[Note from the SCV Home Team: This is the latest in an increasing number of prosecutions of lenders, appraisers, and real estate agents for cases of fraud. The sooner the bad actors get caught, fined, and put away, the better it will be for the industry and the consumers.]
SACRAMENTO, CA - According to United States Attorney McGregor W. Scott, Three defendants will appear in federal court to face charges that they engaged in a straw buyer mortgage fraud scheme that involved at least 19 homes with loans of more than $8 million.
A federal grand jury returned an indictment last Thursday, sealed until this week, charging James Roy Martin, 36, Mario Fellini, III, 38, Gabriel Richard Viramontes, 44, and Joseph Salvatore Gallo, 34, all from the Sacramento area, with bank fraud and conspiracy to launder money. In addition, Martin, Fellini, and Gallo were indicted on charges of making false statements in loan applications, and Martin, Fellini and Viramontes were indicted on mail fraud charges. Martin was arrested at about 9:00 p.m. Monday at a family member’s house, Fellini self-surrendered to federal authorities Tuesday morning at approximately 10:00 a.m., and Gallo self-surrendered in federal court at 2:00 p.m. It is expected that Viramontes will voluntarily appear in court next week.
The case is the product of an extensive investigation conducted by the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigations, and the California Department of Real Estate.
According to Assistant United States Attorney Matthew Stegman, who is prosecuting the case, the indictment charges that from June 2006 through October 2006, the defendants individually and through VFM Investment Group, Esnian Mortgage Realty, and Freedom Capital Mortgage, engaged in a mortgage fraud scheme by asking people they solicited to act as straw purchasers of single family homes on behalf of others with bad credit who wished to purchase homes. Those solicited were told they would benefit financially from the transactions. The defendants then defrauded lenders such as Washington Mutual Bank and Fremont Investment and Loan by submitting fraudulent loan applications, representing straw purchasers of homes as actual purchasers of homes. The indictment further charges that the defendants submitted fraudulent loan applications on behalf of these straw purchasers, which falsely inflated the buyers’ income, falsely stated that a buyer was employed at a specific job, and falsely stated that the properties would be owner-occupied. The indictment alleges that the purpose of the scheme was to ensure that the home purchase transactions closed, so that defendants would receive substantial loan broker commissions and illegal kickbacks from real estate sales commissions.
If convicted, the maximum penalty for bank fraud is 30 years in prison and a fine of up to $1 million, for mail fraud is 20 years in prison and a fine of up to $250,000, and for money laundering is ten years in prison and a fine of up to $250,000 or twice the value of the money laundered, which ever is greater. However, the actual sentence will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables, and any applicable statutory sentencing factors.
~~ from National Realty News, Sept. 26, 2007
Sunday, September 30, 2007
Monday, September 24, 2007
Liquidity Crisis Increases Demand for Credit Repair
As the nation experiences the effects of the recent mortgage liquidity crisis and lenders raise their minimum required credit scores, many borrowers are scrambling to qualify for any mortgage loan—when in weeks past a wide variety of loan programs would have been available to them. As a result, demand for credit restoration services are on the rise.
“Just in the past 60 days, public interest in credit repair has risen 33 percent,” says Edward Jamison, founder of Jamison Law Group and CreditCRM.com. “That’s because credit restoration is the fastest way to increase the chances of getting a higher quality mortgage loan, and for some, it’s the fastest way to qualify for a loan at all.”
Of the factors impacting the mortgage underwriting decision, the credit score is the only variable that can be adjusted in time to impact the final determination. Unlike the property’s value and the borrower’s income and employment status, credit scores can be increased with a few simple steps and in as little as 60 to 90 days.
“Many borrowers erroneously believe that there’s nothing they can do to affect an underwriting decision in a timely manner,” explains Jamison. “This assumption is simply not true. Borrowers have much more control over the approval process than they may believe. There are several very quick action steps borrowers may take that can positively impact their credit scores. However, these actions are often overlooked because most borrowers don’t understand how the credit scoring process works. These steps may be as simple as asking for higher credit limits on credit cards, and making sure that maximum credit limits on each credit line are reported. Simple actions, much like these, have the ability to make a huge difference in the final score.”
According to Jamison, credit restoration is the legal and legitimate process of eliminating derogatory credit information from an individual’s credit report, and can result in an increased credit score in a matter of weeks. Borrowers of all levels can utilize credit restoration to increase their credit scores and impact the underwriting decision to better their chances of not only getting a loan approval, but also securing higher quality loans.
“In today’s volatile market, it makes sense for borrowers to ensure that they have obtained the highest possible credit scores available to them,” adds Jamison.
~~ from National Realty News
“Just in the past 60 days, public interest in credit repair has risen 33 percent,” says Edward Jamison, founder of Jamison Law Group and CreditCRM.com. “That’s because credit restoration is the fastest way to increase the chances of getting a higher quality mortgage loan, and for some, it’s the fastest way to qualify for a loan at all.”
Of the factors impacting the mortgage underwriting decision, the credit score is the only variable that can be adjusted in time to impact the final determination. Unlike the property’s value and the borrower’s income and employment status, credit scores can be increased with a few simple steps and in as little as 60 to 90 days.
“Many borrowers erroneously believe that there’s nothing they can do to affect an underwriting decision in a timely manner,” explains Jamison. “This assumption is simply not true. Borrowers have much more control over the approval process than they may believe. There are several very quick action steps borrowers may take that can positively impact their credit scores. However, these actions are often overlooked because most borrowers don’t understand how the credit scoring process works. These steps may be as simple as asking for higher credit limits on credit cards, and making sure that maximum credit limits on each credit line are reported. Simple actions, much like these, have the ability to make a huge difference in the final score.”
According to Jamison, credit restoration is the legal and legitimate process of eliminating derogatory credit information from an individual’s credit report, and can result in an increased credit score in a matter of weeks. Borrowers of all levels can utilize credit restoration to increase their credit scores and impact the underwriting decision to better their chances of not only getting a loan approval, but also securing higher quality loans.
“In today’s volatile market, it makes sense for borrowers to ensure that they have obtained the highest possible credit scores available to them,” adds Jamison.
~~ from National Realty News
Wednesday, September 19, 2007
Looking Down
Sep 18th 2007
From Economist.com
The Fed's bold cut
IS THE Federal Reserve running scared of the financial markets—or the housing market? On Tuesday September 18th America’s central bank cut its target for the federal funds rate by half a point, to 4.75%, the first reduction for more than four years. Financial markets had thought a quarter-point cut a shade more likely, but prayed fervently for a half. Rejoicing, the S&P 500 jumped by nearly 3% after the Fed’s announcement and the Dow Jones index closed more than 300 points up.
Once the cheering stops, it may be worth reflecting on what the Fed’s action—and words—say about the state of the economy, especially the housing market. The “tightening of credit conditions”, said the Fed, “has the potential to intensify the housing correction and to restrain economic growth.” The Fed seems to be trying to act before things get worse: the cut, it said, “is intended to help forestall some of the adverse effects on the broader economy”.
This argument is close to that laid out by Frederic Mishkin, a Fed governor, at the Jackson Hole central bankers’ symposium a fortnight ago. If a central bank cuts rates swiftly, Mr Mishkin argued there, it can soften the effects of even a sharp drop in house prices—not least because falling house prices translate only slowly into lower spending. The arguments of Janet Yellen, head of the San Francisco Fed, also seem to have been persuasive, says Adam Posen of the Peterson Institute for International Economics in Washington, DC: “the San Francisco Fed is one of the only regional Feds to have independent full-scale forecasts”. She gave warning this week that “financial market turmoil seems likely to intensify the downturn in housing”.
The Fed will have been helped towards its half-point cut by benign data on both consumer and producer prices: the latter, released on the day of the Fed’s decision, showed a 1.4% fall in August. More bad news from the housing market, published the same day, will have added weight to the argument for a bigger cut. An index of homebuilders’ confidence fell to match the lowest level reached since its inception. And the rate of foreclosures has more than doubled in the past year.
To some, it will seem as if the Fed has caved in to Wall Street. The emphasis on the housing market may help to dispel that impression. So might the Fed’s insistence that “some inflation risks remain” and that it will “continue to monitor inflation developments carefully.” So too, notes Mr Posen, will recent data on inflation, housing and jobs. Even so, the Fed will have to keep choosing its words carefully in the months ahead.
