How to Time the Real Estate Market

A good time to buy? Yes, but no need to rush.

Many housing economists have said that for borrowers with stable incomes, good credit history, and FICO scores of at least 620, now is an opportune time to purchase a home. Although inventory rates are below the long-run average, there still are plenty of options available for buyers.

Are you trying to time the market so you can purchase your home when prices are likely to rise again? You might consider taking a different approach. According to one real estate consultant, while home prices have stopped declining in most areas of the state, and even have risen in many areas of San Diego County, mortgage rates may rise, offsetting any potential savings.

Early last year, the Federal Reserve began purchasing mortgage-backed securities, which helped maintain low interest rates for consumers. However, the Fed’s purchase program ended in March, and some analysts forecast interest rates to increase throughout the rest of the year. One financial publishing company predicts that rates likely will rise to 5.5% by mid-2010 and close the year at 5.75% to 6%. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) projects rates on 30-year fixed-rate mortgages to average 5.6% this year.

Timing the market, even for economists, is a 50-50 chance at best. What we see now are home prices lower than they have been in many years, along with very low interest rates. For those who are ready to buy a home, this is a very good TIME.

Struggling Homeowner? Some Welcome News!

The Obama administration on Friday announced adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) program to assist homeowners struggling to meet their mortgage obligations. The program adjustments target three groups: Unemployed homeowners who are unable to make their mortgage payments; underwater homeowners; and homeowners behind on their payments and seeking loan modifications.

Unemployed Homeowners: You may qualify for three to six months of reduced payments while searching for new employment. During this time, payments will be reduced to 31 percent of their current gross monthly income. To qualify, borrowers must, among other things:
1. Be living in their homes.
2. Have loan balances less than $729,750.
3. Provide verification of unemployment benefits.
4. Request assistance within 90 days of delinquency on the mortgage.

Underwater homeowners— If you owe more than your home currently is worth and you are current on your mortgage payments, you may be eligible for a new FHA refinance option that will allow you to refinance your mortgages into new FHA-insured loans equal to no more than 115 percent of your home’s current value. The difference between the original loan balance and the new balance gradually will be forgiven if the homeowner remains current on payments for three years.

Homeowners Seeking Mortgage Modifications Under HAMP, you may be eligible for mortgage principal reductions. Although lenders always have had the option to do so, many have chosen instead to reduce interest rates. However, under the new guidelines, lenders reducing mortgage principal may receive higher financial incentives. The incentives will be paid jointly by the private sector and the federal government through a $50 billion allocation from the Troubled Asset Relief Program (TARP).

The program changes are expected to go into effect in the fall. However, a measure to offer larger incentives to lenders who facilitate short sales or deeds-in-lieu of foreclosure, as well as assistance for unemployed homeowners, will be in place within a few weeks or months, according to the administration.

I will keep you posted!

HOME PERSONALITY ANALYSIS?

Your home has a definite personality, and if your home is for sale, or if you are considering putting your home up for sale, it is important that you get to know your home in a new way. And, YES, homes are still selling in San Diego County! But it is more important than ever to understand what makes a buyer buy!

First Impressions Count

If you had a dinner invitation for the first time to the home of your prospective in-laws my bet is that you would want to make a good first impression. Although you might like to wear jeans with holes in them around the house with a comfortable T-shirt, chances are you wouldn’t dream of showing up in that attire to a first-time meeting! It makes no difference that your fiancé loves you just the way you are. You have a good impression to make and now is the time to put your best foot forward.

Your home is no different. When a prospective buyer drives up to your home for the first time, they will subconsciously notice your home’s “personality,” and this personality will greatly affect their first and most important impression – and the decision whether or not to buy your home. The questions is- If your home is for sale, which personality do you want to put forward?

The Neglected Home – You’ve seen it. Bank-owned/foreclosed homes have this appearance. This home could also be a divorce situation where no one could decide who would do what. Weeds, browning grass, and unswept walks give zero curb appeal. Inside, it is obvious that maintenance and care has been little to nil. Curtains are tightly closed; there is no electricity or heat. This home has a sad personality. No one is going to “fall in love” with this home. It has one hope for getting sold- PRICE. It must be lower than the comps in the area. These homes WILL sell and will sell fast when they are priced to sell.

