Local Investors: New Rental Homes Index

Zillow.com is a website that is often cited for its index of home values across the nation – but its surveys and data are interesting to local real estate observers, too.  Recently it launched a new rental homes index that seeks to measure rental rates throughout the country. The index weighs rental listing prices as well as tax data and homes' sale histories. 

The index has some value to prospective area tenants and landlords as well. Ultimately it might help identify local market trends (but their data only extends back to November 2010, so more time will be needed for its usefulness to be proven). It might, though, serve as a tool for comparing markets. For example, the index showed year-over-year median rent increases in nearly 70 percent of metro markets from January 2010 to January 2011, and it reports that rents have appreciated 3% during the same period. 

Of course we all know that decisions based on data are only as good as the data itself. Unfortunately, Zillow's track record for accuracy in its market value numbers (it calls them "Zestimates"!) is less than stellar. Although these estimates of value are thought to come within 15% of true market values more than three-quarters of the time in some metropolitan markets, if you are interested in rental homes in that other quarter, you might be misled. And in many small markets, it misses the mark entirely. In some markets, the estimates are so far off base that Zillow doesn't even attempt to quantify their accuracy. 

The other disadvantage to relying on an algorithmic index like Zillow's is that algorithms can't replace the local market knowledge that is any real estate professional’s stock in trade. The data we collect and analyze on area rental homes comes from our own knowledge…and what is more important, is put it into a context that allows local tenants and landlords alike to use the information to make sound decisions.  

If you are considering buying an income property, you need to know the most recent and accurate information for the local rental homes market – so I hope you won’t hesitate to call me for a consultation. 

Selling Your Home to a Relocation Buyer

Anyone moving to our town from out of the area is experiencing life near the top of the stress meter. Most homeowners who have listed their property are sensitive to their plight: after all, once they have sold their home, won’t they be facing the same situation? 

Relocation planning has also grown more complicated over the past few years. For many prospective buyers, a slow economy and slumping housing market have narrowed their options. According to HSH.com, relocating individuals cite the depressed housing market as their Number One concern. They may be facing a difficult market as they sell their previous home, and may also have career jitters connected with their new working venue.  

Local home sellers can increase their chances of a successful sale by specifically targeting the relocation market. The can offer a “move-in-ready” home: one that is prepped and ready to show any time the opportunity presents itself. 

Whipping your home into shape before you show it invites the relocation-minded buyer to imagine himself or herself moved in and ready to go to work. Once they see that hour home is in excellent condition, it will go a long way toward removing one important layer of worry -- fear of the kind of unknown maintenance expenses that would only become evident after moving in. Remember that unsolved ‘minor’ mechanical problems can seem ‘major’ to a prospect. Your goal is to make it easy for any potential local relocation candidate to imagine an easy transition, a fast settling-in time and a worry-free living environment.  

You can also reach more relocation buyers by making your property easy to show. Relocation prospects who have to travel for area showings usually need to cram in as many as possible. The schedule is usually tight, especially when they add showing requests at the last minute. When your home is one that a relocation candidate has asked to squeeze in, resist the temptation to regard their request as inconsiderate. It’s a real opportunity to create an excellent impression of your home once they see how great it looks even though you had little time to prepare.    

If you are considering selling your local home and would like to discuss listing, please don't hesitate to contact me directly to discuss strategy.  On the other hand, if you are planning your own local relocation, I have great listings and a buyer's packet waiting for you!

Just How Valuable are “Property Values”?

It’s a little bit like real estate’s Rite of Spring: ‘for sale’ signs sprouting on lawns like new flowers finding the area’s April sun. And since we are used to hearing how “property values” are still battling to rebound, this season the ‘Sale’ part of those signs is likely to be taken more literally than usual.  

But since “property values” seems to be such an important measure, what is really behind the term? Who determines our area’s “property values” – and how? 

We aren’t just talking about some abstract Econ 101 textbook definition of economic principals. We are dealing with a family’s major investment – their current or future home. So it’s valuable to make a mental distinction between that notion of ‘property value’ and other, less abstract terms. Like “price”.  

