1. When you bought your house, you lived in the country. Now you're surrounded by high rises.
2. You can't get any appliances repaired because "they stopped making those parts years ago."
3. The swing set in the backyard has sprouted roots.
4. The plumber's phone number is on your speed dial.
5. Your phone number is on your plumber's speed dial.
6. All the children's rooms are now guest bedrooms.
7. You haven't visited the other half of the house in six months.
8. You have to move the furniture to see the carpet's original color.
9. Your bathroom is a lovely shade of avocado green -- from the first time it was in style.
10. You can't make any improvements to the exterior of your home without getting approval from the Board of Historic Monuments.
Sunday, April 22, 2007
Saturday, April 14, 2007
Subprime Fallout: Good for Housing, Bad on Sales
Fallout from the subprime loan debacle will lead to tighter lending criteria and a healthier housing market, according to the latest forecast by the National Association of Realtors®. But higher loan standards will slow the housing recovery, NAR reports.
David Lereah, NAR’s chief economist, says the changes are necessary for the long-term health of the housing market. “We want people to be able to stay in their homes with mortgage terms they understand and can handle,” he says. “Simply stated, a loan with the lowest monthly payment probably isn’t in your best interests — borrowers need to understand worst-case scenarios. If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.”
Last week, Freddie Mac reported the 30-year fixed-rate mortgage was 6.17 percent. The 30-year fixed rate should rise slowly to 6.6 percent by the end of this year, so borrowers who need to refinance should act soon, NAR says.
Home Sales Expectations
Tighter lending standards will dampen home sales slightly, but by less than a couple of percentage points from initial projections, Lereah says. “We still forecast 2007 to be the fourth highest year on record for existing-home sales, and housing remains a great long-term investment,” Lereah says.
Here are some of NAR’s projections for home sales:
The national median existing-home price will probably slip 0.7 percent to $220,300 in 2007, following a 1 percent rise last year. The median new-home price is expected to increase 0.4 percent to $246,200 this year, after gaining 1.8 percent in 2006. “When you look at housing activity in 2007, especially during the first half of this year, the percentage change in median home price is being distorted as the composition of sales shifts geographically from high-cost markets to moderately priced areas, in contrast with the sales distribution a year earlier,” Lereah says. “Within given markets, most areas can expect minor price gains.”
Overall, modest growth is expected next year, with existing-home prices increasing 1.6 percent and new-home prices rising 2 percent.Other InfluencesAdditional economic factors that can influence the housing market include:
The unemployment rate: expected to average 4.6 percent in 2007, the same as last year.
Inflation: (as measured by the Consumer Price Index) is likely to decline to 2.1 percent this year, compared with 3.2 percent in 2006, while growth in the U.S. gross domestic product is forecast at 2.3 percent in 2007, down from 3.3 percent last year.
Inflation-adjusted disposable personal income: will probably rise 3.1 percent this year, up from a gain of 2.6 percent in 2006.
— REALTOR® Magazine Online
For more housing market statistics and research reports, visit NAR's Research Department at REALTOR.org.
David Lereah, NAR’s chief economist, says the changes are necessary for the long-term health of the housing market. “We want people to be able to stay in their homes with mortgage terms they understand and can handle,” he says. “Simply stated, a loan with the lowest monthly payment probably isn’t in your best interests — borrowers need to understand worst-case scenarios. If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.”
Last week, Freddie Mac reported the 30-year fixed-rate mortgage was 6.17 percent. The 30-year fixed rate should rise slowly to 6.6 percent by the end of this year, so borrowers who need to refinance should act soon, NAR says.
Home Sales Expectations
Tighter lending standards will dampen home sales slightly, but by less than a couple of percentage points from initial projections, Lereah says. “We still forecast 2007 to be the fourth highest year on record for existing-home sales, and housing remains a great long-term investment,” Lereah says.
Here are some of NAR’s projections for home sales:
- Existing-home sales: likely to total 6.34 million in 2007 and 6.52 million next year — in contrast with 6.48 million in 2006.
- New-home sales: projected to be at 904,000 this year and 935,000 in 2008, below the 1.05 million last year.
- Housing starts: estimated at 1.47 million in 2007 and 1.55 million next year, down from 1.80 million units in 2006.“
The national median existing-home price will probably slip 0.7 percent to $220,300 in 2007, following a 1 percent rise last year. The median new-home price is expected to increase 0.4 percent to $246,200 this year, after gaining 1.8 percent in 2006. “When you look at housing activity in 2007, especially during the first half of this year, the percentage change in median home price is being distorted as the composition of sales shifts geographically from high-cost markets to moderately priced areas, in contrast with the sales distribution a year earlier,” Lereah says. “Within given markets, most areas can expect minor price gains.”
Overall, modest growth is expected next year, with existing-home prices increasing 1.6 percent and new-home prices rising 2 percent.Other InfluencesAdditional economic factors that can influence the housing market include:
The unemployment rate: expected to average 4.6 percent in 2007, the same as last year.
Inflation: (as measured by the Consumer Price Index) is likely to decline to 2.1 percent this year, compared with 3.2 percent in 2006, while growth in the U.S. gross domestic product is forecast at 2.3 percent in 2007, down from 3.3 percent last year.
Inflation-adjusted disposable personal income: will probably rise 3.1 percent this year, up from a gain of 2.6 percent in 2006.
— REALTOR® Magazine Online
For more housing market statistics and research reports, visit NAR's Research Department at REALTOR.org.
Simple Ways to Boost Curb Appeal
The outside of a home can be just as important as the inside in attracting buyers. Maureen Gilmer with the DIY Network offers the following five cheap and easy ways to improve curb appeal:
1. Edge it. Make the distinction crisp between lawn and flowerbed or sidewalk. Replace old edging materials with tumbled concrete payers — the heavier they are the better they stay in place.
2. Mulch it. Cover bare ground with two inches of attractive mulch.
3. Stain it. Old concrete walks, steps, and planters crack, stain, and discolor. Cover them with new colored concrete stains. The result unifies paving and mimics more expensive stone.
4. Color it. Worn out fences can give the property a black eye. Stain them with muted colors like warm gray, soft green, antique gold, or subtle blue.
5. Plant it. Buy whole flats of six packs of single color annuals.
Source: Seattle Post-Intelligencer, Maureen Gilmer (04/07/07)
1. Edge it. Make the distinction crisp between lawn and flowerbed or sidewalk. Replace old edging materials with tumbled concrete payers — the heavier they are the better they stay in place.
2. Mulch it. Cover bare ground with two inches of attractive mulch.
3. Stain it. Old concrete walks, steps, and planters crack, stain, and discolor. Cover them with new colored concrete stains. The result unifies paving and mimics more expensive stone.
4. Color it. Worn out fences can give the property a black eye. Stain them with muted colors like warm gray, soft green, antique gold, or subtle blue.
5. Plant it. Buy whole flats of six packs of single color annuals.
Source: Seattle Post-Intelligencer, Maureen Gilmer (04/07/07)
Foreclosures Reshape Neighborhoods
Neighborhoods riddled with foreclosures quickly develop other kinds of problems.In fact, one foreclosure will shave up to 1.5 percent off the value of the other homes on the same block, according to research by Dan Immergluck, associate professor of city and regional planning at Georgia Institute of Technology.
Other costs are harder to measure, but municipal governments, police departments, and neighbors observe that empty homes give rise to an increase in thefts and may encourage drug dealers and even violent criminals to take advantage of the situation.
As homes fall into foreclosure, a neighborhood frequently turns more transient, analysts say. Investors often buy homes in foreclosure and rent them out if they can't sell them."You end up with a very fragmented community," says home owner Ann Fulman of Atlanta. "When investors buy them and turn them into rental property … folks come in [who] don't have the means to keep up the place."
In the Atlanta suburbs of Gwinnett County, the police department recently created a Quality of Life unit to address problems often associated with foreclosures. Working with other government agencies, the unit targets such issues as building-code enforcement, vagrancy, and graffiti.
Source: USA Today, Noelle Knox (04/13/07)
Other costs are harder to measure, but municipal governments, police departments, and neighbors observe that empty homes give rise to an increase in thefts and may encourage drug dealers and even violent criminals to take advantage of the situation.
