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Homes for Heroes Program 25% Rebate to Buyers & Sellers
Do you or someone you may know qualify as a "hero?" If so, there is an exclusive program available now through my real estate brokerage, Exit Preferred Realty. With this program both buyers and sellers are eligible for a 25% rebate at the time of closing.
Who Qualifies as a Hero:
-Firefighters, police officers, public safety officers, health care professionals, military personnel, educators, educational support staff, youth workers, pastors, and more.
How it Works:
-Work with an agent through my brokerage, Exit Preferred Realty and...
-25% of the Gross Commission paid to the Homes for Heroes® Affiliate Company goes to the Hero whether he/ she buys or sells or both.
-Discounted lending fees charged by Homes for Heroes® lender affiliates.
-Title Closing Fee discounts where allowed by law.
This is a wonderful opportunity for you or anyone you may know who can take advantage of this excellent program. For more information, please do not hesitate to contact me.
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$7,500
FHLB Grant
Available Now for First Time Home Buyers
Receive up to $7,500 towards closing costs and Your down payment.
How it Works:
The purchaser contributes a minimum of $500 toward the purchase of his home. FHLB will then match it up to 5 times. To receive the full benefit of the $7,500 grant the purchaser must contribute $1,500, which can be used in the form of an earnest money deposit, appraisal, home inspection, etc.
Eligibility Requirements:
-Must be a First Time Home Buyer (cannot have owned a home within the past three years)
-Must be at or below 80% of the area median income you are purchasing in (this is adjusted per family size)
-Must Contribute at least $500
-Must Complete Simple Home Buyer Counseling
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*Funds are Limited and Granted on a First Come, First Served Basis*
Dont Delay! Contact Matthew T. Smoot now and Get Enrolled! 443-504-8930
*Other Programs also Available...Just Ask*
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The First-Time SELLER
Today’s buyer-take-all bonanza is a boon for fence-sitters and buyers with great credit and deep pockets. But sellers are gearing themselves to new realities that include paying (rather than making) money at the closing table, providing extras to sweeten the deal, and spending more time and cash making the home camera-ready.
For first-time sellers who have never been through the process before, it’s a different world. One where the value of the house isn’t measured in the profit made on the sale, but by the enjoyment the owners had from living in the home.
Here are three things experienced sellers would tell you, if they could.
Price it realistically from the start
Your largest number of showings will occur in the first two to three weeks. One reason: The MLS (multiple listing service) systems and the Internet tend to drive the majority of showings. Many buyers are plugged in electronically. So the minute something new pops up that meets their criteria, they want to see it.
Take advantage of that sweet spot by pricing the house competitively right out of the gate. There is nothing worse for a seller than to over-price their home.
For example, when first-time sellers James and Emily Foltz put their Oklahoma City home on the market last summer, their agent gave them a comprehensive list of the initial asking prices of nearby homes like theirs, along with the final selling prices. “Some varied by $30,000,” says James Foltz.
It gave them an X-ray of their market.
How you style the price is important. The Foltzes first marketed their home for $155,000. But lowering it to $150,000 meant the listing appeared within the computer search parameters that buyers commonly used in that price range, Foltz says.
The result: A few weeks after the price change, they had a winning offer.
Be prepared to lose some money
Want to sit with a house that won’t move? Be the first-time seller who insists you can get the appraised value, the tax assessor’s estimate or whatever you paid a few years ago.
“It seems like there’s no relationship between your assessed value, taxable value and the actual market value of our house,” says Pat Vredevoogd Combs, past president of the National Association of REALTORS®. “There doesn’t seem to be any correlation.”
The truth is that your house is worth what buyers are willing to pay. No more. “This is a true market that Adam Smith would have loved—totally based on supply and demand,” Combs says. That means many buyers should be prepared to lose some money or hang onto the home until the price rises.
“We did end up taking a loss,” says Foltz, who wrote a check for $3,000 at the closing table. The good news is that the couple sold their home in less than two months.
Beware the agent who promises big profits, Combs says. That person may just be after your business. “Don’t go with anyone who doesn’t use comps,” she says. And study sales prices, not asking prices, for real estate.
Promotion, promotion, promotion
One question to ask yourself and pose as you interview agents: How will you reach the home’s target market?
“You have to consider who your most likely buyers are for what you’re selling and cater to that group of people,” Ramsey says.
Targeting 20-somethings who live on their smartphones? You need to effectively access the networks your buyers are tapping to find their next home. One big trend: QR (or “quick response”) bar codes that allow smartphone users to access property information electronically, he says.
The typical starter home can also appeal to downsizing empty nesters, says Ramsey. To serve their needs, you might also want to have a phone number that instantly reaches someone who can provide details and answer questions, he says.
And don’t neglect the modern version of curb appeal: using lots of photos on real estate listings’ websites. However you market your house, you need a good number of clear, well-lit, professional-quality pictures that show your house at its best.
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Revitalizing the Private Mortgage Market
By mid-May, the spring home-selling season is usually in full swing. Homes look their best, and buyers rush to lock in deals so they can relocate in the summer. But this year, things are not so good. Despite low home prices, sales are sluggish as the market struggles to recover from the burst bubble of the past decade.
