Thursday, March 1st, 2012

 

By The Associated Press

WASHINGTON — The housing market is flashing signs of health ahead of the spring buying season.

Sales of previously occupied homes are at their highest level since May 2010. More first-time buyers are making purchases. And the supply of homes fell last month to its lowest point in nearly seven years, which could push home prices higher.

Sales have now risen nearly 13 percent over the past six months. While they are still well below the 6 million that economists equate with a healthy market, the gains have coincided with other changes in the market that suggest more sales are coming.

“The trend is clearly upward,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

 

The National Association of Realtors said Wednesday that re-sales increased 4.3 percent last month to a seasonally adjusted annual rate of 4.57 million.

Single-family home sales rose 3.8 percent. And the number of first-time buyers, who are critical to a housing recovery, increased slightly to make up 33 percent of all sales. That’s still below 40 percent, which tends to signal a healthy market.

One concern is that the market is still saturated with homes at risk of foreclosure, which can lower home prices generally. Those increased to make up 35 percent of sales.

But the supply of homes on the market has plunged to 2.3 million, the lowest level since March 2005. At last month’s sales pace, it would take more than six months to clear those homes, consistent with a healthy housing market. Fewer homes on the market could help boost prices over time.

Most economists said the January report was encouraging, especially when viewed with other recent positive housing data.

Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year — and they responded in January to that interest by requesting more permits to construct single-family homes.
“The rise in existing home sales in recent months adds to the indication from housing starts, building permits, and homebuilder sentiment that the sector has improved modestly since the middle of 2011,” said John Ryding, an economist at RDQ economics.

Much of the optimism has come because hiring has picked up. More jobs are critical to a housing rebound. In January, employers added 243,000 net jobs — the most in nine months — and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.

Analysts caution that the damage from the housing bust is deep and the industry is years away from fully recovering. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit and falling prices.

Many deals are also collapsing before they close. One-third of Realtors say that they’ve had at least one contract scuttled over the past four months. That’s up from 18 percent in September.

Realtors say deals are collapsing for several reasons: Banks have declined mortgage applications. Home inspectors have found problems. Appraisals have come in lower than the bid. Or a buyer suffered a financial setback before the closing.

Sales rose across the country in January. They rose on a seasonal basis by nearly 9 percent in the West, 3.5 percent in the South, 3.4 percent in the Northeast and 1 percent in the Midwest.

Thursday, March 1st, 2012

 

Tara-Nicholle Nelson

When recently surveyed, over a third of real estate agents reported having had one or more home sale contracts fall out of escrow per month. Autopsies of these dead deals often surface a truly lethal culprit: appraisals that come in below the agreed-upon purchase price.

You see, mortgage lenders will only fund transactions up to a certain percentage of the appraised value of the home. If the home appraises low, either the buyer must come up with an increased down payment amount, the parties must agree to a price reduction, some combination of both of these must happen, or the deal is off.

