On today’s market, every savvy seller wants to know what turns buyers off, so they can get their homes sold as quickly as possible, for as much as possible. But buyers, take note – there is a minefield of seller turn-offs you can trigger that hold the potential to keep you from getting the home you want at the best price and terms, or to unnecessarily complicate dealings with your home’s seller.
Lest you think all of today’s sellers are under the gun and will just put up with whatever behavior buyers dish out, be aware that there are still many multiple offer situations in which buyers have to compete with each other to get a home – buyers who trigger these turnoffs tend to lose in those scenarios. Also, avoiding these seller turnoffs can create a transactional environment of cooperation and avoid things turning adversarial. That, in turn, can empower you to score a better price, get extra items you want thrown into the deal, and even negotiate more flexibility around your escrow and move-in timelines – all perks that can make your life easier and your budget go further.
For sellers, these turnoffs pose the potential of irritating you out of an otherwise good deal – maybe even the only deal you have!
Here’s a few of the most common buyer-perpetuated seller turnoffs, with tips for sellers on how to keep an emotional (and economic) even keel, even if your home’s buyer makes some of these waves:
1. Trash-talking. Trash-talkers are the home buyers who think they’re going to negotiate the list price down by slamming the house, telling the sellers how little it is really worth, how the house across the street sold for nothing, why the school on the corner should make them desperate to give the place away, etc. This strategy never works; in fact, when you attack a seller and their home, you only cause them to be defensive, and think up all the reasons that (a) their home is not what you say it is, and (b) they shouldn’t sell their home to you!
Sometimes this happens with buyers who actually love a house and just walk around it fantasizing about all the ways they would customize it to their tastes while a seller is there. Sellers: avoid being at home while your home is being shown. Buyers: save your commentary for your agent; if you do encounter the seller in person keep your conversation respectful and avoid critiquing the house or the list price.
2. Being unqualified for mortgage financing. When a seller signs a buyer’s offer, most often the seller agrees to effectively pull the home off the market, forgoing other buyers who might be interested. As such, the only thing worse than getting no offers on your home is getting an offer, getting into contract, then having the whole thing fall apart when the buyer’s loan falls through – especially if that could have been predicted or avoided up front.
Sellers: Work with your agent to vet your home’s buyers’ qualifications, including their loan approval, down payment and earnest money deposit – before you sign a contract. It’s not overkill for your agent to call the buyers’ mortgage pro before you sign the contract and get a level of comfort for how robust their qualifications are. Buyers: Get pre-approved. Seriously. And make sure that you don’t buy a car, quit your job, deposit lottery winnings or do any other financial twitchery between the time you get loan approval and the time you close escrow on your home.
3. Making unjustified lowball offers. No one likes to feel like they are being taken advantage of. And sellers generally know the ballpark amount that their home is worth, as well as what they need to sell it for to get their mortgage paid off. Yes – the price you pay for a home should be driven by its fair market value, rather than the seller’s financial needs, and deals are more available in a market like the current one, in which supply so vastly outpaces demand. But just throwing uber-lowball offers out at sellers hoping one will hit the spot is not generally a successful strategy, especially if you really, really want a given property.
Sellers: Don’t get overly emotional about receiving a lowball offer; counter at the price you and your agent decide makes sense based on the total circumstances, including your motivation level, recent comps and the interest/activity level your listing is receiving. Buyers: Work through the similar, nearby homes that have recently sold (a/k/a comparables) before you make an offer to factor the home’s fair market value into your offer price – also factor in how much you want the place, too. Don’t be amazed if you make an offer far below asking, and don’t get a response.
4. Renegotiating mid-stream. Sellers plan their finances, moves and - to some extent – their lives around the purchase price a buyer agrees to pay for their home. If you get into contract to buy a home, find out during inspections that costly repairs need to be made, then propose a lower sale price, repair credit or even actual repairs to the seller, that’s sensible and fair. But if you were aware that the property needed a lot of work before you made an offer on it, then you come back asking for beaucoup bucks’ worth of credit or price reductions midstream, expect the seller to cry foul. And holding the seller up two weeks into the transaction because you caught a case of buyer's remorse? Not cool, and not likely to foster the spirit of cooperation you may need to get your deal closed.
Sellers: avoid mid-stream price renegotiations by having a full set of inspection reports and repair bids at hand when you list your home. Buyers: try to avoid renegotiating the entire deal unless you get some major surprises at your inspections or inflating small repairs to try to justify a major price cut.
5. Misleading or setting the seller up. Remember when we talked about buyer turn-offs? Being misled by listing photos or very fluffy property descriptions was high on the list. The same goes for sellers.Offering way over asking with the plan to hammer the seller for a reduction when the house doesn’t appraise at the purchase price? #LAME Making an as-is offer planning the whole time to come back and ask for every penny ante repair called out by the inspectors? Lame squared.
Sellers: If you get multiple offers and are tempted to take a sky-high one or one that claims to be all cash, consider requesting proof that the buyer has sufficient funds to make up the difference between what you think the home will appraise for and the actual sale price, and statements showing the cash truly exists. Buyers: Don’t be lame. I’m not saying you have to tell the seller exactly what your top dollar is, but making offers with terms designed to intentionally mislead is really, really bad form – and can result in losing the home entirely if and when your bluff gets called.
Thursday, March 31, 2011
Monday, March 28, 2011
More people signed contracts to buy homes in Feb.
WASHINGTON — More Americans signed contracts to buy homes in February, but sales were uneven across the country and not enough to signal a rebound in the housing market.
The National Association of Realtors says its index of sales agreements rose 2.1% last month to a reading of 90.8. Sales rose in every region but the Northeast.
Signings were 19.6% above June’s reading, low point since the housing bust. Still, the index is below 100, which is considered a healthy level. The last time it reached that point was April, the final month people could qualify for a federal home-buying tax credit.