Many potential buyers are scared off by worries that a home bought this spring could be worth less a few months later, given that prices have fallen by more than 8 percent over the past 12 months, according to Zillow.com. Others are eager to buy at today’s low prices, but cannot get a mortgage because lenders have tightened standards to avoid a repeat of the default and foreclosure crisis.
Amid all the uncertainty, a number of regulators, lawmakers and market experts continue to wonder: What will the mortgage market, so essential to a healthy housing sector, look like in the future? Key to that is a rekindling of the private market for securitizations—the process of converting mortgages into bonds for sale to investors. Securitization provides the money lent to homeowners. In March, the Federal Reserve, Federal Deposit Insurance Corp. and four other agencies issued proposed new rules for the private securitization market—requirements likely to toughen standards for both borrowers and lenders. But many experts feel the proposals—still subject to comment before final implementation, possibly this summer—would not correct the mortgage market’s problems.
“I think it’s a missed opportunity,” says Susan M. Wachter, professor of real estate at The Wharton School and co-editor of a new book, The American Mortgage System: Crisis and Reform. “I think that we need obviously to envision a restructured housing finance system to replace the failed system that we have had, and this does not get us there. Quite the contrary, it raises more questions.”
Currently, more than 90 percent of new U.S. mortgages are backed by the government entities Fannie Mae, Freddie Mac and the Federal Housing Administration, but almost no one wants the government to continue to be the prime source of mortgage securitization. After suffering huge losses from homeowners who failed to make payments, Fannie and Freddie were taken over by the federal government in 2008 and have so far required a taxpayer bailout exceeding $130 billion. The Obama administration has proposed phasing out the two firms over an unspecified number of years, but that cannot happen without a resurgence of the private securitization market.
The “private-label market,” which was all but nonexistent before the 1990s, skyrocketed from 2004 to 2008, when it accounted for more than $2 trillion in outstanding mortgages. Now it is barely breathing. Enormous losses have scared off the investors who buy private mortgage bonds, which do not carry the guarantees that make Fannie and Freddie bonds attractive.
The federal proposals issued in March, required under the 2010 Dodd-Frank financial reform law, are designed to discourage the issuance of risky mortgages and securities based on them. They would require that firms that issue mortgage-backed securities retain 5 percent of the investment risk contained in the bonds sold to investors. Having “skin in the game,” or a stake in the bonds’ investment prospects, should make the participants careful in approving mortgages and putting the bond packages together, the agencies say.
Matthew T. Smoot
Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
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Housing Affordability Highest in Two Decades
Nationwide housing affordability during the first quarter of 2011 rose to its highest level in the more than 20 years it has been measured, according to National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data released recently.
The HOI indicated that 74.6 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400. This eclipsed the previous high of 73.9 percent set during the fourth quarter of 2010 and marked the ninth consecutive quarter that the index has been above 70 percent. Until 2009, the HOI rarely topped 65 percent and never reached 70 percent.
“With interest rates remaining at historically low levels, today’s report indicates that homeownership is within reach of more households than it has been for more than two decades,” says Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “While this is good news for consumers, home buyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.”
Syracuse, N.Y. was the most affordable major housing market in the country during the first quarter of the year. In Syracuse, 94.5 percent of all homes sold were affordable to households earning the area’s median family income of $64,300.
Also ranking near the top of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Indianapolis-Carmel, Ind.; Warren-Troy-Farmington Hills, Mich.; and Toledo, Ohio.
Among smaller housing markets, the most affordable was Kokomo, Ind., where 98.6 percent of homes sold during the first quarter of 2011 were affordable to families earning a median income of $61,400. Other smaller housing markets near the top of the index included Monroe, Mich.; Cumberland, Md.-W.Va.; Elkhart-Goshen, Ind.; and Springfield, Ohio.
New York-White Plains-Wayne, N.Y.-N.J., led the nation as the least affordable major housing market during the first quarter of 2011. In New York, 24.1 percent of all homes sold during the quarter were affordable to those earning the area’s median income of $65,600. This marks the 12th consecutive quarter that the New York metropolitan division has held this position.
Other major metro areas near the bottom of the affordability index included San Francisco-San Mateo-Redwood City, Calif.; Los Angeles-Long Beach-Glendale, Calif.; Honolulu; and Santa Ana-Anaheim-Irvine, Calif., respectively.
San Luis Obispo-Paso Robles, Calif., where 47.6 percent of the homes were affordable to families earning the median income of $72,500, was the least affordable of the smaller metro housing markets in the country during the first quarter. Other small metro areas ranking near the bottom included Santa Cruz-Watsonville, Calif.; Laredo, Texas; Ocean City, N.J; and Santa Barbara-Santa Maria-Goleta, Calif.
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Cash is King
For home buyers who need to finance their purchase using a mortgage, a cash buyer can be their worst enemy.
That’s because when a buyer makes a cash offer, the seller knows it’s a solid deal—and that financing hiccups won’t delay a closing. Sometimes, that’s enough for the seller to accept a lower bid for a cash deal instead of a higher bid from a financing buyer.
It just recently happened to a client of mine. Against a cash buyer, the financing borrower just couldn’t compete against my cash buyer.
We were wringing our hands over this because the offer that came in on this property was not cash, and we were quite a bit lower than the offer. The winning bid was ours for $370,000; the other buyer's offer was $395,000 and contingent on financing.