While low appraisals can be particularly potent deal killers, their danger to your deal can be neutralized in some cases. If you find yourself facing an appraisal lower than the sale price in the contract, add these five steps to your immediate action plan.
1. Appeal errors or bad comps to the appraiser. Read the entire appraisal report, cover to cover. See if you spot any errors – it’s not at all unheard of for an appraisal report to miss a bedroom or underreport the home’s square footage. The trouble is that what starts out as a clerical error can often result in the application of the wrong “comparables” when it comes time for the appraiser to pick the properties to use as benchmarks of your home’s fair market value.
Whether or not you find actual errors in the details about the home you’re buying or selling, check in with your agent about whether the comparable properties used by the appraiser were reasonable, especially if they are from a different neighborhood, school district, town or construction era than the home you’re trying to buy or you are aware that much more similar or nearby homes have been sold in recent times than the comparable properties you see in the appraisal.
In my town, for example, within a half-mile radius you can find vast variations in property values based on neighborhood and schools and city limits that change almost imperceptibly. Changes in the mortgage industry over the last few years have created situations in which appraisers are sometimes assigned who have little or no familiarity with these hyperlocal types of nuances which you, as a party to the transaction, might be more readily able to detect and appreciate.
If you find errors or feel that there are much more comparable recent sales that justify a higher price for the property, work with your agent to send the correct information and the applicable comps you would propose to your mortgage professional, who can relay that information to the appraiser or Appraisal Management Company and request that the appraiser revise their report and estimate of value. The appraiser has no obligation to make the change, but the more glaring the error, the more likely it is that they will.
2. Ask for a second opinion. Particularly in cases of error or bad comps, if the appraiser ignores your request to revise the report, you might need to escalate your request to the lender itself. Here’s where it’s important to be working with an expert agent and mortgage pro with a great reputation; if they believe strongly in your case, they may be able to plead it to the underwriter and request that a second appraisal be done. The idea here is that if the second appraisal backs up your arguments, listing the correct property details or more accurate comparables, the lender is much more likely to exercise its discretion to deem the first one a dud and go with the second opinion.
3. Renegotiate. Low appraisals disappoint everyone around the negotiating table. If the sellers have the leeway (read: equity) or their bank agrees (in short sales), they might agree to bring the price down to the appraised value or near enough that the buyer feels comfortable putting some extra cash into the deal to close the purchase price-to-appraised price gap. Some buyers refuse to ever do this on general principal, as they feel like it’s overpaying for the property. Others realize that appraisals may come in low for reasons less indicative of the property’s value, like a dearth of comparable sales in the area, and figure that to get the home they want, they’re willing to kick in a little extra dough.
Of course, ‘little’ is relative, and neither position is right or wrong for everyone.
And the decision for sellers is just as personal. When the differential between the purchase price and the appraised value is small, it can seem like a no-brainer to bring the price down if mortgage considerations allow, but it can also seem sensible to request the buyer to make up such a small difference – especially in markets where properties are getting multiple offers. On the other end of the spectrum, when the differential is big, it is less likely that the buyer will want to come up with the cash to close the gap, and also less likely another buyer will come along and offer the appraised price.
You would think these things would make a seller more willing to slash the price where the gap is big, but it also may make their moving plans less feasible, and tempt them to stay put and wait on the market to be more active and bear better comps.
Work with your agent to figure out what re-bargaining position really works for you.
If you do find yourself renegotiating price due to a low appraisal, remember that this is real estate, so everything is back on the table. For example, when the appraisal gap is only $1,000, a buyer might be willing to close the gap if the seller agrees to leave the lawn mower and do some small repairs.

4. Pay the difference or split the difference. On the flip side of renegotiating is reconsidering your personal position. If you’ve been house hunting for two years, forgoing low rates and the tax and lifestyle advantages of owning your home, and you’ve finally found ‘the one’ – in great condition, not a short sale, perfect location – you might think long and hard about whether you are willing to pay the difference between a low appraisal and the purchase price. This is especially so when the gap is small and you have the cash, or when you know the seller is barely breaking even on the deal or has offered to split the difference with you, or the short sale bank refuses to go any lower.

And sellers, this goes for you, too: if you’re committed to trying to close the deal, it behooves you to consider whether you can reduce the price on the home. Consider that in some states and loan situations, a low appraisal report in a deal that dies may become a disclosure the seller must provide to future buyers (ask your agent whether this will apply to you). The fact is, if you don’t agree to a price reduction of some sort, the buyer could very well walk, limiting your options to selling at a lower price, doing a short sale or staying put anyway.

5. Change lenders. Mortgage banks have more control when it comes to choosing appraisers than mortgage brokers do. (Fortunately, many experienced local mortgage brokers work for companies that also have banking divisions, and may be able to process your loan through that division in an effort to get your transaction a fresh start and work around a low appraisal. Ask your mortgage broker if their office has a banking division, if you’re not sure.)

Mortgage brokers are no longer able to hand-pick appraisers for a given transaction like they once could, but unlike broker-only firms (who are forced to work through a middleman company that may pay a cut rate, attracting less experienced appraisers), mortgage banks and hybrid broker-bankers are allowed to pick the set of people included on their own short list of appraisers. I’ve found that lenders use this short list for good much more often than to try to exert any sort of inappropriate influence.
My experience has been that, when compared with the appraisers national lenders and the middleman companies put to work on brokered transactions, small mortgage banks and local, hybrid broker-bankers tend to fill their lists with appraisers who have more local experience and can appreciate the uber-important local nuances like those described in #1, above.