In a nutshell, “property value” can mean different things to different people -- and even different things to the same person! To a homeowner, for instance, it can be the amount of money he or she can sell it for (its “market value”), or the value it has if he or she don’t sell but continue to use it as a place to live (its “use value”). To a lender, it usually means current market value; to a pure investor, property value might be its future value or its liquidation value, -- which would also vary depending on whether they are thinking of some possible future forced liquidation or an orderly liquidation. In other words, “property value” is a term that can mean so many different things that it is not terribly useful. 

So the next time you hear a commentator talking about “rising property values” or “sinking property values,” be ready to take what they are saying with a grain of salt…or possibly a shaker-full. Property values are not anything like “price”, “asking price,” or “selling price.” Those terms can have real numbers attached!  

In case you have been thinking about buying or selling a local property, give me a call.

I’m here at the office -- and the market’s ready!

To Buy a Home or Rent: That is the Question

It’s a fact that many folks in our neighborhood decide not to buy a home. Aiming to save some cash, they rent instead. They may feel that it makes more sense to work on rebuilding their portfolios, put some extra cash into a rainy day fund, save for retirement, or for college -- for any number of worthy goals.

These would all be prudent financial maneuvers, but only if the original assumption is correct. But today’s environment is creating a new reality. It’s one where renting may not be as much of a cost saver as most people think. 

Since it is my profession to deal in real estate, you might think my answer to the question of whether to rent or to buy a home would be an automatic ‘buy!’ Not so. While I certainly do want to help arrange a sale whenever a local buyer and seller can agree on terms, I also want all my clients to make the financial decision that is right for them and their family.  And as we enter the April selling season in our town, I’m pleased to be able to report on a piece of information that may be surprising. It’s one that comes from the latest Trulia Spring 2012 Rent versus Buy index.

This index is a widely watched calculation derived from data in the 100 major metro markets. A Price-to-Rent ratio of 15 or less means that any buyer who plans on living in his home for at least five years would be better off to buy a home than to rent it.

Bottom line: 98% of those 100 areas currently offer a cheaper environment in which to buy a home than to rent it! To make sense of the numbers, Trulia.com looked at the asking price of national rentals and homes for sale. It also included insurance, taxes and maintenance costs in the calculation. With low interest rates making the monthly mortgage cost lower, and high rental rates bringing the rental rate higher, many would-be renters might now find themselves looking at a surprising new reality -- affordable homeownership.

If you are currently considering renting or buying a home in our area, why not sit down with me in our office to run a few numbers first?  I am happy to schedule time to discuss your needs before you sign a lease.  Today it is entirely possible that for you, owning a home will just be cheaper than you think!

Home Automation: The Next Big Thing?

Advanced technology has become such a prominent feature in our everyday lives it is no surprise that it’s increasingly affecting local home values. As “Home Automation” features grow in importance, bottom-line home values are following suit. It’s a new phenomenon, one that motivated home sellers (as well as homeowners heeding long term home values) should understand. 

Home automation – the inclusion of luxury technological features like temperature control, lighting control, security systems and the like – are becoming more commonplace, increasing home values in the process. A few years ago, adding such bells and whistles to an existing home would probably have been more pricey than the return would justify -- but that is becoming ever less true. Think hi def flat screen TV and you’ll have a good example of the direction home automation is headed: ever-improving features for lower and lower prices. 

As automated features become more widespread and their prices lower, some of them are growing increasingly simple to add. And the scope of home systems and their effect on home values can be quite varied. For some, adding an ‘automation system’ might consist of something as simple as installing remote or automatic control of a few lights. Others might make electronic security the key, choosing to install a full-fledged central system.  

Where wireless home Internet networks are already in place, home values can easily be raised by the addition of remote operation. Right now that may sound like an unnecessary futuristic feature, but it may turn out that being able to control lights or heating systems from afar could substantially increase energy efficiency (along with home values).  

Matthew Berman, one of the owners of New York design firm Workshop/apd, was recently quoted in the New York Times describing a “whole-home” lighting system.