Contract signings are usually a good indicator of where the housing market is heading. That’s because there’s usually a one- to two-month lag between a sales contract being signed and a completed deal.
The pace of sales varied from region to region. Signings fell 10.9% in the Northeast. They rose 2.7% in the South, 4% in Midwest and 7% in the West.
High unemployment, strict lending standards, and a record number of foreclosures are deterring would-be buyers, who fear home prices haven’t hit bottom.
Sales of previously owned homes fell last year to the lowest level in 13 years, and economists say it will be years more before the housing market fully recovers. The rise in foreclosures has pushed the median price of previously occupied homes to its lowest point in nearly 9 years.
New-home sales have fared even worse. Americans are on track to buy fewer new homes than in any year since the government began keeping data almost a half-century ago. Sales are now just half the pace of 1963 — even though there are 120 million more people in the United States now.
The National Association of Realtors says its index of sales agreements rose 2.1% last month to a reading of 90.8. Sales rose in every region but the Northeast.
Signings were 19.6% above June’s reading, low point since the housing bust. Still, the index is below 100, which is considered a healthy level. The last time it reached that point was April, the final month people could qualify for a federal home-buying tax credit.
Contract signings are usually a good indicator of where the housing market is heading. That’s because there’s usually a one- to two-month lag between a sales contract being signed and a completed deal.
The pace of sales varied from region to region. Signings fell 10.9% in the Northeast. They rose 2.7% in the South, 4% in Midwest and 7% in the West.
High unemployment, strict lending standards, and a record number of foreclosures are deterring would-be buyers, who fear home prices haven’t hit bottom.
Sales of previously owned homes fell last year to the lowest level in 13 years, and economists say it will be years more before the housing market fully recovers. The rise in foreclosures has pushed the median price of previously occupied homes to its lowest point in nearly 9 years.
New-home sales have fared even worse. Americans are on track to buy fewer new homes than in any year since the government began keeping data almost a half-century ago. Sales are now just half the pace of 1963 — even though there are 120 million more people in the United States now.
Home sellers pull out all the stops to attract wary buyers
At the Millbrook Pointe development in quaint and pristine Wheeling, a $269,000, brick-and-stone townhouse comes with $25,000 in free upgrades, including wood-burning fireplaces, all-stainless steel kitchens and marbled bathrooms tricked out with double-bowl vanities and whirlpool soaker tubs.
Down the highway at the Patriot Place golf course villas in Bolingbrook, buyers are lavished with lawns sodded to perfection, absurdly low seller financing and a year of free insurance that will pay the mortgage if you lose your job.
At the Sunset Ridge estates, the amenity bonanza gets even more surreal: Buy a customizable colonial for as little as $170,000 and get a brand new, $17,000 Chevy Cruze. The 2011 model. For free.
Spring for home sellers is like Christmas for retailers — peak season. Normally, that might mean a few giveaways. A better brand of siding here. An expanded choice of tile color there. But a new car? “Obviously, business has been soft,” says Kim Meier, president of KLM Homebuilders, the company offering the promotion.
The festival of upgrades on new homes — especially in the housing markets that were savaged by the subprime meltdown — is queasy confirmation of just how much the housing market remains the sickest part of the U.S. economy.
Existing home sales plunged nearly 10% in February to their lowest level in nine years. It was the largest drop since July. Forty percent of those sales were on distressed properties. And new-home sales are on track to come in at just 250,000 this year, the fewest since the Kennedy administration, when there were 120 million fewer people in the United States.
“What is discouraging in many markets is that it appears as if some of the local builders are creating the volume,” says Wayne Yamano, vice president with John Burns Real Estate Consulting.
Across the country, real estate agents are reporting a rise in traffic at open houses. But they say buyers are reluctant because of the shellshock they suffered after the free-money machine blew up in everyone’s face. The foreclosure epidemic. The plague of employment insecurity. The fear that the U.S. is on a downward slide. They’re all playing into buyer commitment phobia, brokers say.
There’s also confusion over the conflicting signals. Prices are low, but unemployment is high. Mortgage rates are attractive, but lending standards are strict. Renting is newly chic. “Everybody is now self-loathing about how we’re greedy Americans and we shouldn’t want to own homes,” says Jonathan Miller, CEO of real estate consulting firm Miller Samuel.
The U.S. will certainly have a spring home buying season this year. But even if sales rise as usual, they won’t pull the zombie housing market out of its stupor. Nationwide, forecasters expect house prices to drop at least 5% more this year. And no one in housing land is murmuring about anything like price stabilization until 2012. At least. “We don’t expect a dramatic rebound,” says Paul Ashworth, managing partner at Capital Economics. “We expect stagnation for several more years.”
The housing problems certainly aren’t easing. Foreclosures are expected to peak this year. A third of homeowners owe more than their homes are worth. Normally the number of people with negative equity is 5%. And strategic defaults, where people simply walk away, are rising.
The buying that is happening isn’t coming from first-time homebuyers. A recent study by Capital Economics found that 60% of sales are to foreigners and investors, most of them paying cash. In fact, in international real estate circles, the U.S. is viewed as the “new emerging market,” says Thomas Shapiro, president of global real estate investment firm GTIS Partners.
Foreigners are attracted to U.S. real estate because their local currencies are so much stronger than the dollar. Investors are also attracted to the properties because rents are rising. “You don’t get much money from buying Treasurys as safe investments,” Ashworth says. “There is a search for yield that is making residential property look more attractive.”
Real estate is hyper-local. The places hit hardest by the foreclosure epidemic — California, Arizona, Nevada, Utah and Florida — are certainly skewing the statistics for the worse. In places like New York City, Washington, D.C., and San Francisco, the real estate market is strengthening and can almost seem exempt from the national malaise. That’s because the job market in those cities — dominated by finance, the federal government and the tech sector, respectively — remains robust compared with the rest of the nation.