 

Thursday, March 1st, 2012

 

By Karen Haywood Queen • Bankrate.com
The price of neglect

In this economy, you may be tempted to delay or even skip minor home maintenance repairs, cleaning jobs and inspections in your home. But don’t be penny-wise and dollar-foolish. That $200 or $300 you save today could result in expenditures of $3,000 or even tens of thousands next month or next year if hidden problems in your home go unnoticed and become worse.

Consider coughing up a little dough to take care of these small jobs before they morph into gigantic, expensive jobs later.
Annual HVAC inspection

Cost: $200-$300, depending on where you live.

How often: at least once a year.

When: spring or fall. Heating, ventilation and air conditioning, or HVAC, companies aren’t as busy, and you’re not in dire need of heat or air conditioning.

What an inspection might find:

The furnace blower is not working properly. Cost to repair or replace: $100-$150. Possible consequence of letting it go: a broken heat exchanger. Potential savings down the road: $300-$1,000 to replace the heat exchanger or $750-$3,500, depending on the energy efficiency, to replace indoor or outdoor furnace components.

The reversing switch in the heat pump is broken. Cost to repair or replace: $100-$300. Letting it go results in no heat from the heat pump, and the system switches to a more expensive auxiliary heat. Potential savings: lower heating bills.

Bottom line: “Things that happen often happen at the worst possible time in the worse possible conditions and you’re looking at the maximum rate,” says Terry Townsend of Townsend Engineering in Chattanooga, Tenn., and former president of the American Society of Heating, Refrigerating and Air-Conditioning Engineers. Remember, continual maintenance prolongs the life of the equipment. “You’re sitting there with an investment of thousands in your HVAC system and you’re investing a few hundred dollars in maintenance.”
Chimney inspection

Cost: $65 for an inspection; $150 for inspection and cleaning, including removal of creosote buildup, which may lead to a chimney fire.

How often: once a year.

When: before your first fire in winter.

What an inspection might find:

There’s no chimney cap. Cost to add: $150. If you let it go, rain water can get into your chimney, damage the chimney liner and damper, and even saturate mortar joints — causing mold. Potential savings: $2,000-$4,000 to replace the chimney liner.

Other problems may include: a cracked chimney crown, which can be repaired for $300-$500; chimney flashing that needs caulking, which can be done for $80-$100; and waterproofing the exterior brick, $350-$600. All these fixes will prevent rainwater from getting in and mold from forming.

Bottom line: “A simple chimney cleaning can prevent chimney fires and damage to your entire house,” says Ray Gessner, a licensed professional engineer and owner of A Step in Time Chimney Sweeps, with offices in the eastern U.S. “Water is the No. 1 problem with chimneys. With water damage, you might need to have your whole chimney rebuilt.”
Cost: $75-$200 for an inspection; $200-$300 for a termite protection contract for qualifying homes with no current evidence of termites to cover treatment and repairs for any later infestation.

How often: once a year.

When: any time, although termites are more active in spring and early summer.

An inspection might find subterranean termites that come from the ground or flying termites. If left untreated, these bugs damage framing, trim, drywall, furniture, carpet, copper and other soft metals. Termites cause more than $5 billion in damages a year in the U.S., says Paul Curtis, director of quality assurance for Terminix in Memphis, Tenn. The average homeowner loss for termite damage is $3,000, but losses can be as high as $30,000 or even $80,000, Curtis says. Most homeowners insurance does not cover repair of termite damage.

Bottom line: “Termites eat the wood from the inside out,” Curtis says. “A typical homeowner would not be aware they are even in their home until months or years after they get in and start causing damage. A lot of people don’t realize that termites don’t just feed on the home. They’ll eat flooring, insulation, books — I’ve even seen them penetrate through swimming pool liners.”

Power washing and sealing wood deck

Cost: $100-$300 for a 200-square-foot deck, more for a larger deck.

