Part 2: Ask Yourself: Rent or Buy? Can You Really Afford This House?

In my last post, we saw that owning a home is generally a good thing for individual finances in the long run, even if only slightly. As a homeowner myself, there is also the relative security of knowing my landlord won't up and sell my home out from under me or raise the rent! Though homeownership carries more responsibility, for myself, it just feels good to have my home be .... well, my home!

To be sure, the recession illustrates that renters need to consider not just their desires, but also their financial realities before purchasing a home. Buying a home is a big financial responsibility - the biggest one you will ever make - and one that protects you against those rent increases. A home represents stability, the place where you want to settle down for at least five to seven years and raise your family, if you are inclined. Bottom line: You don't want to take on more square footage than you can maintain and enjoy.

Still not sure? This simple online survey (www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx) can help and so can your financial planner.

And when you are ready, of course, seek me out, Your Personal Realtor!

www.car.org/newsstand/crem/current-issue thank you to Paula Hess, senior editor of California Real Estate Magazine.

Ask Yourself: Rent or Buy? Part 1

Sixty-five percent of Americans prefer owning a home versus renting. Is this just some leftover remnant of "the American dream?" Is it a romantic notion, or can it make financial sense, as well? Is the time right for your family?

With all of the foreclosures, fragile economy and fear about where to put one's investment dollars, the question about whether it is good for your pocketbook is more important than ever.

You've heard "there may never be a better time to buy," what with home prices and mortgage rates at near historic lows. But the reason to buy should have more to do with you and your family's situation than with the market. Yes, prices are low - really low, but tighter lending requirements have made it harder to qualify for a home loan. Bottom line: You'll need a larger down payment and a higher FICO score.

Interestingly, declining home prices have made the differential between buying and renting - significant in years past - minimal in some regions. However, with a cash downpayment, buyers may be able to save an average of $100 per month paying a mortgage over rent for a comparable property.

Of course, homeowners qualify for tax breaks, most notably the mortgage interest and property tax deductions. A general tax benefit-analysis reveals that a buyer purchasing a median-priced home with 20% down and a 30-year conventional mortgage looks to save over $500 per year on taxes. Not a huge amount to be sure, but homeowners will take it, along with the knowledge that their payments can be building equity and not just going into the pocket of a landlord!

In Part 2, we'll look at the second consideration: Can you really afford this house?

Before You Walk Away From Your Mortgage ...

Fannie Mae Increases Penalties for Borrowers Who Walk Away

Seven-Year Lockout Policy for Strategic Defaulters

Fannie Mae announced policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or who did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter time frame.

The purpose of this new policy is to highlight the importance of homeowners working with their mortgage company.

There is no doubt that walking away from a mortgage is bad for borrowers and bad for communities, not to mention the example that is being set for a whole generation watching mom and dad not do all they can to fulfill their responsibilities. Homeowners facing documentable hardship who make a good faith effort to resolve their situation with their mortgage provider will be able to preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.

Fannie Mae says that it will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments, something that could hang over the heads of those who walk away from their mortgages for years to come.

As a Certified Distressed Property Expert, I can relieve homeowners in these situations from the burden of communicating with their mortgage providers - something that discourages many borrowers as banks are famous for not answering phone calls or refusing to speak with borrowers until they are behind on their mortgages. At the very least, I have the experience to help navigate the waters one step at a time for you. One of my clients actually was able to negotiate with his lender to keep his home after he had almost given up hope and we had it up for a short sale (owed more on the home than we could sell it for)!

In these troubled times, I am happy to be able to use my skills to help upside down homeowners develop a plan of attack rather than giving up. It does pay you in the long run, credit-rating-wise, to work things out with your lender, even if it means you end up selling your home for less than you owe.

Call me if you or someone you know needs help.

These policy changes were announced in April, in Fannie Mae's Selling Guide Announcement SEL-2010-05.

Buyer Turn-Offs: What to Do if YOUR House is a Turn Off!

We talked about the features buyers look for, and some things you can do and should NOT do to make sure you show your home's best side to buyers. Now, I want to talk about the top buyer turn-offs, and what to do if your house fits the description.

The top turn-offs for both men and woman are structural damage, bad odors, a busy street, and an awkward floorplan.
First of all, a homeowner must accept reality that if any of these features apply to their home, it will make their home less desireable than a home that does not have these features. Therefore, the home must be priced below a comparable home in size and location. A buyer will naturally buy the home that appeals to them the most within their budget. Reduce the price, and you appeal to a buyer who normally could not afford a home in your area, or a home with as much square footage, or a home with a beautiful yard, etc. There is a buyer for every home, I assure you!