As homes fall into foreclosure, a neighborhood frequently turns more transient, analysts say. Investors often buy homes in foreclosure and rent them out if they can't sell them."You end up with a very fragmented community," says home owner Ann Fulman of Atlanta. "When investors buy them and turn them into rental property … folks come in [who] don't have the means to keep up the place."
In the Atlanta suburbs of Gwinnett County, the police department recently created a Quality of Life unit to address problems often associated with foreclosures. Working with other government agencies, the unit targets such issues as building-code enforcement, vagrancy, and graffiti.
Source: USA Today, Noelle Knox (04/13/07)
Monday, April 09, 2007
Your Top Ten Business Investments
- Invest in your relationships with those you love. What will your success mean to you if you cannot share it with those you love? Don't make the mistake of pushing those most important to you in the name of "building your business." Your investment of time in your family and your friends is paramount to your sense of fulfillment and success.
- Invest in a long-term personal-development program. You are your business's biggest asset. You need to incorporate activities such as attending seminars pertaining to your field and investing in tapes and CDs.
- Invest in a sales coach. You will never know all you need to know to make every decision that arises from running a business. To succeed in sales you must remain teachable.
- Invest in a competent right-hand assistant. More than likely, you are over qualified for the majority of the tasks that you perform. You're probably thinking that you can't afford to hire an assistant. But remember that we're talking about investing, not outspending. The real question you must consider is "Can I afford not to have an assistant?" The fact is that you will never be able to climb to the next level until you free up more time to do the things that bring your business the greatest profit.
- Invest in a personal image. What impressions do people have of you when you walk through the door? What impressions do people get when the view your marketing material and presentations? Presentation is everything. Lastly, ask what impression does your appearance give? I'm sure you've heard the cliché "dress for success." People want to work with successful people that they trust.
- Invest in a personal financial plan. Just like investing in a mentor you should also invest in a meeting with a qualified, trustworthy financial advisor who can help you map out a path to financial stability and freedom.
- Invest time in an exercise program. Your career longevity begins with your health. It's a fact that the state of your body can dramatically affect your business, especially in the sales profession.
- Invest in a client-retention program. To be successful in business you must do more than provide customer service; you must build customer loyalty.
- Invest in technology. You can't move forward if you're using the tools of the past. Today's technology has the capability to reach out to more people than ever before. Seize the opportunity and move your business to the next generation.
- Invest in a library. You don't have to re-invent the wheel in your profession. There are many mentors who specialize in your area of expertise. Learn from them. A little reading can go along way. If you read only fifteen minutes every day, you will complete about fifteen books per year.
"Investing in yourself is the best investment you can ever make." - Gene Bleecker
Friday, April 06, 2007
Foreclosure Sales Can Be Risky
With the National Association of Realtors® estimating that over 1 million homes will end up in foreclosure during the next couple of years, prospective buyers might view the situation as a means of snapping up a residence at a bargain price. However, experts note that foreclosure sales can be dicey, with the riskiest deals involving homes purchased at auction. While this format offers the greatest chance of a deep discount, buyers must provide payment at the time of the sale, making a deal without having the property inspected or an assurance that the current residents will vacate the premises. Once the bank takes possession of homes not sold at auction, buyers can purchase directly from them in a real estate owned (REO) transaction.
While inspections and title insurance are possible, buyers are not likely to receive tremendous discounts or get lenders to respond in a timely manner to their offers under these circumstance.
Those who scan public default notices and approach struggling home owners to inquire about purchasing a dwelling before it ends up in foreclosure assume the least amount of risk, experts say. And in most instances, they need only offer more than the mortgage balance but less than the market value to secure the sale. However, with large inventories of new homes in some markets providing leverages to those in the market for a property, buyers may not need to focus on foreclosures to get a good deal.
Source: USA Today, Christine Dugas (03/30/07)
While inspections and title insurance are possible, buyers are not likely to receive tremendous discounts or get lenders to respond in a timely manner to their offers under these circumstance.
Those who scan public default notices and approach struggling home owners to inquire about purchasing a dwelling before it ends up in foreclosure assume the least amount of risk, experts say. And in most instances, they need only offer more than the mortgage balance but less than the market value to secure the sale. However, with large inventories of new homes in some markets providing leverages to those in the market for a property, buyers may not need to focus on foreclosures to get a good deal.
Source: USA Today, Christine Dugas (03/30/07)
Wednesday, April 04, 2007
FDIC issues warning about mortgage lending sales pitch
Says Community Reinvestment Act offer is bogus
Tuesday, April 03, 2007 Inman News
Some mortgage lenders are using a deceptive direct mail campaign that encourages homeowners to apply for a loan by claiming they are entitled to cash grants or equity distributions under the Community Reinvestment Act.
The Federal Deposit Insurance Corp. issued a warning Monday saying that the CRA is a real law, but that the offer is not.
Consumers have contacted the FDIC with questions and complaints after receiving solicitations suggesting there is a "Community Reinvestment Act (CRA) Program" that entitles certain homeowners to payments.
"These solicitations appear to be a deceptive effort to encourage consumers to apply for a mortgage loan secured by the consumer's home," the FDIC warned.
Enacted in 1977, the Community Reinvestment Act encourages banks and savings and loans to make credit available in low- and moderate-income neighborhoods, but does not entitle individuals to any grants or loans.
The FDIC did not identify the lenders using the ploy by name. California attorney general's office was investigating complaints from consumers about a similar direct marketing campaign.
Tuesday, April 03, 2007 Inman News
Some mortgage lenders are using a deceptive direct mail campaign that encourages homeowners to apply for a loan by claiming they are entitled to cash grants or equity distributions under the Community Reinvestment Act.
The Federal Deposit Insurance Corp. issued a warning Monday saying that the CRA is a real law, but that the offer is not.
Consumers have contacted the FDIC with questions and complaints after receiving solicitations suggesting there is a "Community Reinvestment Act (CRA) Program" that entitles certain homeowners to payments.
"These solicitations appear to be a deceptive effort to encourage consumers to apply for a mortgage loan secured by the consumer's home," the FDIC warned.
Enacted in 1977, the Community Reinvestment Act encourages banks and savings and loans to make credit available in low- and moderate-income neighborhoods, but does not entitle individuals to any grants or loans.
The FDIC did not identify the lenders using the ploy by name. California attorney general's office was investigating complaints from consumers about a similar direct marketing campaign.
Tuesday, April 03, 2007
NAR's Economist Says Tighter Loan Underwriting 'Problematic'
Current market problems and reforms in the underwriting and pricing of subprime loans, including the tightening of underwriting standards by regulators, will have a short-term impact on housing markets. That will be lessened if Congress enacts legislation to expand the roles of Fannie Mae, Freddie Mac and the Federal Housing Administration to provide more housing opportunities to lower-income homeowners and those living in high cost metropolitan areas, the National Association of REALTORS said this week.
NAR Senior Vice President and Chief Economist David Lereah predicted that tighter underwriting practices may cause total home sales to fall by about 100,000 to 250,000 nationally, or no more than three percent a year over the next two years. Many of these households will probably, over time, purchase a home when they have attained the financial capacity to do so by saving for a downpayment or growing their income.
"Foreclosures are increasing inventories in certain local markets. The projected flood of foreclosures are problematic and will add to the already loose housing supply in some local markets, but these local markets are exhibiting healthy economic activity, enabling them to be able to absorb increases in foreclosures," Lereah said.
"From a broader perspective, today's subprime problems are occurring against a backdrop of cyclically low mortgage rates and a growing, healthy economy. Jobs and liquidity are plentiful in the marketplace, suggesting that the subprime problems may be a manageable problem within our $10 trillion-plus economy," said Lereah in a commentary distributed to NAR members recently.
"Many of these households will seek mortgage loans from a revitalized FHA, from lenders making loans that meet Fannie Mae and Freddie Mac standards and from other lenders offering fair and affordable mortgage options to subprime borrowers. Remember, many of these borrowers are low-income, minorities and first-time buyers - all important participants in the home buying marketplace."
