What Sells a Home and Why Most Agents Won't Like This Article

What Sells a Home and Why Most Agents Won't Like This Article

Chances are you're not going to like this article.
What I am about to write flies in the face of the vast majority of real estate agents in North America today.
That is, the number one thing that contributes to the sale of a home, in any market, is the price of the property.  That's it.
Location, features, benefits...all of those have a price tag.  What that means is, if I had a dump of a house in a dump of a location, it would sell if the price was low enough.
That being said, what's low enough for a buyer to want to buy may not, in fact, be low enough for a seller to want to, or be able to sell.  Yes, that was simple economics at it's best and it lends to explaining much of what has gone on the last few years...the price a seller would/could sell a house for far exceeded the price a buyer would (and sometimes could) pay for the house.
Now, let's get back to the reason you, and most agents, might not like this article.
Both when practicing real estate (May 1998-Dec 2006, top ten percent in my market 2001-2006), and more recently as a coach, I've heard the arguments against price being the number one reason homes sell.  Most of those reasons center around an agent's ego and/or the huge misconception as to what their job actually entails, as well as some sort of misplaced loyalty to the seller and the price they say they want.  (Before I go any further, I'm not in any way advocating that you shouldn't be loyal to your sellers.  I'm saying defending a random price a seller tells you they want, ignoring comps and any sense of reality, is misplaced loyalty.)
Some of the arguments from agents:
"If price is the only thing that matters, then we real estate agents aren't needed." - Guess what?  That's actually kind of true.  If you've ever heard of a FSBO selling on their own, then you automatically realize selling a house can be done without a real estate agent.  The good news is that the vast majority of FSBO's do not sell without the help of an agent (even if only on the buyer side - but most end up listing).  And, unfortunately for the FSBO seller, they get a very low list to sale price ratio as compared with when listed by an agent (both stats are published by NAR).  So, on some level, my fine fellow agent, you are definitely needed...so breathe a little easier.
"All you want to do is lower the price as far as you can, darn the seller, and take your quick commissions!" - A buyer will not buy something they don't feel is priced correctly; plain and simple.  I'll explain more about that later in this article.  In the meantime, I can only go on statistics/facts.  My personal statistics in my former real estate practice showed my listings selling for an average of 4-9% more and up to twice as fast my market's average, depending on the year.  Simply put, I was getting my sellers more money, and selling their homes much faster than the market average.  So how was I harming the seller?  I don't know many sellers that want their home to sit on the market for a long time, do you?  Do you know of any seller's who want LESS money for their home?  I sure don't.
And where does this false sense of loyalty to the seller's price come from?  I'm sorry, but it's so misplaced.  I always wanted to get as much money as possible for my sellers, and did my absolute best to make that happen.  But just because a seller WANTS a certain price doesn't mean they'll get it, or, in most cases, that it's even realistic.  I'm sorry if the seller paid $400,000 and owes $350,000.  If the comps say it's worth $275,000 then that's what it's worth.  Listing it at $400,000 so the seller can feel like they broke even does NOT mean the home is WORTH $400,000.  Nor does it mean they will get anywhere near that.  In fact, in my example, with it being so far overpriced, if there isn't a significant price reduction, the house likely won't sell at all.  How is that protecting the seller?
I don't want to digress too much, however in a previous article I wrote on negotiating, I discussed the issue of many listing agents being egotistical about the price they set on their listings.  If a buyer comes in low, the listing agent scoffs and postures to the buyers agent about how the home is worth every penny of what it was listed for, etc.  Please.  The only true test of what a home is worth is what a ready, willing, and ABLE buyer is willing to pay...not what the listing agent or the seller thinks its worth.
"It's not price, it's marketing.  Staging, open houses, broker opens and advertising are all where it's at." - This is the reason for the big chasm between the average agent (selling between 2-5 houses a year, on average, according to NAR) and the higher producers (over 25 homes a year).  Agents who sell a lot of homes know how to SELL, and know that their job is to SELL the home for the most money possible.  Agents who don't sell a lot of homes typically aren't good salespeople, don't actively prospect for buyers and sellers and think their job is not as a real estate SALESperson, but rather a real estate MARKETINGperson.
Simply put, you can market a house to the hilt, but it will NOT sell if the buying public thinks it's overpriced.  In fact, today's shrewd buyer who combs the internet and does their homework, won't even look at home that they feel is overpriced; unless they think they can get a tremendous low-ball deal.  And, if you want to take a notorious low-ball buyer around so he/she can throw offers up on a wall and see what sticks, have at it.  You'll end up doing a lot more work and probably be very frustrated.
So, let's investigate some of these marketing ideas:
Staging - I'm always amazed at how someone comes up with something for agents that doesn't sell homes, yet agents buy into it in droves.  Text "MOVE" to 12345 and receive no obligation information on this listing.  That worked for about a minute until buyers realized they would get called back from agents they didn't want to talk to.  Now, it's no better than a regular sign with a regular phone number or website.  Or, how about the private radio station that drive-by buyers can tune into and hear all about the house?  Way to go!  You just bought something that assures you of never hearing from your buyer leads!  They won't need to call you to find out information because you gave it to them on their car stereo.
Staging is one of those tools that doesn't sell a house.  Yes, the house should always look its best.  And, yes, if you stage a house, it will look better than the competition.  BUT...staging only works better to sell your house versus the competition if the home is priced competitively.  Let's say you're in a development, and two identical houses on the same street are for sale.  One is for $350,000 and NOT staged.  The other is for $425,000 and is staged.  The seller or agent who paid for staging of the $425,000 house doesn't know anything about sales or economics and wasted their money.  No amount of staging in the world can trick a buyer into grossly overpaying for a house.
Open houses - This is the biggest real estate scam ever perpetuated on sellers.  And the funny thing is, many sellers will fight tooth and nail for the right to leave their house for multiple weekends in a row so that you can park yourself there for 4-6 hours at a time and put balloons out front.
NAR itself puts out a report every year that shows a very small percentage of buyers buy the home they saw open.  It's usually around 1%.  That is an astonishingly low rate of return on your marketing efforts.
Open houses do provide buyer leads for the AGENT, not the seller.  All listing agreements should come with a disclaimer showing the past year's NAR percentage of homes actually bought due to the open house.
Low producing agents love open houses because they haven't been taught, or are too afraid, to prospect for business.  So, the idea of sitting in a home and having potential buyers come to them seems good.  Never mind that most people are just looking, and the percentage of leads converted to actual buyers (and the time it takes to convert them) is no better than a call in on a sign or website.  And let's not mention the fact that you may sit all day at a house and have NO traffic.  God forbid if it's a rainy weekend.
Broker opens -   These have a small chance of helping you sell the home because it can get you exposure to agents who missed it in the myriad of listings on the MLS.  However, it's usually not worth doing a broker open until well into the listing term, and is most effective to get a price reduction for the seller by having the agents write their pricing opinions on a survey card (darn, there's that pricing thing again).  And here's the fundamental flaw - top agents, you know the one's doing 90% of the business, are typically too busy to stop at broker opens.  So you're exposing the property to a handful of agents who have nothing better to do than to eat your free lunch.  Look, I know I'm sounding harsh, but my big concern is that many agents think their job duties entail hosting and going to things like broker open houses and working on making a pretty brochure...things that DON'T help sell a home.
Advertising - Here's another scam on the seller.  NAR reports a very small percentage of homes are sold as a result of being advertised.  I will admit they also report a slightly higher percentage of homes are sold as a result of the buyer calling in on a different home, so advertising can help (but the home still has to be priced right).  For the sake of this article however, I want to stick to the specific house you have listed, and I'm talking about advertising over and above the norm.  I mean the type of advertising where the agent thinks it's the solution to why the home hasn't sold in the last 90 days.  We all know that every agent does some form of advertising, whether it's the MLS itself, the various websites that agents/companies have, the websites that pick up listings from the MLS, or the newspaper ads your company provides.
Here's the flaw:  If your local grocery store paid for circular ads in your town's Sunday paper, and advertised premium, no-filler, turkey lunchmeat at $50 a pound, how many people would buy it?  The answer is nobody.  Two things would happen.  People might still visit that store, but they would buy another brand of turkey lunchmeat (congratulations, you're overpriced turkey ad sold the competition), or people will go to another store all together to buy that brand at its normal price.  In any case, the store could have spent millions of dollars on ads all over the place and it wouldn't matter a lick in regards to the sale of that brand of turkey.
Yet sellers and agents all think that more advertising will equal a sold home.
The bottom line is that your job as agent is to educate the seller and list the house at a price that will cause the home to sell.  Stop kowtowing to the seller who wants to overprice the home.  Stop with the false sense of loyalty to a pie-in-the-sky price, against all reasonable economic sense as evidenced by the comps.  Stick to your guns, be professional and price it right.  Or, horrors, be willing to say “no” to the seller, and walk away from listing the home if they insist on overpricing it.
You’ll be doing yourself a huge favor, I promise you.  Even if another agent lists the property, don’t worry.  It’s not going to sell.  Look at your market.  Look at any market.  Overpriced listings don’t sell.  Why do you think there are so many expireds?  Oh, right, I forgot.  The agents all must not have staged those homes.  Yeah, that’s it.

