearn, A. Agarwal, C. Li, and D. Zhuang (2005) “Not All Sprawl: Evolution of Employment Concentrations in Los Angeles, 1980-2000”, paper presented at the European Regional Science Association Conference
David Stiff is Chief Economist, Fiserv Lending Solutions, and works in collaboration with Standard & Poor's on the methodology and maintenance of the S&P/Case-Shiller Home Price Indices. .
Figure 1 Changes in Case-Shiller Zip Code Indices from Peak to Second Half of 2007
Boston-Quincy-Cambridge Metro Area Worcester Metro Area
Figure 2 Changes in Case-Shiller Zip Code Indices from Peak to Second Half of 2007
Los Angeles-Long Beach-Santa Ana Metro Area Oxnard-Thousand Oaks-Ventura Metro Area
By David Stiff, Chief Economist, Fiserv Lending Solutions
During the housing bubble, as home prices appreciated at record rates in many metro areas, housing market activity was pushed outward to distant suburbs and ex-urban areas. Many homebuyers, who could no longer afford to purchase homes close to urban centers, were forced to “drive until you qualify” – trading longer commutes for lower mortgage payments. Others, who could afford smaller homes on smaller lots nearer to downtown neighborhoods, chose to buy larger, more luxurious properties in outlying suburbs, making longer work trips so that they could consume more housing.
Like housing demand, new home construction was also pushed outward in metro areas that experienced large price bubbles. As land prices soared, developers moved their projects to the urban fringe to keep their costs down. Furthermore, developers faced less regulation in these outlying, less densely-settled communities, where residential projects were welcomed by local governments looking to increase their tax bases.
Real estate speculators also boosted housing demand in fringe areas. Within bubble markets, most speculators purchased less expensive homes, based on the idea that first-time homebuyers would provide most of the demand for “flipped” properties. Speculative demand was also pushed outward because investors, although they only expected to hold their properties for a few months, needed to reduce their mortgage costs. For developers, speculators were a new source of demand for their product, so as the bubbles continued to expand, developments in outlying suburbs became even more profitable.
The trends that pushed housing demand toward distant suburbs and rural areas were not sustainable. Although housing in outlying areas was relatively less expensive, a few years of double-digit appreciation quickly made these homes unaffordable for most households, especially after the sub-prime mortgage crisis (which started in August 2007) shut down non-conventional lending. Speculators could only profit from flipping when prices were rapidly increasing. When prices stalled and started to fall in 2006, investor demand for residential properties evaporated, and many speculators left holding unsold properties were forced into foreclosure.
There is also some evidence that household preferences for larger homes may be shifting. In part, this is simply because of sharp increases in commuting costs. During the early years of the housing bubble (2003-2004), the average price of gasoline was US$ 1.70/gallon. Since then, gasoline prices have more than doubled (US$ 3.65/gallon in May 2008), which means that the out-of-pocket costs of commuting for auto drivers have increased by more than 100%. Higher energy prices have also increased heating and cooling expenses, making the monthly costs of owning larger homes jump relative to those for smaller homes.
Because of the reversal in trends that boosted demand for housing in outlying suburbs, since they peaked in 2005 and 2006, home prices have generally fallen more in towns and neighborhoods located farther away from urban centers. Figure 1 shows the change in single-family home prices from their peak until the second half of 2007 in 215 towns and neighborhoods in the Boston and Worcester, MA metro areas.* From its peak in September 2005 through the second half of 2007, the S&P/Case-Shiller index for the Boston metro area dropped by 7.3%. But within the metro area, the price declines have not been uniform – they have been more severe in towns and neighborhoods farther away from Boston’s Financial District (which has the largest concentration of workplaces in the metro area).