Lereah warned against overreaction to the situation. "Tougher lending standards imposed by the marketplace and the regulators are necessary, but we need to be mindful of overcorrection. Responsible lending practices are what the doctor ordered, not practices that cause a credit crunch," Lereah said.
In other news...
Pending sales of existing U.S. homes surprisingly rose in February even as bad weather and weakness in the subprime lending sector put a crimp on the housing market, according to a report released this week by the National Association of REALTORS. Pending sales were down 6.0% from a month earlier. The Pending Home Sales Index (PHSI), based on contracts signed in February, stood at 109.3 - down 8.5 percent from February 2006 when it reached 119.4, but is 0.7 percent higher than a downwardly revised reading of 108.5 in January. Earlier, mild weather caused the index to spike at 113.3 in December.
Wall Street analysts polled ahead of the realtor report were expecting the index to come in at 108.2. Jon Basile, an economist with Credit Suisse of New York, said this week's data "gives a feel that existing home sales has stabilized because they are higher than the lows of last year. At the very least, housing demand is not getting any worse."
The PHSI in the South rose 4.5 percent in February to 121.9 but was 8.0 percent below a year ago. The index in the Midwest increased 2.9 percent from January to 103.0 but was 9.7 percent lower than February 2006. The index in the Northeast slipped 1.3 percent in February to 99.1 and was 8.2 percent below a year earlier. In the West, the index fell 6.0 percent from January to 104.1 and was 8.2 percent lower than February 2006.
~~ Real Trends
NAR Senior Vice President and Chief Economist David Lereah predicted that tighter underwriting practices may cause total home sales to fall by about 100,000 to 250,000 nationally, or no more than three percent a year over the next two years. Many of these households will probably, over time, purchase a home when they have attained the financial capacity to do so by saving for a downpayment or growing their income.
"Foreclosures are increasing inventories in certain local markets. The projected flood of foreclosures are problematic and will add to the already loose housing supply in some local markets, but these local markets are exhibiting healthy economic activity, enabling them to be able to absorb increases in foreclosures," Lereah said.
"From a broader perspective, today's subprime problems are occurring against a backdrop of cyclically low mortgage rates and a growing, healthy economy. Jobs and liquidity are plentiful in the marketplace, suggesting that the subprime problems may be a manageable problem within our $10 trillion-plus economy," said Lereah in a commentary distributed to NAR members recently.
"Many of these households will seek mortgage loans from a revitalized FHA, from lenders making loans that meet Fannie Mae and Freddie Mac standards and from other lenders offering fair and affordable mortgage options to subprime borrowers. Remember, many of these borrowers are low-income, minorities and first-time buyers - all important participants in the home buying marketplace."
Lereah warned against overreaction to the situation. "Tougher lending standards imposed by the marketplace and the regulators are necessary, but we need to be mindful of overcorrection. Responsible lending practices are what the doctor ordered, not practices that cause a credit crunch," Lereah said.
In other news...
Pending sales of existing U.S. homes surprisingly rose in February even as bad weather and weakness in the subprime lending sector put a crimp on the housing market, according to a report released this week by the National Association of REALTORS. Pending sales were down 6.0% from a month earlier. The Pending Home Sales Index (PHSI), based on contracts signed in February, stood at 109.3 - down 8.5 percent from February 2006 when it reached 119.4, but is 0.7 percent higher than a downwardly revised reading of 108.5 in January. Earlier, mild weather caused the index to spike at 113.3 in December.
Wall Street analysts polled ahead of the realtor report were expecting the index to come in at 108.2. Jon Basile, an economist with Credit Suisse of New York, said this week's data "gives a feel that existing home sales has stabilized because they are higher than the lows of last year. At the very least, housing demand is not getting any worse."
The PHSI in the South rose 4.5 percent in February to 121.9 but was 8.0 percent below a year ago. The index in the Midwest increased 2.9 percent from January to 103.0 but was 9.7 percent lower than February 2006. The index in the Northeast slipped 1.3 percent in February to 99.1 and was 8.2 percent below a year earlier. In the West, the index fell 6.0 percent from January to 104.1 and was 8.2 percent lower than February 2006.
~~ Real Trends
New UCLA Anderson Forecast Sees Weakness
In its first quarterly report of 2007, the UCLA Anderson Forecast remains steadfast in its belief that the national economy does not face recession, though the group's economists concede that length of the current, below trend growth period leaves them "increasingly nervous." The Forecast in particular notes that, "The credit crunch in the subprime mortgage market will likely trigger a second leg down in the housing market in terms of output and prices."
In his National report, UCLA Anderson Forecast Senior Economist David Shulman remains consistent with the story the Forecast has been telling for some time, that a recession is not imminent for the U.S. economy. However, Shulman concedes that the period of below average growth will last longer than previously believed before the economy returns to normal.
Shulman's report titled, "A Long Runway for the Soft Landing," delves into the credit crunch in subprime mortgages and the impact it will have on weakness already evident in the housing market. He writes, "For a housing market that has already witnessed starts decline by 36 percent, this is not good news. We previously had thought that housing starts would bottom in the 1.4-1.5 million range; we now think the bottom could be around 1.2-1.3 million units with the risks still on the down side. Moreover, the recent weakness we have experienced in home prices will likely tend to accelerate with the nationwide peak to trough declines ranging from 5-10 percent."
In his National report, UCLA Anderson Forecast Senior Economist David Shulman remains consistent with the story the Forecast has been telling for some time, that a recession is not imminent for the U.S. economy. However, Shulman concedes that the period of below average growth will last longer than previously believed before the economy returns to normal.
Shulman's report titled, "A Long Runway for the Soft Landing," delves into the credit crunch in subprime mortgages and the impact it will have on weakness already evident in the housing market. He writes, "For a housing market that has already witnessed starts decline by 36 percent, this is not good news. We previously had thought that housing starts would bottom in the 1.4-1.5 million range; we now think the bottom could be around 1.2-1.3 million units with the risks still on the down side. Moreover, the recent weakness we have experienced in home prices will likely tend to accelerate with the nationwide peak to trough declines ranging from 5-10 percent."
Monday, April 02, 2007
On Freedom of the Press (a diversion from the real estate biz)
The following article was found at the Columbia Journalism Review. Click the Link for the entire article...
I Was a Tool of Satan
An Equal-Opportunity Offender Maps the Dark Turn of Intolerance
BY DOUG MARLETTE
Last year, I drew a cartoon that showed a man in Middle Eastern apparel at the wheel of a Ryder truck hauling a nuclear warhead. The caption read, "What Would Mohammed Drive?" Besides referring to the vehicle that Timothy McVeigh rode into Oklahoma City, the drawing was a takeoff on the "What Would Jesus Drive?" campaign created by Christian evangelicals to challenge the morality of owning gas-guzzling SUVs. The cartoon's main target, of course, was the faith-based politics of a different denomination. Predictably, the Shiite hit the fan.
Can you say "fatwa"?
*************************************
And more from Marlette...
Them damn pictures
By caving in to fanatics over the Danish cartoons, the West has shown that it is not only gutless but brainless.
Feb. 24, 2006 "Give up the cartoonists; they're in the attic." That is what many of us in the trade feel has been our lot since our brethren in Denmark were forced into hiding after drawing likenesses of the Prophet Mohammed. As art will do, "them damn pictures"-- Boss Tweed's term for Thomas Nast's cartoons from a more innocent time -- have exposed not just the internal dynamics of what some have called Islamofascism but the corresponding corruption of our own values and character in the West. Our insides have been illuminated like an electrocuted Daffy Duck in an old Warner Brothers cartoon. And we now see what we're made of: not a lot of guts, or brains either.
I Was a Tool of Satan
An Equal-Opportunity Offender Maps the Dark Turn of Intolerance
BY DOUG MARLETTE
Last year, I drew a cartoon that showed a man in Middle Eastern apparel at the wheel of a Ryder truck hauling a nuclear warhead. The caption read, "What Would Mohammed Drive?" Besides referring to the vehicle that Timothy McVeigh rode into Oklahoma City, the drawing was a takeoff on the "What Would Jesus Drive?" campaign created by Christian evangelicals to challenge the morality of owning gas-guzzling SUVs. The cartoon's main target, of course, was the faith-based politics of a different denomination. Predictably, the Shiite hit the fan.