“A popular feature of this kind of system is the ability to hit one button when you're leaving your house to turn off all the lights." As a practical matter, he also recommended keeping automated systems separately controllable, making them less complicated to operate and less subject to breakdown. 

It's important to think long-term as well as short-term -- especially for anyone looking to increase home values, whether for future or immediate sale. Home automation is looking like a worthy candidate for the Next Big Thing, and buyers might be ready to gravitate toward advanced features that distinguish one local seller's home from the competition.  Call me if you would like to discuss how home automation might come into play when it comes to selling your area home.

More Bank-Owned Homes Headed Our Way?

With the National Mortgage Settlement (aka ‘Robo-Settlement’) finally negotiated, major lenders are now able to re-examine their plans for dealing with the backlog of bank-owned homes. Local bank-owned homes may be only a tiny portion of the almost 1 million in play nationally, but are nonetheless subject to the wider phenomenon. Banks well realize that at some point, these homes have to enter the housing market. 

That development is a large part of why some analysts believe that for homeowners who want to sell, now might be the time to list. In our town as well as across the nation, their reasoning goes like this:

1. With housing prices at or near record lows, potential buyers who had been on the sidelines are seriously considering a home purchase. Many are aware that the bottom of the market may have been reached. They feel a sense of urgency to take advantage of that combined with record today’s low mortgage rates. For home sellers who have set the right price, it can mean that March is the beginning of a spring selling season filled with newly-motivated buyers.

2. The number of bank-owned homes is predicted to increase over the next few years. Lenders had put foreclosure activities on hold while negotiating the government settlement. But the coast is now clear for them to resume, with the number of bank-owned homes rising as a result. When that glut of bank-owned homes hits the market, it could end in a crowded market and prices driven back down.

3. Individual home sellers have a built-in advantage over banks because they can move a sale significantly faster. Banks are not well equipped to sell their inventory of bank-owned homes – most do not have the staff to handle listing properties or pushing the kind of energetic follow-through that gets deals done in a reasonable amount of time. Tales of frustrating delays are already widespread, and they make dealing with a homeowner and his agent all the more appealing. To some experienced buyers, the difference is worth a premium.

All these factors mean that now might just be the opportune time local sellers have been waiting for.  If you have been delaying your home sale, why not call me today to schedule a complimentary home price evaluation?

Why “For Sale by Owner” Signs Cost A Bundle

When the time comes to list your local home for sale, it can be tempting to stick one of those “for sale by owner” signs in your lawn and just try to sell it yourself. Daydream visions of trips to Europe, new Lamborghinis and stacks of gold ingots (all bought with the commission fees saved) can crowd out more realistic thoughts.

Images of craven real estate agents, twirling their mustachios as they plot to under-price your home, may compete with more practical notions… such as the actual hassle of learning to deal in a specialized marketplace without specialized tools and resources.

Still, it is tempting. After all, in town “For Sale by Owner” signs cost just $8.99 at any hardware store! And how hard could it be to find out what forms you’re supposed to use to accept a good faith deposit? Or where to put the deposit so it’s in escrow (or whatever they call it)…???

The fact is, about 70% of homeowners who try to sell their homes themselves eventually hire an agent. Some of the others give up altogether -- having now established a record of owning a house they didn’t sell.

So it’s probably more practical to forget the Lamborghini, right? Well, maybe not entirely. According to the National Association of Realtors, represented sellers get higher prices for their homes than do owners of comparable homes who eventually complete a sale. Often, the difference in price is more than enough to cover the broker's fees.

Marketing your home is only part of my job. Things really swing into gear once a prospective buyer makes an offer. That offer includes more than an offering price: it also establishes how the buyer wants to structure the deal and sets forth a timeline. It’s really difficult for a homeowner to evaluate the offer and the possible consequences of each term in the contract. As a result, it is also very difficult for the seller to negotiate the offer to his best advantage. I will make sure you understand the offer and its implications -- and keep you from making a costly mistake.

A lot happens between your acceptance of the offer and closing day. The buyer usually orders numerous inspections and, depending on the results, may request repairs. These requests often lead to further negotiations. If the buyer isn't satisfied, your deal can fall apart. And a deal can collapse over financing and title delays. It’s a stressful, emotional time for the buyer and seller both.