In Figure 2, a similar map for the Los Angeles and Oxnard, CA metro areas is displayed for 330 zip codes. Between September 2006 and the second half of 2007, single-family home prices in the Los Angeles metro area dropped by 8.9%, according to the S&P/Case-Shiller index. But, as in Boston, the decline in home prices from their peak has had a very distinct geographic pattern. In Los Angeles, this pattern is more complex because instead of having a single “downtown”, the metro area has more than one large concentration of workplaces.† Home prices have fallen less in neighborhoods near Los Angeles’ two largest employment centers – West Los Angeles and Downtown. Surprisingly, some of the region’s largest home price declines are clustered around another large employment center in Irvine/Orange. But, these two cities are at the epicenter of the sub-prime lending crisis. Irvine/Orange has an extreme concentration of mortgage lending companies, including a few sub-prime lenders that have declared bankruptcy (e.g., New Century Financial) and/or have laid-off many employees.
During market downturns, home prices fall the least in the most desirable areas of a metropolitan region. As housing affordability improves, home buyers who were previously priced out of their preferred towns and neighborhoods will be able purchase properties in these areas. So, even as overall sales volume drops, relatively stronger demand for housing will limit price declines in neighborhoods with shorter work commutes, better schools, and easier access to parks, recreation, and retail centers. Because of sharp increases in gasoline prices, living closer to work has become an even more important consideration in the location decisions of homebuyers. When combined with large inventories of unsold housing on the edges of urban areas, this shift in preferences will mean that prices for homes in outlying neighborhoods will continue their more rapid decline and will be slower to rebound when housing markets finally start to recover.
* These price changes are computed using single-family Case-Shiller indices for individual zip codes. Fiserv Lending Solutions calculates aggregate Case-Shiller indices for more than 3,500 zip codes and price-tier indices for more than 600 of these zip codes.
† Giuliano, G., C. Redfearn, A. Agarwal, C. Li, and D. Zhuang (2005) “Not All Sprawl: Evolution of Employment Concentrations in Los Angeles, 1980-2000”, paper presented at the European Regional Science Association Conference
David Stiff is Chief Economist, Fiserv Lending Solutions, and works in collaboration with Standard & Poor's on the methodology and maintenance of the S&P/Case-Shiller Home Price Indices. .
Figure 1 Changes in Case-Shiller Zip Code Indices from Peak to Second Half of 2007
Boston-Quincy-Cambridge Metro Area Worcester Metro Area
Figure 2 Changes in Case-Shiller Zip Code Indices from Peak to Second Half of 2007
Los Angeles-Long Beach-Santa Ana Metro Area Oxnard-Thousand Oaks-Ventura Metro Area
Thursday, May 8, 2008
Pre-Listing Inspections
Pre-Listing Inspections
A home inspection is supposed to give you peace of mind, but often has the opposite effect. You will be asked to absorb a lot of information in a short time. This often includes a written report, checklist, photographs, environmental reports and what the inspector himself says during the inspection. All this combined with the agent’s inspections and what the sellers have notice themselves makes the experience even more overwhelming. Ordering a home inspection BEFORE you list a homes for sale is a great idea for people who are interested in getting to a closing quickly and with fewer surprises.
Save Time and Money
As a seller, you must provide a Seller’s Disclosure tat indicates all known defects in a property. In this situation, however, what you don’t know can hurt you!
The property inspector is usually hired by the Buyer and arrives at your property after a contract is negotiated to inspect and list any defects, questionable areas, upgrade suggestions and maintenance.
When significant problems are found by the Property Inspector the buyer may:
Terminate the contract
Or ask for amounts to have the problem fixed
Or be so alarmed by the defect found, will terminate the contract without giving you the chance to fix it.
In any of these situations, your property is back on the market and the problem is still there for the next buyer to find.
A Seller’s inspection will virtually eliminate all the hassles and blown deals inspections cause when the Buyer brings their inspector. It gives the leverage back to the Seller.
Most Sellers are honest and are often surprised to learn of defects uncovered during an inspection. Realize that sellers are under no obligation to repair everything mentioned in the report. No property is perfect – so keep things in perspective. Do not kill your deal over things that do not matter. It is inappropriate to demand that a seller address deferred maintenance, conditions that already listed on the seller’s disclosure or nit-picky items.