Can you say "fatwa"?
*************************************
And more from Marlette...
Them damn pictures
By caving in to fanatics over the Danish cartoons, the West has shown that it is not only gutless but brainless.
Feb. 24, 2006 "Give up the cartoonists; they're in the attic." That is what many of us in the trade feel has been our lot since our brethren in Denmark were forced into hiding after drawing likenesses of the Prophet Mohammed. As art will do, "them damn pictures"-- Boss Tweed's term for Thomas Nast's cartoons from a more innocent time -- have exposed not just the internal dynamics of what some have called Islamofascism but the corresponding corruption of our own values and character in the West. Our insides have been illuminated like an electrocuted Daffy Duck in an old Warner Brothers cartoon. And we now see what we're made of: not a lot of guts, or brains either.
Sunday, April 01, 2007
FLIP Tips: Buy the Book
The authors of FLIP, Rick Villani and Clay Davis, have been involved in more than 1,000 flips through their business, HomeFixers. Based on these experiences, they’ve created a list of the three biggest mistakes flippers make.
Last week’s biggest mistake was over- or under-improving a house.
This week’s tip is on the importance of making the absolute most of your money -- and your time.
FLIP TIP No. 3: Don't do too much of the rehab work yourself
Do you consider house flipping to be a hobby or a business? Villani and Davis say your answer to that question dictates how much of the work you should do yourself. If you love working on houses and think of flipping as a way to make a little money doing something you love, then by all means, hang that drywall and tile that floor. But if you look at house flipping as a business, either a side-business or your full-time job, they recommend you leave the rehab work to the professionals.
read more...
“Read this book before you flip that house. FLIP is an indispensable step-by-step guide to flipping houses that you will refer to again and again.”
-Carlos Ortiz, executive producer, Flip That House
From an exclusive partnership between Millionaire Systems, the people behind the bestselling Millionaire Real Estate series, and HomeFixers, one of the country’s leading real estate investment firms, comes FLIP. Offering a unique, five-step system, FLIP makes house flipping understandable, easy-to-implement, and very lucrative.
Buy the book from Amazon.com
Last week’s biggest mistake was over- or under-improving a house.
This week’s tip is on the importance of making the absolute most of your money -- and your time.
FLIP TIP No. 3: Don't do too much of the rehab work yourself
Do you consider house flipping to be a hobby or a business? Villani and Davis say your answer to that question dictates how much of the work you should do yourself. If you love working on houses and think of flipping as a way to make a little money doing something you love, then by all means, hang that drywall and tile that floor. But if you look at house flipping as a business, either a side-business or your full-time job, they recommend you leave the rehab work to the professionals.
read more...
“Read this book before you flip that house. FLIP is an indispensable step-by-step guide to flipping houses that you will refer to again and again.”
-Carlos Ortiz, executive producer, Flip That House
From an exclusive partnership between Millionaire Systems, the people behind the bestselling Millionaire Real Estate series, and HomeFixers, one of the country’s leading real estate investment firms, comes FLIP. Offering a unique, five-step system, FLIP makes house flipping understandable, easy-to-implement, and very lucrative.
Buy the book from Amazon.com
Thursday, March 29, 2007
Foreclosures May Cause Tax Problems
Under current law, if a lender forgives all or some portion of a mortgage debt at the time of a short sale or in a foreclosure proceeding (or under any other circumstances), the borrower must recognize the amount of the forgiven debt as taxable income. This is true even if the borrower has received no cash. In addition, the lender is required to provide information to the IRS identifying the borrower and stating the amount of the forgiven debt.
NAR has long-standing policy opposing this harsh rule. In 1999 and in 2000, a relief provision passed the House and Senate in different tax bills, but was never finally enacted. Now, NAR is renewing its efforts to secure this tax relief in light of a possible wave of foreclosures and short sales that could occur in a slowing market or if interest rates were to rise. Legislation has been drafted but not yet introduced in the House to provide this relief.
~~ NAR Washington Report, March 2007
NAR has long-standing policy opposing this harsh rule. In 1999 and in 2000, a relief provision passed the House and Senate in different tax bills, but was never finally enacted. Now, NAR is renewing its efforts to secure this tax relief in light of a possible wave of foreclosures and short sales that could occur in a slowing market or if interest rates were to rise. Legislation has been drafted but not yet introduced in the House to provide this relief.
~~ NAR Washington Report, March 2007
FTC Encourages Consumers to File Complaints of unfair or Deceptive Practices involving 'Trigger Lists"
In response to comments made by National Association of Realtors at a roundtable hosted by the National Association of Mortgage Brokers on Tuesday, March 20, 2007, the Federal Trade Commission encouraged NAR members and consumers to file complaints with the FTC if they encounter unfair or deceptive trade practices relating to the use of trigger lists by lenders and/or lead generators. The practices include "bait and switch" on interests rates, terms, or loan products, deceptive presentation of fees, deception with regard to who the caller or solicitor represents and deceptive presentation of actual services available.
Numerous NAR members and their affiliates have complained that their clients or customers have been victimized by unfair or deceptive practices that are the result of lead generation through so called "trigger lists." Trigger lists are generated when a credit inquiry is made, usually upon application for a mortgage or other credit product. The credit reporting bureaus compile information (prescreening) and sell it to other lenders or lead generators who then use it to contact consumers with solicitations. The process is permitted under the Fair Credit Reporting Act as long as a "firm offer of credit" can be made. In the case of phone solicitations, FTC and credit reporting industry sources, assert that lenders and lead generators must comply with the "Do Not Call" as well. However, many NAR members report that this is often not the case with regard to firm offers of credit and/or "Do Not Call" compliance.
Individuals may "opt out" of receiving prescreened offers of credit by visiting www.optoutprescreen.com.
If one would like to report an unfair trade practice related to trigger lists or prescreened offers of credit, please fill out the FTC Consumer Complaint Form.
~~ NAR Washington Report, March 2007
Numerous NAR members and their affiliates have complained that their clients or customers have been victimized by unfair or deceptive practices that are the result of lead generation through so called "trigger lists." Trigger lists are generated when a credit inquiry is made, usually upon application for a mortgage or other credit product. The credit reporting bureaus compile information (prescreening) and sell it to other lenders or lead generators who then use it to contact consumers with solicitations. The process is permitted under the Fair Credit Reporting Act as long as a "firm offer of credit" can be made. In the case of phone solicitations, FTC and credit reporting industry sources, assert that lenders and lead generators must comply with the "Do Not Call" as well. However, many NAR members report that this is often not the case with regard to firm offers of credit and/or "Do Not Call" compliance.
Individuals may "opt out" of receiving prescreened offers of credit by visiting www.optoutprescreen.com.
If one would like to report an unfair trade practice related to trigger lists or prescreened offers of credit, please fill out the FTC Consumer Complaint Form.
~~ NAR Washington Report, March 2007
Saturday, March 24, 2007
Reality-Based Real Estate
It's time for a little rant...
Three of my fellow Realtors have approached me about 'The Secret' in the last few weeks. For those of you who are busy during 'Oprah', this movie and book is the new self-help mantra that is part spiritualism, part hucksterism, and just another income stream for Oprah and her groupies who are selling the snake oil, DVDs and the artfully packaged book and associated products to a gullible, and sometimes desperate, public. Yes, the Universe is just waiting to make your personalized wish-list manifest, and if it doesn't, it is your fault. All of the answers are in the book and on the DVD, yes, The Secret itself is there, and if Oprah says it worked for her and it will work for you. Guaranteed. Sure.
I think Carolyn Burnham, the Realtor in the film 'American Beauty', used 'The Secret' to prep herself for her open house near the beginning of the movie. She used all of the techniques in 'The Secret'. Unfortunately, Annette Benning's portrayal was very close to completely accurate for far too many in the business.
The best batch of critical reviews can be found HERE. I really urge you to take a few moments to read it through, especially if you have fallen for this latest twist on the power of positive thinking. Here's a little snippet from Skeptico:
Take a look at the whole site. There is commentary on 'The Secret' from The LA Times, Newsweek, The Onion, Salon, and others.