From Economist.com
The Fed's bold cut
IS THE Federal Reserve running scared of the financial markets—or the housing market? On Tuesday September 18th America’s central bank cut its target for the federal funds rate by half a point, to 4.75%, the first reduction for more than four years. Financial markets had thought a quarter-point cut a shade more likely, but prayed fervently for a half. Rejoicing, the S&P 500 jumped by nearly 3% after the Fed’s announcement and the Dow Jones index closed more than 300 points up.
Once the cheering stops, it may be worth reflecting on what the Fed’s action—and words—say about the state of the economy, especially the housing market. The “tightening of credit conditions”, said the Fed, “has the potential to intensify the housing correction and to restrain economic growth.” The Fed seems to be trying to act before things get worse: the cut, it said, “is intended to help forestall some of the adverse effects on the broader economy”.
This argument is close to that laid out by Frederic Mishkin, a Fed governor, at the Jackson Hole central bankers’ symposium a fortnight ago. If a central bank cuts rates swiftly, Mr Mishkin argued there, it can soften the effects of even a sharp drop in house prices—not least because falling house prices translate only slowly into lower spending. The arguments of Janet Yellen, head of the San Francisco Fed, also seem to have been persuasive, says Adam Posen of the Peterson Institute for International Economics in Washington, DC: “the San Francisco Fed is one of the only regional Feds to have independent full-scale forecasts”. She gave warning this week that “financial market turmoil seems likely to intensify the downturn in housing”.
The Fed will have been helped towards its half-point cut by benign data on both consumer and producer prices: the latter, released on the day of the Fed’s decision, showed a 1.4% fall in August. More bad news from the housing market, published the same day, will have added weight to the argument for a bigger cut. An index of homebuilders’ confidence fell to match the lowest level reached since its inception. And the rate of foreclosures has more than doubled in the past year.
To some, it will seem as if the Fed has caved in to Wall Street. The emphasis on the housing market may help to dispel that impression. So might the Fed’s insistence that “some inflation risks remain” and that it will “continue to monitor inflation developments carefully.” So too, notes Mr Posen, will recent data on inflation, housing and jobs. Even so, the Fed will have to keep choosing its words carefully in the months ahead.
The Bernanke Put
Yesterday the FOMC cut the Fed funds rate and the discount rate 1/2 point, or 50 basis points. Wall Street went nuts, with a one day gain of over 300 points in the NYSE. There was yelling and trading and a good time was had by all.
Yesterday was followed by today's trading with what looks like a another rise, with the Dow in triple digit gain for much of the day but falling off to a gain of 76 at close of trading.
Party on, Wall Street!
American consumers will not see tangible benefits for a few months, with lenders expecting to reduce interest rates modestly, with credit card holders saving maybe $25 per year in interest costs, and adjustable mortgage rate hikes dropping back a little.
Honestly, if individuals were in trouble before the rate cuts, they will likely remain in trouble. For those who weren't in trouble before the cut, they will be paying a little less in interest, but not appreciably so.
The rate cut was a macro-move that bailed out high-end players in the economy, at least for a while. It's a reprieve, not a salvation. Think of it as a little breathing room as the market tries to re-allocate risk of too much money in the system offered to too many people who couldn't handle repayment over the long-term. For the housing market, there is little direct relief.
Mr. Bernanke and the Federal Reserve have told the economy that they will kick the excess can down the road and will deal with it later. In the meantime, the dollar valuation has cheapened about 10% in the last month, the Canadian dollar is at par and rising against the USD, foreign investment in the US continues a sharp decline, and foreign banks are dumping Treasuries at a faster rate. That can't be a good combination.
I expect that the Fed will continue to reduce interest rates another half or three-quarters of a point over the next four or five months in a continuing effort to shore up the economy. However, there are forces building that indicate inflation will rise, thus forcing up interest rates at about six to eight months. There will be a huge rise at that time.
At least that's the view from here right now.
We have a fairly narrow window for home purchases as interest rates are at good lows, particularly for conforming loans under $417,000. For those who want to wait for housing prices to collapse, they may see that eventually, but that will be when interest rates rise so high and that they quickly erode most people's purchasing power.
We are indeed in a golden time for buyers right now: low interest rates, high housing inventories, and fear and/or distress among some sellers. For now the indication is Buy-Buy-Buy if you want to buy within the next few years. Now. Right now is the right time. If you wait, you will likely lose. Or in other words, you will remain renters.
For sellers, it is also the time to Sell-Sell-Sell. Why? We are in that same window of opportunity. Wait and home prices will drop as interest rates bounce quickly higher on inflation fears. Interest rates will get higher than buyers can afford, and with more foreclosures coming on the market, home prices will drop and when that local trickle become a flood, they will drop fast.
Yes, the Fed has given a little breathing room. But it is not a lot of room. The time to act is now. Renters: become buyers while you can still afford to buy. Sellers, get serious. Get it done.
Party on, Wall Street! But it is Last Call!
Yesterday was followed by today's trading with what looks like a another rise, with the Dow in triple digit gain for much of the day but falling off to a gain of 76 at close of trading.
Party on, Wall Street!
American consumers will not see tangible benefits for a few months, with lenders expecting to reduce interest rates modestly, with credit card holders saving maybe $25 per year in interest costs, and adjustable mortgage rate hikes dropping back a little.
Honestly, if individuals were in trouble before the rate cuts, they will likely remain in trouble. For those who weren't in trouble before the cut, they will be paying a little less in interest, but not appreciably so.
The rate cut was a macro-move that bailed out high-end players in the economy, at least for a while. It's a reprieve, not a salvation. Think of it as a little breathing room as the market tries to re-allocate risk of too much money in the system offered to too many people who couldn't handle repayment over the long-term. For the housing market, there is little direct relief.
Mr. Bernanke and the Federal Reserve have told the economy that they will kick the excess can down the road and will deal with it later. In the meantime, the dollar valuation has cheapened about 10% in the last month, the Canadian dollar is at par and rising against the USD, foreign investment in the US continues a sharp decline, and foreign banks are dumping Treasuries at a faster rate. That can't be a good combination.
I expect that the Fed will continue to reduce interest rates another half or three-quarters of a point over the next four or five months in a continuing effort to shore up the economy. However, there are forces building that indicate inflation will rise, thus forcing up interest rates at about six to eight months. There will be a huge rise at that time.
At least that's the view from here right now.
We have a fairly narrow window for home purchases as interest rates are at good lows, particularly for conforming loans under $417,000. For those who want to wait for housing prices to collapse, they may see that eventually, but that will be when interest rates rise so high and that they quickly erode most people's purchasing power.
We are indeed in a golden time for buyers right now: low interest rates, high housing inventories, and fear and/or distress among some sellers. For now the indication is Buy-Buy-Buy if you want to buy within the next few years. Now. Right now is the right time. If you wait, you will likely lose. Or in other words, you will remain renters.
For sellers, it is also the time to Sell-Sell-Sell. Why? We are in that same window of opportunity. Wait and home prices will drop as interest rates bounce quickly higher on inflation fears. Interest rates will get higher than buyers can afford, and with more foreclosures coming on the market, home prices will drop and when that local trickle become a flood, they will drop fast.
Yes, the Fed has given a little breathing room. But it is not a lot of room. The time to act is now. Renters: become buyers while you can still afford to buy. Sellers, get serious. Get it done.
Party on, Wall Street! But it is Last Call!
Friday, September 14, 2007
How Bad Could It Get?
There have been lots of discussions these days about where the housing market is going. I read a lot from a variety of sources, from those who think that the markets and the players will take whatever actions are needed to preserve some order and rationality in the system, to those who think it is all out of control and headed for a dark and scary period of collapse.
Many people have asked me directly what is going to happen. Whatever my answer, if it agrees with your opinion at the time, I'm a genius. If I vary high or low, I'm an idiot or worse.
This Blog provides information that you can use to hopefully have a more informed opinion and make more intelligent decisions.
That said, the following is an argument against bailing out over-leveraged homeowners and Mortgage Backed Securities. Safehaven is pretty over-the-edge but if you think the Fed is the center of all evil, safehaven is the place for you!