How often: every one to three years, depending on the amount of traffic, moss and mold.

When: any time in sunny weather.

Power washing gets rid of stains, algae, mold, mildew and moss. Algae and mold can make your deck slippery and dangerous, says Justin Lee of JL Power Washing in Williamsburg, Va. Sealing your deck after it is cleaned helps prevent water damage. Wood soaks up rain like a sponge, expands and then shrinks, Lee says. Sealing makes the water bead up and roll off. And let’s not forget — your deck will look nicer, too.

If you let it go, your deck will warp, nails will pop out and the deck won’t last as long.

Potential savings: $4,000 to $20,000 or more to replace your deck, depending on size.

Bottom line: “A properly cleaned and sealed wood deck can last 20 to 30 years,” Lee says.

Dryer vent cleaning

Cost: $120-$200.

How often: every year.

When: a sunny day.

The purpose is to get rid of lint buildup. If your dryer is not on an exterior wall, it’s likely that the vent leading outside is clogged up, says Gessner of A Step in Time Chimney Sweeps.

If you ignore it, the result could be a disastrous fire. “Once the vent gets clogged, the dryer starts overheating and it can catch on fire,” Gessner says. “Dryer fires are very dangerous.”

Potential savings: your home, your furnishings, your belongings and your life.

Bottom line: “I had been airing a radio commercial talking about the importance of dryer vent cleaning for about a month when three people (in our area) died in a fire caused by a dryer vent fire,” Gessner says.

Carpet cleaning

Cost: about 50 cents per square foot for hot water extraction cleaning, or $500 for 1,000 square feet of cleaned carpet.

How often: every 12 months; more often for high-traffic areas and homes with small children, pets or smokers. Manufacturers’ warranties may require cleaning every 18 to 24 months. You can save money by focusing on regular cleanings for high-traffic areas and waiting up to two years for the entire carpet.

When: any time.

If the carpet looks dirty, you’ve waited too long because some soil can’t be removed with vacuuming. This soil will bind to your carpet and dull the texture, shortening the life of the carpet.

Your home also will be healthier with pollen, bacteria, insecticides and dirt removed, says Howard Partridge, founder and president of Clean as a Whistle, a cleaning company outside Houston.

Potential savings: extending the life of your carpet. Replacing 1,000 square feet of medium-grade carpet, including padding and installation, costs about $3,000.

Bottom line: “One of my neighbors had to replace his carpet in less than four years,” Partridge says. “And his carpet looked terrible the whole time. I’ve been able to keep my carpet for 12 years now.”

Thursday, March 1st, 2012

By Polyana da Costa • Bankrate.com
More to short sales than getting the lender’s OK

Short sales have become the only way out for some sellers who owe more on their mortgages than their houses are worth. For struggling borrowers, it’s a chance to avoid foreclosure.

While helpful, short sales can be stressful, time-consuming and may lead to harsh consequences if not done properly.

Many sellers think the biggest challenge they face in a short sale is persuading the lender to take a haircut and allow the property to sell for less than the mortgage balance. That’s only the first step.

Here are five tips you must know when short selling your home.

Choose an agent experienced in short sales

If you needed heart surgery, would you put your life in the hands of a surgeon whose first surgery would be on you? Probably not.

The same applies to your financial life. Hire a real estate agent experienced in short sales, says Daniel Gomez, a board member at Neighborhood Housing Services of the Inland Empire in San Bernardino, Calif. He also is a real estate agent.

Ads of real estate agents who claim to be short-sale specialists are widespread these days. But some of these agents have closed only a handful of short-sale deals, says Gomez. Many have taken short-sale courses and are certified in selling distressed properties. That’s not enough; certifications help, but nothing counts more than experience, Gomez says.

“Interview agents, ask how many short sales they’ve closed and ask to talk to some of their clients,” he says.

A short sale is a time-consuming transaction and can take months to close. You want an agent who will stay on top of the game until the deal is closed.

Understand potential consequences of short sale

Underwater sellers are so anxious to get rid of their mortgage payments, they often don’t think about what comes after the sale. Then, months or even years later, they receive a collection letter for the difference between what the house sold for and what was owed on the mortgage.