The Old-Fashioned Home – This home has usually been owned by the same family for its lifetime. Curb appeal may be fair, but the front door and windows would be original. The carpet, flooring, window coverings, fixtures and appliances are unappealing. The color scheme hasn’t been updated since the 1980’s when mauve and baby blue were all the rage! There is really nothing wrong with this home except the fact that you get the feeling you are Back to the Future! Some buyers will see past the home’s dominant personality and imagine updates, but only if the price is right. By right, it must be, once again, lower than the comps in the area. If not, the buyer will buy the home two blocks over that has new windows and appliances, or even The Neglected Home, that has a better price.

The “Different” Home – Some homes have a floor plan that is just plain, well … different! It starts with the curb appeal when you’re not quite sure where the front door is located. Inside, the entry faces a wall or coat closet, or some other part of the house that is unusual. Perhaps the home has been added onto and walls have been removed (or not) and in order to get to the family room or kitchen you need to walk down a hallway past the bedrooms. Room sizes may not appear to make sense, with a huge dining room and tiny kitchen, or vice versa. As a homeowner, you are used to your home being different; however, the majority of the buying population will not find this “different” personality practical or appealing. Unfortunately, the only hope for selling this one is, once again, a price that is lower than the comps in the area. Otherwise, the buyer will purchase a Neglected or Old-Fashioned Home that has the layout that appeals to them.

The Grandma Home – Hey, we’re all going to get there, and the truth of the matter is that when our homes grow old along with us, buyers know it when they see it. This home is similar to the Old-Fashioned Home. Pictures of the grandkids and ancestors are in every room. There is a towel across the back of the chair for the cat and doggie stairs next to the bed. The house has lots of lace and doilies. Though the grandkids love to visit, a buyer may have a hard time imagining living in The Grandma Home. Once again, this home must be priced below the comps in the area or it will languish on the market alongside The Old-Fashioned Home and the “Different” Home.

The Friendly Home – Buyers’ eyes light up when they drive up to this home. There are flowers in the flowerbeds and on the porch. The yard and front door are well maintained and say “welcome.” The home is spotless and clutter free. The walls are freshly painted; woodwork and carpets clean or new. Appliances and countertops are not grossly out of date. Window coverings are current. Buyers will typically fall in love with this home regardless of the age of the home. If priced comparatively to what has recently SOLD nearby, this is the home that brings multiple offers.

So what if your home is not The Friendly Home? Is it possible to get a better price? Yes. The key is DRESS TO IMPRESS! I am a firm believer in staging your home to bring out the best personality possible. Water your lawn. Trim shrubbery. Do those honey-do tasks around the house. Take a couple of weeks and declutter. You are going to be moving, so begin packing, leaving only select decorative items in view. PAINT! Paint your walls and either paint or clean your front door. Buy a new welcome mat. Change the hardware on the door if it is outdated. That, alone, gives a great first impression. Wash all windows and screens inside and out. Remove old, broken blinds and old broken anythings and take them to the dump. You are better off with no window coverings than outdated or broken ones. Update your bathrooms and kitchen if at all possible. Hang new towels and a new shower curtain. Buy new bath and kitchen rugs.

YES, homes are selling; buyers are buying! But in order for your house to sell it is imperative that you make a The Friendly House first impression, and price your home in line with homes that have recently SOLD. Long gone are the days when sellers can ask a price they have in their heads “just to see if anyone will buy it for that.” Location, price and condition (personality)! That is what will sell your home!

Debbie and I would be happy to give you a free Home Personality Analysis with tips on what you can do to Friendly-ize your home for market. Call us or email us anytime!

(Thanks to real estate agent Kristi DeFazio of Colorado for the use of her ideas for this column!)

10 DEADLY MISTAKES Buyers Make When Purchasing A Home

Protect Yourself From These 10 Common Pitfalls ...

MISTAKE NO. 1
Choosing a real estate agent who is not committed to forming a strong business relationship with you.