RK
http://www.safehaven.com/article-8263.htm
It's a Shoe In
Excerpts by Peter Schiff
In order to breathe life into the dying secondary market for non-conforming mortgages, some have suggested that Fannie Mae and Freddie Mac be allowed to buy jumbo mortgages. Others, such as bond guru Bill Gross, have suggested that the Federal government itself establish a fund to bail out homeowners who cannot afford their mortgages. Gross maintains that such a move would be necessary to prevent the biggest real estate price collapse since the Great Depression. If he truly harbors such fears, then he should know that creating such a fund will not prevent the disaster. Even if it means that millions of foreclosures do not occur, real estate prices will still have to fall substantially to return to normal levels and to be in conformity with traditional lending standards.
Setting aside the constitutional or ethical arguments against it, the cost of such a bail out would be staggering. My guess is that the price tag would exceed one trillion dollars (Gross estimates the cost at only around $200 billion). Even if Gross' numbers are accurate, it still represents a significant sum which we would likely have to borrow from abroad. What Gross fails to consider is the moral hazard implicit in such a bail out. Were the government to create a program whereby anyone falling behind on their mortgage could have their loan restructured to some lesser amount with lower payments, one would have to be an idiot not to take advantage of it. If such a nutty plan were ever implemented, it would not be 2 million homes going into foreclosure as Gross fears, but 20 million.
Many people have asked me directly what is going to happen. Whatever my answer, if it agrees with your opinion at the time, I'm a genius. If I vary high or low, I'm an idiot or worse.
This Blog provides information that you can use to hopefully have a more informed opinion and make more intelligent decisions.
That said, the following is an argument against bailing out over-leveraged homeowners and Mortgage Backed Securities. Safehaven is pretty over-the-edge but if you think the Fed is the center of all evil, safehaven is the place for you!
RK
http://www.safehaven.com/article-8263.htm
It's a Shoe In
Excerpts by Peter Schiff
In order to breathe life into the dying secondary market for non-conforming mortgages, some have suggested that Fannie Mae and Freddie Mac be allowed to buy jumbo mortgages. Others, such as bond guru Bill Gross, have suggested that the Federal government itself establish a fund to bail out homeowners who cannot afford their mortgages. Gross maintains that such a move would be necessary to prevent the biggest real estate price collapse since the Great Depression. If he truly harbors such fears, then he should know that creating such a fund will not prevent the disaster. Even if it means that millions of foreclosures do not occur, real estate prices will still have to fall substantially to return to normal levels and to be in conformity with traditional lending standards.
Setting aside the constitutional or ethical arguments against it, the cost of such a bail out would be staggering. My guess is that the price tag would exceed one trillion dollars (Gross estimates the cost at only around $200 billion). Even if Gross' numbers are accurate, it still represents a significant sum which we would likely have to borrow from abroad. What Gross fails to consider is the moral hazard implicit in such a bail out. Were the government to create a program whereby anyone falling behind on their mortgage could have their loan restructured to some lesser amount with lower payments, one would have to be an idiot not to take advantage of it. If such a nutty plan were ever implemented, it would not be 2 million homes going into foreclosure as Gross fears, but 20 million.
Tuesday, September 11, 2007
NAR Projects More Severe Decline in Housing
National Association of Realtors Getting a Clue
[Note: The NAR provides numbers that are national averages. Local numbers may, and do, vary widely from the numbers given in this press release.]
Home values and housing sales will take an even bigger hit than previously forecast and will not recover to their earlier levels throughout all of 2008, according to the latest economic outlook from the National Association of REALTORS released this week.
While the trade group sees gains in prices in 2008 from the current weak levels, it projects that the median existing-home price will be $224,600 in the fourth quarter of next year. That would still put the price slightly below the record price reading of $225,000 in the third quarter of last year.
The trade group now says it expects a 3.7 percent decline in existing-home prices in the third quarter of 2007 compared to a year earlier, which is worse than the previous forecast of a 2.2 percent decline. And the fourth quarter should see prices down 1.3 percent from a year ago, rather than the one percent drop that was previously forecast.
The group also sees continued weakness in new-home prices, with values down 2.2 percent this year, and down three percent in the first quarter of 2008 compared to the first quarter of this year. The median new-home price is estimated to drop to $241,100 in 2007, and then increase 1.7 percent next year to $245,100.
The group is now forecasting an 8.6 percentage drop in the pace of existing-home sales this year, which is not only worse than its previous estimate of a 6.8 percent decline, but also would top the 8.5 percent drop seen in 2006. While the group believes existing-home sales should rebound 5.8 percent in 2008, that would still leave the volume of sales more than 11 percent below the record sales of 7.1 million seen in 2005. Existing-home sales are projected at 5.92 million this year and then rise to 6.27 million in 2008, compared with 6.48 million in 2006.
New-home sales volume is expected to drop even more sharply, posting a 23.8 percent drop this year, and another 7.4 percent drop in 2008. New-home sales should total 801,000 in 2007 and 741,000 next year, below the 1.05 million in 2006. Housing starts are expected to post similar declines each year.
[Note: The NAR provides numbers that are national averages. Local numbers may, and do, vary widely from the numbers given in this press release.]
Home values and housing sales will take an even bigger hit than previously forecast and will not recover to their earlier levels throughout all of 2008, according to the latest economic outlook from the National Association of REALTORS released this week.
While the trade group sees gains in prices in 2008 from the current weak levels, it projects that the median existing-home price will be $224,600 in the fourth quarter of next year. That would still put the price slightly below the record price reading of $225,000 in the third quarter of last year.
The trade group now says it expects a 3.7 percent decline in existing-home prices in the third quarter of 2007 compared to a year earlier, which is worse than the previous forecast of a 2.2 percent decline. And the fourth quarter should see prices down 1.3 percent from a year ago, rather than the one percent drop that was previously forecast.
The group also sees continued weakness in new-home prices, with values down 2.2 percent this year, and down three percent in the first quarter of 2008 compared to the first quarter of this year. The median new-home price is estimated to drop to $241,100 in 2007, and then increase 1.7 percent next year to $245,100.
The group is now forecasting an 8.6 percentage drop in the pace of existing-home sales this year, which is not only worse than its previous estimate of a 6.8 percent decline, but also would top the 8.5 percent drop seen in 2006. While the group believes existing-home sales should rebound 5.8 percent in 2008, that would still leave the volume of sales more than 11 percent below the record sales of 7.1 million seen in 2005. Existing-home sales are projected at 5.92 million this year and then rise to 6.27 million in 2008, compared with 6.48 million in 2006.
New-home sales volume is expected to drop even more sharply, posting a 23.8 percent drop this year, and another 7.4 percent drop in 2008. New-home sales should total 801,000 in 2007 and 741,000 next year, below the 1.05 million in 2006. Housing starts are expected to post similar declines each year.
Monday, September 10, 2007
Removing the Seven Most Deadly Common Buyer Objections
by Jim Remley, Pro Performer Seminars
Horriblize - it's not really a word but it's exactly what many buyers do when they walk through a home for the first time. They look for the negatives, the reasons they can eliminate a home from consideration. Even the smallest flaw in your listing can be seen as a much bigger problem that what it really is. A classic example of this is a ceiling stain.
Countless times over the years as I've walked a buyer through a home they have looked up and noticed a stain on the ceiling. Inevitably they will point up and say something to the effect of "Uh-oh, look at that." Translated, "Scratch this home off the list."
Now a ceiling stain is definitely something to be concerned with as it might indicate that the roof is leaking, or the gutter system is failing, but in the vast majority of these cases what has happened is that there was a previous problem that has since been fixed. The problem is the homeowner didn't take the next step and repair or repaint the ceiling. To be clear this is not a matter of hiding a problem as most states require that homeowners disclose any known defects in a home with a standard disclosure statement. Instead this boils down to a buyer's over zealous imagination. Once they see that stain, they picture the whole attic full of water, a gaping hole in the center of the roof, and rain clouds on the horizon.
Buyers horriblize problems.