It’s a scenario that is becoming more common with the number of cash buyers on the rise, swooping in for deals on low-priced properties. Yet while cash is king, there are some things financing buyers can do to better their chances of having an offer accepted.
Perhaps the most important tip: “The smartest thing they can do is make sure they talk to a competent mortgage banker … to preapprove them ahead of time."
Also, remember that the more cash you’re willing to put down, the more secure your job and the better your credit, the better off you will be in getting the seller to accept your bid, he says.
In February, all-cash deals made up 33 percent of all home sales—a record high, according to the National Association of Realtors. In 2010, 59 percent of those who bought a home as an investment paid cash for the home, the group found.
People are plunking down cash on properties for a variety of reasons. One popular one: With low housing prices, some people are pulling their money out of the stock market and investing in rental properties, with a plan to own them long term.
That way, their money is being put to work in what seems to be a bottoming housing market. You can buy these things cheap enough and with a small amount of renovation … the rents pay the mortgage.
Some parents may be providing the cash to help their children buy homes, at a time when financing can be out of reach for young adults.
Instead of applying for a loan from a bank, the kids make their payments to the Bank of Mom and Dad. Meanwhile, the parents can charge 5 percent to 6 percent interest on the loan—earning them more than they’d get on a safe investment such as a certificate of deposit.
Cash offers often win out when the bank is the seller. Those are most likely foreclosures now back on the lender’s books.
When dealing with a bank, remember that lenders are typically more analytical than a homeowner seller. And for an institution, they’re more apt to go with the safest bet.
Time is money, and taxes are ticking away on (the house). They want to get the bad loan off their books quicker and the money on their ledgers. Someone with cash on hand theoretically could close immediately, while a buyer who needs a mortgage typically drafts a contract contingent on the financing going through.
A typical home seller with equity is less likely to be motivated by a cash buyer, says Donna Knudsen, a mortgage loan originator with Cobalt Financial Corp.
“When you have an equity seller, they don’t have to take a low-ball cash offer,” she says. Instead, they’ll most likely opt for the best and highest offer, since they may not be as motivated by time, she adds.
To compete with a cash buyer, you’ll need a bit of strategy.
First, get prequalified—or better yet, preapproved—for a mortgage. Along with a high down payment, preparing to put down a high deposit could also up your chances of beating out a buyer who is bidding with all cash, he says.
Another tip: To beat the deep pockets, you might have to act quickly.
What I found out is with these cash buyers, they act quickly. To compete, you have to act quickly. A lot of times, these are investors and they have a relationship with these listing agents. It’s a good idea for the buyer’s agent—or the buyer if he’s representing himself—to develop a rapport with the listing real-estate agent too.
Before writing the offer, your agent—or you, if you’re representing yourself — should do some sleuthing: If possible, figure out what the seller needs, including shorter or longer settlement time. In some cases, your flexibility will be a bonus for the seller..
It’s also important to ask if there are other offers and if any of them are cash. In my experience, a well-prepared contract that is typed out, plus a cover page summary of the contract details, is another way to show you’re serious.
Finally, have patience. If you’re interested in bidding on bargain homes including foreclosures, you might end up looking at 40 different properties and make seven or eight offers before you get one accepted. You have to be willing to do whatever it takes.
And remember, cash deals can fall apart too.
Is it $300,000 in green cash in someone’s bank account? Or are they tapping into their 401(k), are they going to be cashing in CDs, are they going to take cash out of another property? If investments need to be liquidated for the purchase, that can also put the deal at risk.
Sometimes cash isn’t really cash, especially if the buyer is utilizing a hard money loan or liquidating assets to consummate the purchase.
Matthew T. Smoot
Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
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The Value of Home Warranties: Protect Your Wallet
Even with home sales and prices continuing to fall nationwide, millions of Americans will still navigate the process of buying and selling homes this summer, and for many, the sheer volume of details and decisions can be overwhelming. With so much to consider when buying or selling a home, it can be challenging to investigate even routine aspects of the process, such as the value of home warranties.
Lelia Chapman, vice president of field sales for one of the nation’s oldest and largest home warranty providers, American Home Shield, says that a reliable home warranty can help provide an important measure of confidence for the buyer and help set a seller’s home apart from the competition.
Still, even with advantages to both parties, many buyers and sellers remain uninformed about the purpose and benefits of home warranties, which cover the repair or replacement of many home-system components and appliances. Home warranties—which are available for single-family homes, condominiums, townhouses, vacation homes and multi-unit properties—address key consumer needs, typically covering the cost of replacing or repairing such things as heating and air conditioning components, dishwashers, water heaters, ovens, garbage disposals, and more.
Such items are not usually covered by homeowners insurance and can be very costly to repair or replace if not covered by a home warranty. Replacing the dishwasher alone can be more costly than an annual home warranty payment; the cost for a one-year home warranty from American Home Shield begins around $300.
“When a system or appliance breaks down unexpectedly, it can be very inconvenient and stressful to homeowners—not to mention potentially devastating to a household budget,” says Chapman.
While many of the home’s system components and appliances are covered as part of a standard home warranty, if home buyers wish for more household items to be covered, they should determine whether their home warranty provider offers an add-on package. American Home Shield offers plans allowing consumers to customize their home warranty to cover specific components and appliances, including ceiling fans, garage door openers, swimming pools and more.