From the moment you sign your listing agreement, I am legally and ethically bound to work in your best interest and to ensure that your sale is as profitable as possible.  If you’re considering selling your home, before you decide to just stick one of those local “For Sale By Owner” signs in your lawn, contact me for a complimentary consultation to see how I can help you succeed!

What - Me Worry About Local Housing? Maybe Not!

If you happened to be among the thousand or so consumers who got a telephone call last month from Fannie Mae, and if you took the time to answer the 100+ questions they were asking, on behalf of the rest of us I’d like to say ‘thanks!’ 

You and your fellow survey subjects have sent a ray of light our way. You told us that you think things are finally looking up! 

According to you and your 1,000 fellow respondents, homeowners who have been considering putting up their local home for sale might have reason to be more inclined to do so. On average, Americans expect home prices to increase over the next 12 months; the number of respondents who say it’s a good time to sell rose to the highest level in over a year; and a solid 65% say they would buy rather than rent their next home if they were going to move.  

Just 29% said they would prefer to rent -- even though 45% think home rental prices will go up. That is nearly ten times the number who think rents will fall.  

Delving into personal financial expectations, only 12% think that their financial situation will worsen in the coming 12 months, representing the lowest value in over a year. Fewer believe their expenses have increased significantly in the last year;, and only one in seven report that their income is lower than it was a year ago.  

Fannie Mae’s National Housing Survey is a window into opinions about owning and renting homes, household finances, housing and the economy, etc.  It is by far the most comprehensive measure of consumer attitudes toward the housing market; and since they keep at it every month, is a fair signal whether attitudes are beginning to turn up or down.  

Local attitudes tend to echo their findings, if for no other reason than Fannie Mae’s headline: “Consumer Attitudes about Personal Finances and Housing Stabilize Alongside Positive Economic News.” That may be a mouthful, but whenever you see ‘Housing’ and ‘Positive’ in the same headline, it has to make everybody a little cheerier.

If you are planning on your own local property purchase or sale, why not give my office a call? Unlike Fannie Mae, we won’t ask you 100 or more questions – but will be ready to answer all of yours!

Mortgage Rates: Getting Right to the Points

                   
The subprime mortgage crisis and the resulting haymaker it dealt the entire housing market has caused noticeable changes in how local homeowners look at mortgage rates and the loans they negotiate. 

The intense media focus on the residential financing industry has caused everyone to pay closer attention to the form of home loans they arrange. The truth is that borrowers are more wary about the loans they choose. They are insisting on clarity in how their choices will pencil out in dollars and cents in both near and long terms. 

One decision that determines what mortgage rates wind up on local bottom lines is whether to ‘buy down’ mortgage rates with points. Points represent interest that buyers pay up front to lower the rates on the remainder – the mortgage rates that show up at the bottom of our monthly statements.  

Increasingly, local buyers are shunning the points option. 

There are many reasons for the shift. Some are clearly related to the subprime mess, but others less so. Many of today’s buyers are entering the market for the first time, and they are cash-strapped. They may find it a struggle to come up with money for the down payment and closing costs. Often, these new homeowners simply can’t afford to pay points -- even if they can be rolled into the loan.  

Historically low interest rates are another reason area buyers at all levels are thinking harder about points vs. mortgage rates.  Last week’s national average on 30-year fixed mortgage rates (3.88%) was a full percentage point lower than a year ago – when it was already visiting the basement! Some buyers just don't see the value in making an advance interest payment – financed or otherwise – when it may only knock a fraction of a percent off an interest rate that's already at such low levels. 

First-time homebuyers can also see points as an unnecessary expense if they do not plan to stay in their homes long enough for the lower mortgage rates to return the investment. For them, it just doesn’t pencil out. 

With interest rates at historic lows and lenders competing for the same pieces of a smaller pie, it has never been more important for buyers to take a hard look at the pros and cons of the mortgage rates vs. points decision.  If you are looking for a home to buy in town and would like to discuss your options, give me a call. The time has never been better.  