What About Repairs?
The ideal use of a pre0inspection by a home seller is to determine what repairs are needed in the property and make them.
Sellers with properties found in need of repairs should make the repairs and provide the listing inspection report to buyers along with documentation (warranties on the work receipts) that the repairs have been made. This generates enormous good faith between buyers and sellers and increases the likelihood of a quick and amicable sale. The bottom line is by eliminating the issues that buyers may want to negotiate with results in a win-win for both buyers and sellers.
On the other hand, if your home is not in stellar shape, the benefits to having your property pre-inspected is that the problems can be taken into consideration when pricing the property or during original listing negotiations with a prospective buyer.
This can minimize, if not eliminate, re-negotiations which often fuel emotions and turn off buyers. Historically, buyers will want to negotiate two dollars for every dollar of reported deficiencies. Just think of having to drop your listing price by the amounts equal to twice as much as the cost of all the repairs needed in your home! It can really add up.
By having a professional property inspection document the repairs needed in your property, you can take control of the situation. You can present the inspection report to your buyers and let them know that all these repairs needed are reflected in the listing price. The buyer then has the opportunity to decide whether they would like to move forward and accept the offer.
Sellers typically bare the majority of the liability when it comes to real estate disclosures. It is important to express that properties, whether they are homes, condos, town homes or commercial, are much to complex to assess visually – especially by non-experts. The fractional cost of a property inspection will pay ten fold in peace of mind and security from future litigation. You would not buy a property without getting an inspection; do not list one without getting one either. For more information on property inspections visit: www.AGPIC.com – and click “educate”.
A home inspection is supposed to give you peace of mind, but often has the opposite effect. You will be asked to absorb a lot of information in a short time. This often includes a written report, checklist, photographs, environmental reports and what the inspector himself says during the inspection. All this combined with the agent’s inspections and what the sellers have notice themselves makes the experience even more overwhelming. Ordering a home inspection BEFORE you list a homes for sale is a great idea for people who are interested in getting to a closing quickly and with fewer surprises.
Save Time and Money
As a seller, you must provide a Seller’s Disclosure tat indicates all known defects in a property. In this situation, however, what you don’t know can hurt you!
The property inspector is usually hired by the Buyer and arrives at your property after a contract is negotiated to inspect and list any defects, questionable areas, upgrade suggestions and maintenance.
When significant problems are found by the Property Inspector the buyer may:
Terminate the contract
Or ask for amounts to have the problem fixed
Or be so alarmed by the defect found, will terminate the contract without giving you the chance to fix it.
In any of these situations, your property is back on the market and the problem is still there for the next buyer to find.
A Seller’s inspection will virtually eliminate all the hassles and blown deals inspections cause when the Buyer brings their inspector. It gives the leverage back to the Seller.
Most Sellers are honest and are often surprised to learn of defects uncovered during an inspection. Realize that sellers are under no obligation to repair everything mentioned in the report. No property is perfect – so keep things in perspective. Do not kill your deal over things that do not matter. It is inappropriate to demand that a seller address deferred maintenance, conditions that already listed on the seller’s disclosure or nit-picky items.
What About Repairs?
The ideal use of a pre0inspection by a home seller is to determine what repairs are needed in the property and make them.
Sellers with properties found in need of repairs should make the repairs and provide the listing inspection report to buyers along with documentation (warranties on the work receipts) that the repairs have been made. This generates enormous good faith between buyers and sellers and increases the likelihood of a quick and amicable sale. The bottom line is by eliminating the issues that buyers may want to negotiate with results in a win-win for both buyers and sellers.
On the other hand, if your home is not in stellar shape, the benefits to having your property pre-inspected is that the problems can be taken into consideration when pricing the property or during original listing negotiations with a prospective buyer.