Advantages for both buyers and sellers
Whether the home warranty is provided by the seller of the home or purchased by the buyer after the sale, there are numerous advantages to both parties.
“Home warranties are appealing to buyers because they cover appliances and system components that a new homeowner has no familiarity with,” says Chapman. Sellers benefit from offering a home warranty because it sets the home apart from the rest of the competition in today’s saturated market, often leading to faster sales at better prices.”
Get the plan that’s right for you
While home warranties are a popular addition to the home buying and selling process, they may be purchased at any time. Chapman encourages consumers to do their research before choosing a plan or provider, as costs, coverage levels, customer service and other factors vary. American Home Shield’s website offers homeowners an interactive experience where they can review a range of options and custom-design plans based on the cost and coverage level that is right for them.
“In today’s economy, home warranties make sense more than ever,” says Chapman. “Not only are they a great tool to help you sell your home, but they’re something you definitely want to insist on when buying one.”
Matthew T. Smoot
Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
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70% of Renters Strive to Become Homeowners
Most Americans still believe that owning a home is a solid financial decision, and a majority of renters aspire to homeownership as a long-term goal. According to the 2011 National Housing Pulse Survey released recently by the National Association of REALTORS®, 72 percent of renters surveyed said owning a home is a top priority for their future, up from 63 percent in 2010.
Seven in 10 Americans also agreed that buying a home is a good financial decision while almost two-thirds said now is a good time to purchase a home. The annual survey, which measures how affordable housing issues affect consumers, also found that more than three quarters of renters (77 percent) said they would be less likely to buy a home if they were required to put down a 20 percent down payment on the home, and a strong majority (71 percent) believe a 20 percent down payment requirement could have a negative impact on the housing market.
“Despite the economic setbacks Americans have experienced in today’s current climate, it is clear that a strong majority still believe in homeownership and aspire to own a home,” says NAR President Ron Phipps. “However, achieving the dream of homeownership will become increasingly difficult for buyers if they are required to make a 20 percent down payment, which may be a reality for many of tomorrow’s buyers if a proposed Qualified Residential Mortgage rule is adopted. That is why REALTORS® are strongly urging regulators to go back to the drawing board on the proposed rule.”
Defining the QRM rule is important because it will determine the types of mortgages that will generally be available to borrowers in the future. As currently proposed, borrowers with less than 20 percent down will have to choose between higher fees and rates today—up to 3 percentage points more—or a 9-14 year delay while they save up the necessary down payment.
Over half—51 percent—of self-described “working class” homeowners as well as younger non-college graduates (51 percent), African Americans (57 percent) and Hispanics (50 percent) who currently own their homes reported that a 20 percent down payment would have prevented them from becoming homeowners.
Pulse surveys for the past eight years have consistently reported that having enough money for a down payment and closing costs are top obstacles that make housing unaffordable for Americans. Eighty-two percent of respondents cited these as the top obstacle, followed by having confidence in one’s job security.
The survey also found respondents were adamantly against eliminating the mortgage interest deduction. Two-thirds of Americans oppose eliminating the tax benefit, while 73 percent believe eliminating the MID will have a negative impact on the housing market as well as the overall economy.
“The MID facilitates homeownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working American families,” says Phipps. “Homeownership offers not only social benefits, but also long-term value for families, communities and the nation’s economy. We need to make sure that any changes to current programs or incentives don’t jeopardize our collective futures.”
When asked why homeownership matters to them, respondents cited stability and safety as the top reason. Long-term economic reasons such as building equity followed closely behind. On a local level, respondents said neighbors falling behind on their mortgages and the drop in home values were top concerns. Foreclosures also continue to remain a large concern, with almost half of those surveyed citing the issue as a problem in their area.
Matthew T. Smoot
Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
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In its latest real estate and economic forecast, the National Association of REALTORS® anticipates that sales of existing homes, after falling 4.8 percent in 2010, will rise 7.9 percent this year, to 5.3 million, and another 4.5 percent in 2012, to 5.53 million.
The median price of existing homes, meanwhile, rose 0.3 percent in 2010 after a 12.9 percent drop in 2009, and is expected to rise 0.5 percent this year, to $173,800, and another 2.4 percent in 2012, to $177,900.
Sales of new single-family homes are expected to rebound faster, rising 17.7 percent this year, to 374,000 sales, after a 15.5 percent drop in 2010, and then rising 51.1 percent in 2012, to 565,000 sales. In an earlier forecast, released last month, NAR anticipated that sales of new single-family homes would climb 20.8 percent in 2011 and 30.9 percent in 2012.
The new-home median price rose 2.2 percent in 2010 and is expected to climb 1.8 percent this year, to $224,700, and 1.9 percent in 2012, to $229,000.
NAR expects that 30-year-fixed mortgage rates will average 5.1 percent this year, up from 4.7 percent in 2010, and rise to 5.9 percent in 2012.
The group also forecasts the U.S. unemployment rate to fall from 9.7 percent in 2010 to 9.4 percent this year and 8.7 percent in 2012, while U.S. real gross domestic product is expected to dip from 2.8 percent in 2010 to 2.6 percent this year, rising to 3.2 percent in 2012.