Scott Friedman is a former top producing agent from New Jersey.  He is a speaker, coach and co-founder of You're The Difference Sales Coaching.  He is also co-author of the highly acclaimed objection handler book Now What Do I Say?  If you're interested in learning what to say and how to say it so that you can sell more homes, visit www.yourethedifference.com for more information on the book and other products, as well as training and coaching.  To ask Scott a question about your business, or hire him to speak or coach, email scott@yourethedifference.com, or call 609-601-1296

Buyers Should Push to Cut Junk Fees

Buyers Should Push to Cut Junk Fees

Now is a good time for home buyers to push for lower closing costs.

Closing costs include lending charges, local tax and transfer fees, and expenses for such things as title insurance, appraisal costs, and other third-party services. The rule of thumb used to be about 3 percent of the cost of the property.

Today, most buyers should be able to do better than that, said Guy Cecala, publisher of industry newsletter Inside Mortgage Finance. Fees that buyers shouldn’t have much trouble negotiating away include wire-transfer fees, loan application-processing fees, and high FedEx charges.

"It all boils down to what a lender will work for," says Cary Pearce, production manager at Provident Bank Mortgage in Riverside, Calif.

Source: Investor’s Business Daily, Kathleen Doler (04/22/2010) 

Buyers Rush to Meet Tax Credit Deadline

Nearly half the homes sold in March – 48.2 percent – were purchased by first-time buyers, according to a survey of more than 1,500 real estate practitioners by Campbell/Inside Mortgage Finance.

"Many observers had felt that the pool of first time home buyers had been depleted last fall," Thomas Popik, research director for Campbell Surveys, said in a statement. "Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time home buyers."

Source: Reuters news (04/19/2010)

2009-10 Cost vs. Value Report: Small Projects, Big Bang

Judicious home remodeling is still worth the investment, according to Remodeling magazine's annual "Cost vs. Value Report."

By G.M. Filisko
January 2010

Uncertainty and restraint are the order of the day in this economy, and that sense of caution is reflected in home owners’ return on their investment in remodeling projects, according to REALTORS® in 80 metropolitan markets surveyed by Remodeling magazine for this year’s Cost vs. Value Report.

The majority of the 10 remodeling projects with the best return on investment nationally are a testament to pragmatism. Six of the 10 projects—siding and window replacement using a variety of materials—involve home maintenance that costs less than $14,000.

Two more—adding an attic bedroom or a wood deck—reinforce the notion that boosting the amount of livable space in and around your home will attract buyers who are increasingly looking for more room for their buck. In past years, converting an attic into a bedroom was a project that landed squarely in the middle of the rankings, but this year it leapfrogged over other categories into third place. It’s an admittedly pricey project, with an average national cost of nearly $50,000, but it generates an average national return of 83.1 percent and a better-than-100 percent return on investment, according to REALTORS® in 14 of the 80 cities surveyed. Adding a wood deck is much more economical, with an average national cost of slightly more than $10,000. Its average national return is 80.6 percent, but in six cities, its return is estimated at 100 percent or greater.

The six siding and window home maintenance projects in the top 10, combined with the project with the biggest return on investment—a mid-range entry door replacement—prove something that every sales associate tells sellers throughout the country: First impressions count. A mid-range entry door replacement, a project new to the survey this year, is the only home remodeling project that REALTORS® expect to generate a full return for the money nationally. It’s the least expensive of the 33 projects included in the analysis, yet it brings a whopping average national return on investment of 128.9 percent. It generates a better-than-100 percent return in 48 of the 80 cities, according to REALTORS® surveyed, and in several cities, its return is estimated at more than double its cost.

Additional data prove the value of restraint. Upgrading kitchens and baths is still a smart bet. However, home owners will recoup the greatest share of their costs by foregoing super-deluxe projects in favor of mid-range kitchen and bath remodels. A mid-range kitchen remodel brings an average 72.1 percent return on investment, while an upscale kitchen re-do returns only an average of 63.2 percent of the money invested. A mid-range bathroom project has an average 71 percent cost recovery, but the average recovery on an upscale bathroom project is nearly 10 points lower, at 61.6 percent.

The only upscale projects that cracked the top 10 were the home maintenance projects of fiber-cement siding replacement and vinyl window replacement. The average cost of fiber-cement siding is more than $13,000, but its return on investment reached 83.6 percent, placing it squarely in second place in the survey. The average cost of vinyl window replacement is nearly $14,000, and it generates an average return of 76.5 percent, or tenth place in the survey. Of the 12 upscale projects, nine landed in the bottom half.

Overall, home owners recouped an average of 63.8 percent of their investment in 33 different home improvement projects, according to REALTORS® who responded to the survey. The expected cost recoup was generally down from previous years in line with the drop in home prices nationally (see page 23). The return on home owners’ investment in remodeling projects has declined an average of 3.5 percentage points between 2008 and 2009. That’s down from the 2.7 point drop between 2007 and 2008 and much less than the 5.5 point drop between 2006 and 2007 and the 10.5 point drop from 2005 to 2006.

Zooming in from the national to the city level, Honolulu sits atop the rankings for having the most projects—18—that generate at least a full return on investment. In Honolulu, adding a wood deck, completing a minor kitchen remodel, adding fiber-cement siding, and replacing an entry door bring the highest returns, ranging from 121.1 to 195.3 percent return on investment. San Francisco is closest behind with 10 projects generating at least a full return on investment. Adding a master suite, doing a minor kitchen remodel, and replacing an entry door have the biggest returns, producing between 112.2 and 119.1 percent return on investment.

One surprise: Despite the common perception that contractors are hungry for work and therefore willing to wheel and deal, the average national cost of every project surveyed has gone up, though at a slower rate than in the previous year.

View 2009-10 Cost Vs. Value Report. Data courtesy of Remodeling Magazine

Greenspan: Housing Will Come Back

Former Federal Reserve Chair Alan Greenspan told officials in Mexico on Wednesday that he believes U.S. home prices have hit bottom. However, home owners are still unnerved by the decline in value, and until prices stabilize, the economy will remain weak.

"We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized, but they are very fragile," Greenspan said in a televised interview.

"Eventually housing will come back; it can't get any lower," he added.


Source: Reuters News (03/25/2010)

New-Home Sales Soften in February

Sales of new homes declined 2.2 percent in February compared to the previous month to a seasonally adjusted annual sales pace of 308,000. This is the slowest pace since the government began tracking the statistic in 1963, according to the U.S. Commerce Department.

This was the fourth consecutive monthly decline. Sales in the Northeast fell 20 percent, Midwest sales declined 18 percent, and sales fell 5 percent in the South. In the West, they rose 21 percent.

The median price of new homes for sale rose 6 percent in February compared to the previous month to $220,500. Inventory rose 1.3 percent to 236,000, a 9.2-month supply at the current sales pace.