Now it might be natural to think that a real estate agents job is to convince a buyer to overlook these small flaws. Wrong. A listing agent's job is to expose a home to the maximum number of buyers through marketing and promotion, and one inescapable truth in marketing is that top condition equals top dollar, and less than top condition equals less than top dollar. When a home has flaws one of two things has to happen - either the sellers will have to pay a buyer to ignore them by reducing their price or the seller will have to fix them.
So what areas of a home are buyers most concerned with? Let's take a look at the seven most deadly buyer objections.
(Don't be alarmed you might notice that the intended reader is actually the homeowner - I stole these recommendations from my new book Sell Your Home in Any Market - 50 Surprisingly Simple Strategies to Sell Your Home Fast and For Top Dollar! )
Ceiling Stains
Since we already cracked the shell on this rotten egg let's deal with it first. If your home has any roof leaks, seeping around vents, chimneys, or additions, or if your home's gutter system is blocked or failing, these items must be fixed in order to secure top dollar. If you don't happen to be a licensed roofing contractor, it may be wise to have the work done by someone who can provide a certification that the work was done to local building code standards.
But as important as fixing the source of the problem is repairing any damage done inside of the home is just as important. These repairs could include new sheet rock, wood paneling, paint or wallpaper. Just be sure your repair fully matches the rest of the homes finish.
Kitchens
The kitchen is the center point of most homes, the hub around which the family wheel spins. It's no wonder then that a kitchen can make or break a home sale. While a buyer may be willing to overlook a small bedroom, or a missing closet, if a kitchen does not measure up to a buyers standards all bets are off. To improve your kitchen you may want to follow the advice of home improvement experts by looking at these top five ideas:
Top Five Kitchen Improvements
Sinks and Faucets - Even the best quality sinks, and faucets can get beaten up over time. When it's time to sell it's a good idea to, at the very least, clean the faucets, re-caulk the sink, and if your sink is chipped take a trip to Home Depot for a low cost fix. If your sink or faucet is beyond repair it may be a great time to upgrade to a more modern sink system.
Appliance Upgrade - Although not cheap, new or updated appliances can excite a buyer who may be leaving older appliances. In addition matching the appliances by color will provide continuity to the kitchen. Obviously small home appliances that are rarely used but take up counter space like bread makers and toaster ovens should be packed and stored.
New or Refaced Cabinets - When selling many homeowners make the choice to invest in new cabinets or opt for the less expensive option of re-facing older cabinets. Re-facing cabinets means that you leave the cabinets in place but add a new veneer to the exterior. Can't decide what to do - replace or reface? Visit www.thisoldhouse.com for ways to make your decision easier.
New Lighting - According to www.homefocused.com - "Bright, airy lighting makes working in the kitchen easier. Fluorescent lighting on the ceiling provides a bright, but soft light. Fluorescent lighting can also be installed under cabinets for task lighting, throwing light directly onto the countertop below them."
New Counter Tops - A kitchen counter is the face of your kitchen, sure you can have the best cabinets, appliances, lighting, flooring, and paint but if the counter top doesn't hit a home run your still three bases short of a win. The counter top ties every piece of your kitchen together. Ask yourself - Do my counter tops live up to the rest of the kitchen, if not consider an upgrade. Also don't forget the back splash, a worn out back splash can make even the best counter tops seems dull or dated.
If you have the notion of going big by completely remodeling your kitchen, or perhaps building a new home from scratch to resell check out the top items buyers are looking for in a new kitchen.
Upper End Appliances 65%
Increased Pantry Space 64%
Renewable Flooring 53%
Wine Refrigerators/Storage 53%
Integration with Living Space 53%
Recycling Center 48%
** Based on 2006/2007 American Institute of Architects Poll
Declining Neighborhood
In a 2006 study of home buyers and sellers conducted by the National Association of REALTORS® it was found that buyers rated neighborhood quality as the number one factor in purchasing a home. So what if your neighborhood lacks a little (or a lot) to be desired? Check out this quick list of ideas compiled by Trish a REALTOR® from Mississippi:
Cleaning Up the Neighborhood
Strike a Deal - If your neighbor's homes are dragging your listing down why not spring for a landscaper to give their yard a makeover? Why pay for a neighbors yard to be improved? So you can sell your home for top dollar!
Call the City or Chamber of Commerce - Ask them if they are any neighborhood clean up programs available. Many volunteer organizations pick an area each month to clean or improve. Why not your neighborhood?
Team Up - If there are other homeowners attempting to sell their homes in the neighborhood why not team up to tackle the problem? A combined effort over one weekend - picking up trash, cleaning out storm drains, or painting over graffiti could inspire others to follow your lead.
Age of home
Because many buyers perceive an older home to be a potential money pit some sellers find it wise to invest in minor home improvement projects. For instance many sellers replace their cabinet hardware with updated styles. The same is true of lighting fixtures, and even plumbing fixtures. For bigger projects sellers have been known to replace windows, front doors, appliances, and even garage doors to update a homes appearance.
Anticipating Buyer Concerns
When considering the purchase of a vintage home many home buyers understandably will want to know more about the homes systems. Wise sellers are prepared to answer questions on everything from plumbing, to insulation and wiring. Remember anything left unknown for a buyer is a black hole, something they fear and will do almost anything to avoid.
Bathrooms
Your bathroom is about to have a top to bottom inspection so be sure to re-caulk around the tub and toilet, replace rusted or worn out fixtures, and remove all of the unnecessary items taking up space on the counter. The tub and shower are of critical concern, if they are chipped or damaged cancel your golf game and head down to your nearest hardware store. Buyers also hate to see leaking faucets, or drains that don't, you know drain, and don't be surprised if they flush the toilet to watch how fast the bowl refills.
If you plan to remodel or add a bathroom to your home check out this list of what home buyers want in a new bathroom:
Radiant Heated Floors 62%
Multi-Head Showers 62%
Accessibility/Universal Design 48%
Door-less Showers 47%
Linen Closet Storage 36%
** Based on 2006/2007 American Institute of Architects Poll
Smells
If you are a smoker, who actually smokes in your home, be warned your home could take a lot longer to sell. Why? Only 25% of the American population smokes and of that group a big percentage don't smoke in their homes. Of course smells can come from other sources as well - cooking odors, oven fires, trash or compost, and one of the worst animal odors. To remove smells from your home take a look at these tips from home cleaning expert Linda Miller of Hermiston, OR.
Ten Ways to Breathe Easier
Open windows and doors and place a large fan where it can blow fresh air in and a second fan to exhaust the odors out.
Replace attic insulation. The odors from cooking rise in the heat and are trapped in the attic insulation. The insulation cannot be cleaned or effectively deodorized and must be discarded. Completely clean the entire attic and allow it to dry, and then replace the insulation with new material.
Use a steam extractor for cleaning carpets and upholstered furniture. A commercial steam extractor can be rented from an equipment rental facility. Hiring a professional truck mounted steam extractor is much more powerful and is worth the money if the odors are deeply imbedded and persistent. It is nearly impossible to get odors out of mattresses and foam pillows, these may need to be discarded and replaced.
Clothing, bedding, and drapes will need to be laundered or dry cleaned. Be sure to check the tags for care instructions and follow the directions.
Clothing may need to be washed several times to remove some odors; particularly stale cigarette smoke.
Take care of the air circulation. Change the furnace or air conditioning filters once a day until you no longer smell offensive odors when you come into the house. The odor causing particles will be in all the ducting and you may need to have a professional duct cleaning service come clean your ducting to completely remove the particulates.
Ceilings, walls and floors need to be washed down.
Unplug and wash your stove and refrigerator inside and out (including the back of the stove and the coils of the refrigerator) with a dish washing liquid, then rinse with a solution consisting of one cup vinegar, the juice of three lemons, and a gallon of warm water.
Take all the drawers out of your cabinets and open all the cupboard doors, wash inside and out paying attention to the drawer slides and around the hinges. Allow to dry completely before replacing drawers and closing the cupboard doors.
When you have totally washed, and rinsed everything, allow it to dry completely. Place small dishes of vanilla extract, baking soda, sliced lemons or potpourri throughout the house to capture the odors and replace them with a better alternative.