One can dependably predict a tough year or more in real estate when these types of crazes sweep the industry. It happened in the early 90's, and it looks like deja vu all over again. Three of the major real estate companies in our local area have their core believers of the Waiting Genie, and my own company has a small but growing hive of buzz followers. It is kind of embarrassing. Let me give you a small dose of this altered reality...
If your house doesn't sell, it is because the seller and the agent didn't visualize the sale sincerely enough... never mind market forces such as proper pricing, condition, location, supply and demand... it was the negative thoughts themselves that were the cause. This is the corollary to The Secret's Law of Attraction, which is that if you visualize the buyer buying the house, it will happen.
Hocus Pocus. Smoke and Mirrors.
Now I don't want to offend those followers of the one and true path, but if you are one of the newly-minted faithful, aren't you a little old for the Tooth Fairy?
As for the regular people who want to buy a great home for the least amount possible, or for those sellers for whatever reason you have in selling, a piece of advice: If your real estate agent shows any inclination at all in this latest scheme called 'The Secret', it is time to switch agents and call me.
And speaking of switching agents...
I know people who have bought houses in the last couple of years at the very top of the market, who had agents then who slammed them into the homes and who sat idly by while predatory lenders screwed them over, who now are listing their homes that they now cannot afford with THOSE SAME AGENTS!!!
People, are you completely out of your minds???
Reality-based real estate. What a concept. Call me.
Three of my fellow Realtors have approached me about 'The Secret' in the last few weeks. For those of you who are busy during 'Oprah', this movie and book is the new self-help mantra that is part spiritualism, part hucksterism, and just another income stream for Oprah and her groupies who are selling the snake oil, DVDs and the artfully packaged book and associated products to a gullible, and sometimes desperate, public. Yes, the Universe is just waiting to make your personalized wish-list manifest, and if it doesn't, it is your fault. All of the answers are in the book and on the DVD, yes, The Secret itself is there, and if Oprah says it worked for her and it will work for you. Guaranteed. Sure.
I think Carolyn Burnham, the Realtor in the film 'American Beauty', used 'The Secret' to prep herself for her open house near the beginning of the movie. She used all of the techniques in 'The Secret'. Unfortunately, Annette Benning's portrayal was very close to completely accurate for far too many in the business.
The best batch of critical reviews can be found HERE. I really urge you to take a few moments to read it through, especially if you have fallen for this latest twist on the power of positive thinking. Here's a little snippet from Skeptico:
So, what is the big Secret?
The Secret is what they call the Law Of Attraction – the idea that you become or attract what you think about the most. Or as one person expressed it: “Thoughts become things.”
This is presented as a literal truth – a law just like the laws of gravitation. And it is stated that this: “Always works every time” Note: always. And every time. No exceptions. It’s a Law, you see.
Examples are given. A man is shown worrying about being late, and so he gets stuck in a traffic jam. Another man is shown locking up his bicycle, presumably because he is worried about it being stolen; he returns later to find it has been stolen. The absurdity of these examples should be obvious. Are we supposed to believe the traffic jam wouldn’t have happened if it were not for this one guy worrying about being late? And what about the other people in the traffic jam? Were they all thinking negative thoughts about being late? Were there no positive-minded people in the area, thinking about being on time? And if there were, doesn’t that debunk the “always works every time” mantra? And what about the guy getting his bike stolen? Are we to assume that if another guy had left an identical unlocked bike at the same location, the bike thief would still have stolen the locked bike of the person worried about theft? Has anyone done a controlled study on this? (Hey, these were the examples used in the film – don’t blame me if they make no sense.)
As with What The Bleep, it is implied that there is science behind these revelations. For example, there was this from the self-proclaimed "visionary" Rev. Dr. Michael Beckwith:"It has been proven scientifically now that an affirmative thought is hundreds of times more powerful than a negative thought."
Really? Proven by which scientists? And written up where? Because I couldn’t find it.
Not a Law
Of course, the basic flaw in all this is that the Law Of Attraction is not a Law like the Law Of Gravitation that they compare it to. Newton’s Law’s can be demonstrated by anyone – drop an object and its acceleration will be exactly as the Law predicts. And this really does “always work every time” – that’s why it’s a Law. The “Law Of Attraction” as they call it just doesn’t work that way. Although having a positive attitude, being confident, believing in your own success etc is a definite advantage, and should be encouraged, having positive thoughts will not send out magic brainwave frequencies that change reality around you. This brainwave “magnetic signature” as one person called it, never goes out, any time. Not in the real world.
Take a look at the whole site. There is commentary on 'The Secret' from The LA Times, Newsweek, The Onion, Salon, and others.
One can dependably predict a tough year or more in real estate when these types of crazes sweep the industry. It happened in the early 90's, and it looks like deja vu all over again. Three of the major real estate companies in our local area have their core believers of the Waiting Genie, and my own company has a small but growing hive of buzz followers. It is kind of embarrassing. Let me give you a small dose of this altered reality...
If your house doesn't sell, it is because the seller and the agent didn't visualize the sale sincerely enough... never mind market forces such as proper pricing, condition, location, supply and demand... it was the negative thoughts themselves that were the cause. This is the corollary to The Secret's Law of Attraction, which is that if you visualize the buyer buying the house, it will happen.
Hocus Pocus. Smoke and Mirrors.
Now I don't want to offend those followers of the one and true path, but if you are one of the newly-minted faithful, aren't you a little old for the Tooth Fairy?
As for the regular people who want to buy a great home for the least amount possible, or for those sellers for whatever reason you have in selling, a piece of advice: If your real estate agent shows any inclination at all in this latest scheme called 'The Secret', it is time to switch agents and call me.
And speaking of switching agents...
I know people who have bought houses in the last couple of years at the very top of the market, who had agents then who slammed them into the homes and who sat idly by while predatory lenders screwed them over, who now are listing their homes that they now cannot afford with THOSE SAME AGENTS!!!
People, are you completely out of your minds???
Reality-based real estate. What a concept. Call me.
Friday, March 23, 2007
7 Tips to Radically Update Your Home
Everyone loves to update their homes, and if you live in an older home in an appreciating neighborhood, it can be a fantastic investment. There are some pitfalls to avoid, which can cost a homeowner quite a bit of money because of no return on investment. However, it's better to focus on what TO do and stay the course.
1. Raise the Roof!!!
Not literally, but gut the attic, and raise the ceiling in, at least, the living room. Older homes typically have 8 foot ceilings, and it's one of the first characteristics that buyers notice. It's relatively inexpensive, when you compare your return on investment, to demolish the ceilings of your older home and sheetrock over your new, vaulted ceiling. It's amazing how much larger and lighter your home will feel.
2. Knock Down Walls
Literally, knock down as many walls as you can and still retain the integrity of the home, and the NECESSARY separation of rooms. If you compare older homes to newer homes, you'll notice that older homes are typically "choppy" while newer homes feel "open and flow well." This is due to "line of sight." Newer homes opt for less separation in rooms. You can create this same feeling by demolishing a half-wall that separates your kitchen from the living room or knocking down the wall between the living room and dining room to create one grand room. You'll be AMAZED at the difference it makes.
3. Overhaul Your Kitchen and/or Master Bathroom
These are the two rooms in the house that you can ALMOST go overboard and still get your money back when you sell the home. Refinish or replace the cabinetry, put in new tile and sinks - even install a new, stand-up shower! When (or if) you put your home on the market, you should see a GREAT return on investment.
4. Add a Master Bathroom
The 1-Bathroom houses from the 1970's and earlier are now obsolete. Americans have decided that we like a private bathroom for ourselves and another bathroom for our guests and children. While 90% of the house additions are bad ideas because they don't flow well or create poorly usable space, a master bathroom addition is a fantastic way to add more square footage, and more value to your home. Make SURE that your builder ties in the new slab to the old, and make sure that the addition is done properly. A poorly designed or executed addition never adds value - most buyers immediately imagine demolishing the work.