Laws vary by state, but many states allow lenders to go after that balance once a short sale or foreclosure is completed. That’s why it’s crucial for borrowers to understand whether the lender agrees to waive the deficiency, or the balance that will be left on the loan after the sale, says Howard Ullman, an attorney at Family Counseling Law Firm in Deerfield Beach, Fla.

“This needs to be discussed verbally and represented in documents,” he says. “It shouldn’t come as a surprise.”

One way to avoid a deficiency judgment is to do the short sale through the Home Affordable Foreclosure Alternatives program, or HAFA. Lenders who approve short sales through this federal program have to release the borrower from a potential deficiency judgment.

Lenders are not obligated to approve HAFA short sales. They may choose to do the short sale based on their own internal rules and the guidelines set by loan investors. In that case, it’s really up to the lender to decide whether it will pursue the deficiency against the borrower.

You can negotiate your way out of deficiency

When negotiating a short sale, many lenders don’t voluntarily offer to release you of liability on the remaining balance of your loan — at least not for free. But you can ask to negotiate a waiver.

“I’ve never had a lender refuse to negotiate a settlement” to waive the borrower from deficiency, says Patty Da Silva, a real estate agent certified in distressed property assets and owner of Green Realty Properties in Davie, Fla.

Some lenders may ask you to sign a promissory note for at least a small portion of the balance, usually cents on the dollar, or they may ask for a lump sum. Sellers often are outraged when first presented this settlement offer, Da Silva says.

“The sellers sometimes forget they actually borrowed that money,” she says. In many cases, it is usually worth paying upfront to avoid future headaches.

“There is a price attached to the waiver of deficiency, but most of them are very tiny,” she says.

Talk to an attorney

Real estate agents who are experienced in short sales can coordinate the transaction with the bank and tell you what to expect of the process, but remember they are not lawyers.

“Most of the people who do short sales are doing it through the Realtors or people who claim to be short-sales specialists,” Ullman says. “But there are many issues that borrowers need to discuss that cannot be discussed with a short-sale specialist.”

Those issues range from potential tax implications to protecting other assets the borrower may own if the lender tries to collect the balance of the loan in the future.

If you don’t understand the contract you are signing or the potential consequences of a short sale, you should consult with a lawyer.

Keep up with HOA payments

If you are thinking about short selling your home, don’t stop paying your homeowners association dues. The fees can turn into a snowball and kill the sale, even if the buyer is willing to pay for the delinquent dues at closing.

“In short sales, there are a few problems that money cannot fix,” Da Silva says. In a regular sale or even with foreclosures, the seller or the bank pays any past dues owed to the HOA at closing so the buyer gets clear title of the property. But in a short sale, the seller’s lender wants to get every penny out of the transaction, Da Silva says.

She says it is so crucial for the seller to stay current on HOA and condo dues that she refuses to represent a seller who won’t keep up with the payments.

“Plus, you want to make sure the association is able to maintain the common areas so your house is saleable,” she says. “A short-sale property needs to be maintained. The power needs to be on; the grass needs to be cut. You don’t want your home to look like a foreclosure.”

 

Monday, February 27th, 2012

The week left yet another trail of evidence leading back to a housing market on the mend. This time, the encouraging signs were even less clandestine. Nationally, both new and existing home sales enjoyed improvements. Even some December numbers were upwardly revised. New home sales have real and noticeable impacts on GDP, thus generating jobs and driving down unemployment. The overall bias for the entire U.S. is firmly toward balance. Locally, market activity was mostly positive. Spring will still be the major tell.

In the Twin Cities region, for the week ending February 18:

  • New Listings decreased 7.1% to 1,256
  • Pending Sales increased 28.6% to 899
  • Inventory decreased 23.2% to 17,756

For the month of January:

  • Median Sales Price decreased 3.4% to $140,000
  • Days on Market decreased 8.5% to 142
  • Percent of Original List Price Received increased 3.4% to 91.2%
  • Months Supply of Inventory decreased 34.6% to 4.7

Click here for the full Weekly Market Activity Report.

From The Skinny.

Posted in The Skinny, Uncategorized |

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