Floor Coverings
Often the first item a buyer will notice when they step into your home is the floor coverings. Carpets that are in good condition, clean, and match the style of the home will add to a buyer's favorable first impression. On the other hand floor coverings that are worn, torn, dirty, or just plain ugly will turn off a buyer faster than a terrarium full of pet vipers (something I've actually seen in a buyer's home).
I know the argument - We don't want to pick a carpet the buyer won't like so will just let them do it after they move in. Come on, we both know this is really code for: "I don't want to spend money carpeting a home I'm about ready to sell." The problem is buyers are notoriously bad at visualizing a home in some future state of repair and they are even worse about buying a home that is not turn key ready. Because of this many sellers do their homework and find a floor covering company that will install new flooring but will also agree to wait 30, 60, or 90 days for payment. Best case the home sells before the bill comes due and the invoice gets paid in escrow worse case you get to enjoy new carpets and a new second mortgage.
Horriblize - it's not really a word but it's exactly what many buyers do when they walk through a home for the first time. They look for the negatives, the reasons they can eliminate a home from consideration. Even the smallest flaw in your listing can be seen as a much bigger problem that what it really is. A classic example of this is a ceiling stain.
Countless times over the years as I've walked a buyer through a home they have looked up and noticed a stain on the ceiling. Inevitably they will point up and say something to the effect of "Uh-oh, look at that." Translated, "Scratch this home off the list."
Now a ceiling stain is definitely something to be concerned with as it might indicate that the roof is leaking, or the gutter system is failing, but in the vast majority of these cases what has happened is that there was a previous problem that has since been fixed. The problem is the homeowner didn't take the next step and repair or repaint the ceiling. To be clear this is not a matter of hiding a problem as most states require that homeowners disclose any known defects in a home with a standard disclosure statement. Instead this boils down to a buyer's over zealous imagination. Once they see that stain, they picture the whole attic full of water, a gaping hole in the center of the roof, and rain clouds on the horizon.
Buyers horriblize problems.
Now it might be natural to think that a real estate agents job is to convince a buyer to overlook these small flaws. Wrong. A listing agent's job is to expose a home to the maximum number of buyers through marketing and promotion, and one inescapable truth in marketing is that top condition equals top dollar, and less than top condition equals less than top dollar. When a home has flaws one of two things has to happen - either the sellers will have to pay a buyer to ignore them by reducing their price or the seller will have to fix them.
So what areas of a home are buyers most concerned with? Let's take a look at the seven most deadly buyer objections.
(Don't be alarmed you might notice that the intended reader is actually the homeowner - I stole these recommendations from my new book Sell Your Home in Any Market - 50 Surprisingly Simple Strategies to Sell Your Home Fast and For Top Dollar! )
Ceiling Stains
Since we already cracked the shell on this rotten egg let's deal with it first. If your home has any roof leaks, seeping around vents, chimneys, or additions, or if your home's gutter system is blocked or failing, these items must be fixed in order to secure top dollar. If you don't happen to be a licensed roofing contractor, it may be wise to have the work done by someone who can provide a certification that the work was done to local building code standards.
But as important as fixing the source of the problem is repairing any damage done inside of the home is just as important. These repairs could include new sheet rock, wood paneling, paint or wallpaper. Just be sure your repair fully matches the rest of the homes finish.
Kitchens
The kitchen is the center point of most homes, the hub around which the family wheel spins. It's no wonder then that a kitchen can make or break a home sale. While a buyer may be willing to overlook a small bedroom, or a missing closet, if a kitchen does not measure up to a buyers standards all bets are off. To improve your kitchen you may want to follow the advice of home improvement experts by looking at these top five ideas:
Top Five Kitchen Improvements
Sinks and Faucets - Even the best quality sinks, and faucets can get beaten up over time. When it's time to sell it's a good idea to, at the very least, clean the faucets, re-caulk the sink, and if your sink is chipped take a trip to Home Depot for a low cost fix. If your sink or faucet is beyond repair it may be a great time to upgrade to a more modern sink system.
Appliance Upgrade - Although not cheap, new or updated appliances can excite a buyer who may be leaving older appliances. In addition matching the appliances by color will provide continuity to the kitchen. Obviously small home appliances that are rarely used but take up counter space like bread makers and toaster ovens should be packed and stored.
New or Refaced Cabinets - When selling many homeowners make the choice to invest in new cabinets or opt for the less expensive option of re-facing older cabinets. Re-facing cabinets means that you leave the cabinets in place but add a new veneer to the exterior. Can't decide what to do - replace or reface? Visit www.thisoldhouse.com for ways to make your decision easier.
New Lighting - According to www.homefocused.com - "Bright, airy lighting makes working in the kitchen easier. Fluorescent lighting on the ceiling provides a bright, but soft light. Fluorescent lighting can also be installed under cabinets for task lighting, throwing light directly onto the countertop below them."
New Counter Tops - A kitchen counter is the face of your kitchen, sure you can have the best cabinets, appliances, lighting, flooring, and paint but if the counter top doesn't hit a home run your still three bases short of a win. The counter top ties every piece of your kitchen together. Ask yourself - Do my counter tops live up to the rest of the kitchen, if not consider an upgrade. Also don't forget the back splash, a worn out back splash can make even the best counter tops seems dull or dated.
If you have the notion of going big by completely remodeling your kitchen, or perhaps building a new home from scratch to resell check out the top items buyers are looking for in a new kitchen.
Upper End Appliances 65%
Increased Pantry Space 64%
Renewable Flooring 53%
Wine Refrigerators/Storage 53%
Integration with Living Space 53%
Recycling Center 48%
** Based on 2006/2007 American Institute of Architects Poll
Declining Neighborhood
In a 2006 study of home buyers and sellers conducted by the National Association of REALTORS® it was found that buyers rated neighborhood quality as the number one factor in purchasing a home. So what if your neighborhood lacks a little (or a lot) to be desired? Check out this quick list of ideas compiled by Trish a REALTOR® from Mississippi:
Cleaning Up the Neighborhood
Strike a Deal - If your neighbor's homes are dragging your listing down why not spring for a landscaper to give their yard a makeover? Why pay for a neighbors yard to be improved? So you can sell your home for top dollar!
Call the City or Chamber of Commerce - Ask them if they are any neighborhood clean up programs available. Many volunteer organizations pick an area each month to clean or improve. Why not your neighborhood?
Team Up - If there are other homeowners attempting to sell their homes in the neighborhood why not team up to tackle the problem? A combined effort over one weekend - picking up trash, cleaning out storm drains, or painting over graffiti could inspire others to follow your lead.
Age of home
Because many buyers perceive an older home to be a potential money pit some sellers find it wise to invest in minor home improvement projects. For instance many sellers replace their cabinet hardware with updated styles. The same is true of lighting fixtures, and even plumbing fixtures. For bigger projects sellers have been known to replace windows, front doors, appliances, and even garage doors to update a homes appearance.
Anticipating Buyer Concerns
When considering the purchase of a vintage home many home buyers understandably will want to know more about the homes systems. Wise sellers are prepared to answer questions on everything from plumbing, to insulation and wiring. Remember anything left unknown for a buyer is a black hole, something they fear and will do almost anything to avoid.
Bathrooms
Your bathroom is about to have a top to bottom inspection so be sure to re-caulk around the tub and toilet, replace rusted or worn out fixtures, and remove all of the unnecessary items taking up space on the counter. The tub and shower are of critical concern, if they are chipped or damaged cancel your golf game and head down to your nearest hardware store. Buyers also hate to see leaking faucets, or drains that don't, you know drain, and don't be surprised if they flush the toilet to watch how fast the bowl refills.
If you plan to remodel or add a bathroom to your home check out this list of what home buyers want in a new bathroom:
Radiant Heated Floors 62%
Multi-Head Showers 62%
Accessibility/Universal Design 48%
Door-less Showers 47%
Linen Closet Storage 36%
** Based on 2006/2007 American Institute of Architects Poll
Smells
If you are a smoker, who actually smokes in your home, be warned your home could take a lot longer to sell. Why? Only 25% of the American population smokes and of that group a big percentage don't smoke in their homes. Of course smells can come from other sources as well - cooking odors, oven fires, trash or compost, and one of the worst animal odors. To remove smells from your home take a look at these tips from home cleaning expert Linda Miller of Hermiston, OR.