Warren Buffet Now: “Buy!”

Since everyone in the country knows who Billionaire Warren Buffet is, it’s fair to call him the most prominent investment expert around. So, when Mr. Buffet offers his opinion of the housing market as he did during a recent interview, area residents considering whether to buy a home (or sell one) had good reason to pay attention.  

Mr. Buffet is definite in saying that believes now is a good time to enter or re-enter the housing market. It may not mean that it makes sense for everyone in town to go out and buy a home -- but what he does say is more than a little encouraging:

1. Buffet believes that real estate is a good investment right now because of the undeniable price factor. In an interview with CNBC, he even singled out the single-family home as a good investment opportunity. Would he personally buy a home right now? “…A couple hundred thousand” would be about right…if only he had a way to do it!  

2. According to the Oracle of Omaha, real estate is now a good long-term investment. In addition, with 30-year fixed rate mortgages below 4%, this looks like a particularly propitious time to buy a home for the long term. 

3. He also points out that there is a lot of real estate available for sale. With such a large inventory available in all over the country, area buyers join others throughout the country in having an unusually wide number of options available.

Even though Buffet’s prognostications on the housing market have not always been spot-on, his track record as an investor speaks for itself. He points out that while some of these same positives are true of other investments, single-family investors have a built-in advantage over institutional competitors. When we buy a home, it’s likely to be our single largest investment. To institutions, that same purchase is too small to consider. Less competition means more opportunity.

When someone like Warren Buffet says he would invest in hundreds of thousands of homes if only it were feasible, that does have a way of making anyone pause and think.  In other words, in case you have been considering whether now is a good time to buy a home or local income property, go ahead and call me today. Let’s talk over the prospects!

Uncertainty + Homes for Sale = Good News

Now there’s a headline that doesn’t seem to make much sense! But here is why I think it does:  

For a long time the ‘the economy’ seemed to be just some distant abstract notion. Talking heads on Sunday shows jabbered about it, made predictions or shied away from making predictions about it, and life went on either way. Certainly local homeowners would decide to put up their homes for sale and prospective buyers would look for local homes for sale without first checking on the state of ‘the economy’. Remember those days? 

Then the whole thing seemed about to crash (and just missed doing so). People started to pay attention as their own lives became affected. Soon everyone began to pay attention, and to hesitate before making plans. 

And now we have a situation where the economy is…headed up? Headed down? In a stall? About to stall? It’s anyone’s guess. It’s no wonder why individuals and families have been waiting for ‘the economy’ to declare itself one way or the other before making major decisions (such as beginning to hunt for local homes for sale).  

When there’s uncertainty in the air, it does not create a comfortable atmosphere for making large commitments. But there are major reasons – comfort aside –  why the atmosphere this March may be perfect for beginning to seriously investigate area homes for sale.  

Large inventory

In any market, buyers find options when inventories are strong. The uncertain financial conditions have led to precisely that situation. If supply were the only factor, now would certainly be one of the best times ever to look for local homes for sale. It also makes it much more likely that you will be able to find precisely what you desire…and probably at an affordable price. 

Low financing rates

One factor about which there is no uncertainty at all is this March’s financing rates. Rates are famously low, and most of the aggressive financial products that were associated with mortgage shenanigans have already been discontinued. First time buyers can check out the FHA to find out what options are available. And if you look at any historical chart, you will see how the squiggle is scraping along the bottom – the ‘good news’ area for homebuyers! 

Discounts from builders

Many builders have grown keenly interested in saving their credit by clearing out inventory. In this kind of buyers’ market, it’s not unusual for potential buyers to ask for improvements, price reductions and discounts on closing costs.  

The only thing that is certain about the future is that whatever is happening today, sooner or later it will change. When it’s widely agreed that ‘the economy’ is roaring back, the factors that are so favorable now will change with them. That’s why I believe that for area homebuyers, Uncertainty + Homes for Sale = Good News!