Also today, NAR reported a 2 percent month-to-month rise in December for its index tracking pending sales of existing homes, though the index was down -4.2 percent compared to December 2009.
The Pending Home Sales Index tracks homes for which a sales contract has been signed but the transaction has not yet closed. Typically, a sale is finalized within one to two months of signing, so the index is considered a leading indicator.
Regionally, the index fell 10.7 percent in the West, 5.3 percent in the Northeast and 5.1 percent in the Midwest while rising 1.7 percent in the South in December 2010 compared to December 2009.
And the index dropped 13.2 percent in the West while rising 11.5 percent in the South, 8 percent in the Midwest, and 1.8 percent in the Northeast from November 2010 to December 2010, NAR reported.
Lawrence Yun, NAR's chief economist, said in a statement, "Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we'll continue to see a favorable environment for buyers with good credit."
NAR reported last week that the sales rate for existing homes rose about 12.3 percent from November 2010 to December 2010, but fell 2.9 percent compared to December 2009. The median price of existing homes dropped about 1 percent year-over-year in December, to $168,800.
Sales of new single-family homes were up an estimated 17.5 percent from November 2010 to December 2010 and fell about 7.6 percent year-over-year in December, the U.S. Census Bureau and Housing and Urban Development Department reported Wednesday. The median price rose about 8.5 percent year-over-year in December, to $241,500.
Take a Minute to Update Yourself on Both Local and National Housing Market Trends (UPDATED MONTHLY):
http://SoldwithSmoot.housingtrendsenewsletter.com
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Real Estate Trends for the Last Half of 2011 and Beyond
For the remainder of 2011 and beyond, the prospect of future inflation and higher interest rates does not bode well for most forms of business or investment. However, there is a bright sliver of opportunity for investment vehicles capitalizing on fixed-rate debt to leverage income producing tangible assets that will have their nominal value increased and their debt debased by inflation.
“The most obvious remedy for this problem is income producing real estate,” says Hartman. “Since most income producing properties are financed with fixed-rate mortgages, they will provide an excellent hedge against inflation for investors.”
“Rental income will be directly impacted by the expected increases in interest rates as more people are pushed out of the homeownership pool into the renter pool,” adds Hartman. “This will have the net effect of strengthening market rents.”
Trends in Real Estate
Heading into 2011, one of the most impactful news items was the announcement by Bank of America suspending foreclosure activity and the decision by government agencies to increase scrutiny on the foreclosure process. Halfway through 2011, nobody completely knows how long this increased scrutiny will last, how intense it will be or the long-term impact on market activity.
Hartman predicts prices will be temporarily strengthened as the inventory of foreclosures is artificially constrained. Currently, people are being held out of the rental pool while living in their house (without paying a mortgage) as the foreclosure process proceeds at a snail’s pace. The impetus behind this is quite clear since the politicians in charge of government policy are attempting to curry favor with their constituents by helping them stay in houses they cannot afford.
Over time, this decision will continue playing out and the market will regress back to equilibrium. In many markets, this will take the form of short-term price stabilization or increase, followed by softening of market prices as foreclosure inventory that had been held off the market comes back on. In conjunction with this, people will be moving out of the “owner” population and into the renter pool. Rents will only strengthen as the population of renters increases faster than the supply of rental properties. This will remain true even if investors purchase some of the foreclosed properties because the displaced owners become renters.
In some markets with low land values, the wave of foreclosures is pushing market prices far below the cost of construction. Fundamentally, this means that buyers will have “built-in” equity since the low prices have ground new construction to a halt and future demand increases will push market prices up toward replacement cost before new construction begins.
This Regression to Replacement Cost™ is expected to be an upward force on future market values in some areas—notably Atlanta, Dallas, Indianapolis and Phoenix. Conversely, in markets such as California and New York with high land costs, there is considerable room for price compression since the values exceed replacement cost by a very large margin. It is not likely that land value in these markets will compress to zero, but whenever land value makes up a high percentage of total market value, there is more downside risk exposure.
In the end, the only situation that can create a fundamental market recovery in real estate is an increased number of people paying their bills. With national unemployment at 9.2% at the end of June according to the Bureau of Labor Statistics, there is considerable slack in the labor markets that stands in the way of a fundamental recovery. It is likely that real estate will lag the overall market recovery, as there need to be more people who are employed and paying their bills before a sustainable increase in the number of people purchasing homes appears. For astute investors, there are tremendous opportunities available to purchase properties in healthy economic areas for prices far below the cost of construction.
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Driven by an increase in length of time from application to approval, the average timeline of the mortgage origination process has increased for a third consecutive year, while customer satisfaction has declined, according to the J.D. Power and Associates 2011 U.S. Primary Mortgage Origination Satisfaction Study released.
The study, based on the voice of the customer, measures customer satisfaction in four key factors of the mortgage origination experience: application/approval process; loan officer/mortgage broker; closing; and contact.
The study finds that the time from application to approval has increased to 27.5 days in 2011 from 20 days in 2010. As a result, the time frame for the entire origination process has increased to 52.1 days in 2011 from 46.9 days in 2010. Consequently, overall satisfaction has decreased to 734 (on a 1,000-point scale) in 2011 from 739 in 2010.
