Home Buyers Are Ready to Move from the Sidelines: Survey

RISMEDIA, August 30, 2010—Are more Americans positioning themselves for home purchase? Although May’s data showed that home sales were down 26.8% as the home buyer tax credit concluded, a new survey conducted by Relocation.com suggests some families are opting for renting while they research—cash in hand—for deals on a new, more desirable home in their area.

Among the key findings of the survey: Of the 60% of individuals moving into rentals, 24% were previous homeowners who are renting temporarily while they look for a new home to purchase. Underscoring this finding is the fact that for many of these families, foreclosure was not the reason for moving—in fact, the number of consumers who moved due to foreclosure dropped by 70%.

Furthermore, many of these families stayed in the area (one in three made a short distance move of 100 miles or less), opting to remain in a location where they already know their schools, shopping districts and prime neighborhoods.

 “While the housing market continues to flux from month to month, we’re seeing strong, continued interest as consumers looking to move start their research with us,” said Relocation.com Chairman and Founder Sharon Asher. “These findings suggest that more Americans may be poised to re-enter the housing market this year.”

 The Relocation.com survey was conducted in early June 2010 and is a continuation of consumer surveys conducted since March 2009 to gauge moving and relocation attitudes and behaviors.
 For more information, visit http://www.relocation.com/.

 RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

MEDIAN SALES PRICE AND DAYS ON MARKET: DENVER JULY 2010

Reverse Mortgages Pros and Cons

RISMEDIA, August 23, 2010—(Real Estate Center) — Some parents are warning their kids not to bank on inheriting the homestead. Why? Because some parents are considering a reverse mortgage. Such mortgages may not be beneficial for everyone, but their popularity is definitely on the rise.


“Reverse mortgages are based on the home’s current value, borrower’s age and existing interest rates,.” said Dr. James Gaines, research economist for the Real Estate Center at Texas A&M University. “Borrowers can choose to receive loan proceeds in a single, lump-sum payment, as periodic predetermined payments, a line of credit or both.

Writing in the July issue of Tierra Grande magazine, the Center’s flagship periodical, Gaines explained the pros and cons of reverse mortgages.


Pros of a Reverse Mortgage

 • A reverse mortgage has no fixed due date.

• No repayment is required as long as the home remains the borrower’s principal residence.

• Loans become payable upon death, sale, ceasing to live in the home or failure to keep taxes, insurance or maintenance current.

• Borrowers cannot be foreclosed on.

• Reverse mortgages are non-recourse loans. The amount owed can never exceed the selling price.

• Borrowers continue to hold title to the property.

• There are flexible payment options.

• Loan proceeds are not taxable.

• Underwriting and approval do not depend on the borrower’s current income or employment status.

• Would-be borrowers are required to meet with an independent financial counselor prior to getting a loan.

• The lender’s lien on the property is removed if the lender fails to make loan advances according to the agreement.


Cons of a Reverse Mortgage

 • Homeowners must be at least 62 years old, own their home outright or have high home equity.

• Reverse mortgages provide around 65 percent of the home’s value. Loan-to-value ratios as high as 80 percent may be available to older homeowners, but higher closing costs and fees and shorter life expectancy offset some of this advantage.

• When the borrower dies, the loan and all accrued interest and costs become due and payable, typically necessitating the sale of the home. Heirs wanting the house must repay the entire amount due, which could be greater than the home’s value at the time. Inheritance planning is tricky.

• Relatively high up-front costs mean borrowers need to stay in the home longer (at least ten years) to make the loan financially attractive. This disadvantage has been offset by some lenders eliminating origination fees, setting aside service fees or both.

• Borrowers are responsible for all other ownership costs.

• Homes can be foreclosed on if borrowers cease to live in them for 12 consecutive months or default on any obligation, such as maintenance, taxes or insurance.

• Borrowers may be targets for aggressive sales pitches for other expensive and potentially inappropriate products or services.

• Reverse mortgages are fundamentally different than forward purchase mortgages or home equity loans. Generally, reverse mortgages have more complicated terms and conditions.


For a comprehensive explanation, read “Reverse Mortgages: Alternative Home Equity Funding” by Gaines and former Center research assistant Beth Thomas. It can be found online at http://recenter.tamu.edu/pdf/1939.pdf.

David S. Jones is the senior editor for the Real Estate Center at Texas A&M University.


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Homeownership and Stable Communities Go Hand-in-Hand

RISMEDIA, August 16, 2010—Homeowners who are more active in their communities benefit from improved education opportunities and report higher levels of self-esteem and happiness when compared to renters, according to leading research. A new report from the National Association of Realtors, Social Benefits of Homeownership and Stable Housing, explores the impact of stable housing and the positive social outcomes resulting from homeownership.
“Homeownership is in investment in your future—home is where we make memories, build our lives and feel comfortable and secure,” said Vicki Cox Golder, owner of a Tucson, Ariz.-based firm. “Owning a home has long-standing government support in this country because homeownership benefits individuals and families, strengthens our communities and is integral to our nation’s economy.”