Ten Ways to Breathe Easier
Open windows and doors and place a large fan where it can blow fresh air in and a second fan to exhaust the odors out.
Replace attic insulation. The odors from cooking rise in the heat and are trapped in the attic insulation. The insulation cannot be cleaned or effectively deodorized and must be discarded. Completely clean the entire attic and allow it to dry, and then replace the insulation with new material.
Use a steam extractor for cleaning carpets and upholstered furniture. A commercial steam extractor can be rented from an equipment rental facility. Hiring a professional truck mounted steam extractor is much more powerful and is worth the money if the odors are deeply imbedded and persistent. It is nearly impossible to get odors out of mattresses and foam pillows, these may need to be discarded and replaced.
Clothing, bedding, and drapes will need to be laundered or dry cleaned. Be sure to check the tags for care instructions and follow the directions.
Clothing may need to be washed several times to remove some odors; particularly stale cigarette smoke.
Take care of the air circulation. Change the furnace or air conditioning filters once a day until you no longer smell offensive odors when you come into the house. The odor causing particles will be in all the ducting and you may need to have a professional duct cleaning service come clean your ducting to completely remove the particulates.
Ceilings, walls and floors need to be washed down.
Unplug and wash your stove and refrigerator inside and out (including the back of the stove and the coils of the refrigerator) with a dish washing liquid, then rinse with a solution consisting of one cup vinegar, the juice of three lemons, and a gallon of warm water.
Take all the drawers out of your cabinets and open all the cupboard doors, wash inside and out paying attention to the drawer slides and around the hinges. Allow to dry completely before replacing drawers and closing the cupboard doors.
When you have totally washed, and rinsed everything, allow it to dry completely. Place small dishes of vanilla extract, baking soda, sliced lemons or potpourri throughout the house to capture the odors and replace them with a better alternative.
Floor Coverings
Often the first item a buyer will notice when they step into your home is the floor coverings. Carpets that are in good condition, clean, and match the style of the home will add to a buyer's favorable first impression. On the other hand floor coverings that are worn, torn, dirty, or just plain ugly will turn off a buyer faster than a terrarium full of pet vipers (something I've actually seen in a buyer's home).
I know the argument - We don't want to pick a carpet the buyer won't like so will just let them do it after they move in. Come on, we both know this is really code for: "I don't want to spend money carpeting a home I'm about ready to sell." The problem is buyers are notoriously bad at visualizing a home in some future state of repair and they are even worse about buying a home that is not turn key ready. Because of this many sellers do their homework and find a floor covering company that will install new flooring but will also agree to wait 30, 60, or 90 days for payment. Best case the home sells before the bill comes due and the invoice gets paid in escrow worse case you get to enjoy new carpets and a new second mortgage.
Home Sellers: Reality Bites
The psychology of buyers and sellers in the real estate marketplace is important to properly price and sell properties. With the current upheaval in the market, it is more important than ever if sellers are to price their properties for sale, and for buyers in making a rational decision to buy.
For sellers, the following points are key:
Home values will (best case) stay stagnant or decrease.
Qualified borrowers are looking for deals.
Fewer borrowers are qualifying for home loans.
Rising foreclosures tend to negatively affect home values.
Increased "days on the market" (DOMs) increases the likelihood that buyers will aggressively negotiate prices down.
Continued stress in the financial markets will affect consumer confidence.
Loans may take longer to close.
Appraisals at sales price are becoming more difficult to obtain.
For buyers, properties should be funded before contract contingencies are removed.
It's critical to encourage sellers to price homes to sell -- and sell quickly -- decreasing the need for price reductions.
While price is important, it is not the only consideration for buyers. Location as always is a factor... 'good' location better than 'bad' location, whatever the specifics are. Unfortunately, location is what it is. If there are negatives to the location, re-pricing downward will come into play.
Condition is another important consideration, and one that the seller does have some or absolute control over. In addition to paint and carpet, cleanliness, curb appeal, and deferred maintenance, there may be other factors that affect the buyer's decision to buy. Such factors might include outdated and old (but working) appliances, unpermitted additions or other unpermitted features of the property, excess possessions, showing restrictions, or inadequate incentives offered such as paying buyer costs and/or increasing commission or paying for loan buydowns.
Sellers should be thinking long and hard about ANY factor that would tend to push a prospective buyer away from a decision to buy, and reduce or eliminate it from the equation. And once a buyer gets involved with a property and makes an acceptable offer, the work doesn't stop there. Homes are falling out of escrow at an alarming rate, whether the buyer's reason is disclosure or inspection of property condition, inability to qualify for financing, or just 'cold feet' because the buyer let relatives talk him or her out of the purchase. While not much can be done about this last condition, it is a significant factor these days. Again, sellers should be addressing those factors they actually have an effect on like condition and pricing.
In re-reading the above, the general climate of the real estate market can best be described as 'unsettled'. As has always been the case, in a declining market many sellers dig in their heels (at first) and loudly declare that they will not, absolutely will not, give their homes away. I have sympathy for their feelings, but if they seriously want to sell, they need to recognize market realities. Home prices are on a declining trend, and reality is, buyers don't want their hard-earned down payments and equity in a home that they have purchased to disappear in a depreciating asset, just as sellers don't like to see their equity disappear. Plus it is pretty difficult to rationally make an argument that it's OK to preserve the equity for sellers at highly appreciated levels, while having the buyer take on the risk of equity decline. Another way to put it for sellers is: what makes you so special and immune from the swings of the housing market? Prices go up... prices go down. In general and historically, housing appreciation has been about 5% per year on average over a long time. But not every year in particular.
If you are a seller, you might think I am being unnecessarily tough on you. No, I am just re-introducing you to reality. If you don't really want or need to sell, then don't. Stay in your home, make your housing payments if you are secure in your ability to do so over the next four or five years no matter what the larger economy does or how it affects interest rates, pay down your mortgage balance and build equity over time. Re-capture a traditional view of home ownership. Don't whine about the swings of the market and what your home used to be worth. Be happy.
But if you don't know if you will be able to make the mortgage payments over the next year or two or three as your interest rate adjusts for the mortgage terms that you have, you should seriously consider selling right now. The market has swung, and foreclosures are going to go up as the conditions for a 'perfect storm' for housing develops. If you were counting on home price appreciation to bail you out, as it has bailed out so many people over the last five years, you should re-think your plan.
We can help. As always, the SCV Home Team and I want the best for you. We really do. We want to help you make rational decisions in your own best interests. If the best decision for you and your family is to stay in your home and wait some years for the market to work out the excesses, that is great. If the more prudent course is to 'downsize' from where you are, it is best to do that by choice and rationally, rather than wait a few months or years for an NOD, a foreclosure, and then either the Sheriff's knock at the door or a moving van in the middle of the night.
Yes, reality can bite. Just don't let it bite you.
If you live in the Santa Clarita Valley, or the adjacent San Fernando or Antelope Valleys, and we need to have a serious discussion about your particular circumstances, call us at 661-287-9164.
For sellers, the following points are key:
Home values will (best case) stay stagnant or decrease.
Qualified borrowers are looking for deals.
Fewer borrowers are qualifying for home loans.
Rising foreclosures tend to negatively affect home values.
Increased "days on the market" (DOMs) increases the likelihood that buyers will aggressively negotiate prices down.
Continued stress in the financial markets will affect consumer confidence.
Loans may take longer to close.
Appraisals at sales price are becoming more difficult to obtain.
For buyers, properties should be funded before contract contingencies are removed.
It's critical to encourage sellers to price homes to sell -- and sell quickly -- decreasing the need for price reductions.
While price is important, it is not the only consideration for buyers. Location as always is a factor... 'good' location better than 'bad' location, whatever the specifics are. Unfortunately, location is what it is. If there are negatives to the location, re-pricing downward will come into play.
Condition is another important consideration, and one that the seller does have some or absolute control over. In addition to paint and carpet, cleanliness, curb appeal, and deferred maintenance, there may be other factors that affect the buyer's decision to buy. Such factors might include outdated and old (but working) appliances, unpermitted additions or other unpermitted features of the property, excess possessions, showing restrictions, or inadequate incentives offered such as paying buyer costs and/or increasing commission or paying for loan buydowns.
