Daily Archives: May 15, 2012

8 things to know about buying a home today | North Salem NY Real Estate

The home-sale market is showing signs of life. More buyers are confident now than they were a year ago that now might be a good time to buy. Interest rates are near all-time lows and home prices in some areas are back to 2002-2003 levels.

Some analysts are finally suggesting that we may be headed for recovery. If you have a secure job, plan to stay put and feel this is the right time for you to buy a home, consider the following.

In most places in the country, home prices are still declining. It has only been recently that the market picked up and it’s too soon to know if this will result in a sustainable increase in prices.

The recent home sales in areas around California’s Silicon Valley defy the norm. Significant job growth in the area combined with a low inventory of good homes for sale has resulted in multiple offers with buyers bidding the price up sometimes hundreds of thousands of dollars over the asking price.

In other high-demand, low-inventory areas, you may find yourself bidding against other buyers, perhaps even more than once. This doesn’t necessarily mean that the price will be bid up significantly over the asking price. This will vary from one listing to the next depending on property location, condition and price.

It’s important to research the local community where you want to buy. Find out what homes are selling for, if multiple offers are common and if listings are selling for more than the asking price. This will help you make a realistic offer that might be accepted when you find a home you’d really like to buy. It helps to work with an experienced local real estate agent.

Some sellers in high-demand niche markets intentionally list their home at a low price hoping to stimulate multiple offers. If you see such a listing and there are a lot of buyers wanting to make offers, you will be better able to know how high your offer would need to be to win the contest if you have done your due diligence.

HOUSE HUNTING TIP: Whether you’re anticipating competition or not, you should be preapproved for the mortgage you’ll need to complete the purchase before you write an offer. In competition, this will make a big difference, particularly if everyone else who is offering is preapproved. It also lets you know what you can afford. And, it puts you in a good bargaining position with the seller.

Buyers aren’t the only participants in the housing market that have heard the news that the market has improved. Some sellers are putting their homes on the market because they’ve been waiting for a better time to sell. This is good news for buyers looking in low-inventory markets.

You should expect that you will have to negotiate. Many of today’s sellers are selling for less than they paid. Even though the market has improved a bit, sellers may be disappointed with the current market value of their home. Be prepared to negotiate, not just the initial price, but after inspections are completed if items come up that you hadn’t anticipated.

Include realistic contingency time frames in your purchase contract for loan and appraisal approval if you’re applying for a mortgage. The recent uptick in the market means that lenders are suddenly overwhelmed.

In mid-March, buyers in Oakland, Calif., who were seeking approval for a jumbo loan were told they could close a transaction in 21 days. Not only could they not close in 21 days, it took more than 21 days for loan approval due to lender backlog.

THE CLOSING: Underwriters could require that additional conditions be met before you can be approved. Act quickly to avoid further delay.

Overcoming challenges of borrower-ordered appraisals | Cross River NY Real Estate

Last week’s column detailed the following benefits from switching from a system of lender-ordered appraisals to a system of borrower-ordered appraisals:

  • Borrowers would obtain appraisals before applying for a mortgage, and when the appraised value turned out to be too low, they would spare themselves and the lender the cost of an aborted application.
  • The loan process would be shortened, allowing borrowers to use a shorter and cheaper lock period.
  • Borrowers would no longer be dissuaded from shopping alternative lenders by the prospect that each application would require an additional appraisal fee.

But there are other issues connected to such a switch, including the important objective of protecting appraisals from pressure exerted by any of the parties with a vested interest in the outcome. This was the major purpose of the Home Valuation Code of Conduct (HVCC), which became effective May 1, 2009, and which has substantially changed the appraisal landscape.

Assuring appraisal independence: The crux of HVCC was an “appraisal independence requirement,” designed to insulate the appraisal process from influence by any of the parties with an interest in the outcome. Mortgage brokers and Realtors could no longer have any contact with appraisers, and lenders had to obtain appraisals in some manner that prevented them from exercising any control. In order to protect themselves from liability, most lenders today order appraisals through appraisal management companies (AMCs).

The theory was that lenders influenced appraisals through contact with appraisers, and if the AMC stood between them, the process would be clean. But this overlooks that the lender is positioned to direct a continuing stream of clients to the AMC, and won’t do it if the appraisals that come back don’t meet the lender’s expectations. Similarly, the AMC is positioned to direct business to appraisers. If the lender is unhappy with a particular appraiser’s work, the appraiser may no longer get assignments from the AMC.

  

Part 1:
Let borrowers order their own appraisals

  

Having borrowers purchase appraisals directly from appraisers is not a good idea because borrowers could shop for the appraiser that would do the borrower’s bidding. But in purchasing appraisals through AMCs, borrowers would have very little leverage — much less than lenders because each borrower transaction would be a one-shot deal.