“If you have a secure job and the economy around is growing, then it’s a great time to buy,” says Barbara Corcoran, a New York real estate investor and analyst. “That’s not true in too many places, but you can see improvement in certain pockets.”
Adds Tara-Nicholle Nelson, director of consumer education at the online real estate search firm Trulia.com: “It’s like a big spring clearance sale on real estate.”
Todd Leykamp, 29, works in TV production in Los Angeles. He and his girlfriend have been casing the open-house market for six months. They pay $1,200 a month for their Hollywood rental and can afford to double that payment if they buy a house. But he says they have yet to find The One. “There are just too many factors, and every time you find one you love, there are 10 more out there you haven’t found that you’ll love just as much,” Leykamp says.
Worse news for sellers is that buyers don’t think the housing market has hit bottom yet, according to Truila.com. A recent survey by Trulia and Harris Interactive found that nearly 70% of renters who aspire to being homeowners say they will wait at least two years before buying. And nearly 60% say a housing recovery won’t come until after 2012.
“Many are reluctant to purchase a home even if they have the means because of the uncertainties in the economy,” says Celia Chen, a housing market analyst at Moody’s Analytics.
It’s clear that many sellers are panicked. A quarter of sellers who listed their properties on Truila.com on March 1 have already slashed their prices at least once.
Last summer, Bobby Barweki started looking for a foreclosure to buy. Barweki, 30, scraped together a 20% down payment by living with his parents after graduating from college in 2007. The foreclosures he looked at were all “trashed,” he says.
Then one day his dad sent him an e-mail about the free-car deal at Sunset Ridge Estates.
Barweki, a store manager at Chicago recreation goods chain Novotny Sales, just closed on a $178,900 ranch. He has a 4.875% interest rate on a 30-year-loan. Instead of getting the new car, he opted for $17,000 worth of free upgrades, including a stone facade and hardwood floors. Barweki doesn’t have much faith in an economy where the definition of a recovery seems to be that things don’t get worse. He says all the new jobs are low-paying. And he doesn’t think the housing market has hit bottom. But for him, it was the right time. “Interest rates are low, I had the money, and I got a great deal,” Barweki says.
The U.S. has already suffered one “lost decade” in housing. Now some economists are worried that the country could be in for another. “It could be 10 to 15 years before you are going to get back to peak levels,” says Zillow.com chief economist Stan Humphries.
Fewer first-time home buyers hurt market
Many first-time home buyers are sitting on the sidelines of the U.S. housing market, hampering its ability to gain traction.
Last month, 34% of existing-home purchases were made by first-time buyers, according to the National Association of Realtors. In January, they were 29% of the market, the lowest since NAR surveys started tracking them monthly in late 2008.
In healthy markets, first-time buyers make up 40% to 45% of all purchasers. They play a critical role in buying starter homes so those owners can buy more expensive homes.
Despite low mortgage rates and falling prices in many markets, existing-home sales have been weak for months and were down 2.8% in February from a year ago.
MORE: Real Estate front page
What’s keeping more first-timers at bay:
•Expired tax credits. Federal credits boosted home sales in 2009 and 2010 and lured some first-time buyers into the market sooner than normal, says Lawrence Yun, NAR chief economist. The credits expired in April. Last March, 48% of buyers were first-timers, Inside Mortgage Finance data show. “It’ll take some time to rebuild that pipeline,” Yun says.
•Lending standards. Tighter lending standards since the housing bust are edging out first-timers who can’t meet credit or employment history requirements in a still-weak economy, says Guy Cecala, publisher of Inside Mortgage Finance.
Higher credit standards are reflected in loans bought by government-backed mortgage giants Freddie Mac and Fannie Mae. Last year, loans in Freddie Mac’s portfolio had an average credit score of 758, it says. That was up from 720 five years ago.
Many lenders are also requiring higher down payments, says Greg McBride, senior analyst at Bankrate.com. The best terms kick in with 20% or more down. Higher down payments are driving more buyers to Federal Housing Administration loans. The FHA requires as little as 3.5% down for borrowers with good credit scores. In fiscal year 2010, FHA loans were 19% of the home purchase market vs. 14% a decade before.
•Competition. In February, cash buyers accounted for a record 33% of existing-home sales, NAR says. In some areas, including Southern Nevada, cash buyers now account for more than half of existing-home sales. Sellers often prefer cash offers because they’re more likely to close, says Realtor Jerry Abbott of Grupe Real Estate in Stockton, Calif. He recently had one listing with six offers: one cash, two with 20% down payments and four FHA, which often means first-time buyers.
“The seller didn’t even consider the FHA” offers, Abbott says.
Last month, 34% of existing-home purchases were made by first-time buyers, according to the National Association of Realtors. In January, they were 29% of the market, the lowest since NAR surveys started tracking them monthly in late 2008.
In healthy markets, first-time buyers make up 40% to 45% of all purchasers. They play a critical role in buying starter homes so those owners can buy more expensive homes.
Despite low mortgage rates and falling prices in many markets, existing-home sales have been weak for months and were down 2.8% in February from a year ago.
MORE: Real Estate front page
What’s keeping more first-timers at bay:
•Expired tax credits. Federal credits boosted home sales in 2009 and 2010 and lured some first-time buyers into the market sooner than normal, says Lawrence Yun, NAR chief economist. The credits expired in April. Last March, 48% of buyers were first-timers, Inside Mortgage Finance data show. “It’ll take some time to rebuild that pipeline,” Yun says.
•Lending standards. Tighter lending standards since the housing bust are edging out first-timers who can’t meet credit or employment history requirements in a still-weak economy, says Guy Cecala, publisher of Inside Mortgage Finance.
Higher credit standards are reflected in loans bought by government-backed mortgage giants Freddie Mac and Fannie Mae. Last year, loans in Freddie Mac’s portfolio had an average credit score of 758, it says. That was up from 720 five years ago.