NAR’s study identifies research from government, industry and academia that identified the relationship between homeownership and stable communities. Homeowners move far less frequently than renters, and therefore are embedded into the same neighborhood and community for longer. This allows for social cohesion, ultimately resulting in social benefits and stronger communities.


“Realtors care as much about keeping families in their homes as they do about helping them find the home of their dreams,” said Golder. “Social benefits do not arise solely from ownership, but also from greater housing stability and social ties associated with less frequent moves among homeowners.”


Several research studies cited in the NAR report have found that homeownership has a significant impact on educational achievement. For instance, the decision by teenage students to stay in school is higher for those raised by parents who are homeowners compared to those whose parents are renters. Access to economic and educational opportunities are also more prevalent in neighborhoods with high rates of homeownership. Furthermore, studies have shown that changing schools frequently due to moving impacts a child’s educational outcome negatively.


Civic participation is another social benefit resulting from homeownership and stable housing. Homeowners are proven to be more politically active and are more likely to vote in local elections compared to renters. In addition, homeowners have a higher membership in voluntary organizations.


Studies have shown that homeowners are more likely to believe that they can do things as well as anyone else, and they self-report higher ratings on their physical health. “The research shows that homeowners report higher self-esteem and happiness than renters, resulting in better overall health, both physically and psychologically,” said Golder.


When it comes to property, homeowners have more invested both financially and emotionally. Property crimes affect homeowners directly, but nonviolent property crimes can impact the property values of the entire neighborhood. Therefore, homeowners are more motivated to deter crime by forming and implementing voluntary crime prevention programs. In addition, it is easier for homeowners to recognize perpetrators in stable neighborhoods because of extensive social ties. Unstable neighborhoods often display social disorganization which can lead to higher levels of crime.


Along with protecting their home and neighborhood from crime, homeowners spend more time and money maintaining their home than renters. Neighbors also influence other homeowners to improve their property, resulting in a better overall quality of the community.


“Homeownership certainly contributes to positive social outcomes, but those outcomes are truly a result of stable housing communities,” said Golder. “With strong social ties and a cohesive community, homeowners can enjoy not only the long-term financial benefit of owning a home, but also a more satisfying life—which is what’s really at the heart of the American Dream.”

For more information, visit www.realtor.org.


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Beware of Foundation Problems When Getting Your Home In Shape for the Market

Beware of Foundation Problems When Getting Your Home Ready for the Market

RISMEDIA, August 14, 2010—Selling a house isn’t easy these days. There are a huge number homes on the market, and buyers are easily scared off if they encounter problems that may negatively impact resale value. Among the many issues that need to be addressed in order to make a house more marketable, foundation problems rank near the top of the list, according to Walter Molony, an expert in statistics and research at the National Association of Realtors.

“Before a house is listed for sale, the real estate agent will work with the homeowners to make sure that the property is competitive with similar properties in the area,” Molony explains. “A little dampness in the basement or a small drywall crack are flaws that a potential buyer may be willing to overlook,” says Molony, “but a cracked or bowed foundation wall will be a major red flag. Since most home sales are contingent on a satisfactory home inspection, foundation problems are very likely to stop a home sale dead in its tracks.”

Home improvements vs. home repairs

In today’s tight economy, it’s understandable for homeowners to put off home improvements until they feel more financially secure. But it’s important to make a distinction between basic “feel-good” improvements (like painting a room or installing shelving) and repairs that correct safety issues or prevent a problem from getting worse. Fixing a damaged foundation definitely falls into this latter “must-do” category.

“It’s risky to put off fixing a damaged foundation,” says Dave Thrasher, of Nebraska-based Foundation Supportworks. “If a crack starts to enlarge or a wall starts to buckle, you’re seeing a failure that is probably going to get worse,” Thrasher continues. “The longer you wait, the more extensive the problem becomes and the more expensive the repair is going to be.”

Foundation problems follow the building boom

Some foundation problems are obvious—cracks, tilting chimneys and bowing basement walls, for example. But there are other symptoms that may signal a settling or shifting foundation. For example, windows or doors can be racked by a shifting foundation and become difficult to open and close. Drywall cracks that extend from the corners of windows and doors are another telltale sign.

As surprising as it seems, a newer home may be just as likely to have foundation problems as an older one. A Wall Street Journal article (8/13/2009) reported on an entire housing development in California with numerous foundation problems.