"While the revised Real Estate Settlement Procedures Act guidelines appear to have streamlined and shortened the time from approval to closing, the unintended consequence is that the application-to-approval time frame has lengthened and become more complicated," said David Lo, director of financial services at J.D. Power and Associates. "Ultimately, this longer timeline has a negative impact on overall satisfaction, although there are specific best practices that may mitigate the negative perceptions."
The study finds that the most important best practices, which are most closely associated with high levels of satisfaction, are:
• Providing proactive updates on the status of the loan
• Providing a welcome acknowledgment after an application is submitted
• Avoiding asking for the same information more than once
• Closing on the promised date
• Clearly explaining loan options and ensuring that the customer understands
• Clearly explaining the entire process from application to approval
The study also finds that usage of the online application channel continues to increase. Nearly 20 percent of customers now go online to start the mortgage application process, up from 14 percent in 2010. In comparison, only 29 percent of customers start the mortgage application process in person, while 33 percent did so in 2010. In addition, fewer customers this year say that they met with their loan officer or mortgage broker in person during the mortgage origination process -- 50 percent, compared with 57 percent in 2010.
"Customer preference and, more importantly, perceptions, continue to increase with the online direct channel," said Lo. "Online lenders do a very good job of keeping their customers informed of the process every step of the way by providing periodic status updates and information pertaining to their loan."
If you or someone you may know needs financing for a home purchase, please do not hesitate to contact me as I will be more than happy to put you in touch with an excellent loan officer who get the job done promptly and most importantly, keep you informed on the entire process.
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ONE
Hire a real estate agent.
It may be tempting to list your home on your own to avoid paying a sales commission, but selling your own home is a full-time job itself. A real estate professional represents the best opportunity to earn the maximum amount from your home’s sale. An agent will recommend the best listing price, market your home effectively and show your home to buyers. An agent also recognizes what buyers are looking for in a new home. TWO
Get your home inspected.
You are required to disclose any problems with your property to prospective buyers. Failure to do so will lead to further complications, even if you weren’t aware of the flaws ahead of time. Hire a professional inspector to identify and document any problems with your property. Also, make sure your home has a clean bill of health
from termites.
THREE
Make repairs ahead of time.
A long list of necessary repairs is a major put-off for most buyers, who may decide to move on rather than deal with the headache of fixing up the home. Do as many repairs yourself as possible, then hire a contractor to complete the rest. If you decide not to make major repairs beforehand, hire a reputable professional to provide cost estimates that you can show to any interested buyers to put their minds at ease.
FOUR
Showcase your home.
Curb appeal and first impressions are valuable assets when selling your home. Clear unnecessary items from your yard and maintain the landscape to welcome visitors. Keep the interior of your home clutter-free to maximize your home’s livable space.
FIVE
Price it right.
The original asking price of your home has a huge impact on the ultimate sales price. If you price it too high, buyers will look for better values and your home will remain on the market longer. The longer your home is on the market, the less desirable it becomes to buyers—even if you eventually lower your asking price— because most buyers will avoid a home that others are avoiding. Conversely, pricing your home too low may result in a quicker transaction but will yield you less money in the end.
Matthew T. Smoot
Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
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Now more than ever the Benefits of Home-ownership outweigh Renting
Home mortgage interest deduction: The interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home is deductible as an itemized deduction. In the early years of a home loan most of the payments consist of interest, so this deduction is particularly substantial during the first years of home ownership.
Depending on the state a buyer lives in and his or her tax bracket, this deduction can reduce the cost of borrowing by one-third or more.
Home equity loan deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. The money can be used for any purpose, such as paying off high-interest credit card debt. In contract, the interest on credit card debt is not deductible.
Property tax deduction: Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home. This is another itemized deduction that renters don't get.
Deductible home-buying expenses: Various closing costs ordinarily involved in a home purchase are also deductible as itemized deductions, including loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
$250,000/$500,000 home-sale exclusion: Perhaps the greatest tax benefit of owning a home comes when a person sells it at a profit. Homeowners who lived in their home for two of the prior five years prior to its sale need to pay no income tax on a substantial amount of their profit -- $250,000 for single homeowners and $500,000 for married homeowners who file jointly. This exclusion can be used once every 24 months.
14 days of free rental income: Another little known tax benefit of owning a home is that the owner can rent it out for up to 14 days during the year and pay no tax at all on the rental income. In contrast, a renter who sublets his or her rental must pay income tax on all the rental income he or she earns.
Tax benefits of renting:
The only tax benefit that a renter can qualify for by virtue of being a renter is the home office deduction. This is a business deduction available to renters who own a business and have a home office they use regularly and exclusively for business purposes.
Some employees can qualify for this deduction as well. The deduction is limited to the amount of profit earned from the business each year. If a renter pays a lot of rent, this deduction can be substantial. Homeowners who are in business and have a home office can also qualify for the deduction.
Take a Minute to Update Yourself on Both Local and National Housing Market Trends (UPDATED MONTHLY):
http://SoldwithSmoot.housingtrendsenewsletter.com
Matthew T. Smoot
Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
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Protect yourself from these common pitfalls...When buying a home, emotions get mixed with financial limitations and ultimately move you in the direction of making one of the 10 Deadly Mistakes which are common among home buyers. Following are 10 points to consider as you prepare to buy a home:
Home Buyers Mistakes - #1Making an offer on a home without being prequalified.