1. Let's take Structural Damage. This often happens to homes that were rentals for a long time, or perhaps the home was owned by folks who became disabled and could no longer either afford to keep the home up or just didn't notice the problems occuring. Perhaps there was a leak in the attic or under the house that slowly caused damage. What to do?

You have three choices: Repair the damage before you put the house up for sale, or sell the house as it is with the knowledge that much of the repairs will need to be paid for by the seller in escrow, or sell to a cash-only buyer. The fact is that unless the price of a structurally damaged house is considerably below comparables, a buyer will not purchase the home without having the damage repaired. Most buyers do not have the capital to repair structural damage. Also, if the buyer is getting a loan on the home, most banks will not loan on a home with structural damage. As your agent, I would assess what the damage is when I list your home and make recommendations based on what I observe.

2. Bad odors. It's a fact of life that we all get used to the smells in our own home! Even some odors that would knock a visitor down seem to go undetected by the resident. Obviously bad odors are a turn off, and if a home is listed without the odor having been eradicated, buyers will run the other way. What to do?

Before you list, get rid of odors caused by cigarette smoking, animals and relaxed house cleaning. Often carpets need to be replaced and walls painted to get the home smelling show-ready. Ask a friend you trust to come over and give your home the sniff test. If you choose to sell your home as is - odors and all, expect to have to lower your price below the comparables to get any buyer interest.

3. A Busy Street. This is a tough one, but not impossile to deal with. Your sales price will have to be adjusted regardless of what you do, but it is possible to make your home appealing even on a busy street. I would recommend putting in dual-paned windows at least on the side of the traffic. Dual-paned windows are a great selling point all over the house, and I would definitely recommend replacing all windows if they are single paned.

Next, I recommend a fountain in your outdoor space. A nice tinkly one that distracts from the street noise. I actually live with a busy street behind my home, and we have a wonderful fountain outdoors. Visitors rarely comment about the street noise, and we rarely notice it.

Plant screening plants to block the view of the busy street from windows. And of course, make sure your home is clean and staged before listing!

4. And lastly, the Awkward Floorplan. If you've got it, you may not even know it, you are so used to it. Buyers are looking for open floorplans these days. If you have no remodeling $$$ to remove walls, you must know that your sales price will need to be below the comparables to make up for the floorplan. Sounds ridiculous, but buyers know what they want.

For floorplans that are set in stone - no way to change it - I would recommend focusing on the positive features of your home mentioned in my prior article. Make sure you have a killer backyard, or a killer kitchen. Something that stands out that buyers want that makes up for the floorplan. Make sure your home is clean and freshly painted. As your agent, I will help you arrange your furniture to distract from the floorplan.

There IS a buyer for every home. Sometimes it takes elbow grease, and often it takes being realistic about the features your home is lacking and the turnoffs your home has that you have no control over, and adjusting your price to compensate. As your agent, I will evaluate your home and take your home's best foot and put it forward and center in order to get you the best possible price in today's market!

What Buyers Want! Top 11!

Most of us consider our home to be not only our castle, but a big investment. Sadly, few of us pay attention to nurturing this important investment by keeping an eye on what buyers are looking for now in order to prepare for that future day when we will sell.

With that in mind, I want to share with you this 2010 survey of 1,000 buyers conducted by ZipRealty. It is a "Top 10" survey, but since men and women differ slightly, it is actually a "Top 11!"

1. Garage. Most buyers want a garage. If you have a garage, my advice to you would be not to permanently convert it to another bedroom. Families are shrinking and the days of 3-4+ bedrooms are going bye bye. Convert if you must, but in a way that can be undone by YOU before you sell.
2. Master suite. Buyers want a bathroom within their bedroom. Don't have it? If you have remodeling $$$, add one. You'll love it now, and buyers will love it later.
3. Ample store space. Don't enlarge your home and remove closets. Big no no. DO put built-in storage in your garage (see #1!). DO have even a little storage shed in an inconspicuous place in the yard.
4. Guest Bedroom. This surprises me, but it shouldn't. Families are now spread out all over the country. So don't convert a third bedroom into a family room, unless YOU can UNconvert it before you sell.
5. Large closets. See #3.
6. Outdoor entertainment area. Especially here in San Diego! DO spend money on your yard! Patios with covers, greenery of some kind on automatic sprinklers, barbeque area. This is a place to spend a moderate amount of $$$. DO NOT OVERDO YOUR NEIGHBORHOOD! You won't get your money out of it. Just a lot of oooohs and ahhhhs!
7. Gourmet or updated kitchen. Yes, yes, yes, yes, keep those appliances current. Buyers LOVE new appliances and solid surface countertops. Tile and grout are OUT OUT OUT, except on the floor. Put your $$$ here, and while you're at it, update those bathroom sinks, cainetry and faucets. Buyers love that, but don't overdo it (see #6 above).
8. Breakfast room or eat-in kitchen. If you have it, don't remodel and lose it. If you don't have it, find a way to fake it.
9. Men want a view. Either you have that or you don't. If you have it, don't obstruct it. Show it off with places to sit and ponder it.
10. Large yard. Any yard. We have noticed that TOO big of a yard isn't a good thing either. If you have an acre, chop off a nice chunk and make it a cozy space, and use a weedeater on the rest. Fences sell too for those kids and pets.
11. Women want wood floors. Solid wood is best, but a good quality wood-type floor works. Wood is better than all tile for crawling babies, so if you have a house that would someday sell as a family house, go for the wood in the family areas and tile in the kitchen.