HERE'S HOW TO AVOID IT
Making a connection with the right real estate agent is crucial. Choose a professional who is dedicated to serving YOUR needs - before, during and after the sale.

MISTAKE NO. 2
Making an offer on a home without being qualified.

HERE'S HOW TO AVOID IT
Pre-qualification will make your life easier - take the time to talk with bank or mortgage representatives. Their specific questions with regard to income, debt and other factors will help you determine the price range that you can afford. It is one of the most important steps on the path to home ownership.

MISTAKE NO. 3
Not knowing the total costs involved.

HERE'S HOW TO AVOID IT
Early in the buying process, ask your real estate agent or mortgage representative for an estimate of closing costs. Title insurance and escrow fees should be considered. Pre-pay responsibilities such as homeowner's association fees and insurance must also be taken into account. Remember to examine your settlement statement prior to closing.

MISTAKE NO. 4
Limiting your search to open houses, ads or the Internet.

HERE'S HOW TO AVOID IT
Many homes listed in magazines or on the Internet have already been sold. Your best course of action is to contact a real estate agent. They have up-to-date information that is unavailable to the general public, and they are the best resource to help you find the home you want.

MISTAKE NO. 5
Thinking that there is only one perfect home out there.

HERE'S HOW TO AVOID IT
Buying a home is a process of elimination, not selection. New properties arrive on the market daily, so be open to all possibilities. Ask your real estate agent for a comparative market analysis. This compares similar homes that have recently sold or are still for sale.

MISTAKE NO. 6
Not considering long-term needs.

HERE'S HOW TO AVOID IT
It's important to think ahead. Will your home serve your needs 3-5 years from now. How about in 5-10 years?

MISTAKE NO. 7
Not following through on due diligence.

HERE'S HOW TO AVOID IT
Make a list of any concerns you have relating to issues such as crime rates schools, power lines, neighbors, environmental conditions, etc. Ask the important questions before you make an offer on a home. Be diligent so that you can have confidence in your purchase.

MISTAKE NO. 8
Not having a home inspection.

HERE'S HOW TO AVOID IT
Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that many buyers can overlook.

MISTAKE NO. 9
Not examining insurance issues.

HERE'S HOW TO AVOID IT
Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.

MISTAKE NO. 10
Not purchasing a home protection plan.

HERE'S HOW TO AVOID IT
This is essentially a mini insurance policy that usually lasts one year from the date of the sale. It usually covers basic repairs you may encounter and can be purchased for a nominal fee. Talk to your agent to help you find the protection plan you need.

Main Street and Wall Street - Fact, Fiction, and Exaggerations

Hi friends! I read this article and had to post it for you to read. I can't tell you how many people I run into who think that it is not possible to get a home loan. Since we just closed 5 escrows, and have 5 more buyers or sellers in escrow, that is just not true. This article is more the reality of life to us as realtors. Enjoy!


By Marylyn B. Schwartz
RISMEDIA, Oct. 13, 2008-Eric Tyson has every right to be opinionated about the media’s treatment of the current market conditions both on Main and Wall Streets. Tyson is a former management consultant to Fortune 500 financial service firms and has successfully invested in real estate for more than two decades. He earned his Bachelor’s degree in economics from Yale and his MBA at Stanford Graduate School of Business.

He might be more recognizable to the real estate community through his authorship and co-authorships of the very successful Real Estate Investing for Dummies, Home Buying for Dummies, Taxes for Dummies and Personal Finance for Dummies. With his insight and candor relative to what we should, and perhaps should never, be doing, we had quite a lively conversation.

Marylyn B. Schwartz: Eric, it’s tough to turn on the TV or pick up a newspaper without feeling like we are all lemmings ready to plunge into the abyss. To hearken to the pundits, this Wall Street mess is going to be the undoing of America as we know it.