Prequalification will make your life easier - so take the time to speak with a lender. Their specific questions in regard to income, dept, etc., will help you determine the price range you can afford. It is an important step on the path to home ownership.
Home Buyers Mistakes - #2Not having a home inspection.
Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that many buyers can overlook.
Home Buyers Mistakes - #3Limiting your search to open houses, ads or the Internet.
Many homes listed in magazines or on the Internet have already been sold. Your best course of action is to contact a Realtor®. They have up-to-date information that is unavailable to the general public and are the best resource to help you find the home you want.
Home Buyers Mistakes - #4Choosing a Real Estate Agent who is not committed to forming a strong business relationship with you.
Making a connection with the right Realtor® is crucial. Choose a professional who is dedicated to serving your needs - before, during and after the sale.
Home Buyers Mistakes - #5Thinking there is only one perfect house out there.
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 Realtor® for a comparative market analysis. This compares similar homes that have recently sold, or are still for sale.
Home Buyers Mistakes - #6Not considering long-term needs.
It is important to think ahead. Will the home suit your needs 3-5 years from now?
Home Buyers Mistakes - #7Not examining insurance issues.
Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.
Home Buyers Mistakes - #8Not buying a home protection plan.
This is essentially a mini insurance policy that usually lasts one year from the close of escrow. 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.
Home Buyers Mistakes - #9Not knowing total costs involved.
Early in the buying process, ask your Realtor® or lender for an estimate of closing costs. Title company and attorney fees should be considered. Pre-pay responsibilities such as Homeowner Association fees and insurance must also be taken into account. Remember to examine your settlement statement prior to closing.
Home Buyers Mistakes - #10Not following through on due diligence.
Buyers should make a list of any concerns they 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. |
Protect yourself from these common pitfalls...When buying a home, emotions get mixed with financial limitations and ultimately move you in the direction of making one of the 10 Deadly Mistakes which are common among home buyers. Following are 10 points to consider as you prepare to buy a home:
Home Buyers Mistakes - #1Making an offer on a home without being prequalified.
Prequalification will make your life easier - so take the time to speak with a lender. Their specific questions in regard to income, dept, etc., will help you determine the price range you can afford. It is an important step on the path to home ownership.
Home Buyers Mistakes - #2Not having a home inspection.
Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that many buyers can overlook.
Home Buyers Mistakes - #3Limiting your search to open houses, ads or the Internet.
Many homes listed in magazines or on the Internet have already been sold. Your best course of action is to contact a Realtor®. They have up-to-date information that is unavailable to the general public and are the best resource to help you find the home you want.
Home Buyers Mistakes - #4Choosing a Real Estate Agent who is not committed to forming a strong business relationship with you.
Making a connection with the right Realtor® is crucial. Choose a professional who is dedicated to serving your needs - before, during and after the sale.
Home Buyers Mistakes - #5Thinking there is only one perfect house out there.
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 Realtor® for a comparative market analysis. This compares similar homes that have recently sold, or are still for sale.
Home Buyers Mistakes - #6Not considering long-term needs.
It is important to think ahead. Will the home suit your needs 3-5 years from now?
Home Buyers Mistakes - #7Not examining insurance issues.
Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.
Home Buyers Mistakes - #8Not buying a home protection plan.
This is essentially a mini insurance policy that usually lasts one year from the close of escrow. 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.
Home Buyers Mistakes - #9Not knowing total costs involved.
Early in the buying process, ask your Realtor® or lender for an estimate of closing costs. Title company and attorney fees should be considered. Pre-pay responsibilities such as Homeowner Association fees and insurance must also be taken into account. Remember to examine your settlement statement prior to closing.
Home Buyers Mistakes - #10Not following through on due diligence.
Buyers should make a list of any concerns they 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. |
Protect yourself from these common pitfalls...When buying a home, emotions get mixed with financial limitations and ultimately move you in the direction of making one of the 10 Deadly Mistakes which are common among home buyers. Following are 10 points to consider as you prepare to buy a home:
Home Buyers Mistakes - #1
Making an offer on a home without being prequalified.
Prequalification will make your life easier - so take the time to speak with a lender. Their specific questions in regard to income, dept, etc., will help you determine the price range you can afford. It is an important step on the path to home ownership.
Home Buyers Mistakes - #2
Not having a home inspection.
Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that many buyers can overlook.
Home Buyers Mistakes - #3
Limiting your search to open houses, ads or the Internet.
Many homes listed in magazines or on the Internet have already been sold. Your best course of action is to contact a Realtor®. They have up-to-date information that is unavailable to the general public and are the best resource to help you find the home you want.
Home Buyers Mistakes - #4
Choosing a Real Estate Agent who is not committed to forming a strong business relationship with you.
Making a connection with the right Realtor® is crucial. Choose a professional who is dedicated to serving your needs - before, during and after the sale.
Home Buyers Mistakes - #5
Thinking there is only one perfect house out there.
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 Realtor® for a comparative market analysis. This compares similar homes that have recently sold, or are still for sale.
Home Buyers Mistakes - #6
Not considering long-term needs.