Many lenders are also requiring higher down payments, says Greg McBride, senior analyst at Bankrate.com. The best terms kick in with 20% or more down. Higher down payments are driving more buyers to Federal Housing Administration loans. The FHA requires as little as 3.5% down for borrowers with good credit scores. In fiscal year 2010, FHA loans were 19% of the home purchase market vs. 14% a decade before.
•Competition. In February, cash buyers accounted for a record 33% of existing-home sales, NAR says. In some areas, including Southern Nevada, cash buyers now account for more than half of existing-home sales. Sellers often prefer cash offers because they’re more likely to close, says Realtor Jerry Abbott of Grupe Real Estate in Stockton, Calif. He recently had one listing with six offers: one cash, two with 20% down payments and four FHA, which often means first-time buyers.
“The seller didn’t even consider the FHA” offers, Abbott says.
30-Year Fixed-Rate Mortgage Edges Up to 4.81 Percent
MCLEAN, Va. -- Freddie Mac today released the results of its Primary Mortgage Market Survey (PMMS), which shows rates increasing from the previous week influenced by inflationary and ongoing geopolitical concerns. The 30-year fixed-rate mortgage matches its February 3, 2011 level of 4.81 percent.
30-year fixed-rate mortgage (FRM) averaged 4.81 percent with an average 0.7 point for the week ending March 24, 2011, up from last week when it averaged 4.76 percent. Last year at this time, the 30-year FRM averaged 4.99 percent.
15-year FRM this week averaged 4.04 percent with an average 0.7 point, up from last week when it averaged 3.97 percent. A year ago at this time, the 15-year FRM averaged 4.34 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.62 percent this week, with an average 0.6 point, up from last week when it averaged 3.57 percent. A year ago, the 5-year ARM averaged 4.14 percent.
1-year Treasury-indexed ARM averaged 3.21 percent this week with an average 0.6 point, up from last week when it averaged 3.17 percent. At this time last year, the 1-year ARM averaged 4.2 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Mortgage rates were up this week compared to last, but still remain at relatively low levels. The rate uptick was related to higher than anticipated inflation data for February and ongoing geopolitical concerns. The 12-month growth rate in the consumer price index rose 2.1 percent in February, compared to 1.6 percent in January; however, most of the increase was due to food and energy prices, which tend to be volatile. The core index rose 1.1 percent, slightly up from 1.0 percent in January."
"The housing market recovery experienced a setback during the start of this year. Existing home sales fell 9.6 percent from January to February and were down 2.8 percent from February 2010. Sales of new homes declined for the second consecutive month in February to record lows dating back to 1963. Even new construction on one-family homes fell 11.8 percent in February to the third slowest pace since 1959."
30-year fixed-rate mortgage (FRM) averaged 4.81 percent with an average 0.7 point for the week ending March 24, 2011, up from last week when it averaged 4.76 percent. Last year at this time, the 30-year FRM averaged 4.99 percent.
15-year FRM this week averaged 4.04 percent with an average 0.7 point, up from last week when it averaged 3.97 percent. A year ago at this time, the 15-year FRM averaged 4.34 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.62 percent this week, with an average 0.6 point, up from last week when it averaged 3.57 percent. A year ago, the 5-year ARM averaged 4.14 percent.
1-year Treasury-indexed ARM averaged 3.21 percent this week with an average 0.6 point, up from last week when it averaged 3.17 percent. At this time last year, the 1-year ARM averaged 4.2 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Mortgage rates were up this week compared to last, but still remain at relatively low levels. The rate uptick was related to higher than anticipated inflation data for February and ongoing geopolitical concerns. The 12-month growth rate in the consumer price index rose 2.1 percent in February, compared to 1.6 percent in January; however, most of the increase was due to food and energy prices, which tend to be volatile. The core index rose 1.1 percent, slightly up from 1.0 percent in January."
"The housing market recovery experienced a setback during the start of this year. Existing home sales fell 9.6 percent from January to February and were down 2.8 percent from February 2010. Sales of new homes declined for the second consecutive month in February to record lows dating back to 1963. Even new construction on one-family homes fell 11.8 percent in February to the third slowest pace since 1959."
Real Estate Outlook: Younger Generation Leads Way
If the latest release from the National Association of Home Builders and Builder Magazine is any indication, it may just be the younger generation of Americans that leads the way to a housing recovery.
While they make up just 32 percent of the home-buying population, Generation X is the most mobile of the generations.
Mollie Carmichael, principal of John Burns Real Estate Consulting in Irvine, California, says, "They are in full force with their careers and they need to accommodate growing families."
In comparison, Baby Boomers, who make up 41 percent of potential buyers, are waiting it out until the market improves.
Is this part of the reason that existing-home sales fell in February for the third consecutive month? Some experts think so.
According to National Association of Realtors chief economist, Lawrence Yun, “Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers.”
Regionally, the numbers were consistent. All four regions saw decreases in existing-home sales in February. And the declines were fairly hefty figures.
The Northeast was down 7.2 percent, with the median home price down 9.5 percent from a year ago. It is now around $230,000.
The Midwest saw the largest decline, at 12.2 percent. Their median price is a much more affordable $122,000, but is still down 5.4 percent from February 2010.
And the South and West fell 10.2 and 8.0 percent, taking them to existing-home sale figures close to year ago levels.
Unfortunately, it's not just sellers feeling the crunch of the down market. Builders are feeling the pain, as well.
Nationwide housing starts and permits were both down in February, according to the U.S. Commerce Department.
Bob Nielsen, NAHB chairman, says this decline is the effect of builder uncertainty. He says, "The decline in new construction and permits in February is the culmination of a great deal of nervousness that both builders and consumers are feeling right now. In an already-fragile market where credit for building and buying homes remains extremely tight, additional concerns about energy costs, interest rates and other factors are contributing to an atmosphere in which many have adopted a very cautious stance."
And just like with existing-home sales, no region was immune.