According to journalist M.P. McQueen, the decade-long building boom that began in the late 1990s “caused shortages of both skilled construction workers and quality materials. Many municipalities also fell behind inspecting and certifying new homes.” This perfect storm of poor quality control definitely took its toll. Research conducted by Criterium Engineers, a national building-inspection company, confirmed an uptick in the percentage of new homes with major construction defects.

Specialty foundation repair contractors have the right solutions

The good news about foundation problems is that most of them can be corrected, as long as the contractor has the training, tools and materials to do so. “We certainly get our share of calls from panicked homeowners,” says Thrasher. “By the time people call us, they’ve probably realized that local remodeling contractors can only temporarily fix cosmetic problems, but are unable to permanently solve the problem.

For more information, visit www.foundationsupportworks.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Tips to Keep Your Central Air Running Well

RISMEDIA, August 11, 2010—As the summer sun continues to heat up the country, homeowners are taking full advantage of their central air conditioner units. Charles Furlough, vice president, Pillar To Post Home Inspections offers the following tips to keep your air conditioner running smoothly this summer.

 Keep It Clear:

The big AC unit outside your house is called the condenser. This equipment actually cools the liquid in the coils of your AC. Cooler coils mean cooler air in your house.

You’ll want to keep the area around the condenser clear of grass, bushes, leaves and just about everything else so that the fan gets the maximum amount of airflow. Ensure there is nothing blocking the vents or around the unit for one or two feet in every direction.

Keep It Clean:


Turn off the power to the unit before cleaning. Check that the interior is free of debris on the inside and outside. Most units can be cleaned with a hose sprayed from the top down, washing any dirt or debris from the inside. Remove one side panel of the outside unit and then take a broom or rake and remove any leftover debris or leaves that have been washed down to the bottom.

Coils can be damaged fairly easily, so spraying them down with water usually is sufficient.

Keep It Cool:


The U.S. Department of Energy recommends shading your central AC unit so that it doesn’t have to work as hard to cool the coils inside the unit. Planting a shade tree near (but not too close) the unit can help keep the unit cool and running efficiently. According to the U.S. Department of Energy, this one action could save you up to 10% on your cooling bill.

Keep It Consistent:


Turning the AC unit on and off can wear down interior switches and potentially damage the thermostat. Instead, set the thermostat temperature and let the air conditioning catch up and do its job without interference.

An automatic thermostat can be programmed to change the temperature when the home is typically empty during the day. This money-saving idea also saves energy, since the house won’t be as cool when no one is at home.

Keep the central air conditioner fan on AUTO and not ON all the time. These systems are meant to cycle on their own terms and keeping the furnace fan ON all the time could actually blow warm air back into the home.

Keep It Maintained:


Check the air filter and replace it a little more often than usual. In addition to the filter, look around for any leaks in the hoses or air ducts. Loose ducts with small gaps and tiny air leaks around older duct work can severely diminish the AC’s efficiency.

Keep It Charged and Serviced:


A professional technician can tell if the refrigerant should be recharged or if other system elements need replacing. Consider having a full service on your AC unit every year or two. The money recovered in energy savings and peace of mind during those hot summer days will easily compensate for the incremental cost.

For more information, visit www.pillartopost.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

How Important Changes to Mortgage Underwriting May Affect Many Buyers

RISMEDIA, August 9, 2010—

The real estate industry and especially the mortgage industry have been overwhelmed with changes, regulations and consolidations recently. In the last couple of months, many transactions nationally have experienced delayed closings or worse as a result of the application of new guidelines affecting APR, Good Faith Estimates (GFE), Truth in Lending (TILA) and condo project approvals to name a few. 

There is one more issue that is critical for real estate agents, loan officers, and anyone else who deals with consumers purchasing a home or obtaining a refinance. Effective with applications on or after June 1, 2010, Fannie Mae has issued new lender mandates (FNMA LL-2010-03 Loan Quality Initiative) on a national basis that, if not understood properly, could have devastating consequences for many buyers and sellers. We want to be certain that everyone understands the implications of the new rules and ensure that all interested parties know what they need to know to minimize negative repercussions.

The intent of this initiative is to assure that all applicant information is disclosed and is honest and accurate as of the moment of closing. Lenders will now be required to re-pull credit report information just prior to closing, re-verify employment, validate Social Security numbers, verify intent to occupy and verify that all parties to the transaction have been checked against the national “excluded party” list, which is managed by HUD and by the General Services Administration. Changes in any of these factors are likely to result in a re-underwrite, the need for additional documentation, or suspension of loan closing.

The most onerous of these is the credit re-pull. It is important that this is done as a “soft pull” so it does not show as an inquiry, which could potentially change the borrower’s credit score. Firms will, however, have to match the outstanding debts and inquiries with the report used to approve the loan. Additional credit or increased balances that change the debt-to-income ratio more than 2% (or less if it now exceeds guidelines) will require the loan to be suspended and re-submitted to underwriting.