5. Xeriscape Your Lawn
It's trendy, it's cheap - it should be a go! Your homes curb appeal is the first thing that buyers notice, and it's how buyers decide whether or not they'll "click on your house" online to further investigate the interior. You can xeriscape a ¼ acre lot for around $3000, and you'll more than make up for that when your home goes on the market. Furthermore, it's environmentally & fiscally responsible. Stop wasting water!
6. Paint!!!
It's fairly obvious, but painting your home modern, neutral colors makes a HUGE difference in the appearance of the home. And when you factor in the cost - roughly $0.75/s.f. - it would be a HUGE mistake to forego painting your home when you decide it's time to modernize it. If you're planning on staying in the home for some time, paint it whatever colors you wish, but plan on repainting right before it's time to put it up for sale. If you plan on updating your home in order to sell it, go with neutral colors so that it will appeal to the widest audience.
7. Put in Wood Floors
You won't ALWAYS get your money out of installing wood floors. If you're in a great area, and it's time to replace the floors, look at the cost difference between tile, pergo, and wood. If your home will sell for $250k+ then forget about pergo and, if you choose tile, make sure it's not cheap tile. If the cost difference between wood and your other options is negligible, then go with wood - it appeals to the most buyers.
Updating your older home can be very fun, very rewarding, and potentially very lucrative. Older homes in established neighborhoods are ripe for updating and can draw a premium on the marketplace. Make sure and follow these guidelines, and you should see a great return on your investment.
1. Raise the Roof!!!
Not literally, but gut the attic, and raise the ceiling in, at least, the living room. Older homes typically have 8 foot ceilings, and it's one of the first characteristics that buyers notice. It's relatively inexpensive, when you compare your return on investment, to demolish the ceilings of your older home and sheetrock over your new, vaulted ceiling. It's amazing how much larger and lighter your home will feel.
2. Knock Down Walls
Literally, knock down as many walls as you can and still retain the integrity of the home, and the NECESSARY separation of rooms. If you compare older homes to newer homes, you'll notice that older homes are typically "choppy" while newer homes feel "open and flow well." This is due to "line of sight." Newer homes opt for less separation in rooms. You can create this same feeling by demolishing a half-wall that separates your kitchen from the living room or knocking down the wall between the living room and dining room to create one grand room. You'll be AMAZED at the difference it makes.
3. Overhaul Your Kitchen and/or Master Bathroom
These are the two rooms in the house that you can ALMOST go overboard and still get your money back when you sell the home. Refinish or replace the cabinetry, put in new tile and sinks - even install a new, stand-up shower! When (or if) you put your home on the market, you should see a GREAT return on investment.
4. Add a Master Bathroom
The 1-Bathroom houses from the 1970's and earlier are now obsolete. Americans have decided that we like a private bathroom for ourselves and another bathroom for our guests and children. While 90% of the house additions are bad ideas because they don't flow well or create poorly usable space, a master bathroom addition is a fantastic way to add more square footage, and more value to your home. Make SURE that your builder ties in the new slab to the old, and make sure that the addition is done properly. A poorly designed or executed addition never adds value - most buyers immediately imagine demolishing the work.
5. Xeriscape Your Lawn
It's trendy, it's cheap - it should be a go! Your homes curb appeal is the first thing that buyers notice, and it's how buyers decide whether or not they'll "click on your house" online to further investigate the interior. You can xeriscape a ¼ acre lot for around $3000, and you'll more than make up for that when your home goes on the market. Furthermore, it's environmentally & fiscally responsible. Stop wasting water!
6. Paint!!!
It's fairly obvious, but painting your home modern, neutral colors makes a HUGE difference in the appearance of the home. And when you factor in the cost - roughly $0.75/s.f. - it would be a HUGE mistake to forego painting your home when you decide it's time to modernize it. If you're planning on staying in the home for some time, paint it whatever colors you wish, but plan on repainting right before it's time to put it up for sale. If you plan on updating your home in order to sell it, go with neutral colors so that it will appeal to the widest audience.
7. Put in Wood Floors
You won't ALWAYS get your money out of installing wood floors. If you're in a great area, and it's time to replace the floors, look at the cost difference between tile, pergo, and wood. If your home will sell for $250k+ then forget about pergo and, if you choose tile, make sure it's not cheap tile. If the cost difference between wood and your other options is negligible, then go with wood - it appeals to the most buyers.
Updating your older home can be very fun, very rewarding, and potentially very lucrative. Older homes in established neighborhoods are ripe for updating and can draw a premium on the marketplace. Make sure and follow these guidelines, and you should see a great return on your investment.
Monday, March 19, 2007
Staging a Home for Sale: Vacant Homes Invite Questions
What's A Buyer Thinking?
1.Why are they selling?
If you choose to show your listing vacant, potential buyers will probably start wondering why your home has already been vacated! Is it a divorce situation? Relocation? Bankruptcy? Has the owner moved out already because they have a new payment on another home? Alot goes through a buyers mind while viewing listings. This could result in a lower offer to you! A staged home keeps the buyers mind on your listing and off of your personal business!
2. Is this home right for me?
When potential buyers are viewing a vacant home, it can be very difficult for them to distinguish each living space for what it is...such as an "eat in kitchen", "bonus room" or that much needed "office space". Rooms in a vacant home blend together and everything starts to look the same. Furnishing your listing will invite buyers to experience each space separately and visualize themselves living there!
3. Is this everything or did I miss something?
It's not very inviting for a potential buyer to view a vacant home. When vacant, there's nothing in the main living spaces or bedrooms that invites them to walk into a certain area and experience the space. Standing there looking at a vacant bedroom does nothing to draw the buyer into the space. They may even miss that extra large bathroom around the corner with the jetted tub or double vanitys!
4. Is this "The One"?
Its simple....you want a potential buyer to make an "emotional connection" with your listing. This can occur at any time. Maybe its made when their viewing the master bathroom filled with luxury bath accessories, reminding them of relaxing in a warm tub. Maybe it's made when their viewing the formal dining room, complete with beautiful linens and dishes, reminding them of holidays with family. Maybe its made when stepping outside and viewing a backyard thats ready for summer entertaining. An "emotional connection" can bring you that offer!
5. Who's selling this place anyway?
Showing a vacant property can seem like abandonment to a buyer. Overgrown vines and bushes, old newspapers and flyers, dusty floors, bathtubs and sinks, a "stuffy" closed up smell upon entry and no furnishings are all warning signs to a buyer that the home has been vacated and forgotten! A major turn off! If you don't want to be there, why should they? Home staging can give your listing new life!
Home Staging services and other Home Services and Contractors can be found at www.SCVhometeam.com
1.Why are they selling?
If you choose to show your listing vacant, potential buyers will probably start wondering why your home has already been vacated! Is it a divorce situation? Relocation? Bankruptcy? Has the owner moved out already because they have a new payment on another home? Alot goes through a buyers mind while viewing listings. This could result in a lower offer to you! A staged home keeps the buyers mind on your listing and off of your personal business!
2. Is this home right for me?
When potential buyers are viewing a vacant home, it can be very difficult for them to distinguish each living space for what it is...such as an "eat in kitchen", "bonus room" or that much needed "office space". Rooms in a vacant home blend together and everything starts to look the same. Furnishing your listing will invite buyers to experience each space separately and visualize themselves living there!
3. Is this everything or did I miss something?
It's not very inviting for a potential buyer to view a vacant home. When vacant, there's nothing in the main living spaces or bedrooms that invites them to walk into a certain area and experience the space. Standing there looking at a vacant bedroom does nothing to draw the buyer into the space. They may even miss that extra large bathroom around the corner with the jetted tub or double vanitys!
4. Is this "The One"?
Its simple....you want a potential buyer to make an "emotional connection" with your listing. This can occur at any time. Maybe its made when their viewing the master bathroom filled with luxury bath accessories, reminding them of relaxing in a warm tub. Maybe it's made when their viewing the formal dining room, complete with beautiful linens and dishes, reminding them of holidays with family. Maybe its made when stepping outside and viewing a backyard thats ready for summer entertaining. An "emotional connection" can bring you that offer!
5. Who's selling this place anyway?
Showing a vacant property can seem like abandonment to a buyer. Overgrown vines and bushes, old newspapers and flyers, dusty floors, bathtubs and sinks, a "stuffy" closed up smell upon entry and no furnishings are all warning signs to a buyer that the home has been vacated and forgotten! A major turn off! If you don't want to be there, why should they? Home staging can give your listing new life!