It is important to think ahead. Will the home suit your needs 3-5 years from now?
Home Buyers Mistakes - #7
Not examining insurance issues.
Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.
Home Buyers Mistakes - #8
Not buying a home protection plan.
This is essentially a mini insurance policy that usually lasts one year from the close of escrow. 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.
Home Buyers Mistakes - #9
Not knowing total costs involved.
Early in the buying process, ask your Realtor® or lender for an estimate of closing costs. Title company and attorney fees should be considered. Pre-pay responsibilities such as Homeowner Association fees and insurance must also be taken into account. Remember to examine your settlement statement prior to closing.
Home Buyers Mistakes - #10
Not following through on due diligence.
Buyers should make a list of any concerns they 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.
Matthew T. Smoot Your "Whatever it Takes" Realtor®
Associate Broker of Exit Preferred Realty
The Exit Express Team
"Express Service, Express Results"
8839 Belair Road
Perry Hall, MD 21236
443-504-8930 (Cell)
410-670-9150 (Direct)
410-670-9109 (Office)
410-670-9151 (E-Fax)
410-497-0526 (Fax)
Visit me on the Web at:
www.SoldwithSmoot.com or
www.ExitRealtyExpress.com
-
If you've been through a foreclosure, you may wonder if there is hope for you to become a homeowner again.
"It doesn't mean you'll never be a homeowner again," said Linda Davis-Demas, director of housing at Consumer Credit Counseling Service of Greater Dallas.
But you'll need to examine what caused you to fall behind on your mortgage and take steps to fix the problem.
"You have to look at what were the reasons you didn't make the payment," said Davis-Demas. "Was it budgeting? You can modify that type of behavior."
A foreclosure is a major hit to your credit history and stays on your credit report for seven years.
"Foreclosure is one of the FICO seven deadlies," said credit expert John Ulzheimer, referring to the dominant FICO credit score. "It's considered a major derogatory item, regardless of the back story"—whether it's a job loss, rate reset, underemployment or other reasons.
Your credit score will also suffer "the minute the foreclosure process begins," said Ulzheimer, founder of 2StepCredit.com, a credit education website.
"It doesn't have to be completed for it to be very damaging," he said. "The damage will vary based on your scores, but it can damage the score as much as 200 points, especially if your scores are very strong to begin with."
So, after a foreclosure, your priority has to be rebuilding your credit. You'll have some time to do so, because mortgage giants Fannie Mae and Freddie Mac impose strict rules on how long it will take before you're eligible for another mortgage.
For example, borrowers with a prior foreclosure and extenuating circumstances—such as a job loss, divorce or medical issues—must wait three years before they can qualify for a Fannie Mae-backed loan, said spokeswoman Amy Bonitatibus. For all other borrowers the waiting period is seven years.
At Freddie Mac, those who can prove extenuating circumstances must wait three years before applying for a new mortgage; everyone else must wait five years. But that will change in February, when the waiting period for those whose foreclosure was caused by their own financial mismanagement will increase to seven years.
Fannie Mae and Freddie Mac also have strict rules on the credit score and the size of the down payment required of borrowers with a prior foreclosure.
Here's what you need to do to rebuild your credit to qualify again for a mortgage:
PAY YOUR BILLS ON TIME: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time.
"Stability is the key," said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. "Have you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?"
REVIEW CREDIT REPORT: You're entitled to a free credit report once every 12 months from each of the three national credit bureaus—Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.
To get your free credit report, go to http://www.annualcreditreport.com. Go to only this website, not ones with similar-sounding names.
"Make sure it is about you and only you," said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. "If you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily."
CHECK YOUR MORTGAGE: You want to be sure that you don't still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren't enough to cover what's owed on the mortgage, which would leave you owing the difference.
"Make sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance," Cunningham said.
Many lenders are willing to settle that "deficiency judgment" for less than what's owed because "it's better than getting no money at all," Jarrell said.
APPLY FOR CREDIT: In particular, apply for different varieties of credit.
"Credit scoring models value having different types of credit," Cunningham said. "Having some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score."
But don't apply for too much credit at once.
"This can appear as though you're desperate for credit and perhaps make lenders less inclined to extend credit to you," Cunningham said. "Further, too many credit inquiries can have a negative impact on your credit score."
DON'T FALL PREY: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job—after paying a fee for the service.
"The truth is, that no one can remove accurate negative information from your credit report," according to the Federal Trade Commission. "It's illegal."
Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.
When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.
"Know that time is your friend, as the further you move away from the financial distress, the less negative impact it has," Cunningham said. "Follow with responsible behavior with your new credit, and you'll soon have a solid credit file."
HOW TO HELP YOUR MORTGAGE CHANCES:
If you've been through a foreclosure, there's still hope for you to become a homeowner again. Here are tips to make lenders want to take a chance on you:
—Save for a down payment.
—Clean up your credit. Pay off or pay down your debts and establish a record of consistent on-time bill payments.
—Get your credit score as high as possible.
—Show stability in your job.
—Monitor your credit report to ensure that your old loan shows up as closed and that you still don't owe anything else on it.
Take a Minute to Update Yourself on Both Local and National Housing Market Trends (UPDATED MONTHLY):
http://SoldwithSmoot.housingtrendsenewsletter.com