Eric Tyson: I could not agree more. Listening to all the hype would lead people to believe that it was nearly impossible to get a home loan. It is harder to get a loan, but hardly impossible. There is a great deal of misinformation. The fact is, real estate is ‘on sale’ now as is stock. While I have no crystal ball about whether we have hit bottom, we are close. It is my contention that this is an excellent time to invest. We all know that buying low and waiting for things to return to more ‘normal’ circumstances is an excellent way to make money. Consumers with good credit will have little trouble finding lenders to write a mortgage. It is a fact that the volume of foreclosures and short-sales are slowing things down, and the fear of the credit crunch has added to the malaise. What we are seeing is a market correction, plain and simple. After the orgy of irresponsible lending by Fannie Mae and Freddie Mac, this was inevitable.

MBS: People are scared that their investments are at risk. When house values have declined significantly in many markets and nest eggs, if small, have all but disappeared, how can we assure people that they need to hang in, not panic and not act without careful guidance and counseling?

ET: We all need to avoid hasty decisions. We cannot afford a 9/11 type mentality. That is, experiencing a crisis and reacting in the short term rather than sitting tight and letting the dust settle. After the tragedy of 9/11, we had economic woes that lasted many years. However, people who invested in real estate then made back their initial investments many times over. Selling a depressed investment is never wise. Fifteen years from now, we will be looking at this time and shaking our heads. However, this economy is a great deal tougher if you are close to retirement. You need to be sure that you are not invested in high-risk markets. One way to measure your portfolio for its level of risk is to take 110 and deduct your age. The result is the percentage of your portfolio that should be in long-term growth assets …stocks, real estate, bonds, etc. These may or may not fit the cautious-investment criteria dependent upon the history of their performance.

MBS: What do you think the biggest misconception is relative to the spin the media places on the financial mess?

ET: This is not the Great Depression. We have to stop comparing the two times in our history. If facts are compared, it is not difficult to determine that where we are today is not where we were in 1929. The stock market decline of 700 points was a result of people listening to the media, panicking and selling off assets or liabilities as they saw them. The next day, the market rebounded significantly, and these same people are wondering if what they did was right or wrong. During the great depression, we had 50% foreclosures as compared with 2.5% or so today. We are suffering with 6% unemployment, yet back eighty years ago unemployment hit 25%. The bailout bill was grossly misrepresented by the media. They failed to liken present-day challenges to other times in recent history when we were in economic crisis. The Resolution Trust Corporation (RTC) that was formed by the US Government in 1989 to liquidate primarily real estate-related assets (including mortgage loans) belonging to savings and loan associations. These assets were declared insolvent by the Office of Thrift Supervision as a consequence of the savings and loan crisis of the 1980s. Between 1989 and mid-1995, the RTC closed or otherwise resolved 747 thrifts with total assets of $394 billion. Many who invested wisely in the consolidation and distribution of these assets realized profits down the road. Instead of it costing the taxpayer 450 billion as initially proffered, it ultimately cost closer to 75 billion. The key point is that we successfully weathered a seemingly insurmountable crisis with far less pain than the media would have had us believe.

MBS: Tough logic to swallow for people who are now having trouble buying food and providing shelter. While in the long run things will right themselves, it is the dark span between crises and leveling that scares most of us. We’re uncertain that we will come out the other end remotely whole…

ET: I understand that. It is in the ‘trenches’ where the pain is most palatable. However, as an economist, it is incumbent upon me to look at every aspect of our economy and determine where, and if, there are reasons to be optimistic. We do have a few strong economic indicators. Exports are up. The weakening of the US dollar aided that segment of our economy. As a result, our GDP grew. We are a resilient economy. We were entering a recession in 2001, and then we saw economic growth bolstered by the strong real estate market. Now we are seeing an adjustment for reasons mentioned earlier. I liken these adjustments to sausage making. While it is an ugly process to watch, the end product is quite palatable. There is far too much ‘daily noise’ that we have no control over. Research shows that the more negativity a person exposes himself/herself to, the more upset and out of control he/she feels. We must do our homework, balance the hyperbole with the facts and hunker down. There is simply no effective way to speed up the pains of an overdue economic correction.

MBS: There are many who are watching this correction with a high level of anxiety. There is ‘skin in the game’ all the way around, and no one wants another misstep no matter how slight. The American public is already reeling from the magnitude of this correction. Let’s hope that the bright spots you have identified continue to grow into a new day.