Home Staging services and other Home Services and Contractors can be found at www.SCVhometeam.com
Sub-Prime Loan Market: What you need to know
The headlines are once again full of news from the mortgage and real estate front...and this time, the "subprime meltdown" is taking center stage. What exactly is going on, and what does it mean to you?
A "subprime" home loan is a loan where the client has some significant credit issues, or was otherwise unable to qualify for a standard, conventional loan. Due to the fact that these loans tend to be quite risky for the lender...they also bear higher interest rates to match, as well as often being adjustable rates that likely have recently hiked sky high, not to mention the steep prepayment penalties they generally carry.
These loans have been around for years - so why all the drama now?
Many subprime and other adjustable home loan rates have moved dramatically higher, due in part to the Federal Reserve Boards recent rate hike cycle. So as these rates are adjusting higher - and the payment right along with it - the homeowners are finding that they are unable to keep up with the dramatic increase in payment.
In the past, homeowners in this situation would simply throw the house on the market, realize enough of a profit to cover any prepayment penalties, and literally move on. But the soft real estate market isn't making this quite so easy any more - houses are not selling as quickly, and the home appreciation rates enjoyed in the past have moderated.
So the subprime homeowner is stuck - and many of these homes are falling into foreclosure, causing even more problems. As more and more loans are defaulting, mortgage lenders are forced to tighten up their lending standards across the board in response...making it tougher for a troubled homeowner to even refinance to get out of trouble. Many subprime lenders are feeling the pain, and in some cases, actually being forced to close their doors as they are hit with all the defaulted loans and foreclosed properties coming back home to roost.
How does this impact you?
In the short term, home loan rates are benefiting, as the stock market is taking a beating, causing money to flow into Bonds and Mortgage Backed Securities, which benefits home loan rates. But the longer term picture may spell higher interest rates ahead, as lenders have to absorb the cost of the loans that went belly-up, combined with the cost of increased compliance and accountability standards.
Now in many cases, the advice and loan strategy given to the client was perfectly appropriate for the client at the time they took out the loan...but the "perfect storm" of colliding economic events may have just worked against them. Yet unfortunately, many homeowners are paying a very steep price for what may have been poor advice and counsel given them at the time of their home purchase or refi. Now more than ever before, it is clear that it pays to work with a true professional, especially when your home is on the line. If you've ever thought it's too expensive to work with a real professional...just wait until you work with an amateur. The price paid is clear - and in this case, it's a very painful one.
Because of these events, credit and lending standards are tightening across the board, so it's a great time to get a "financial check up" - both you personally, as well as your clients, friends, family members and coworkers - even if they are not immediately in need of any home loan financing.
You know that I want to build relationships for the long run, not just to provide a "transaction" - so although you may not have a need for my team's home loan services at this time, I'd like to invite you to contact my friend and SCV Team member Adam Ford of the Mortgage Advisor's Group in Valencia (661-254-3744 x19) for a review of your current credit and financial situation. There may be recommendations he can make now, that will ensure you are in the best possible shape to obtain the most favorable financing terms when the need does arise.
Feel free to forward this newsletter directly, or print out copies for your clients, friends and coworkers who are asking about the headlines. As always, simply give me a call or email - I am always glad to hear from you, and happy to answer any questions regarding this matter or any other way we can be of service to you.
A couple of other tips:
Avoid getting a sub prime loan: It is more important than ever to have good credit as you have fewer loan options so be prepared, give my friend Adam a call if you have had ANY credit issues long BEFORE you get into escrow that way we can help you solve them or hire a company to help you with your credit issues. A recent collection can lower your scores by as much as 100 points.
Follow the “RULES” of credit: Never close an account, Never pay a collection off UNLESS THEY WILL DELETE IT (remember they only want the money), Never allow your credit card balances to go above 50% of the limit, Avoid finance accounts (no interest no payments for a year) they are have the highest default rate consequently they effect the credit scores the most.
A "subprime" home loan is a loan where the client has some significant credit issues, or was otherwise unable to qualify for a standard, conventional loan. Due to the fact that these loans tend to be quite risky for the lender...they also bear higher interest rates to match, as well as often being adjustable rates that likely have recently hiked sky high, not to mention the steep prepayment penalties they generally carry.
These loans have been around for years - so why all the drama now?
Many subprime and other adjustable home loan rates have moved dramatically higher, due in part to the Federal Reserve Boards recent rate hike cycle. So as these rates are adjusting higher - and the payment right along with it - the homeowners are finding that they are unable to keep up with the dramatic increase in payment.
In the past, homeowners in this situation would simply throw the house on the market, realize enough of a profit to cover any prepayment penalties, and literally move on. But the soft real estate market isn't making this quite so easy any more - houses are not selling as quickly, and the home appreciation rates enjoyed in the past have moderated.
So the subprime homeowner is stuck - and many of these homes are falling into foreclosure, causing even more problems. As more and more loans are defaulting, mortgage lenders are forced to tighten up their lending standards across the board in response...making it tougher for a troubled homeowner to even refinance to get out of trouble. Many subprime lenders are feeling the pain, and in some cases, actually being forced to close their doors as they are hit with all the defaulted loans and foreclosed properties coming back home to roost.
How does this impact you?
In the short term, home loan rates are benefiting, as the stock market is taking a beating, causing money to flow into Bonds and Mortgage Backed Securities, which benefits home loan rates. But the longer term picture may spell higher interest rates ahead, as lenders have to absorb the cost of the loans that went belly-up, combined with the cost of increased compliance and accountability standards.
Now in many cases, the advice and loan strategy given to the client was perfectly appropriate for the client at the time they took out the loan...but the "perfect storm" of colliding economic events may have just worked against them. Yet unfortunately, many homeowners are paying a very steep price for what may have been poor advice and counsel given them at the time of their home purchase or refi. Now more than ever before, it is clear that it pays to work with a true professional, especially when your home is on the line. If you've ever thought it's too expensive to work with a real professional...just wait until you work with an amateur. The price paid is clear - and in this case, it's a very painful one.
Because of these events, credit and lending standards are tightening across the board, so it's a great time to get a "financial check up" - both you personally, as well as your clients, friends, family members and coworkers - even if they are not immediately in need of any home loan financing.
You know that I want to build relationships for the long run, not just to provide a "transaction" - so although you may not have a need for my team's home loan services at this time, I'd like to invite you to contact my friend and SCV Team member Adam Ford of the Mortgage Advisor's Group in Valencia (661-254-3744 x19) for a review of your current credit and financial situation. There may be recommendations he can make now, that will ensure you are in the best possible shape to obtain the most favorable financing terms when the need does arise.
Feel free to forward this newsletter directly, or print out copies for your clients, friends and coworkers who are asking about the headlines. As always, simply give me a call or email - I am always glad to hear from you, and happy to answer any questions regarding this matter or any other way we can be of service to you.
A couple of other tips:
Avoid getting a sub prime loan: It is more important than ever to have good credit as you have fewer loan options so be prepared, give my friend Adam a call if you have had ANY credit issues long BEFORE you get into escrow that way we can help you solve them or hire a company to help you with your credit issues. A recent collection can lower your scores by as much as 100 points.
Follow the “RULES” of credit: Never close an account, Never pay a collection off UNLESS THEY WILL DELETE IT (remember they only want the money), Never allow your credit card balances to go above 50% of the limit, Avoid finance accounts (no interest no payments for a year) they are have the highest default rate consequently they effect the credit scores the most.
Monday, March 12, 2007
Mortgage Excesses: The New Century Story
At a Mortgage Lender,Rapid Rise, Faster Fall
Wall Street Fueled Growth at New Century;
A Party-Hard Culture
By JAMES R. HAGERTY, RUTH SIMON, MICHAEL CORKERY and GREGORY ZUCKERMAN
March 12, 2007;
Wasll Street Journal, Page A1
Ruthie Hillery was struggling to make the $952 monthly mortgage payment for her three-bedroom home in Pittsburg, Calif., last summer when a mortgage broker called. The broker persuaded the 70-year-old Ms. Hillery to refinance into a "senior citizen's" loan from New Century Financial Corp. that she thought would eliminate the need to make any payments for several years, according to her lawyer.