Source: Associated Press, Alan Zibel (03/12/2010)

Short-Sale Incentives Start April 5th 2010

Potential buyers of short-sale homes might consider waiting until April 5th before making a formal offer.

That’s the date the federal government will begin offering lenders financial incentives to hasten the process. Under the new rules, banks will seek a BPO before the property is listed for sale and let the sellers know a minimum number they are willing to accept. If the sellers bring a buyer with a good offer, the lender must accept it within 10 days.

Not all sellers are eligible for the program, dubbed the Home Affordable Foreclosure Alternatives (HAFA), but enough are that it is probably worth waiting.

Source: The Wall Street Journal, June Fletcher (03/19/2010)

Real Estate Investor Financing Through HUD

A product that investors could really use to their advantage may finally be here. As most of you real estate investors know, 20% down has been the norm in this market as it is virtually impossible to find mortgage insurance (MI) for investor properties. Well for a limited time, HUD REO and HUD foreclosures are being opened up for investors to use FHA financing for a purchase.

What does this mean for people who want to buy investor properties using FHA financing? How about pretty much the same thing owner occupants can use with the 3.5% down payment with no adjustments to the rate for investor properties? Remember FHA has no limit on the number of properties you can own but a borrower does have to qualify using traditional guidelines. Imagine the advantage of having an owner occupant rate for an investment property.

Again, this program is only for HUD owned homes and you must use a real estate agent who is approved with HUD to submit these offers. The offer must stipulate the use of this program.

This is good news for investors as well as homeowners. If investors can purchase some of the foreclosed homes, it will more quickly get them off the market, reducing overall supply and hopefully minimizing their affect on the values of non- foreclosure listings and appraisals.

Fewer Sellers Are Cutting Prices

Daily Real Estate News, March 9, 2010


Fewer Sellers Are Cutting Prices

The prices on 19 percent of homes for sale as of March 1st have been reduced at least once, the lowest percentage in the last year, according to Trulia.com.

In October and November, when the market was feeling the effect of the tax credit, 26 percent of sellers cut their asking prices.

“Better pricing is leading to less time on the market, less price reduction, and in a lot of markets we're starting to see bidding wars on lower end properties," said Ken Shuman, spokesperson for Trulia.

Trulia calculates that these U.S. cities experienced the biggest decline in price reductions from Feb. 1, 2010 to March 1, 2010:

Charlotte, N.C.

Colorado Springs, Colo.

Houston

Raleigh, N.C.

Jacksonville, Fla.

Albuquerque, N.M.

Tucson

Omaha, Neb.

San Antonio, Texas

Source: Trulia.com (03/09/2010)

Buyers Who Wait May Lose a Lot

Potential home buyers who delay have a lot to lose.

First-time home buyer and move-up tax credits worth $8,000 and $6,500, respectively, expire April 30. Buyers who qualify get a dollar-for-dollar reduction in taxes or a cash payment if they don’t pay enough taxes to cover the credit.

Other factors that should spur buyers:

Low mortgage rates. If the Federal Reserve stops buying mortgage-backed securities at the end of March, 30-year rates will almost certainly rise to more than 6 percent.

Rising prices. About 30 percent of markets are already experiencing price increases. Prices are falling in 12 percent of markets, says Fiserv (but that only helps if you want to live there).

Source: Money Magazine, Beth Braverman (03/02/2010)

It Wasn't A Mortgage Recession After All

Wasn't a Mortgage Recession After All: So Why Don't We Feel Better?

By Robert X Cringely Feb 26th 2010 @ 12:00PM

The Great Recession wasn't the result of subprime mortgage madness, according to a new report from the National Bureau of Economic Research. It was just a plain old bank panic. Yeah, but weren't bank panics supposed to be a thing of the past, thanks to the creation of the Federal Deposit Insurance Corporation in 1934?

That's the problem.

The report, by Yale economics professor Gary Gorton, says subprime mortgage securitization was a mess -- a house of cards probably doomed to fall -- but subprime by itself simply wasn't big enough to put the entire financial system at risk. That required a failure of the Renew Sale and Repurchase (REPO) market for collateralized securities that over the last 30 years had come to backstop global finance.

The problem here, of course is that hardly anyone has even heard of REPO, which manages to be an unregulated, uninsured $20 trillion business that is absolutely essential to keeping money flowing in the world. Subprime is only $1.2 trillion -- not big enough by itself to wag this dog.

According to Gorton, the entire basis of global banking changed in the 1980s, thanks to money market funds and junk bonds, which took all the profit out of being a traditional bank. So banks began securitizing loans to regain those lost profits.

The REPO market of interbank loans had always existed but it grew dramatically in the 1990s to support securitization. But since there was no deposit insurance for institutional loans measured in hundreds of millions of dollars, counterparties demanded collateral to back these overnight REPO loans that generally replaced demand deposits in the banking system.

While the subprime mortgage crisis began in January, 2007, the ensuing bank panic didn't happen until August of that year when lenders began making collateral calls and demanding haircuts (collateral fire sales at discounted prices) from borrowers that led to all the big banks being seriously under-capitalized.

The government, while well prepared to respond to a demand deposit bank panic like those of 1907 and 1933, was not only unprepared for the 2007 panic, they didn't even know there was a panic until it was well underway.

The panic meant that the value of all types of bonds declined, trillions of bank capital evaporated and the REPO market, itself, collapsed as all counter-parties lost faith in each other and the basis of the entire banking system literally disappeared.

So what does this mean? Well it explains why the banks still aren't lending money, because they don't have the means to back the loans they'd like to make, absent government intervention. It means that until the REPO market regains some steam there isn't going to be much natural progress in getting the economy to start growing again (take out the government stimulus and we're screwed). And it shows that the Fed and Treasury in the United States were no better able to protect us than you could keep your dog from running into the road and being hit by a car.

But it wasn't strictly a subprime mortgage crisis.

Why is it I don't feel better?

FHA Insurance Premiums to Increase

We’ve been stressing the urgency of buying now for almost a year, and I am sure you are probably tired of hearing it. However, the reason we reiterate the point so much is because new home shoppers still are not quite comprehending the situation. You are likely never going to see such amazing prices on homes again in your lifetime. The exceptional values, like being able to purchase a $350,000 home for $225,000, should be enough to get you investing in a new home, but just in case it isn’t you also have sizable tax credits from the government and some of the lowest interest rates in history.There’s no denying it is a perfect time to buy a new home, but the conditions will soon be changing.

In a little less than two months, the federal housing tax credit is going to expire. Inventory throughout Atlanta is being absorbed more and more everyday, so the low prices are going to start rising. The interest rates are expected to increase this year, and, for all of you first time home buyers looking to use an FHA loan to secure your first home, the Upfront Mortgage Insurance Premium is increasing.

The FHA loan is perfect for first time home buyers because you do not need 20% of the price of the home as a down payment. Instead, you only need 3.5%, which is much easier to acquire. The reason you are able to get approved for a home loan with so little down is because the Federal Housing Administration (FHA) insures the loan for the lender. In order for them to do so, the FHA charges an Upfront Mortgage Insurance Premium, and, beginning April 15, 2010, that insurance premium is going to be 2.25% – it used to be only 1.75%.

I know you must be thinking can .5% really make that much a difference, so let’s look at an example.

Home Price: $150,000

3.5% Down Payment: $5,250

2.25% UMIP: $3,375

1.75% UMIP: $2,625

Before April 15th, to purchase a $150,000 house with an FHA loan, the insurance premium cost will be $2,625, but after April 15th it jumps to $3,375. That’s almost a difference of $1,000. While most people finance the premium into their mortgage, the difference will affect closing costs and your monthly mortgage payment. In this example, the $750 difference will add $5 or $6 a month to your payment on a 30-year mortgage with market interest rates, which may not seem like a lot but in this economy every penny counts.

For more details about the insurance premium, closing costs or FHA loans in general, contact your real estate agent or mortgage broker.