Quality of appraisals: A much-noted feature of the growth of AMCs as intermediaries in the appraisal process is a decline in the quality of appraisals. While some lenders select AMCs on the basis of price and service, lenders that have affiliated business relationships with AMCs direct their business to them. Affiliated AMCs are chosen because the lender shares its revenues, not because the AMC has well-paid appraisers, or appraisers located in proximity to the subject property.

All the major lenders have affiliated business relationships with AMCs. That is why one hears frequently about appraisals being done by appraisers who are not familiar with the local market.

If borrowers ordered appraisals from AMCs, they would select an AMC with local appraisers on their rosters, because AMCs would emphasize this in marketing to consumers. Some AMCs might also disclose what they are paying appraisers, or what amounts to the same thing, what they are retaining for themselves, as a way of emphasizing the quality of their appraisals.

Appraisal fees: Under existing arrangements, AMCs must compete for the business of lenders who refer borrowers to them. Such competition results in higher marketing costs for AMCs, and in revenue splits of affiliated business entities that are favorable to lenders. The result of this kind of competition is higher appraisal fees paid by borrowers. Appraisers, in turn, must compete for the business of AMCs who retain them to do appraisals. The result of this competition is lower fees for appraisers and poorer-quality appraisals. Nobody competes for the borrowers, who pay higher appraisal fees for poorer-quality appraisals.

If borrowers ordered appraisals from AMCs, lenders would be out of the process, and good riddance. AMCs would then have to compete for the patronage of borrowers, which would reduce appraisal fees.

Implementation: It should be public policy to have appraisals ordered by borrowers and have such appraisals accepted by all mortgage lenders. The key to implementing this policy is acceptance by Fannie Mae, Freddie Mac and FHA of appraisals carrying the borrower’s name rather than the lender’s name.

Borrowers who order their own appraisal and require an FHA mortgage will face two special problems, both of which are solvable. Problem one is that FHA will accept appraisals only from FHA-approved appraisers. This means that a borrower who may need an FHA mortgage must inform the AMC that they need an FHA-approved appraiser.

Problem two is that FHA makes it difficult to use the same appraisal twice. It assigns a case number to every application, which is stamped on the appraisal form. This makes the appraisal non-usable by a second lender unless the first lender attests that the borrower was not rejected! Not surprisingly, lenders who are rejected by borrowers are reluctant to assist their competitors, so this rule has the effect of locking FHA borrowers into dealing with the first lender to whom they apply.

But borrowers ordering their own appraisal could defeat this regulatory inanity in a very simple way. When they shop, they provide the lender with a copy of their appraisal but not the original upon which the case number is attached. They hold on to the original until they are prepared to make a commitment.

4 traits of happy homeowners | Waccabuc NY Real Estate

<a href="<a href=Happy homeowners image via Shutterstock.

If someone were to chart it, I’d guess that the bell curve that represents how happy American homeowners have been over the last 10 years would be just about as volatile as the one that represents home values.

Actually, the emotional roller coaster might even be a carbon copy of the path of home prices from peak to trough, as the joy and exuberance most owners express about their homes at any given moment is directly proportional to what it’s worth at the time.

But there are two germane, essential truths: (1) Happiness is the ultimate objective of the intentional life, of which homeownership is a part; and (2) Home values, like the value of any asset, go up and down.

So, wouldn’t it be great if we could decouple our experience of happiness with our homes from their values, freeing ourselves up to simply enjoy them and be happy no matter what’s going on in the market? What if we can make our experience of homeownership recession-resistant, even if we can’t recession-proof the market itself?

Well, I know some such happy homeowners — people who remained free of the angst and teeth-gnashing that seemed to become the near-universal sentiment among homeowners during the housing recession. And they also remained free of the euphoric rush and frenzied decision failures of homeowners at the top of the market.

Here are a few of the traits and behaviors that I’ve noticed in these happy homeowners:

1. Smart, proactive money managers. This does not mean these people are day traders or sit around the computer tracking every cent they spend. What it does mean is that these people are assertive about their financial planning, understand their income and expenses, save and invest for the present and the future, and live well within their means. This empowers them to weather occasional financial storms like illnesses, layoffs, and market downturns without excessive panic and fear about what their home is worth at any moment in time.

I once heard a happy homeowner express his belief that there should never be a need to tap into an emergency fund, because so-called “emergencies” like car repairs and roof leaks are just inevitabilities of life. So, instead of having an emergency fund set aside, he has structured his income and savings and expenses so that he saves upwards of 20 percent of what he makes every month, no matter what, and is always in a state of financial preparedness for the curve balls that life can throw.

2. Optimistic about their long-term future — and that of the market. I’ve been fascinated lately to see all the talk of how much better mutual funds perform over the long term if they are simply invested in every stock on an exchange and parked there for decades, versus being actively traded by even the most expert of Wall Street wizards.

I find that so compelling because it mirrors my experience of real estate: One of my first clients was a 70-year-old man whose home I sold for $550,000; he told me he had paid less than $20,000 for it 30 years earlier.