Instead, the $336,000 adjustable-rate loan started out with payments of $2,200 a month, more than double her income. In December, Ms. Hillery received notice that New Century intended to foreclose on the property. Then, earlier this month, after a formal demand by the lawyer, New Century agreed to refund all its fees and cancel the loan once Ms. Hillery gets refinancing elsewhere.
The lawyer, Alan Ramos, says the loan never should have been made. "You have a loan application where the income section is blank," Mr. Ramos says. "How does it even get past the first person who looks at it?"
New Century, an 11-year-old company that billed itself as "a new shade of blue chip," has become a symbol of excess in lending to subprime borrowers, people with weak credit records or high debt in relation to their income. The company has imploded over the past few months as defaults surged and accounting misdeeds surfaced. New Century's share price last week dropped 78% to $3.21 as some traders bet a bankruptcy-court filing is near.
MORE
Wall Street Fueled Growth at New Century;
A Party-Hard Culture
By JAMES R. HAGERTY, RUTH SIMON, MICHAEL CORKERY and GREGORY ZUCKERMAN
March 12, 2007;
Wasll Street Journal, Page A1
Ruthie Hillery was struggling to make the $952 monthly mortgage payment for her three-bedroom home in Pittsburg, Calif., last summer when a mortgage broker called. The broker persuaded the 70-year-old Ms. Hillery to refinance into a "senior citizen's" loan from New Century Financial Corp. that she thought would eliminate the need to make any payments for several years, according to her lawyer.
Instead, the $336,000 adjustable-rate loan started out with payments of $2,200 a month, more than double her income. In December, Ms. Hillery received notice that New Century intended to foreclose on the property. Then, earlier this month, after a formal demand by the lawyer, New Century agreed to refund all its fees and cancel the loan once Ms. Hillery gets refinancing elsewhere.
The lawyer, Alan Ramos, says the loan never should have been made. "You have a loan application where the income section is blank," Mr. Ramos says. "How does it even get past the first person who looks at it?"
New Century, an 11-year-old company that billed itself as "a new shade of blue chip," has become a symbol of excess in lending to subprime borrowers, people with weak credit records or high debt in relation to their income. The company has imploded over the past few months as defaults surged and accounting misdeeds surfaced. New Century's share price last week dropped 78% to $3.21 as some traders bet a bankruptcy-court filing is near.
MORE
Saving for a Down Payment
Saving for a Down Payment
Lenders are shying away from offering riskier "subprime" mortgages amid worries about rising defaults.
As a result some would-be home buyers with little savings are being turned away.
WHAT TO DO: If you don't qualify for a loan because you have no down payment, stop shopping for homes and start getting your house in order. To save more, spend as if you've already bought a home. If your mortgage payment would be $2,500 and your rent is $1,500, deposit the $1,000 difference automatically into a high-yielding savings account each month. (You can find yields of 5% or more on savings accounts. Sock away sudden windfalls, such as tax refunds, bonuses and reimbursements from flexible-spending accounts.
Another way to save more is to earn more -- here are some tips to boost your pay. For more ways to save, click here. --Terri Cullen, 2/26/07
Lenders are shying away from offering riskier "subprime" mortgages amid worries about rising defaults.
As a result some would-be home buyers with little savings are being turned away.
WHAT TO DO: If you don't qualify for a loan because you have no down payment, stop shopping for homes and start getting your house in order. To save more, spend as if you've already bought a home. If your mortgage payment would be $2,500 and your rent is $1,500, deposit the $1,000 difference automatically into a high-yielding savings account each month. (You can find yields of 5% or more on savings accounts. Sock away sudden windfalls, such as tax refunds, bonuses and reimbursements from flexible-spending accounts.
Another way to save more is to earn more -- here are some tips to boost your pay. For more ways to save, click here. --Terri Cullen, 2/26/07
Thinking Conservatively About Your #1 Asset
HOME SWEETER HOME
Here are five things you can do to better manage your number one asset
• THINK DIFFERENTLY
It's a house, not a retirement fund. Stop thinking of your house as an investment, and recognize it for what it really is: an expensive installment-plan purchase that promises you a hefty rebate down the line. The best way to make a true profit on a home is to pay as little for it as you can. That means buy cheaper, buy quicker, buy smarter.
• PAY EARLY, PAY OFTEN
Speed up your mortgage payments. A typical home today will end up costing its buyer $1 million over the next 30 years. The first way to significantly cut that cost is to reduce interest costs. Add $100 a month to a 6.25%, $300,000 loan payment, and you will shave almost four years of loan payments and save $57,000 of interest. Add an extra $500, and you will pay off the house in just 17 years and save $170,000. Caution: Don't defer retirement savings in favor of rapid mortgage payments. Do both.
• SHARE THE BURDEN
Buy a two-family house or a house with a rental unit as your first home. [I wish we had these kinds of properties in our local market area. ~~ RK] Pay it off quickly, bulking up your monthly payments with your tenants' rent and paying off your mortgage early. Then use that house to buy your dream home. You will get out of debt more quickly, have more money to pay for your new home, save more in your retirement fund and use less of your regular income for future housing costs.
• WATCH THE RENOVATING
Build a new kitchen -- or bath or bedroom -- because you want it or need it, not because it will make you a profit or enhance the value of your home. According to Remodeling magazine's annual report on the costs and value of home renovations, a top-of-the-line kitchen remodel like you see on TV or in shelter magazines will cost you $108,000 and return just $82,000 -- a loss of $26,000. Borrow the money, and your loss will be worse.
• DON'T MOVE SO OFTEN
It's the best way to build equity and enjoy the benefits of rising values. According to a study by Harvard's Joint Center for Housing Studies, 15% of homeowners move every year -- or the equivalent of every U.S. homeowner buying and selling a home every seven years. Few homeowners have paid off more than 10% of their loan principal by that point. But they will have paid four times as much in interest. When they buy their new house, they start the mortgage clock all over again.
--David Crook
Here are five things you can do to better manage your number one asset
• THINK DIFFERENTLY
It's a house, not a retirement fund. Stop thinking of your house as an investment, and recognize it for what it really is: an expensive installment-plan purchase that promises you a hefty rebate down the line. The best way to make a true profit on a home is to pay as little for it as you can. That means buy cheaper, buy quicker, buy smarter.
• PAY EARLY, PAY OFTEN
Speed up your mortgage payments. A typical home today will end up costing its buyer $1 million over the next 30 years. The first way to significantly cut that cost is to reduce interest costs. Add $100 a month to a 6.25%, $300,000 loan payment, and you will shave almost four years of loan payments and save $57,000 of interest. Add an extra $500, and you will pay off the house in just 17 years and save $170,000. Caution: Don't defer retirement savings in favor of rapid mortgage payments. Do both.
• SHARE THE BURDEN
Buy a two-family house or a house with a rental unit as your first home. [I wish we had these kinds of properties in our local market area. ~~ RK] Pay it off quickly, bulking up your monthly payments with your tenants' rent and paying off your mortgage early. Then use that house to buy your dream home. You will get out of debt more quickly, have more money to pay for your new home, save more in your retirement fund and use less of your regular income for future housing costs.
• WATCH THE RENOVATING
Build a new kitchen -- or bath or bedroom -- because you want it or need it, not because it will make you a profit or enhance the value of your home. According to Remodeling magazine's annual report on the costs and value of home renovations, a top-of-the-line kitchen remodel like you see on TV or in shelter magazines will cost you $108,000 and return just $82,000 -- a loss of $26,000. Borrow the money, and your loss will be worse.
• DON'T MOVE SO OFTEN
It's the best way to build equity and enjoy the benefits of rising values. According to a study by Harvard's Joint Center for Housing Studies, 15% of homeowners move every year -- or the equivalent of every U.S. homeowner buying and selling a home every seven years. Few homeowners have paid off more than 10% of their loan principal by that point. But they will have paid four times as much in interest. When they buy their new house, they start the mortgage clock all over again.
--David Crook
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