FINALLY HERE!! INVESTOR FHA REO PURCHASES with FHA FINANCING

This is great news - someone has come forward with some money for the investor. Call Eric for the details and to get pre-qualified.

Hi All,

Unbelievable, but true, FHA has a program for investors.

One of my lenders, MetLife, is now promoting it.

The 203b program has been around for awhile

It is just most lenders don’t promote it.

I have included some information on the program, so

Please forward this to your base of clients.

Buyers need to have an approved contract with Pemco/ HUD, to submit a deal

They are looking for seasoned investors;

However, any newbie needs a strong financial profile

Credit, assets, income, etc.

Also, this is NOT a rehab loan, just a purchase loan

Subject to FHA inspection, Minor cosmetic allowable up to 110% of purchase price



I will be available to assist you and your clients

Thank you,

Eric Reque

Mortgage Manager

Lenox Financial

E: ereque@lenoxnational.com

P: 404-601-0620

F: 678-623-8252



MetLife Home Loans

a division of MetLife Bank N.A.

INVESTOR FHA REO PURCHASES with FHA FINANCING

FHA Program

• 203b REO with Repair Escrow up to 110%LTV/ or 203b REO w/no Repair Escrow to 96.5%

• Investor purchases allowed based on acceptable approved Pemco contract


Requirements

• Investor must hold title to property for 12 months after purchase

• Minimum Fico score is 640/Minimum Investment 3.5%

• Qualifying restrictions apply

Full Documentation, Assets and 2 years tax returns


Target Audience – Investor who:

• Possibly owns more financed properties than currently allowed by Fannie and Freddie

• Wants a low interest rate, typically 5.5-6.0%

Understands how to leverage money/Seeks minimal cash investment

• Is competent and an established real estate investor

Benefits

• Investor can purchase FHA REO HUD owned foreclosures marketed by HUD PEMCO with FHA financing

• Investor’s min cash investment is 3.5%*

• No restrictions on the number of current financed properties owned

• The investor can include the cost of required repairs in the maximum mortgage amount up to 110%LTV

Terms Available

• 30 Year / 15 Year

Pricing

• No additional charge for FHA REO financing

• No additional charge for INVESTMENT PROPERTY

Exposure Limitations

• MetLife’s maximum exposure to one borrower is 3 loans to one individual – a 4th maybe available on exception basis. (Additional FHA restrictions could apply. If your client is interested in more than one loan, please discuss with me first.

Homebuyers Finding That Cash Really Is King

LOS ANGELES - Melissa Hughett and her husband set out to buy their first home in the best buyer's market in years, confident they would land a deal within a few months.

The couple put offers on several homes, but lost them all to rivals who weren't offering more money — just a lot more cash.

"Each time somebody came in and put $100,000 down in cash and scooped up the property or they had enough money to pay for the whole property in cash," said Hughett, 30. "It's agonizing."

Would-be homebuyers, armed only with financing, are competing with real estate investors with the means to pay for a home in cash. Often, the all-cash buyers are edging out everyone else, leaving many frustrated at a time when lower prices and tax incentives favor buyers.

The market scuffle is happening primarily over heavily discounted foreclosed homes and other properties typically under $300,000, or even well below $100,000 in some markets. These homes are attractive to investors seeking a good return and first-time buyers looking for an affordable home.

The trend is most pronounced in areas of California, Florida, Arizona, Nevada and elsewhere where home prices have dropped sharply and foreclosures make up a large slice of homes for sales in many metro areas. In Las Vegas and Phoenix, for example, foreclosures accounted for more than half of all home resales in December, according to MDA DataQuick.

Although getting financing for heavily damaged foreclosures can be difficult, there's still a healthy competition. Ultimately, cash is king.

"Even though a first-time buyer may be offering the same price as an investor, or a higher price, the investor has the edge," said Jed Smith, a researcher for the National Association of Realtors. "The investor may actually pay less, but it's cash, right now."

Across the country, some 22 percent of all previously owned homes sold in December were purchased entirely with cash, up from 16 percent a year earlier. That's the highest level since March and April, when all-cash purchases made up 30 percent of sales, according to a survey by the trade association.

That rate jumps even higher in metro areas where foreclosures have driven home prices down sharply.

In Las Vegas, all-cash transactions accounted for nearly 46 percent of all sales in December, up from 33 percent a year earlier, according to MDA DataQuick. In Miami, they were 54 percent of sales, an 8 percent increase. While in Southern California, they accounted for a quarter of sales, an increase of 2 percent.

"I've never seen so many cash transactions in my career as I have in this market," said Stephanie Vitacco, a Coldwell Banker agent in Woodland Hills, Calif., with 20 years in the business.

Making matters worse, the inventory of homes for sale is down in many markets. That's due in part to banks delaying the foreclosure process as troubled homeowners are evaluated for loan modification assistance. It has all made the competition for the most affordable properties even fiercer.

Many of the cash buyers are groups of people who have pooled their money to buy foreclosures and flip them or turn them into rentals. Another large segment consists of homeowners looking for a vacation property. It's possible that some cash buyers will turn around and take out a mortgage later.

Sellers favor all-cash or cash-heavy deals because it speeds up the closing process and makes it more likely the transaction won't fall through. One common concern when a loan is necessary is that the property appraisal could come in too low for the bank to approve the deal. It's a pitfall that's become more common as home values have fallen.

"Even if the offers are comparable, a seller will go with all cash all of the time," said James Joseph, who owns Century 21 and Coldwell Banker real estate offices in Southern California. "They don't have to worry about an appraisal."

Hoping to circumvent competition from investors, Hughett approached family friends about buying their three-bedroom, two-bath house for $340,000. The owners had yet to put the home for sale.

"That's the only way we can get in," said Hughett. This way she and her husband are sure there won't be another buyer "coming in and dropping a large amount of cash."

Homebuyers who can't afford to pay cash are at a disadvantage. But experts say there are some steps homebuyers can take to boost the chances:

•Get a financing prequalification letter from a lender for an amount that's 20 percent higher than the price they're offering the seller.

•Come up with a large down payment in the 20 percent range.

•Look for HUD properties. Only noninvestors are allowed to make offers on HUD properties during the first five days that they hit the market. That gives buyers a head start over investors or those looking for second homes.

•Ask a real estate agent to get a list of recently repossessed properties being prepared for sale. It can take several weeks before these homes hit the market. That's because the bank's agent can't officially advertise the home until it's ready to be sold. But agents can ask for details on these foreclosures and get their clients ready to pounce.

•Write a letter to the seller or bank handling a foreclosure sale and make a case for why they should sell you the property — anything to make you stand out as a potential buyer.

Foreclosures drop in January - but don't get excited

February 19, 2010


Foreclosures drop in January - but don't get excited

NEW YORK (CNNMoney.com) -- First, the good news: Foreclosure filings dropped nearly 10% between December and January.

That's a total of 315,716 notices compared to 349,519 in December, according to RealtyTrac, which issues a monthly report on foreclosure activity.

Now, the bad news: Filings rose 15% compared to a year ago, and the number of people who actually had their homes repossessed jumped 31% to 87,648.

That year-over-year increase in bank repossessions is what Rick Sharga, a spokesman for RealtyTrac, finds most troubling. "A lot of properties that had been stalled in foreclosure are now going all the way through to auction," he said.

The repossession numbers for January indicate to Sharga that the nation will probably set a new record for homes lost this year. All that needs to happen is for repossession numbers to stay flat the rest of the year.

And the drop in filings might -- or might not -- be actual good news. The numbers followed a familiar theme: December foreclosure statistics tend to spike as households cope with increased spending preceding the holidays and end of year financial pressures.

Did you buy a foreclosure?

"January foreclosure numbers are exhibiting a pattern very similar to a year ago," said James Saccacio, RealtyTrac's CEO. "If history repeats itself, we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan-modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works."

Most industry observers also expect home prices to decline further this year before they stabilize. That will push more homeowners underwater -- meaning they owe more on their mortgages than their homes are worth -- making them less likely or able to pay off their mortgage loans.