This can minimize, if not eliminate, re-negotiations which often fuel emotions and turn off buyers. Historically, buyers will want to negotiate two dollars for every dollar of reported deficiencies. Just think of having to drop your listing price by the amounts equal to twice as much as the cost of all the repairs needed in your home! It can really add up.
By having a professional property inspection document the repairs needed in your property, you can take control of the situation. You can present the inspection report to your buyers and let them know that all these repairs needed are reflected in the listing price. The buyer then has the opportunity to decide whether they would like to move forward and accept the offer.
Sellers typically bare the majority of the liability when it comes to real estate disclosures. It is important to express that properties, whether they are homes, condos, town homes or commercial, are much to complex to assess visually – especially by non-experts. The fractional cost of a property inspection will pay ten fold in peace of mind and security from future litigation. You would not buy a property without getting an inspection; do not list one without getting one either. For more information on property inspections visit: www.AGPIC.com – and click “educate”.
Wednesday, May 7, 2008
Court Confirmation Procedures
When court confirmation is either chose or required, certain procedures are generally followed, as required by law and/or custom:
o An offer is presented and conditionally “accepted” by the estate representative. This purchase agreement is not binding on the estate.
o After all buyer contingencies are removed from the accepted offer, a petition for the court hearing depends upon the court calendar at the time, but is generally 20 – 6- days from the date of the petition.
o The buyer needs to deposit 10% of the purchase price prior to or on the sate of the court confirmation hearing.
o The sale together with the accepted offering price, is advertised for a statutory period (three times) in a local newspaper.
o There is open competitive bidding at the court hearing, The minimum first overbid shall be an amount equal the accepted purchase price of the accepted offer, plus five percent of that amount, plus $500. In the even of such an overbid, the court shall determine any further incremental overbidding amounts – for example, $1000 or $2000. The bidding stops with the final bid.
o Any person who bids in court must make an unconditional offer (i.e., obtaining financing and approving inspections should not be a condition of the offer) and if confirmed must present a cashier’s check deposit for 10% of the purchase price as described above, or as determined by the court.
o In the event a buyer defaults after a court confirmed sale, the buyer may lose his/her deposit
o If the court confirms the sale to an over bidder rather than the original buyer, the original buyer’s deposit shall be refunded. If the sale is confirmed to the original buyer, the deposit shall apply to the purchase price. (Deposit could be tied up for up to 90 days).
o The purchase price accepted must be at least 90% of the probate’s referee’s appraised of re-appraised value of the property.
o Real Estate commissions are subject to the approval of the court.
o An offer is presented and conditionally “accepted” by the estate representative. This purchase agreement is not binding on the estate.
o After all buyer contingencies are removed from the accepted offer, a petition for the court hearing depends upon the court calendar at the time, but is generally 20 – 6- days from the date of the petition.
o The buyer needs to deposit 10% of the purchase price prior to or on the sate of the court confirmation hearing.
o The sale together with the accepted offering price, is advertised for a statutory period (three times) in a local newspaper.
o There is open competitive bidding at the court hearing, The minimum first overbid shall be an amount equal the accepted purchase price of the accepted offer, plus five percent of that amount, plus $500. In the even of such an overbid, the court shall determine any further incremental overbidding amounts – for example, $1000 or $2000. The bidding stops with the final bid.
o Any person who bids in court must make an unconditional offer (i.e., obtaining financing and approving inspections should not be a condition of the offer) and if confirmed must present a cashier’s check deposit for 10% of the purchase price as described above, or as determined by the court.
o In the event a buyer defaults after a court confirmed sale, the buyer may lose his/her deposit
o If the court confirms the sale to an over bidder rather than the original buyer, the original buyer’s deposit shall be refunded. If the sale is confirmed to the original buyer, the deposit shall apply to the purchase price. (Deposit could be tied up for up to 90 days).
o The purchase price accepted must be at least 90% of the probate’s referee’s appraised of re-appraised value of the property.
o Real Estate commissions are subject to the approval of the court.