Regional declines were nearly all in the double digits. The Northeast was down 37.5 percent. The West posted a 28 percent decline for February. And the Midwest was down a whopping 48.6 percent. The smallest decline was seen in the South, at just 6.3 percent.
Overall, the economy continues to try to recover. There are pockets of lights in areas all across the nation. Let's hope they start shining on some of the darker areas.
While they make up just 32 percent of the home-buying population, Generation X is the most mobile of the generations.
Mollie Carmichael, principal of John Burns Real Estate Consulting in Irvine, California, says, "They are in full force with their careers and they need to accommodate growing families."
In comparison, Baby Boomers, who make up 41 percent of potential buyers, are waiting it out until the market improves.
Is this part of the reason that existing-home sales fell in February for the third consecutive month? Some experts think so.
According to National Association of Realtors chief economist, Lawrence Yun, “Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers.”
Regionally, the numbers were consistent. All four regions saw decreases in existing-home sales in February. And the declines were fairly hefty figures.
The Northeast was down 7.2 percent, with the median home price down 9.5 percent from a year ago. It is now around $230,000.
The Midwest saw the largest decline, at 12.2 percent. Their median price is a much more affordable $122,000, but is still down 5.4 percent from February 2010.
And the South and West fell 10.2 and 8.0 percent, taking them to existing-home sale figures close to year ago levels.
Unfortunately, it's not just sellers feeling the crunch of the down market. Builders are feeling the pain, as well.
Nationwide housing starts and permits were both down in February, according to the U.S. Commerce Department.
Bob Nielsen, NAHB chairman, says this decline is the effect of builder uncertainty. He says, "The decline in new construction and permits in February is the culmination of a great deal of nervousness that both builders and consumers are feeling right now. In an already-fragile market where credit for building and buying homes remains extremely tight, additional concerns about energy costs, interest rates and other factors are contributing to an atmosphere in which many have adopted a very cautious stance."
And just like with existing-home sales, no region was immune.
Regional declines were nearly all in the double digits. The Northeast was down 37.5 percent. The West posted a 28 percent decline for February. And the Midwest was down a whopping 48.6 percent. The smallest decline was seen in the South, at just 6.3 percent.
Overall, the economy continues to try to recover. There are pockets of lights in areas all across the nation. Let's hope they start shining on some of the darker areas.
Thursday, March 24, 2011
10 Pieces of Paper You Must Round Up to Buy (or Sell) a Home
Home buyers and -sellers alike often bristle with anticipatory irritation at the mere thought of all the paperwork they expect they’ll have to come up with to do their transaction, above and beyond the basic loan application, contract, disclosures and closing docs. And these worries start way in advance; it’s as though, before they even start visiting open houses, buyers begin to visualize - and dread - spending hours upon hours in the dank catacombs of the Vatican (Ã la Da Vinci Code) combing through ancient files, seeking some rare and precious artifact documenting their childhood dental history or genealogy.
In some respects, this vision of the experience of obtaining a home loan might not be far off - there are oodles of hoops through which to jump and, occasionally, the loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought - or sold. Here they are:
In some respects, this vision of the experience of obtaining a home loan might not be far off - there are oodles of hoops through which to jump and, occasionally, the loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought - or sold. Here they are:
- ID (e.g., driver’s license, state-issued ID, passport). Who must produce it? Buyers and sellers. Why? Uh, hello!?! Lender wants to know that you are who you say you are, buyers, and the title insurance company wants to make sure, sellers, that you actually have the right to sell the home. Funny enough, this commonly goes unrequested until you get to the closing table, when the notary requests to see it before signing, but some mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
- Paycheck Stubs. Who must produce it? Any buyer financing their purchase with a mortgage. Sellers, usually only in the case of a short sale. Why? Buyers’ purchase price ranges are determined, in part, by their income. And short sellers have to prove an economic hardship.
- Two months’ bank account statements. Who must produce it? Buyers getting financing; sellers selling short. Why? Buyers’ lenders now require proof of regular income and proof that the down payment money is your own. Short sellers? It’s all about the hardship.
- Two years’ W-2 forms or tax returns. Who must produce it? Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
- Updated everything. Who must produce it? Buyer/mortgage applicants. Why? Because things change, and because the time period between the first loan application and closing can be many months - even years! - on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements, checks stubs, and such - and its quite common for them to call your office the day before closing to request a last minute verification of employment!
- Quitclaim deed. Who must produce it? Married buyers purchasing homes they plan to own as separate property. Married sellers selling homes that they own separately, or joint owners selling their interests separately. Why? With the Quitclaim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the the selling owner, making it possible for the title insurer to guarantee clear, undisputed title is being transferred in the sale.
- Divorce decree. Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. Why? Again, to ensure that the seller has the right to sell. Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
- Gift letters. Who must produce it? Buyers using gift money toward their down payment. Why? The bank wants to be sure the gift came from a relative, and is their own money to give. They also want the relative to confirm in writing that it’s a gift, not a loan - a loan would need to be factored into your debt load.
- Compliance certificates. Who must produce it? Usually sellers, but sometimes buyers, by contract. Why? Some local governments require various condition requirements be met before the property is transferred, like some cities which require a sewer line be video scoped and repaired, cities which require a checklist of items be met before a certificate of occupancy be issued (usually relevant to brand new and really old homes, the latter of which are often subject to lead paint concerns) and energy conservation ordinances which require low-flow toilets and shower heads to be installed. Ask your real estate pro for advice about which, if any, such ordinances apply in your area.
- Mortgage statements. Who must produce it? Any seller with a mortgage. Why? the escrow holder or title company will need to use them to order payoff demands from any mortgage holder who has to get paid before the property’s title can be transferred.
Wednesday, March 23, 2011
Short List for Long-Term Real Estate Decisions
No longer is there an automatic last move for boomers—that is, being moved into a HOME. No longer is there a “last stage” of adult life that dictates an end to independence and to living in a home you love. Aging in place, or staying in your own home as you age, even if you need support to do so, is now a globally-accepted trend.