Any additional delinquencies will result in a new, full credit re-pull and re-underwriting, utilizing the new credit. Any and all inquiries from other lenders or credit suppliers must be verified by the credit bureau and certified that new debt did not occur. If new credit has been extended, the new debt must be included in the borrower’s debt-to-income ratio and the loan must be re-underwritten.

Other considerations are W-2 employees that may own more than 25% of a business, mandating business returns and cash flow analysis and full disclosure of child support and alimony. Changes could render the applicant unqualified or could delay the closing. As a result of TILA, GFE and risk-based pricing changes, additional debt could result in re-pricing the loan due to a change in credit score, which even if approvable, would delay the closing three business days as re-disclosure would be required.

So How Do We Manage the New Process?
Real estate agents and lenders must impress upon the applicants the need for full and honest disclosure at the time of application, during the loan process and at closing. Buyers must be cautioned against applying for new credit during the process, changing jobs (30-day pay stub requirements are being enforced), and charging to their credit cards. It is imperative that they notify the lender if anything changes from application to closing.

We must all be aware that an applicant that signs an erroneous initial or final closing application could be committing fraud. Lenders choosing to approve loans without the proper loan quality processes and documentation are only endangering the buyer. Any lender or real estate agent that encourages someone to falsify information could be equally responsible. It is noteworthy to mention that many loans go through an immediate quality control audit post closing, so this could affect highly qualified applicants as well. Identified fraud of this nature could be investigated by the FBI.

While this new policy was implemented first by Fannie Mae, it is already a mandate of all national lenders and, based on experience, will soon be required on every loan. It is important to keep this in mind on every deal, not just ones that may involve Fannie Mae.

Jim Dinkel is vice president of FM Lending in Raleigh, North Carolina.

Ken Trepeta is director of Real Estate Services for the National Association of REALTORS®.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Denver Metro Market Update

We are over halfway through this new year. Into the bowels of summer we drift with Fall peeking at us from just around the corner. Before we know it,
school buses will once again populate the roadways. Friday night football games will echo across the landscape.  Summer will have become a distant memory.

Life appears to move more quickly these days in this age of information. There is so much more to occupy our minds; more stuff to sift through; more options. At times, there can be too much. We are on overflow. Fortunately, for those of us who call Metro Denver home, we can escape to the mountains, to the neighborhood park or simply take the time to relax and reflect on the fact we live in such a beautiful place. During these times of economic upheaval and personal stress, the Metro Denver real estate market has retained some semblance of sanity. While parts of California, Nevada, Texas and Florida have seen property values plummet, our market area has held its own. It’s not the “good old days” when double digit appreciation was the norm, but it definitely hasn’t been the “bad new days” with double digit depreciation. Thus, there are some things to be thankful for.

Home mortgage interest rates, those purveyors of doom and gloom in the past, have been our friend recently. The traditional thirty-year fixed rate mortgage has trickled down below 5%, making the home buying process more affordable. Despite the fact the government’s Home Buyer Tax Credit Program terminated on April 30, 2010 (contracts written on or before that date must now close no later than September 30, 2010) it is a great time to buy.
There are a number of reasons why NOW is the time to think seriously about purchasing a first home or moving-up.
 
1. Home mortgage interest rates don’t stay down forever. Once the economy stabilizes and shows
signs of sustained growth, interest rates will rise. It’s a given. 

2. Homeowners are still motivated to sell. There are nearly 5,600 single family homes available for sale now throughout the Metro Denver area. I would surmise all of those owners would like to sell their home this year.
 
3. New home construction, especially in the custom home arena, has been extremely limited the past couple of years as builders worked to rid themselves of standing inventory. Banks weren’t overly excited about lending to builders to build spec homes. Production builders have been gearing-up the past six months offering buyer incentives for landscaping, basement finish, financing, etc.

4. Investors have reentered the marketplace. Not to describe them as vultures, that would be unfair, they are “opportunists”. They could be the little old lady who plays the organ Sunday’s at the community church who wants an investment property to an organized investment group looking to purchase tracks of land or large apartment complexes. In times of economic crisis, there are always opportunities for those who are proactive.

5. Finally, this is an excellent time to consider building a new custom home. Custom home builders have been sitting on the sidelines for the past couple of years, surviving on basement finishes and kitchen remodels. Building material costs are more reasonable today than they were two or three years ago. Subcontractors are looking for work. Developers want to “jump-start” their subdivisions and may be more willing to work with a presale buyer on the value of their lots.

For more information on how to take care of this great buying market, call Cynthia today: 303-563-9700.