Sharga does not think the problem is going away anytime soon. "We've settled into a plateau," he said, "with 11 straight months of 300,000-plus filings. I don't see that changing the rest of the year."

Worst-hit places

Foreclosure filings dropped 18% year-over-year in Nevada, but it still remained the nation's leading foreclosure state with one household in every 95 receiving at least one filing during the month.

Foreclosure plauge: Where it's spreading

Arizona was the second-worst performer, with a rate of one household for every 129 receiving a filing. Florida and California followed with one in every 187 households.

California, by far the nation's most populated state, had the highest volume of filings, with 71,817. Florida was second, with 47,069.

The least affected state was South Dakota, which had a total of only 14 foreclosure filings during the month, one household in nearly 26,000. Vermont also maintained a nearly pristine record with just one household in every 20,841 getting hit.

America's most overvalued cities

The hardest hit metropolitan area in January was Las Vegas, with a rate of one for every 82 households. Phoenix was next, with one in every 102.

The next six hardest-hit metro areas all are located in California, led by number three Modesto and Stockton, both with one in every 107. Two Florida places made the top 10 list: Cape Coral-Ft. Myers (one in 121) and Orlando (one in 143).

NEW LEAD BASED PAINT RULE

Many real estate investors have not heard of the new

EPA rule that will take effect on April 22, 2010. It will

affect any housing you own built prior to 1978 when doing

any repair and maintenance activities that disturb 6 sq. ft.

or more of paint per room inside, or 20 sq. ft. or more on

the exterior of a home or building.


Any work that disturbs more than these minimal areas will

be required to be done by a certified lead paint

contractor. And that will translate into much higher

costs. This can even affect electrical or plumbing work

done on the property. Think you can do it yourself or use

your own employees? Think again. The EPA considers rental

income as compensation for purposes of this rule and

therefore you will need to be certified!


So, how do we deal with this? The easy, but expensive,

answer is to hire only certified contractors for any work

on your pre-1978 buildings. In some cases, this may be

your only option. But there may be an alternative or two.

First, it appears simple painting where there is no

preparation work such as sanding, scraping or other

disturbance of the existing surfaces is not covered.

This may be fine for the interior, but often the exterior

needs prep.


A homeowner may also opt out by signing a waiver if there

are no children under age six frequently visiting the

property, no one in the home is pregnant, or the property

is not a child-occupied facility. It is not yet clear if

the owner of a rental property can use this same exemption.


Another exemption is if the house or components test lead

free by a Certified Risk Assessor, Lead Inspector, or

Certified Renovator.


More to come on this subject in the near future.

Six ways to ensure a remodeling project pays off

February 12, 2010

Just a few years ago you could count on getting the bulk of your money back for almost any home-improvement project you took on. Today merely replacing a toilet seat can feel like throwing caution, and cash, to the wind. According to a study from Remodeling magazine, the average return on value for an upgrade declined from 87% in 2005 to 64% in 2009. But these six new rules will help you maximize your return on your remodeling investment.

Rule No. 1: Repairs get the biggest returns

The smartest money now goes into "undeferring" needed maintenance. That's because while buyers might appreciate enhancements like Jacuzzis and Sub-Zeros, they won't tolerate a house with a leaky roof or antiquated plumbing. "If a property is known to have issues, today's buyers won't even look at it," says Austin real estate appraiser Jim Amorin.

And trying to keep problems a secret can cost you big-time. If buyers discover them during inspection, it's now common practice to ask sellers not only to pick up the tab for the repair but also to pay a penalty to compensate the buyer for the inconvenience of having work done.

So the $20,000 you saved by putting off a roof repair, say, could turn into a $30,000 credit to the buyers at closing, says Amorin.

Rule No. 2: Remodeling beats adding on

McMansions have gone the way of the SUV -- and large additions don't pay off either. "There's been a fundamental shift toward quality over quantity," says Warwick, R.I., real estate agent Ron Phipps.

Having a big, formal living room plus an everyday family room is less desirable than having one multi-use common space. So rather than adding on, you're better off repurposing existing square footage by reconfiguring the floor plan or capturing unused basement or attic space.

Want an eat-in kitchen? Knock down the wall between the kitchen and dining room ($2,000 to $8,000, depending on whether it's load-bearing or contains plumbing). That will instantly create a large eat-in kitchen and give the whole house a more open feel -- without a huge investment to make up at resale.

Rule No. 3: Eco-friendly upgrades can save cash

Some green improvements pay you back long before you sell your house. Install energy-efficient features, such as EnergyStar appliances and extra wall insulation, and you'll see lower energy bills every month.

Add in the federal tax credit of up to $1,500 that lasts through 2010, plus many local rebates and tax incentives (see dsireusa.org), and the work may pay for itself in just five years. Green features are also increasingly a selling point, says Phipps. "Most people in the market right now are first-time homebuyers in their thirties, and they've been raised to care about carbon footprints and being ecofriendly," he says.

The best way to go green is with a while-you're-at-it job: When it's time to replace your furnace, for example, upgrading to super-efficiency might add only $500 (after tax credits), compared with standard new equipment, but it will save you -- and your buyers someday -- $150 or more in annual heating costs.

Rule No. 4: Tech infrastructure trumps cool gadgets

Home electronics seem like a deal, since prices have fallen about 50% over the past three years and continue to drop, according to Stephen Baker, president of industry analysis at NPD Group, a market research firm.

Still, that doesn't change the fundamental problem with expensive built-in technology: Put in a $10,000-plus dedicated home theater today, and something better will come along tomorrow and make your system look as if it's from the Mesozoic Era. With buyers seeking any excuse to low-ball their offers, they're not going to reward you for an out-of-date system.
When to refinance your home

Tech infrastructure is different, however. Anytime you're opening up walls for a construction project, have cabling and Ethernet ports installed. At about $80 a room, it's a low-cost way to provide the capability for whatever technologies come along.

Rule No. 5: Let the Joneses be your guide

During the boom, you could be the first on your block to have a luxury kitchen, spa bathroom, or in-ground pool and count on others following suit. And even if the neighbors never took your lead, there was plenty of equity growth to cover your costs.

Nowadays that fudge factor is gone. "You really have to keep your house's amenities in line with the neighborhood now," says Kermit Baker, director of the remodeling futures program at Harvard University's Joint Center for Housing Studies.

If other houses on the block have real marble countertops, by all means add one to your house, but if everyone still has faux blue-marble Formica from the '70s, you're not getting your money back.

Also, keep your projects design-neutral so they'll appeal to the greatest number of people. Choose neutral colors and traditional electrical and plumbing fixtures unless your house has a modern architectural style.

Rule No. 6: The new payback time is five years

As with any volatile investment, the longer your time frame, the lower the risk. Don't take on a big project if you're likely to move in less than three to five years. There's just too much chance that any money you put in -- aside from necessary repairs or superficial cosmetic work -- could be lost while the housing market continues to meander.

But if you plan to stay awhile, don't delay starting a project. Home improvements are a bargain right now, with contractors bidding 10%, 20%, even 40% lower for the same work than just a year or two ago, says Bernie Markstein, senior economist for the National Association of Home Builders.

Grab them while they're hungry for work and make it clear that you'll be getting multiple bids so they'll be motivated to undercut one another's prices. You'll fulfill the first rule of investing: Buy low. Then hope that when you're ready to move, you can sell high.

By Josh Garskof, Money Magazine contributing writer - Money Magazine

Mortgage rates edge up slightly

February 13, 2010

Mortgage rates edge up slightly

Rates on 30-year fixed mortgages rose slightly this week, inching above 5 percent, Freddie Mac said Thursday.

The average rate on a 30-year fixed mortgage was 5.01 percent this week, up from 4.98 percent last week. Last year at this time, the average rate for a 30-year fixed mortgage was 5.25 percent.

Rates fell to a record low of 4.71 percent set in early December. They've been held around 5 percent by a Federal Reserve program to pump $1.25 trillion into mortgage-backed securities to try to keep rates low and make home buying more affordable. That program is set to end March 31.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.