This means that where you chose to live can have a significant impact on how you live and how you enjoy the decades ahead. Each housing choice has the potential to be your last. Not because you cease to exist, but because the search to satisfy needs and lifestyles ends with a home that is difficult for you to top.
An individual or couple could choose to move often and frequently, or they might find one dream-satisfying location and adapt it over the years. Your future may lie somewhere in between. The more flexible your housing choice, and the more fulfilling the neighbourhood that surrounds it, the fewer reasons there are to move.
However, when the “kids have grown and gone” family headquarters becomes less desirable or less financially practical, townhouses, condominium units, and rental apartments remain popular alternatives. What has changed for 20th Century lifestyles is:
A Short List of Long-Term Considerations
Here are key long-term factors to consider every time you buy and before you sell, just in case this is the one. The list also offers useful discussion points for constructive conversations with parents or children as they contemplate real estate purchases or sales. Mulling these ideas around makes everyone smarter buyers, sellers, and owners:
This means that where you chose to live can have a significant impact on how you live and how you enjoy the decades ahead. Each housing choice has the potential to be your last. Not because you cease to exist, but because the search to satisfy needs and lifestyles ends with a home that is difficult for you to top.
An individual or couple could choose to move often and frequently, or they might find one dream-satisfying location and adapt it over the years. Your future may lie somewhere in between. The more flexible your housing choice, and the more fulfilling the neighbourhood that surrounds it, the fewer reasons there are to move.
However, when the “kids have grown and gone” family headquarters becomes less desirable or less financially practical, townhouses, condominium units, and rental apartments remain popular alternatives. What has changed for 20th Century lifestyles is:
- the ever-increasing array of condominium choices from bungalows, estate houses, and townhomes to high-rise multi-level suites, amenity-rich hotel rooms, and resort suites. Search out the ideal urban or recreational location, here or anywhere that captures your imagination. You could also own one or more units and move between them with the seasons.
- the expansion into a new spacial alternative instead of downsizing, or moving into a smaller unit. Up-sizing or buying something larger, whether a house or condominium, is a viable choice for many. This may also involve sharing responsibilities and privileges with other family members or extended family or friends.
- a growing list of ownership alternatives that include shared ownership variations for unrelated buyers and purchases of fractions of title which equate to weeks or months of ownership per year. More on fractional ownership variations and related lifestyle options in a later column.
A Short List of Long-Term Considerations
Here are key long-term factors to consider every time you buy and before you sell, just in case this is the one. The list also offers useful discussion points for constructive conversations with parents or children as they contemplate real estate purchases or sales. Mulling these ideas around makes everyone smarter buyers, sellers, and owners:
- When you buy as a couple, what would each do if they became the surviving owner? If this is a solo purchase, what would your choices be if you became a couple? Would this work for two, or would the property be ideal as a rental property?
- What long-term needs or wants are compromised by the decision to buy or sell?
- What might happen to property value between the time you buy and decide to move on? Decades of steadily-escalating real estate values can lull us into believing real estate will always increase in value over time, or, at very worst, hold its value. The investment caution about not keeping all your financial eggs in one basket applies to real estate, too.
- What long-term municipal official plans and development patterns are in play to change and to preserve aspects of the neighbourhood and its environs, including its water shed? Local environmental groups and government agencies are good sources, online and off, for these investigations.
- Which institutions and organizations in the area will preserve variety and quality of life over time? Mental stimulation and life-long learning are acknowledged standard requirements, so how will these needs be met? How committed are you to ensuring that technology remains an enabler for your lifestyle, financial needs, and wellness goals?
- Which stereotypes about aging and retirement are holding you back from truly embracing the possibilities of extended living in the 21st Century? What will the outcomes be if all goes as well as possible? What could put those outcomes at risk?
- How far into the future can you imagine? When you bought or moved into your current home, how far into the future were you looking? Look back one and then two decades to review priorities and choices. Hindsight can reveal your strengths and weaknesses at forward thinking.
Home sales fall 9.6% in Feb.; median price lowest in 9 years
WASHINGTON — Fewer Americans bought previously occupied homes in February and those who did purchased them at steep discounts. The weak sales and rise in foreclosures pushed home prices down to their lowest level in nearly nine years.
The National Association of Realtors said Monday that sales of previously occupied homes fell last month to a seasonally adjusted annual rate of 4.88 million. That’s down 9.6% from 5.4 million in January. The pace is far below the 6 million homes a year that economists say represents a healthy market.
Nearly 40% of the sales last month were either foreclosures or short sales, when the seller accepts less than they owe on the mortgage.
One-third of all sales were purchased in cash — twice the rate from a year ago. In troubled housing markets such as Las Vegas and Miami, cash deals represent about half of sales.
The median sales price fell 5.2% to $156,100, the lowest level since April 2002.
Millions of foreclosures have forced down home prices and more are expected this year. Tight credit has made mortgage loans tough to come by. And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.
New-home prices are now 45% higher than prices for previously occupied homes. A more normal difference is about 15%, an indication that old homes on the market are being sold at comparatively cheap, and affordable, levels.
The number of first-time home-buyers rose to 34% of the market, partly because of rising rents. A more healthy level of first-time home-buyers is about 40%, according to the trade group.
But home prices and sales are uneven across the country. In Miami, where prices have dropped 18.6% since last year, sales have skyrocketed 46.4% over the same period. In St. Louis, where prices rose 8.2% over the past year, sales have fallen 8.6%.
One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers rose to 3.49 million units in February. It would take 8.6 months to clear them off the market at the February sales pace. Most analysts say a six-month supply represents a healthy supply of homes.
Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.
For February, sales fell in all four regions of the country, by 12.2% in the Midwest, 10.2% in the South, 8% in the West and 7.2% in the Northeast.
Sales of single-family homes fell 9.6% to an annual rate of 4.25 million units. Sales of condominiums fell 10% to a rate of 630,000 units.