Wednesday, March 12, 2008
Existing Home Sales to Trend Up in 2008
Written by National Association of Realtors
WASHINGTON, D.C. - Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors®. However, a recovery for new-home sales is unlikely before 2009.
Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.
The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.
“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun said. “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”
Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.
“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.
“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said. “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”
Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”
New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.
The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest ratesGrowth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 200The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.
End of Article
WASHINGTON, D.C. - Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors®. However, a recovery for new-home sales is unlikely before 2009.
Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.
The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.
“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun said. “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”
Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.
“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.
“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said. “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”
Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”
New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.
The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest ratesGrowth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 200The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.
End of Article
Wednesday, February 6, 2008
Increasing Conforming Loan Limits Part of Stimulus Package
The U.S. House of Representatives unanimously approved a measure Tuesday that includes an increase in the conforming loan limits as part of a larger economic stimulus package. The measure would allow the Federal Housing Administration and Fannie Mae and Freddie Mac to issue mortgages above the current $417,000 level. Raising the conforming loan limits to more accurately reflect the cost of housing in California and other high-costs areas of the nation has long been an objective of C.A.R.
“While this measure is expected to face an uphill battle in the Senate, Tuesday’s action by the House represents a huge win for Californians and for C.A.R., which has fought aggressively for the increases for several years,” said C.A.R. President William E. Brown.
“For years, Chairman Barney Frank and I have worked to create affordable housing opportunities for families across the country by increasing the FHA and GSE conforming loan limits,” said Congressman Gary G. Miller, who has worked closely with C.A.R. to push for the reforms. “With the average home price in high-cost areas like California exceeding the current loan limit, homeowners and homebuyers in these areas have been unable to utilize these important federal housing programs. The loan limit increases included in the economic stimulus package will make safe, conforming mortgage loans available for homebuyers in all areas of the country.”
Currently, Californians are forced into more expensive non-conforming jumbo loans, decreasing homeownership opportunities for many and forcing others into more costly – and often riskier – loan products. Under terms of the proposed stimulus package, the conforming loan limit will be raised from $417,000 to as high as $729,750 in high-cost areas. The increases would only be valid through the end of the year.
While the House is hoping to send the measure to President Bush for signature by Feb. 15, the Senate is reported to be crafting a stimulus package of its own, including add-ons, which may result in delays. In addition, the Office of Federal Housing Enterprise Oversight (OFHEO) continues to oppose conforming loan limits reforms.
The House’s economic stimulus package also includes $500 million to support foreclosure mitigation counseling agencies across the country, many of which are currently short-staffed and overwhelmed by the rise in defaults.
“While this measure is expected to face an uphill battle in the Senate, Tuesday’s action by the House represents a huge win for Californians and for C.A.R., which has fought aggressively for the increases for several years,” said C.A.R. President William E. Brown.
“For years, Chairman Barney Frank and I have worked to create affordable housing opportunities for families across the country by increasing the FHA and GSE conforming loan limits,” said Congressman Gary G. Miller, who has worked closely with C.A.R. to push for the reforms. “With the average home price in high-cost areas like California exceeding the current loan limit, homeowners and homebuyers in these areas have been unable to utilize these important federal housing programs. The loan limit increases included in the economic stimulus package will make safe, conforming mortgage loans available for homebuyers in all areas of the country.”
Currently, Californians are forced into more expensive non-conforming jumbo loans, decreasing homeownership opportunities for many and forcing others into more costly – and often riskier – loan products. Under terms of the proposed stimulus package, the conforming loan limit will be raised from $417,000 to as high as $729,750 in high-cost areas. The increases would only be valid through the end of the year.
While the House is hoping to send the measure to President Bush for signature by Feb. 15, the Senate is reported to be crafting a stimulus package of its own, including add-ons, which may result in delays. In addition, the Office of Federal Housing Enterprise Oversight (OFHEO) continues to oppose conforming loan limits reforms.
The House’s economic stimulus package also includes $500 million to support foreclosure mitigation counseling agencies across the country, many of which are currently short-staffed and overwhelmed by the rise in defaults.