The average rate on 15-year fixed-rate mortgages rose slightly to 4.40 percent from 4.39 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.27 percent, up from 4.25 percent a week earlier. Rates on one-year, adjustable-rate mortgages dropped to 4.22 percent from 4.29 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 point for 30-year and 15-year mortgages. It averaged 0.6 point for five-year loans and 0.5 point for one-year loans.

The Next Wave - Vacant Lots Become Hot Property

Vacant residential lots are looking better and better to real estate investors.

The cost of a finished, ready to build lot, can cost a developer about 25 percent of the finished home price. There are a number of these ready-to-go lots on the market at about half what they actually cost to prepare. Investor groups are snapping them up, figuring that the time will come soon when they will be in demand.

"The country needs 1.2 million new units for the next 10 years just because of population growth," says Scott Clark, president of American Development Partners, which has bought thousands of vacant lots all over the West. "[U.S. builders] built about 500,000 units in 2009 and 600,000 units in 2008, so there eventually will be pent-up demand. We want to get as many of those finished lots as we can because as demand begins to rise, the need for housing will become painfully obvious. The delta (ratio of change to value of underlying asset) in this investment will be significant."

Source: Inman News, Scott Bergsman (02/12/2010)

As of Feb 10, 2010 - 15 Best Retirement Cities

Boomers are willing to move farther than previous generations when they retire, and they are choosing places unlike stereotypical retirement hotspots, says Tom Brokaw in his report on Boomer retirement, airing on CNBC, Thursday, March 4 at 9 p.m. ET.

 

The top places listed by AARP and explored on the show are:

 

• Loveland/Fort Collins, Colo.
•  
• Las Cruces, N.M
•  
• Rehoboth Beach, Del.
•  
• Portland, Ore.
•  Greenville, S.C.
•  
• Sarasota, Florida
•  
• Ann Arbor, Mich.
•  
• Tucson, Ariz.
•  
• Montpelier, Vt.
•  
• Honolulu
•  
• Santa Fe, N.M
•  
• Atlanta
•  
• Charleston, S.C
•  
• Northampton, Mass.
•  
• San Diego, Calif.

 

 

Source: CNBC, Paul Toscano (02/05/2010)

 

When Is It Worth The $$$ To Remodel???

A Project's Worthiness

When buyers love a neighborhood, a home's curb appeal, and the price, but strongly dislike its kitchen, number of bathrooms, or basement, should they purchase it and embark on an overhaul? Or should they keep looking for a more perfect union?

The rules of the remodeling and decorating game are different, given the tougher economy. There’s no guarantee that a costly chef-inspired kitchen, luxurious master bathroom, or landscaped deck will offer the financial payback most home owners historically have come to expect.

The amount of dollars and effort invested now needs to be carefully considered, particularly because of today’s surplus of inventory at reduced prices. Your job is to listen closely to buyers’ priorities, serve as a sounding board, and help them weigh pros and cons.

Sometimes another resource—a design pro—should be called in once buyers have narrowed their choices. Depending on the type of work needed, they may find it helpful to hire an architect, decorator, landscape architect, contractor, or other specialist. Many won’t charge because they hope to win the job if a purchase is made. Architect Michael J. Malone, AIA, of WKMC Architects in Dallas offers his help gratis for an initial meeting and estimate, but charges once plans are requested so work can be bid out to contractors.

Others may bill from the get-go with an hourly rate or flat fee if they think the consultation will entail considerable time. St. Louis designer Caryn Burstein of CLB Interiors charges because she visits possible purchases and asks potential clients to fill out and go over a detailed questionnaire. Kitchen designer Jennifer Gilmer of Jennifer Gilmer Designs in Washington, D.C., also charges because of the time needed to view and measure a space and estimate costs. “Most home owners underestimate labor,” she says.

Below are six questions that design pros recommend asking. Home owners waffling on whether to stay put and make changes or look for another home can use the same analysis:

Who should you call?

Allan J. Grant, AIA, of Grant Architects in Chicago advises calling in an architect when an addition is being considered or major interior work is to be tackled, such as moving walls, stairs, or windows. He and Malone find it useful to have a contractor offer input regarding materials and labor costs for these major undertakings. A designer may be the best person to call if the work is more cosmetic, such as changing wall colors, tiles, or countertops, Grant says. A specialist such as a structural engineer might be best for advice relating to specific problems like a cracked foundation, Malone says. The most reputable design pros will also advise home owners when it’s smart not to proceed, even though that may mean no job. Sometimes, they still get the work. Malone discouraged a couple from adding on to their existing home because he felt it would take 10 years or longer for neighboring houses to play catch up to the home’s increased value. “They loved the neighborhood, and proceeded,” he says. He did the work.

How much will the project cost?

Most pros have done enough projects to estimate the final price tag, based on square footage, materials, appliances, level of finish, custom cabinets or stock, and labor, says architect Stuart Cohen, AIA, with Cohen & Hacker in Evanston, Ill. The best experts also know to tell home buyers to set aside funds for unforeseen problems such as decaying joists, which Gilmer recently found in an old house.

How long will they stay?

The cost of changes becomes more sensible if they’re amortized over a longer time frame, and buyers stay at least five years. One of Burstein’s clients was willing to spend $100,000 but wanted to remain just two to three years. “I advised them that that wasn’t long enough to recoup their money, especially since they weren’t putting it into spaces that appeal to most buyers—a kitchen and master bathroom—but spending on lower-level and third-floor changes. I urged them to ask their salesperson for guidance. They’re now looking for another home,” she says.

Are the costs justified in terms of the area?

Here’s where your expertise as a salesperson knowledgeable about comps is invaluable. Buyers need to know that the improvements they make are warranted for the house because of the value of neighboring homes. Salesperson Jennifer Ames of Coldwell Banker Residential Brokerage in Chicago says she often advises buyers on which enhancements will add the most value because of neighborhood prices. Investments also should be made only when area prices are stable or appreciating, says Cohen.

How much are buyers willing to be inconvenienced?

Camping out and using a makeshift kitchen in a basement is fun only for so long. Buyers should decide how willing they are to be inconvenienced if they plan to stay put during construction, says William Bronchick, a Denver attorney and author of How to Sell a House Fast in a Slow Real Estate Market (Wiley, 2008), who has flipped dozens of homes.

Is the project the best use of funds?

Before buyers proceed, suggest they be honest about whether the changes are where they truly want to invest their funds, or if they’d rather buy the house, avoid changes, and spend discretionary dollars on vacations or squirrel them away for retirement, Bronchick says.

----------------------------------------------------------------------------------------

LEARN MORE

Good design books can help buyers visualize changes:

•Creating Your Architectural Style by George D. Hopkins (Pelican Publishing Co., 2009);

•Not So Big Remodeling by Sarah Susanka and Marc Vassallo (The Taunton Press, 2009);

Get Your House Right: Architectural Elements to Use & Avoid by Marianne Cusato and Ben Pentreath (Sterling, 2007)

You lost your house - but you still have to pay!

February 03, 2010

As terrible as it is to lose your house to foreclosure, at least it's a relief to put your biggest financial headache behind you, right?

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

"My understanding was that the deficiency was negotiated away," she said. "Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it."

Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called "liar loans" where they didn't have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances -- like unemployment or a job transfer -- can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

"After the banks foreclose, it's very common now to have large deficiencies with houses not worth the balances owed," said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey's lender, BB&T did indicate it was pursuing more deficiency judgments.

"They follow the rise and fall of foreclosures," said the spokeswoman, who would not discuss Corey's account.

Can they come after you?

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there's a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

"Once they have a judgment, they can pursue you anywhere," said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. "They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail."

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the if the original loan was refinanced, some or all of it may be subject to claims.

Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

"People shouldn't have a false sense of security that a deficiency judgment may not be later sought," Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.
"The parties who bought those notes wouldn't have paid money for them unless they had the intention of acting," Zaretsky said.

The Ticking time bomb

What can be scary is that the judgments don't have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn't have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn't until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

"I told them, 'Hey, you guys released the title,'" he said. "As far as I know, I'm off the hook."