Sellers should be thinking long and hard about ANY factor that would tend to push a prospective buyer away from a decision to buy, and reduce or eliminate it from the equation. And once a buyer gets involved with a property and makes an acceptable offer, the work doesn't stop there. Homes are falling out of escrow at an alarming rate, whether the buyer's reason is disclosure or inspection of property condition, inability to qualify for financing, or just 'cold feet' because the buyer let relatives talk him or her out of the purchase. While not much can be done about this last condition, it is a significant factor these days. Again, sellers should be addressing those factors they actually have an effect on like condition and pricing.
In re-reading the above, the general climate of the real estate market can best be described as 'unsettled'. As has always been the case, in a declining market many sellers dig in their heels (at first) and loudly declare that they will not, absolutely will not, give their homes away. I have sympathy for their feelings, but if they seriously want to sell, they need to recognize market realities. Home prices are on a declining trend, and reality is, buyers don't want their hard-earned down payments and equity in a home that they have purchased to disappear in a depreciating asset, just as sellers don't like to see their equity disappear. Plus it is pretty difficult to rationally make an argument that it's OK to preserve the equity for sellers at highly appreciated levels, while having the buyer take on the risk of equity decline. Another way to put it for sellers is: what makes you so special and immune from the swings of the housing market? Prices go up... prices go down. In general and historically, housing appreciation has been about 5% per year on average over a long time. But not every year in particular.
If you are a seller, you might think I am being unnecessarily tough on you. No, I am just re-introducing you to reality. If you don't really want or need to sell, then don't. Stay in your home, make your housing payments if you are secure in your ability to do so over the next four or five years no matter what the larger economy does or how it affects interest rates, pay down your mortgage balance and build equity over time. Re-capture a traditional view of home ownership. Don't whine about the swings of the market and what your home used to be worth. Be happy.
But if you don't know if you will be able to make the mortgage payments over the next year or two or three as your interest rate adjusts for the mortgage terms that you have, you should seriously consider selling right now. The market has swung, and foreclosures are going to go up as the conditions for a 'perfect storm' for housing develops. If you were counting on home price appreciation to bail you out, as it has bailed out so many people over the last five years, you should re-think your plan.
We can help. As always, the SCV Home Team and I want the best for you. We really do. We want to help you make rational decisions in your own best interests. If the best decision for you and your family is to stay in your home and wait some years for the market to work out the excesses, that is great. If the more prudent course is to 'downsize' from where you are, it is best to do that by choice and rationally, rather than wait a few months or years for an NOD, a foreclosure, and then either the Sheriff's knock at the door or a moving van in the middle of the night.
Yes, reality can bite. Just don't let it bite you.
If you live in the Santa Clarita Valley, or the adjacent San Fernando or Antelope Valleys, and we need to have a serious discussion about your particular circumstances, call us at 661-287-9164.
Tuesday, September 04, 2007
President Bush Proposes Mortgage Relief
The White House is proposing to expand the role of the federal government to stem a wave of mortgage defaults, President Bush said last week, unveiling a series of steps including allowing refinancing into government-insured mortgages. Under the plan, the Federal Housing Administration's mortgage insurance program will be changed to allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages. People who have missed mortgage payments are now ineligible for FHA insurance.
The President's plan would allow them to be eligible for FHA insurance if the amount they are required to pay each month increases, as has happened on many adjustable loans with so-called "teaser" introductory rates. However, Bush is rejecting a wholesale bailout of borrowers and lenders alike, saying it's not Washington's role to provide such a backstop.
"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," Bush said. But he said many homeowners could be helped if their lenders are flexible with mortgage terms and the government offers them modest help.
The president wants to work with Congress to temporarily suspend the tax liability that can take effect when borrowers lose their homes through short-sales, and when lenders forgive mortgage debt. That will enable borrowers to more easily re-work their loans.
Bush also discussed putting together a coalition of community groups, government agencies and government-sponsored enterprises, such as Freddie Mac, to help homeowners refinance onerous loans. That would include making credit available as well as counseling borrowers on credit issues.
Another of the president's goals is to increase transparency in lending practices so consumers would better understand the true risks and costs of loans for which they sign up. That could reduce the number of borrowers facing the loss of their homes in the future.
The President's plan would allow them to be eligible for FHA insurance if the amount they are required to pay each month increases, as has happened on many adjustable loans with so-called "teaser" introductory rates. However, Bush is rejecting a wholesale bailout of borrowers and lenders alike, saying it's not Washington's role to provide such a backstop.
"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," Bush said. But he said many homeowners could be helped if their lenders are flexible with mortgage terms and the government offers them modest help.
The president wants to work with Congress to temporarily suspend the tax liability that can take effect when borrowers lose their homes through short-sales, and when lenders forgive mortgage debt. That will enable borrowers to more easily re-work their loans.
Bush also discussed putting together a coalition of community groups, government agencies and government-sponsored enterprises, such as Freddie Mac, to help homeowners refinance onerous loans. That would include making credit available as well as counseling borrowers on credit issues.
Another of the president's goals is to increase transparency in lending practices so consumers would better understand the true risks and costs of loans for which they sign up. That could reduce the number of borrowers facing the loss of their homes in the future.
Monday, September 03, 2007
Six Ways to Quickly Boost Credit Scores
Daily Real Estate News | July 20, 2007
6 Ways to Quickly Boost Credit Scores
As lenders tighten their underwriting guidelines, borrowers are wise to raise their credit scores to qualify for loans, secure better loan terms, and receive lower interest rates.
"Individuals can positively affect their credit scores in as little as three weeks," says Edward Jamison, a Los Angeles based credit attorney. "It's just a matter of getting educated and focused on the best, fastest, and most reliable course of action."
Jamison, who you may know as a credit expert on the NBC show, “Starting Over,” offers these six tips for improving credit strength quickly.
1. Know your limits. Borrowers should first check their credit limits and evenly distribute the balances they're carrying to help increase their credit scores, or better yet, pay them off in full to get the highest score increase. "Make sure your
maximum limit is reported," Jamison says. "When no limit is reported, credit scoring software presumes the account is maxed out."
2. Bring the balances near zero. The credit scoring software scores more favorably to those with a closer balance to zero. Balances over 70 percent damage credit the most, followed by the next tier of 50 percent and then 30 percent of the maximum credit limit. "Rather than carrying a large balance in an unfavorable tier, redistribute outstanding balances over several credit cards," advises Jamison.
3. Don’t cancel your cards. "Closing credit card accounts can hurt your score unless the accounts were opened less than two years ago, and you have over six credit cards," Jamison says. Fair Isaac's credit scoring software assumes that people who have had credit for a longer time are at less risk of defaulting on payments.
4. Eliminate late payments (but ask nice). Get rid of late payments listed on the credit report. "Contact the creditors that report late payments and request a good faith adjustment that removes the late payments reported on your account," Jamison says. The creditor may work with you, but it may require more than one phone call; patience is required. Your odds of success will dwindle if you're rude or unclear about your request, he adds.
5. Get rid of collection accounts. But only if the collection agency agrees to delete them in return. Paying them off can otherwise actually lead to a decreased credit score due to the date of last activity getting updated to the current date when you pay. The consumer should contact the collector and request a letter explicitly stating the agreement to delete the account upon receipt or clearance of the payment, Jamison says. Not all collection agencies will delete reporting, but it's certainly worth the effort.
6. Pay off past due amounts on accounts that are not in charge-off status. After that, Jamison advises getting rid of charge-offs and liens that are less than two years old. "Charge-offs and liens that are older than 24 months do not affect your credit score nearly as much as ones under 24 months," says Jamison. "But if they're newer than 24 months, they can seriously damage your credit." If you have both charge-offs and collection accounts, but have limited funds, pay off the
past due balances first, then pay collection accounts as long as the collectors agree to remove all references to credit bureaus.
— REALTOR® Magazine Online
6 Ways to Quickly Boost Credit Scores
As lenders tighten their underwriting guidelines, borrowers are wise to raise their credit scores to qualify for loans, secure better loan terms, and receive lower interest rates.
"Individuals can positively affect their credit scores in as little as three weeks," says Edward Jamison, a Los Angeles based credit attorney. "It's just a matter of getting educated and focused on the best, fastest, and most reliable course of action."