The National Association of Realtors said Monday that sales of previously occupied homes fell last month to a seasonally adjusted annual rate of 4.88 million. That’s down 9.6% from 5.4 million in January. The pace is far below the 6 million homes a year that economists say represents a healthy market.
Nearly 40% of the sales last month were either foreclosures or short sales, when the seller accepts less than they owe on the mortgage.
One-third of all sales were purchased in cash — twice the rate from a year ago. In troubled housing markets such as Las Vegas and Miami, cash deals represent about half of sales.The median sales price fell 5.2% to $156,100, the lowest level since April 2002.
Millions of foreclosures have forced down home prices and more are expected this year. Tight credit has made mortgage loans tough to come by. And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.
New-home prices are now 45% higher than prices for previously occupied homes. A more normal difference is about 15%, an indication that old homes on the market are being sold at comparatively cheap, and affordable, levels.
But home prices and sales are uneven across the country. In Miami, where prices have dropped 18.6% since last year, sales have skyrocketed 46.4% over the same period. In St. Louis, where prices rose 8.2% over the past year, sales have fallen 8.6%.
One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers rose to 3.49 million units in February. It would take 8.6 months to clear them off the market at the February sales pace. Most analysts say a six-month supply represents a healthy supply of homes.
Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.
For February, sales fell in all four regions of the country, by 12.2% in the Midwest, 10.2% in the South, 8% in the West and 7.2% in the Northeast.
Sales of single-family homes fell 9.6% to an annual rate of 4.25 million units. Sales of condominiums fell 10% to a rate of 630,000 units.
No Better Time to Invest in Myrtle Beach Real Estate, Says Leading Myrtle Beach Realtor
With home prices in the Grand Strand down and mortgage rates still relatively low, leading Myrtle Beach Realtor John Kim urges buyers to consider investing in Myrtle Beach real estate now. Though diminishing in number, foreclosures and short sale are currently driving prices down throughout the Myrtle Beach area.
“Even during the peak years homebuyers and investors have always seen their dollar stretch further here in Myrtle Beach,” says Kim. “Now that prices are down, they're going to get even better deals and there's a lot more to choose from as well since the inventory is high even for in-demand properties like Myrtle Beach Oceanfront homes.”
Myrtle Beach and the Grand Strand have been some of America's most beloved vacation destinations for generations and are likely to remain so far into the future. This makes real estate here an excellent choice as a long-term investment and there are numerous real estate investment opportunities currently available today.
“If you have the cash or you can get the financing, then it would be a shame not to take advantage of today's low prices,” says Kim. “It's really best to make your move now since interest rates are beginning to rise and you will have more competition once spring comes around.”
One of the Myrtle Beach area's up-and-coming realtors, Kim has been making a mark in the local real estate scene in recent years. Specializing in homes and condos in Myrtle Beach and North Myrtle Beach homes and condos, as well as other properties in nearby Grand Strand communities, he has also earned the National Association of Realtors® Certified Distressed Property Expert Certification (CDPE), allowing him to expand his services and enabling him to meet the increasingly diverse demands of homebuyers and sellers in today's marketplace.
For more information on the real estate market in Myrtle Beach, visit John Kim at his website: www.littleriver-realestate.com
Mortgage Rates Remain in Holding Pattern
Even though it has been a busy week for markets, mortgage rates remain in holding pattern and still low enough to be attractive to borrowers. Freerateupdate.com's survey of wholesale and direct lenders show that conforming 30 year fixed mortgage rates are at 4.625%, 15 year fixed mortgage rates are at 3.750% and 5/1 adjustable mortgage rates are at 3.000%, all remaining the same for the past week. Borrowers with good credit and the ability to meet lender guidelines can obtain these low mortgage rates with 0.7 to 1% origination fee. Conforming fixed rate mortgage loans continue to be popular with borrowers because of the security of having monthly mortgage payments that remain the same for the life of the loan.
Also remaining the same this week, FHA 30 year fixed mortgage rates are at 4.375%, FHA 15 year fixed mortgage rates are at 4.000% and FHA adjustable mortgage rates are at 3.750%. Even though some FHA mortgage rates are lower than conforming mortgage rates and may appear to be cheaper mortgages, borrowers must pay higher FHA closing costs (APR) because of various FHA fees and the upfront mortgage insurance premium. On the positive side, FHA offers down payment requirements as low as 3.5%.
For borrowers in need of mortgage financing above the conforming loan limit, which is $417,000 to $729,250 depending on location, jumbo mortgage rates have continued to stay low. Still unchanged, jumbo 30 year fixed mortgage rates are at 5.250%, jumbo 15 year fixed mortgage rates are at 5.000% and jumbo 5/1 adjustable mortgage rates are at 3.625%. Borrowers with excellent credit can obtain these jumbo mortgage rates with 0.7 to 1% origination fee.
Mortgage backed securities prices (MBS) have a direct affect on mortgage rates which move in the opposite direction. This past week, economic data was filled with both positive and negative reports. Increases in the Empire State index, import prices, consumer price index and a decrease in the unemployment rate were all positive results pointing to a steady economic recovery. On the other hand, home construction and existing home sales both were down last month indicating a housing market that is still struggling. MBS prices moved both up and down, but never enough to make an impact on mortgage rates. Overall, markets were reacting to the crisis in Japan and the Middle East.
Also remaining the same this week, FHA 30 year fixed mortgage rates are at 4.375%, FHA 15 year fixed mortgage rates are at 4.000% and FHA adjustable mortgage rates are at 3.750%. Even though some FHA mortgage rates are lower than conforming mortgage rates and may appear to be cheaper mortgages, borrowers must pay higher FHA closing costs (APR) because of various FHA fees and the upfront mortgage insurance premium. On the positive side, FHA offers down payment requirements as low as 3.5%.