He wasn't. Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."

Lenders are also very inconsistent. One of Zaretsky's short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Strategic defaults

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

"Banks are pulling credit reports to see if it's a strategic default," he said. "If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

"We don't favor any short-sale contracts that leave any deficiency that can be pursued," he said.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.


NEW YORK (CNNMoney.com)

New Wave of The Future: Container Home?

Have you ever thought about living in a container? Yes, you heard me right! No, I’m not talking about being forced into due to the economy, but rather living in one by choice, thanks to the ingenuity of local entrepreneurs.

The other day, a colleague and I made our way to a site on the outskirts of the city to meet with ‘container gurus’ Bryan McCrea and Channing McCorriston to have a peek at a “container home” demo unit. The two (along with Evan Willoughby, who was not present) are the founders of 3twenty Solutions – a company looking to produce affordable dwellings based on containers, right here in Saskatoon.

Their award-winning business concept of recycling and renovating shipping containers for purposes such as office space, sleeping quarters, and housing units has been raising eyebrows and taking heed from a number of industries and property seekers.

The two were kind enough to give us the grand tour of a renovated container – and let me say, I foresee myself wanting one…or three!

The great thing about them – they come standard sizes, which means the dimensions are the same throughout the container. No need for endless measuring, you know exactly what you are getting. Containers are also made of Corten (the strongest steel out there), and have the ability to withstand just about any weather condition.

While this concept might seem revolutionary to North Americans, the truth is that containers have been re-purposed in other parts of the world for quite some time. Containers have been found & reused in parts of China, Australia, and Western Europe – but the trend is just now starting to catch on domestically.
In fact, even some of Google’s Data Centers reside in a complex made of shipping containers. But, thanks to local companies like 3twenty Solutions, these units are on their way to becoming one of the hottest trends in urban living – and perhaps one of the next ’styles’ of real estate.

With over 700,000 idle containers in North America alone, this recycling initiative couldn’t be a greener one. Now the real question is, how would you market this type of home to buyers?

Watch the CNN News report on Shipping Container Homes: http://www.youtube.com/watch?v=UvcUe_yPHdg&feature=player_embedded

FHA Relaxes Anti-Flipping Rule

Beginning Feb. 1, the Federal Housing Administration will provide mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days.

The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.

Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.

FHA's change "is going to be absolutely terrific" for first-time home buyers hoping to take advantage of the tax credit, says Bobby Taylor, an associate with Coldwell Banker Mountain West Real Estate in Salem, Ore.


Source: Washington Post (01/30/2010)

Fannie to Offer Closing Cost Aid on Foreclosures

Fannie Mae, the largest provider of residential home funding in the United States, announced Friday that it would pay the closing costs on purchases of foreclosed homes in its inventory.

The government-controlled company said buyers of qualified properties will get up to 3.5 percent in closing costs, or an equivalent amount for the purchase of new appliances.

The goal of Fannie is to clear out the nearly 50,000 properties it has in inventory— listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes.

"Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover," said Terry Edwards, executive vice president for credit portfolio management, in a statement.

Source: Reuters News, Al Yoon (01/28//2010)

Home Prices Rise Unexpectedly in November

MIAMI - U.S. home prices rose for the sixth straight month in November, with 14 of 20 metro areas posting improvements from the month before.

The Standard & Poor's/Case-Shiller home price index released Tuesday inched up 0.2 percent to a seasonally adjusted reading of 145.49. The index was off 5.3 percent from November last year, nearly matching analyst's estimates that it would fall by 5.1 percent.

The index is now up 3.4 percent from its bottom in May, but still 30 percent below its peak in May 2006.

Phoenix and San Francisco posted the highest month-to-month gains on a seasonally adjusted basis, while New York and Chicago had the largest declines.

Recent price gains have been fueled by a federal tax credit for first-time homebuyers, who rushed to purchase homes ahead of a Nov. 30 deadline. Congress eventually extended the deadline into the spring, and expanded the program to include a tax credit for current homeowners.
While prices have risen steadily on a national basis, some economists predict they will dip again early this year because of high unemployment and foreclosures.

"Until we get job growth, we won't get complete healing of the housing market," said Jeff Humphreys, an economist with the University of Georgia.

Humphreys said data for December and January could show price declines due to a lull in buyer activity after the tax credit was extended.

Rising prices are important to the economic recovery because they make homeowners feel wealthier and lead them to spend more money.

They also help millions of homeowners who owe more to the banks than their houses are worth.

Banks/Mortgage Lenders Seek Payback from Walkaways

Increasingly aggressive mortgage lenders are seeking to collect deficiencies from former home owners who walked away from their properties or sold them in short sales.

Many states, including Florida, give mortgage holders as long as five years to seek a deficiency judgment. If granted, the bank gets up to 20 years to collect and the option to renew for another 20 years if the debt isn’t paid.

About one-third of U.S. states, including California and Arizona, prohibit collection efforts after foreclosure, but home owners usually waive that protection in a refinance.

Most states allow collection on unpaid home-equity loans.

Banks are most likely to try to collect from people who walk away from a property on which they are still making payments.

“The bank is going to pull your credit report, and if you’re current on your other bills they are going to come after you and potentially ruin you,” said Larry Tolchinsky, a Florida real estate attorney.

Source: Bloomberg, Kathleen M. Howley (01/28/2010)

Ten Inexpensive Ways to Wow Buyers

Now is the time for home owners contemplating a spring sale to spruce up their properties in anticipation of what Mike Larson of Weiss Research calls a potentially vibrant home-selling season. "If you have been beating your head against a wall, this is going to feel a lot better,” he jokes.

Here are 10 cheap ways to make a property more attractive to shoppers.

Improve first impressions. Touch up the paint on the front door and other areas that buyers see first.

Clean up the landscaping. Trim the hedges and trees and plant some annuals in the flowerbeds.

Paint the interior. A coat of light yellow or cream with contrasting white woodwork looks fresh and clean.

Refurbish the floors. Buff the hardwoods. Install new carpets – or at least get them professionally cleaned.

Take care of the big problems. If the house needs a roof or the front stoop is crumbling, get them fixed.

Buy warranties. Putting appliances under warranty gives homebuyers a secure feeling.

Improve energy efficiency. New windows or improved insulation tell a potential buyer the seller is on top of things plus they come with tax benefits.

Replace light fixtures. Updated fixtures, especially at the entrance way and in the foyer, create a good first impression.

Buy a stove. Home owners whose kitchen isn’t top of the line can jazz it up for a few hundred dollars by buying a new stove, which gives the room a fresh feel.

Tidy up the bathrooms. Get rid of mildew, replace caulking and replace stained sinks.

Source: U.S. News & World Report, Luke Mullins (01/21/2010)

No Picket Fence on Some Men's Horizon

Even though the government and society applaud homeownership, a growing number of men are little interested in the institution for financial, practical, and emotional reasons.

Only 10 percent of single men buy houses. Some experts say this disparity is related to single males' interest in changing jobs and cities, as well as being more willing to share living space.

Possibly for some people, house buying evolved from living in a house to a speculative investment during the last decade, and with the collapse of the housing market, some people are looking at the true value of that investment to determine if owning a house is worth the expense.

Nathan Quevedo says his bout with homeownership has taught him that having the American dream does not necessarily mean owning a house. Homeownership ties buyers to a location, which makes it harder for people to accept new business ventures and job opportunities if they are in another location.

Moreover, repairs and damage can be costly. Ohio State University Economics Professor Donald Haurin says, "People who are particularly mobile should not be a homeowner because of the high transaction costs [of unloading a house.]"


Source: New York Times

6 Surprising Facts About the Buyer Tax Credit

The homebuyer tax credit is not as simple or straightforward as you might think. Here are some nuances that will affect homebuyers who plan to use it.

To qualify for the move-up tax credit, a home owner must have occupied the same principal residence for five of the last eight years consecutively.

Buyers can elect to claim the credit on either their 2009 or their 2010 tax return, whichever is best for them.