Friday, January 18, 2008
SENATE PASSES FHA MODERNIZATION BILL
In a significant victory for REALTORS® and homeowners across the country, the U.S. Senate on Dec. 14 approved legislation designed to modernize the Federal Housing Administration’s (FHA) mortgage insurance program by increasing loan limits and helping troubled borrowers with subprime loans refinance into federally insured mortgages. The Senate’s approval followed an aggressive call to action by C.A.R. urging REALTORS® to contact Sen. Barbara Boxer seeking her support in passage of the bill.
The FHA Modernization Act, approved in a 93-1 vote, would increase loan limits for FHA-insured loans from $362,790 to $417,000, to mirror current conforming loan limits Fannie Mae and Freddie Mac may purchase. In addition, the Senate bill would allow the FHA to insure refinanced loans for borrowers who are delinquent on their mortgages due to ballooning payments on subprime loans.
“This is a tremendous victory for REALTORS® and C.A.R., and I want to thank REALTORS® who responded to our ‘Calls to Action’ and urged their elected officials to pass this bill,” said C.A.R. President William E. Brown. “The Senate’s action is a milestone in our efforts to provide safe alternatives for financing a home mortgage, not only for those borrowers who are facing foreclosure today, but for future homeowners as well.”
The bill, which has the support of the Bush administration, also would reduce the required minimum down payment for an FHA-insured loan from 3 percent to a flat 1.5 percent of the appraised value of a home.
The House passed a separate FHA overhaul measure in September, but there are several differences between it and the one passed by the Senate. The House bill, for example, would increase the FHA loan limit to $729,750, or 175 percent of the Conforming Loan Limit. The House bill also is pushing for a 0 percent minimum down payment, compared with the Senate’s 1.5 percent. The house bill would allow risk-based pricing for FHA mortgage insurance premiums, while the Senate version opposes it. Both bills would categorize all condo units as single-family units.
Both the House and Senate measures will now be carefully scrutinized by a conference committee for comparisons and reconciliation of their differences. Once a final bill can be crafted, it will be sent to the President for signature.
Meanwhile, C.A.R. will continue its efforts to work with California’s congressional delegation to ensure the final version of FHA reform passed out of conference committee has as high of a loan limit as possible.
The FHA Modernization Act, approved in a 93-1 vote, would increase loan limits for FHA-insured loans from $362,790 to $417,000, to mirror current conforming loan limits Fannie Mae and Freddie Mac may purchase. In addition, the Senate bill would allow the FHA to insure refinanced loans for borrowers who are delinquent on their mortgages due to ballooning payments on subprime loans.
“This is a tremendous victory for REALTORS® and C.A.R., and I want to thank REALTORS® who responded to our ‘Calls to Action’ and urged their elected officials to pass this bill,” said C.A.R. President William E. Brown. “The Senate’s action is a milestone in our efforts to provide safe alternatives for financing a home mortgage, not only for those borrowers who are facing foreclosure today, but for future homeowners as well.”
The bill, which has the support of the Bush administration, also would reduce the required minimum down payment for an FHA-insured loan from 3 percent to a flat 1.5 percent of the appraised value of a home.
The House passed a separate FHA overhaul measure in September, but there are several differences between it and the one passed by the Senate. The House bill, for example, would increase the FHA loan limit to $729,750, or 175 percent of the Conforming Loan Limit. The House bill also is pushing for a 0 percent minimum down payment, compared with the Senate’s 1.5 percent. The house bill would allow risk-based pricing for FHA mortgage insurance premiums, while the Senate version opposes it. Both bills would categorize all condo units as single-family units.
Both the House and Senate measures will now be carefully scrutinized by a conference committee for comparisons and reconciliation of their differences. Once a final bill can be crafted, it will be sent to the President for signature.
Meanwhile, C.A.R. will continue its efforts to work with California’s congressional delegation to ensure the final version of FHA reform passed out of conference committee has as high of a loan limit as possible.
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