For borrowers in need of mortgage financing above the conforming loan limit, which is $417,000 to $729,250 depending on location, jumbo mortgage rates have continued to stay low. Still unchanged, jumbo 30 year fixed mortgage rates are at 5.250%, jumbo 15 year fixed mortgage rates are at 5.000% and jumbo 5/1 adjustable mortgage rates are at 3.625%. Borrowers with excellent credit can obtain these jumbo mortgage rates with 0.7 to 1% origination fee.
Mortgage backed securities prices (MBS) have a direct affect on mortgage rates which move in the opposite direction. This past week, economic data was filled with both positive and negative reports. Increases in the Empire State index, import prices, consumer price index and a decrease in the unemployment rate were all positive results pointing to a steady economic recovery. On the other hand, home construction and existing home sales both were down last month indicating a housing market that is still struggling. MBS prices moved both up and down, but never enough to make an impact on mortgage rates. Overall, markets were reacting to the crisis in Japan and the Middle East.
Sunday, March 20, 2011
Foreclosures Get Makeovers?
Are foreclosures getting makeovers? In today's market they’re getting spruced up in hopes of catching more buyer interest.
The Chicago Tribune reported earlier this month that banks are investing thousands of dollars to clean up foreclosures. The goal, of course, is to attract a broader pool of buyers.
When banks take over foreclosed homes, they’re often in bad condition and depending on how long they stay vacant, they could get even worse. Foreclosed homes are frequently vandalized. These homes can have broken windows, water damage, missing fixtures, plumbing pipes, door handles, and more. Some homes are even uninhabitable, making it nearly impossible for a buyer to secure a mortgage.
Real estate agents are reporting that they’re making suggestions to the banks and the banks are doing more than just listening; they’re taking action. The agents are identifying the target buyer for a foreclosed property. Then they address the necessary repairs which often include fixes such as paint, some remodeling, refinishing damaged floors, repairing leaky roofs, and replacing old and broken windows.
Banks are hoping that the repairs will make the properties more appealing to regular buyers instead of just investors and professional rehabbers.
As banks invest a little more “makeover” money into the foreclosed properties, there may be an overall boost in the real estate market due to greater demand and increased sales prices of these homes.
The foreclosure market is also gaining more attention from financial giant, Bank of America. Its decided to no longer offer reverse mortgages. The Wall Street Journal reported that Bank of America ranked No. 2 in reverse mortgages for 2010.
These types of mortgages were only available to seniors (62 and older). The mortgage works in reverse. It’s based on the buyer’s equity in the home. The buyer gets monthly payments from the lender instead of the reverse. So instead of having money tied up in the home in equity, the money is paid to the senior (borrower). The bank takes possession of the property when the buyer dies or moves out (often into a nursing home or with other family members). However, by eliminating reverse mortgages, the bank will focus on more traditional mortgages aimed at assisting distressed borrowers who need loan modifications in order to prevent foreclosures. The bank will create a unit to deal specifically with troubled mortgages which are facing possible foreclosure.
Reverse mortgages have come under fire frequently due to their potentially risky nature. Regulatory agencies are scrutinizing these types of loans to ensure that those taking these types of loans aren’t being forced to purchase additional products in order to receive the reverse mortgage. The Federal Housing Administration wants to make sure that borrowers completely understand the reverse mortgage and their role especially when it comes to home insurance and property taxes.
Bank of America’s focus on what it calls its “core mortgage operations” may benefit troubled homeowners. And according to a report in The Wall Street Journal, this move to end reverse mortgages may reduce the banks presence “in areas where there could be liability and exposure.”
The Chicago Tribune reported earlier this month that banks are investing thousands of dollars to clean up foreclosures. The goal, of course, is to attract a broader pool of buyers.
When banks take over foreclosed homes, they’re often in bad condition and depending on how long they stay vacant, they could get even worse. Foreclosed homes are frequently vandalized. These homes can have broken windows, water damage, missing fixtures, plumbing pipes, door handles, and more. Some homes are even uninhabitable, making it nearly impossible for a buyer to secure a mortgage.
Real estate agents are reporting that they’re making suggestions to the banks and the banks are doing more than just listening; they’re taking action. The agents are identifying the target buyer for a foreclosed property. Then they address the necessary repairs which often include fixes such as paint, some remodeling, refinishing damaged floors, repairing leaky roofs, and replacing old and broken windows.
Banks are hoping that the repairs will make the properties more appealing to regular buyers instead of just investors and professional rehabbers.
As banks invest a little more “makeover” money into the foreclosed properties, there may be an overall boost in the real estate market due to greater demand and increased sales prices of these homes.
The foreclosure market is also gaining more attention from financial giant, Bank of America. Its decided to no longer offer reverse mortgages. The Wall Street Journal reported that Bank of America ranked No. 2 in reverse mortgages for 2010.
These types of mortgages were only available to seniors (62 and older). The mortgage works in reverse. It’s based on the buyer’s equity in the home. The buyer gets monthly payments from the lender instead of the reverse. So instead of having money tied up in the home in equity, the money is paid to the senior (borrower). The bank takes possession of the property when the buyer dies or moves out (often into a nursing home or with other family members). However, by eliminating reverse mortgages, the bank will focus on more traditional mortgages aimed at assisting distressed borrowers who need loan modifications in order to prevent foreclosures. The bank will create a unit to deal specifically with troubled mortgages which are facing possible foreclosure.
Reverse mortgages have come under fire frequently due to their potentially risky nature. Regulatory agencies are scrutinizing these types of loans to ensure that those taking these types of loans aren’t being forced to purchase additional products in order to receive the reverse mortgage. The Federal Housing Administration wants to make sure that borrowers completely understand the reverse mortgage and their role especially when it comes to home insurance and property taxes.
Bank of America’s focus on what it calls its “core mortgage operations” may benefit troubled homeowners. And according to a report in The Wall Street Journal, this move to end reverse mortgages may reduce the banks presence “in areas where there could be liability and exposure.”
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