Million-Dollar Foreclosures Up, Midrange Down

It’s not what you would guess, but there it is: according to CNNMoney, the firm that keeps track of foreclosures has reported that the foreclosures on million dollar properties is growing while foreclosures for midrange properties are beginning to drop. 

It’s been five years since the housing market began its precipitous drop. During that time, overall growth in foreclosures has been front and center for headline writers in our area and throughout the rest of the nation.  But only now are foreclosures among some of the nation’s wealthiest homeowners drawing attention. The foreclosure rate is rapidly increasing in this group --and at a faster rate than for the rest of the United States.   

Surprising also is that many of these wealthy families are doing so voluntarily. 

RealtyTrac is the firm quoted by CNNMoney. Its data show that last year upwards of 36,000 homes valued at $1,000,000 or more were foreclosed upon or served with a notice of foreclosure (default). Even though that is fewer than 2% of all foreclosures nationwide, it still represents a greater number of foreclosures than seen in earlier years. For wealthier homeowners who actually could continue to make mortgage payments but decide not to, it can be a business decision. Financial experts call such foreclosures “strategic defaults.”  

RealtyTrac also found that the number of foreclosures on properties valued at $1 million or more has risen by 115% in the last five years, and twice as fast for those worth more than $2 million. However, among mid-range homes – those valued between $500,000 and $1 million -- foreclosures actually dropped by 21% during the same period.

It seems that the housing crisis may be ending from the bottom up, with borrowers who purchased lower-cost homes now beginning to emerge from the storm, even as some of the wealthier families (admittedly a very small percentage of them) go through the same trial.   

The silver lining?  If you are looking to buy a home in the $1,000,000+ range, now could be your window to snag a once-in-a-lifetime value!  Call me if you would like to see a complete picture of all the local properties for sale this March.

FHA Loans Actually Aren’t

By the end of February, The Wall Street Journal felt confident enough to print a headline shrieking, “At Last! Banks Rev Up Lending”. But that doesn’t mean that FHA loans aren’t going to continue to be important to the local real estate market. To be perfectly clear, let’s get some terms straight. “FHA” stands for the Federal Housing Administration. And “FHA Loans” aren’t. 

Aren’t loans, that is. 

The term “FHA loans” actually refers to loans made by entities other than the FHA. If that isn’t contradictory enough, the banks and other loaning entities are called ‘FHA Lenders’ (the ones who aren’t, actually). The reason behind the naming contradiction is that these mortgage loans are only guaranteed by the FHA – that is, insured by it, not funded by it.   

The FHA offers to act as an insurer in order to lower the risk to the actual mortgage lender. Since the availability of FHA insurance makes it less hazardous for those lenders to grant people mortgages, the ultimate effect (and intention of FHA loans in the first place) is to make it easier for potential homeowners to obtain a mortgage, thereby freeing up the kind of large capital that mortgage loans usually involve. FHA loans help ‘unlock’ the real estate market, allowing people to move in and out of residences more freely.  

FHA loans can be a good deal for some people, but as with most financial alternatives, there are both pros and cons to the program.  A key advantage of FHA loans is that potential buyers with marginal credit scores can more readily quality to get them. FHA loans also carry relatively low interest rates, and because they are based on the good credit and massive financial power of the federal government (AKA taxpayers), down payments and closing coats for FHA loans can be kept low.  

FHA loans are quite common, yet not a good fit for everyone. For home buyers with good credit scores, other private mortgage insurance options are available. In some cases their premiums may be lower than comparable FHA premiums. As is well known, the FHA also places a limit on the size of a mortgage it will guarantee. If your transaction involves a larger “jumbo” mortgage, FHA loans won't be available.  

When you are thinking about buying a home, being aware of current FHA rules as well as area mortgage insurance rates is a good place to start. My office is here to help you with these and all of the other current intelligence we take into account when helping you find a property and structure the most favorable terms for your local real estate purchase.

Will Zip Codes Zip You to a New Home?

For people in the first stages of their local real estate search, entering a 5-number zip code seems to anchor almost every step of the way. That’s a quick way for computer databases like the MLS to direct searches, but there are some not-so-apparent facts about zips that it’s good to keep in mind. 