Of course, any questions at all about your particular dilemma, just give me a call or an email, and I'll do my best to guide you through spending your investment dollars wisely! It DOES matter!

Source: ZipRealty.com (6/10/2010)

Why Did Housing Take a Tumble?

This question has been rehashed by the talking heads on T.V. time and time again. We all have our theories as to why it happened and who are the villians. Some say it was the fault of the banks. Some say it was the predatory lenders. Some say it was investors buying up property causing inflated values. Others say that it was the "perfect storm."

According to a study recently released by the Mortgage Bankers Association and conducted by the University of Maryland, poor data, incomplete performance metrics, short-term focus, and unrealistic optimism among senior business managers contributed to the housing downturn. The study analyzed the risk management processes employed by mortgage lenders leading up to the housing crisis and discusses lessons learned for future risk managers.

Key findings from the study include: Subprime loan underwriting criteria expanded between 1999 and 2006 and a false sense of security with new products originated prior to 2007 occurred as a result of better than average economic conditions.

Hmmm. Sounds like a perfect storm and few heeded the warnings because so many were getting what they wanted - finally! Investors were making money. First-time homeowners were getting a home for no downpayment, with expectations that in a few years, they could sell that starter home and make money that they could then put down on a BETTER home. Lenders were of course making money.

What those of us on the ground saw happening during those good 'ol days were too many buyers risking basically only their credit scores for those expectations because they had no "skin in the game." No money of their own was sunk into their investment. Human nature requires some accountability, without which it is that much easier to walk away and leave the mess to someone else: you and I. The homes that these buyers left behind were indeed messes. Browned, unkempt landscapes and ill-used interiors needing to be labled, "mild fixer."

Of course, caught up in the storm were very responsible homeowners who did manage to refinance and hang on for as long as they could to their very well maintained and loved homes. A lost job or scarce contracts for the self-employed put these homeowners in the very same position as the risky buyers, and the stigma of foreclosure. It has been painful to watch up close.

A one-size-fits-all bandaid cannot work for even these two scenarios. That is why I am pleased that California has passed a bill to protect responsible homeowners from having to pay income tax on their forgiven debt! These homeowners should not be lumped into the same box as the risky buyer who easily walked away from a mess.

A perfect storm does best describe the housing downturn. And in any storm of life, we must learn something as individuals and as a community and as a State. You can't get something for nothing. If you have, beware of the strings attached.

To obtain a copy of the report, please visit the RIHA Web site at http://www.housingamerica.org.

Distressed Homeowners! RED ALERT!

The Big Banks are Still Opposing C.A.R.'s Bill to Protect Borrowers

The vote is TOMORROW! Please call TODAY!

Call Senator Dennis Hollingsworth Today!
Urge him to vote "Yes" on SB 1178.

Call 1-800-672-3135 and enter my PIN number -- 196519571 I just did and it took 1 minute!

This is an important vote for many homeowners who are not able to make their balloon payments or their mortgage is readjusting, making it impossible for them to continue to make their payments. These homeowners cannot sell the home for what they owe, and if they "walk away" or sell their home in a "short sale", they oftentimes will be held responsible to be taxed on the deficiency. The banks are digging in their heels about this legislation, even though they are getting bailouts by the Federal government to see them through.

Responsible homeowners who have gotten stuck in this bind could use some mercy from the government in the form of not having to pay the taxes on the amount of money they lost the banks on their mortgages. Please know that this legislation will only cover homeowners whose mortgage is strictly for their home and will not cover equity taken out of homes for other purchases!

Call Senator Dennis Hollingsworth Today!
Urge him to vote "Yes" on SB 1178.

Call 1-800-672-3135 and enter my PIN number -- 196519571 I just did and it took 1 minute!

Thousands of responsible homeowners need our help.