Jamison, who you may know as a credit expert on the NBC show, “Starting Over,” offers these six tips for improving credit strength quickly.
1. Know your limits. Borrowers should first check their credit limits and evenly distribute the balances they're carrying to help increase their credit scores, or better yet, pay them off in full to get the highest score increase. "Make sure your
maximum limit is reported," Jamison says. "When no limit is reported, credit scoring software presumes the account is maxed out."
2. Bring the balances near zero. The credit scoring software scores more favorably to those with a closer balance to zero. Balances over 70 percent damage credit the most, followed by the next tier of 50 percent and then 30 percent of the maximum credit limit. "Rather than carrying a large balance in an unfavorable tier, redistribute outstanding balances over several credit cards," advises Jamison.
3. Don’t cancel your cards. "Closing credit card accounts can hurt your score unless the accounts were opened less than two years ago, and you have over six credit cards," Jamison says. Fair Isaac's credit scoring software assumes that people who have had credit for a longer time are at less risk of defaulting on payments.
4. Eliminate late payments (but ask nice). Get rid of late payments listed on the credit report. "Contact the creditors that report late payments and request a good faith adjustment that removes the late payments reported on your account," Jamison says. The creditor may work with you, but it may require more than one phone call; patience is required. Your odds of success will dwindle if you're rude or unclear about your request, he adds.
5. Get rid of collection accounts. But only if the collection agency agrees to delete them in return. Paying them off can otherwise actually lead to a decreased credit score due to the date of last activity getting updated to the current date when you pay. The consumer should contact the collector and request a letter explicitly stating the agreement to delete the account upon receipt or clearance of the payment, Jamison says. Not all collection agencies will delete reporting, but it's certainly worth the effort.
6. Pay off past due amounts on accounts that are not in charge-off status. After that, Jamison advises getting rid of charge-offs and liens that are less than two years old. "Charge-offs and liens that are older than 24 months do not affect your credit score nearly as much as ones under 24 months," says Jamison. "But if they're newer than 24 months, they can seriously damage your credit." If you have both charge-offs and collection accounts, but have limited funds, pay off the
past due balances first, then pay collection accounts as long as the collectors agree to remove all references to credit bureaus.
— REALTOR® Magazine Online
HOA Rules May Override Free Speech Rights
Homeowners who live in a common interest development and are subject to CC&Rs and rules adopted by the HOA (Homeowner Association) are still American citizens (assuming they were to begin with). They don’t give up their rights of free speech, do they?
They can say whatever they want, wherever they want, however they want, right? Well… maybe not. Both residents of common interest developments, HOA directors, and their management companies will want to pay special attention to a recent ruling by the New Jersey Supreme Court. While, technically, the ruling only applies within the state of New Jersey, it is liable to have considerable influence elsewhere.
The case (Committee for a Better Twin Rivers v. Twin Rivers Homeowners Association) arose out of a dispute between certain residents of the Twin Rivers development and the governing homeowners association. These residents (the Committee) brought a lawsuit against the HOA claiming that it had failed to allow them to freely express their views. One count of the complaint “sought to invalidate the Association’s policy relating to the posting of signs. The Association’s sign policy provided that residents may post a sign in any window of their residence and outside in the flower beds so long as the sign was not more than three feet from the residence.” Only one sign per lawn and per window were permitted. No signs were permitted on utility poles or natural features (e.g. trees) within the community. The stated purpose of the sign rules was, among other things, “to preserve the aesthetic value of the common areas.”
Other complaints related to the association’s alleged restrictive use of the development’s community room, and to access restrictions to the community newsletter.
A trial court noted that “the Association asserted considerable influence on the lives of the [the development] residents”, but it observed that much of the impact “was a function of the contractual relationship that residents entered into when they elected to purchase property [there]”. It found that the rules with respect to signs were reasonable and enforceable.
An appellate court then reversed the trial court, holding that “the Association was subject to state constitutional standards with respect to its internal rules and regulations.” That is, it held that the residents’ free speech rights had been unduly curtailed. Then the Association appealed.
The New Jersey Supreme court reversed the ruling of the appellate court. In the words of one analyst, “it framed the issue as to whether the case before it presented one of those limited circumstances where, in the setting of a private community, the Association’s rule and regulations were limited by the constitutional rights of the association’s members.” It pointed out that “private property itself remains protected under due process standards from untoward interference with … regulations upon its reasonable use.” In this case, even though private residences were involved, it found that the rules and regulations were for private purposes, and that government interference was not warranted. It held that the restrictions of the rules were minor and reasonable. Moreover, the court said, the residents had “other means of expression”. They could “walk through the neighborhood, ring the doorbells of their neighbors, and advance their views.”
Key to the ruling was the fact that the court did not find the association to be a “state actor”, and that, therefore, it could not be held accountable to constitutional restrictions that might apply to a state agency.
The New Jersey court also noted that there are plenty of provisions in the state codes that protect residents from arbitrary actions by an HOA, and that void unreasonable provisions of HOA rules or CC&Rs.
The ruling in the Twin Rivers case is yet another one from courts around the country that demonstrate that courts are not going to intervene and overturn reasonable rules that govern those who have contractually committed to follow them.
by Bob Hunt
scbhunt@aol.com
Bob Hunt is a Director of the California Association of REALTORS® and is Chairman of its Legal Affairs Forum.
They can say whatever they want, wherever they want, however they want, right? Well… maybe not. Both residents of common interest developments, HOA directors, and their management companies will want to pay special attention to a recent ruling by the New Jersey Supreme Court. While, technically, the ruling only applies within the state of New Jersey, it is liable to have considerable influence elsewhere.
The case (Committee for a Better Twin Rivers v. Twin Rivers Homeowners Association) arose out of a dispute between certain residents of the Twin Rivers development and the governing homeowners association. These residents (the Committee) brought a lawsuit against the HOA claiming that it had failed to allow them to freely express their views. One count of the complaint “sought to invalidate the Association’s policy relating to the posting of signs. The Association’s sign policy provided that residents may post a sign in any window of their residence and outside in the flower beds so long as the sign was not more than three feet from the residence.” Only one sign per lawn and per window were permitted. No signs were permitted on utility poles or natural features (e.g. trees) within the community. The stated purpose of the sign rules was, among other things, “to preserve the aesthetic value of the common areas.”
Other complaints related to the association’s alleged restrictive use of the development’s community room, and to access restrictions to the community newsletter.
A trial court noted that “the Association asserted considerable influence on the lives of the [the development] residents”, but it observed that much of the impact “was a function of the contractual relationship that residents entered into when they elected to purchase property [there]”. It found that the rules with respect to signs were reasonable and enforceable.
An appellate court then reversed the trial court, holding that “the Association was subject to state constitutional standards with respect to its internal rules and regulations.” That is, it held that the residents’ free speech rights had been unduly curtailed. Then the Association appealed.
The New Jersey Supreme court reversed the ruling of the appellate court. In the words of one analyst, “it framed the issue as to whether the case before it presented one of those limited circumstances where, in the setting of a private community, the Association’s rule and regulations were limited by the constitutional rights of the association’s members.” It pointed out that “private property itself remains protected under due process standards from untoward interference with … regulations upon its reasonable use.” In this case, even though private residences were involved, it found that the rules and regulations were for private purposes, and that government interference was not warranted. It held that the restrictions of the rules were minor and reasonable. Moreover, the court said, the residents had “other means of expression”. They could “walk through the neighborhood, ring the doorbells of their neighbors, and advance their views.”
Key to the ruling was the fact that the court did not find the association to be a “state actor”, and that, therefore, it could not be held accountable to constitutional restrictions that might apply to a state agency.
The New Jersey court also noted that there are plenty of provisions in the state codes that protect residents from arbitrary actions by an HOA, and that void unreasonable provisions of HOA rules or CC&Rs.
The ruling in the Twin Rivers case is yet another one from courts around the country that demonstrate that courts are not going to intervene and overturn reasonable rules that govern those who have contractually committed to follow them.
by Bob Hunt
scbhunt@aol.com
Bob Hunt is a Director of the California Association of REALTORS® and is Chairman of its Legal Affairs Forum.
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