Buyers who claim the credit in 2009 can’t file electronically because the Internal Revenue Service hasn’t put the required forms on line. The wait for a refund is three or four months.

The home can be a mobile home or travel trailer that is fixed to land owned or leased by the home owner. A mobile home or travel trailer that is actually mobile doesn’t qualify.

The home can’t be purchased from a close relative, including a parent, spouse, child, grandparent or grandchild.

A buyer who earns no taxable income or doesn’t owe any federal income tax can qualify for the tax credit and file a tax return just to claim it.


Source: Bankrate.com, Marcie Geffner (01/21/2010)

Harder to get an Uncle Sam mortgage

It's going to be harder to get a government-backed mortgage from now on.

Looking to shore up its weakening finances, the Federal Housing Administration is set to announce stricter standards on Wednesday.

The agency, which insured nearly a third of new mortgages in 2009, will increase the premium it charges for its mortgage insurance and require those with weaker credit scores to come up with larger downpayments.

The FHA will also reduce the amount of money a seller can provide a homebuyer for closing costs, as well as tighten its enforcement of lenders.

"Striking the right balance between managing the FHA's risk, continuing to provide access to underserved communities, and supporting the nation's economic recovery is critically important," FHA Commissioner David Stevens said in a statement. "Importantly, FHA will remain the largest source of home purchase financing for underserved communities."

FHA loans have skyrocketed in popularity during the mortgage crisis since the agency backstops banks if borrowers stop paying. But housing experts are growing increasingly concerned about the agency's ability to handle rising numbers of defaults. (Cash cushion shrivels for FHA.)

In November, the agency reported that its reserve fund has dropped to .53% of its insurance guarantees, well below the 2% ratio mandated by Congress and the 3% ratio it had last fall. The fund covers losses on the mortgages the agency insures.

Federal housing officials, who took several steps to shore up the agency's finances last year, promised to do more. The new announcement is the latest set of changes to FHA policies.

What the new rules mean

The agency will increase its up-front mortgage insurance premium to 2.25%, from 1.75%. It will also ask Congress for the right to hike its ongoing premium, currently between .5% and .55% monthly.

The FHA will also require borrowers to have at least a credit score of 580 to qualify for the agency's 3.5% downpayment program. Those with lower scores will have to pay at least 10%. However, this rule may have little practical effect since Stevens recently said the average borrower score is 693.

The new policy also will reduce the amount of money sellers can provide to homebuyers at closing to 3%, down from 6%, of the home's price. That change will bring the agency in line with industry standards and remove the incentive to inflate appraisals.

Finally, officials plan to clamp down on lenders offering FHA mortgages. It will more closely monitor their performance and compliance with agency rules, as well as seek legislative authority to require mortgage firms to assume liability for all loans they originate and underwrite.

One thing the agency did not do is to broadly increase the downpayment requirement. Many industry observers said such a step is necessary to reduce the risk the FHA faces.

Agency plays crucial role

As banks have clamped down on mortgage lending, the FHA program has emerged as one of the few ways people can buy a home.

Banks are more willing to make FHA loans because they come with a federal guarantee to cover losses if the borrower defaults. And borrowers can more easily qualify for FHA loans because they only need 3.5% down and can have lower credit scores.

As a result, demand for FHA loans has exploded. The agency guaranteed more than $360 billion in single-family mortgages in fiscal 2009, which ended Sept. 30, more than four times the volume in 2007.

The agency insured about 30% of home purchases and 20% of refinanced mortgages in 2009. Nearly 50% of first-time homebuyers go through the agency.

The agency, however, has also seen a spike in delinquencies amid the mortgage meltdown. Some 14.36% of FHA loans were past due in the third quarter, according to the Mortgage Bankers Association. This compares to 9.64% of all loans.


NEW YORK (CNNMoney.com)

FHA To Toughen Down Payment Rules

The Federal Housing Administration will raise the minimum down payment for its least credit-worthy borrowers, agency announced Tuesday.

Borrowers with credit-rating scores below 580 will be required to put down at least 10 percent. Those with a credit score above 580 will be able to continue to put down only 3.5 percent. The changes are intended to shore up the agency's finances.

The FHA also will increase its upfront mortgage insurance premium from 1.75 percent to 2.25 percent. The agency is expected to seek congressional approval to raise annual mortgage insurance premiums, paid by borrowers over the life of the loan, above the current 0.55 percent maximum. The amount it will seek has yet been announced.

Source: Reuters News, Corbett B. Daly (01/19/2010)

FHA Property Flipping Waiver

Saturday, January 16th, 2010

Since the announcement around 5:00 p.m. EST on Friday, January 15, my phone has not stopped ringing. The consensus is that this FHA property flipping waiver is a huge boon. Lots of people are citing links to it but very few people have actually taken the time to read it, break it down, digest it and offer comments about where they think the business is going as a result of this recent property flipping waiver.

Allow me to share with you a few bullet points:

1. This waiver is very good news.

2. This waiver does NOT necessarily mean that you will be able to do back to back same day closes to an FHA end buyer.

Allow me to explain why. Upon closely reading this waiver, you will see that they require that the “seller holds title to the property” thus the investor seller must be the owner of record.

Considering the past policy interpretations of the FHA underwriters, I believe that this means that they may very well expect to see the investor/seller be the owner of record as of the date the contract to sell to the FHA insured buyer is executed. This means that you can close on Monday, go into contract on Tuesday, and hopefully close in 30 days. This is a vast improvement over 91-140 days.

The next salient point is that if you are selling it for 20% more than what you bought it for, you are going to face a higher level of scrutiny in the underwriting process. So, if you can buy a property for $300,000, resell it for less than $360,000 you are going to be fine – but still be prepared to have to come up with the $300,000 and hold the property for a period of time, if you choose to sell to an FHA end buyer.

Sophisticated title companies such as Old School Title and a few other ones that I work with may be able to expedite the process through unique and proprietary business practices that they use to work with FHA underwriters. If you are not working with a cutting edge and industry-leading title and escrow company, now is the time to get with one.

Going back to the actual three page flipping waiver, you will note that the rationale behind this waiver is the recognition that people can buy properties, substantially rehab them and improve the value of them in less than 90 days, so don’t be surprised to see certain FHA underwriters still looking for proof of what you have done to enhance the value. You may in some instances be able to rely on the Freddie Mac Attachment A argument from October 2009 regarding the difference in value is the market reaction to you paying off all of the liens and clearing up the title issues, thus increasing the value of the property. Or, you may have to show receipts for paint and carpet with accompanying before and after photographs.

By now, I hope you realize that I do not see this property flipping waiver as the sudden opening of the bank vault with no security guards anywhere in sight. Rather, I see it as a significant but limited move by our nation’s “housing authority” to try to address the illiquidity in the residential real estate market.

I want it to be very clear that everyone will still need their short term brokerage funding, particularly 30-60 day funding, maybe less, to capitalize on this policy change by the FHA. You will still have to buy and fund this deal and then go through the process of selling to the FHA end buyer. However, it’s a whole lot easier to find 30-60 day money than 90-120 day money.

To summarize the salient points of this waiver:


1. All transactions must be arm’s length.

2. Assignments of a contract for sale will trigger a red flag.

3. The seller holds title to the property.

4. Entities such as LLCs, corporations, and trust must be properly established and operating in accordance with applicable state and Federal law.

5. There is not a pattern of previous flipping activity for the subject property, so if the property has been wholesaled two or three times in the last 12 months I doubt you are going to get an FHA loan on this. If you bought it via a short sale from someone who was losing it in foreclosure, I think you will be in good shape.

6. The property must pass at a minimum the FHA inspection. The program does not apply to reverse mortgages.

7. Most importantly, items 6 and 7 in the waiver make it very clear that this elimination of the 90 day resale restriction clearly applies to private sales of property for resale, therefore the entire restriction set forth in 24 C.F.R. § 203.37a (b)(2) is waived for a one year period.

8. The title company that you use and the particular lender that your C buyer selects will become crucial as to whether you will only need 30 day money or whether you will need money for longer.