Marylyn B. Schwartz, CSP, is an expert in real estate and corporate sales training/management and team development. She is president of Teamweavers and a trainer for Leader’s Choice.
For more information, visit [1] http://www.marylynbschwartz.com/, or e-mail [2] teamweaver@aol.com.
RISMedia welcomes your questions and comments. Send your e-mail to: [3] realestatemagazinefeedback@rismedia.com.

Taking Advantage of SHORT SALES

Short sales. We hear alot about them these days, but what are they again? It is something you need to know because short sale opportunities are on the rise. If you or someone you know is fearing forecloseure, encourage them to talk to their lender. Many lenders are realizing that they'll save money the sooner they can get a property off the books. So, when they fear a homeowner may be headed for floreclosure, they may fix a sales price lower than the mortgage balance and put the property on the market for a quick sale. That is what a "short sale" is: a property on the market that has a sales price lower than the mortgage balance.

I know you know someone who is losing their home. We all do. And we probably all know someone who has just "walked away." Two thirds of homeowners in default (so late on their payments and property taxes that the property is flagged for foreclosure) never even contact their lender!

What is in it for the homeowner? Well, if the lender does agree to a short sale, the homeowner avoids foreclosure, the lender avoids the carrying costs, and the neighborhood avoids another abandoned property on the block. We have done some successful short sales and had a few that the lender decided to let foreclose. In our success stories, our clients have appreciated the service we provided by doing all of the leg work with their lender(s).

This market is going to be with us for awhile and we have learned how to handle these sales and handle them professionally. Several of our buyers have put offers in on short sales, and they are in demand because of their attractive pricing. Multiple offers are the norm when the property is priced right and in good repair.

Please do not hesitate to call me with any questions about whether or not you or someone you know would benefit by selling short. It is just one more way that I enjoy being Your Personal Realtor!

(My thanks to Dave Liniger, RE/MAX, for the idea and some of the content of this post!)

Senate Bail-Out Bill - What the New York Times Says About It

As housing bill evolves, crisis grows deeper

Most media loves really bad news. It's always sold papers and always will! Here is their current doomsday message about the Housing Bill:

"The mortgage rescue plan currently before Congress, which was designed to help only about 400,000 of the 2.6 million homeowners needing assistance at the time it was created, may fall far short of bailing out the thousands of additional Americans each month who join the ranks of mortgage borrowers in need thanks to an increasingly troubled economy, analysts say."

Let's try to make some sense out of this for us every-day folks:

• The Senate is expected to consider a bailout bill after the July 4 recess. That bill would allow banks and borrowers to refinance troubled adjustable-rate mortgages into 30-year fixed-rate loans backed by the government. Lenders would lower each loan amount to 85 percent of its current value while borrowers would pay a 1.5 percent annual mortgage insurance premium, and any gain in value would be shared when a home is sold.
• An estimated nine million homeowners currently owe more than the market value of their home. To qualify, borrowers would have to demonstrate that they can’t afford their current mortgage payment but have the financial wherewithal to make payments on a new loan with new terms.
• Critics of the proposal suggest that the real estate market will correct itself without Congressional intervention, and that a weak economy, rising unemployment and higher mortgage interest rates could derail the usefulness of the program, which would be managed by the Federal Housing Administration and funded by the mortgage insurance fees, a 3 percent lender fee, and a tax on Fannie Mae and Freddie Mac.

To read the full story, please click here:http://www.nytimes.com/2008/06/29/washington/29housing.html?_r=1&th=&adxnnl=1&emc=th&adxnnlx=1214794471-1wPUSlKP4CUyMb8ECvTjAg&oref=slogin

Historically the United States has had its good economic times and its not so good economic times. This too will pass, and many of us will be stronger for it, though not wealthier! Most of our great-grandparents would roll over in their graves to see the spending habits of our generation, and this current real estate climate is a giant wake-up call for many who have thought of home equity as an ATM machine.

Panic and fear will drive the economy down fast. It is important to realize that this, too, will pass. It is time to revert to thrifty economizing as our grandparents and even our parents did. We will all get through this!