Homeowners who have an optimism that the value of their home will increase over the very, very long term tend to be less hung up on and stressed out by the cyclical ups and downs in the real estate market.

3. Conservative mortgage holders. These folks often put a lot of money down, make extra payments, invest in improvements that bring up the value of their home, or make some combination of these and other relatively conservative mortgage moves. They might refinance if interest rates drop so low the costs of refinancing pale by comparison with the savings. But these folks are generally inclined against taking short-term or aggressively adjustable loans, and they tend to disfavor frequent refinancing or excessive borrowing against their homes.

As a result, even if they didn’t put a huge down payment on the home at the time they bought it, they do tend to get and stay in a relatively strong equity position compared to their peers.

4. Relatively stable and committed to their homes for the long term. People who own homes that work well for them and their families — and will work well for years and years to come — tend to be less emotionally yanked around by market vagaries.

Homebuyers take note: Happy homeowners tend to be people whose homes have ample space, are in good condition, and are in neighborhoods where they feel safe and comfortable; if you can position yourself well with respect to as many of these criteria out of the gate by being smart about the home you choose, you’ll be that much closer to membership in this select club.

These people are aware of what’s going on in the market; they’re just not obsessed with it, because they don’t plan to move in any event.

Often times, a happy homeowner’s commitments to his home mirrors a commitment to his job or career or line of business, if he’s self-employed, which allows him to take the stance that as long as he can make the payment, he’s planning to stay put for a very, very long time. And that, in turn allows him to opt out of the “freak out”-engendering fixation on real estate headlines and market data that in a down market causes so many unhappy homeowners to make panicked, poor real estate decisions.

Philadelphia starts from scratch to fix foreclosures | South Salem NY Real Estate

The Philadelphia sheriff’s office and its deflated foreclosure system is under construction.

Former Sheriff John Green left his post at the end of 2010 after more than 20 years in office. According to an audit report released last year, two private companies built systems to handle evictions and foreclosure sales. The companies were allegedly connected to Green and overcharged the city millions of dollars for the services.

Before the departure, the system was stripped out, and the office was left with an antiquated system that led to backlogs and delays, according to sources familiar with the situation. The sheriff office website isn’t even accessible; a big, yellow ‘under construction’ graphic appears in lieu of information.

Philadelphia Mayor Michael Nutter, President Judge of the First Judicial District Pamela Dembe and the current sheriff Jewell Williams finalized an advisory board Friday to help tackle the technological problems.

Representatives from each office will be on the board, including local attorneys. Michael McKeever, who represents banks for KML Law Group will be on the board.

“The office has been plagued by understaffing and a lack of technology,” McKeever said in an interview.

Transferring money from a third-party who buys a home at sheriff office foreclosure sale to the bank usually takes 60 days. In some cases, it now takes eight months, according to McKeever.

The deed process has also been extended out several months as well.

The city, one of the largest in the country and one of the hardest hit by the crisis, has only the 97th highest foreclosure rate in the U.S., according to RealtyTrac. One in every 284 homes in Philadelphia is in the foreclosure process as of March 31, comparable to far healthier areas such as Dallas and Memphis, Tenn.

But the filings are picking up. Foreclosure activity jumped 33% in the first quarter, according to RealtyTrac, the fifth highest increase in the country.

McKeever said the board will attempt to make recommendations within three months, and the sheriff office hopes to install the necessary changes within one year.

“They just did not have the resources to do the sales. The goal here is an open transparent office,” McKeever said. “Mayor Nutter has been very good. He’s been a strong champion of ethics and accountability in the office. He saw how it was impacting the city.”

House panel considers HUD subpoena over wasteful spending | Katonah NY Real Estate

A House subcommittee will vote Wednesday on whether to subpoena the Department and Housing Development over reportedly wasteful spending through a housing construction program.

Last year, the Washington Post uncovered hundreds of millions of dollars idling in the HOME Investment Partnership Program meant to develop properties in low-income areas. According to the story, more than 700 projects funded with more than $400 million made no progress for as long as a decade in some cases.

At the time, HUD published a blog post in reaction to the story. It claimed the stalled projects represented roughly 2.5% of active developments, and more than 1 million homes have been constructed because of the program.

The House oversight and investigations subcommittee spent the past year looking into the program. Rep. Randy Neugebauer, chairman of the panel, will hold a vote to obtain program documents from HUD.

“The documents we have requested are essential to our ongoing investigation to weed out waste, fraud, and abuse and see whether the HOME Program can be better run,” Neugebauer said. “The documents we are requesting are important to maintain the integrity of our investigation and ensure that taxpayer dollars are not wasted.”

HUD denied claims it has been uncooperative during the investigation.

“We have already provided over 2,000 pages of emails,” a HUD spokesman said. “We feel we have been responsive on this.”