School district 

Those of us who spend our professional lives assisting others to buy and sell local real estate know it to be true. Many future homebuyers – even those who currently don't have children -- base much of their search direction on the type and quality of nearby schools. Families want the option of being able to settle down, and most hope to be within hailing distance of good schools. But zip codes can exist in more than one school district, and many neighborhoods have more than one zip code! Add to that the fact that a given school district may have schools of varying quality and it becomes clear that zip code = school quality is not necessarily a valid real estate equation.  

Taxes

We all know that different towns have different tax ordinances, which might lead one to assume that taxes can be approximated by zip code. Not! Within a single zip code there can be different area ratings that influence property values. Proximity to water is frequently such a factor, and it can be significant. 

Zip Grab Bag

Cities and towns have different zip code overlays: multiple town names may be included in a single zip, and many zips can share the same town name. Zip codes can direct a real estate search toward a general area, but as for being certain that it describes the place you are thinking of -- not so fast! A single zip’s radius can cover anything from Alaska’s amazing 99756 (roughly the size of California) to those metropolitan codes that cover just one building.  

It’s the Neighborhood!

Getting serious about any area real estate home search means going well past simple online zip code entry. It means being familiar with neighborhoods. Neighborhood is a vague term because it encompasses the human factors: some are appropriate for young couples, featuring trendy shops and nightlife; others are more family-oriented with parks, playgrounds, and family-friendly dining options. These factors are not dependably tied to the five-number zip codes that govern most web searches. 

 The National Association of Realtors tells us that the average homebuyer spends 12 weeks looking for a new home -- and actually views a dozen of them. My office is here in town to help you with your actual neighborhood searches. You can bet that they will be the ones that count!

Variations on a Rent-to-Own Theme

The popularity of Rent-to-Own arrangements has grown during the past few years. Because some would-be local home buyers have suffered the direct consequences of the widespread economic downturn and slow recovery, rent-to-own deals can rescue transactions that would have been impossible through regular purchase and mortgage financing arrangements. If a potential buyer’s cash flow seems strong enough to support an eventual purchase, rent-to-own can overcome credit or cash shortfalls.  

In a typical rent-to-own deal, the landlord and tenant execute both a lease and a sales contract at the same time. The tenant usually pays an option fee upfront as well as an agreed-upon amount in excess of the rent payment each month. The landlord applies these additional payments toward the tenant's eventual down payment. As a result, the tenant no longer has a feeling that he has nothing to show for his monthly rent payment, and the landlord has current cash flow plus the warm feeling that at a time certain his property sale will be completed. Everybody is delighted. 

However, there is always some potential for less than smooth sailing in a rent-to-own deal, and all parties should be clear about what they are.  

The primary risk to the tenant/buyer in the kind of rent-to-own structure I have just outlined is the possibility that the tenant might not be able to complete the purchase at the end of the option period. When this happens, it usually results in the tenant's forfeiture of both the option fee and the payments made in excess of the rent amount -- money the tenant could otherwise have saved or used to resolve credit issues. 

There are also a number of ways to make a rent-to-own deal more favorable to the tenant. The first is to make the option fee applicable to the down payment if the tenant purchases at the end of the option period. In addition, the contract can allow the tenant to assign the purchase option in the event that he is unable to make the purchase. This way, if his real estate agent can find another buyer, he may recoup some of his investment. Such a contract might also entitle the tenant to a refund of a portion of the value of improvements he may have made in anticipation of purchasing if he is unable to complete the purchase. 

Because a rent-to-own deal can have many possible details, both tenant and landlord are well advised to work closely with experienced real estate and legal professionals from the outset. Our office is here to furnish the knowhow that helps turn local rent-to-own and other real estate possibilities into realities.

Anticipating the Area Spring Buying Season

It has been a long time since truly credible sources dared to combine the word ‘optimistic’ with anything like ‘Home Sales Buying Season’, but last week the National Association of Realtors’ Chief Economist, Lawrence Yun, sounded like he is ready to start talking that way.

This spring the local residential real estate outlook is being buoyed by an upward trend in the national “pending home sales” numbers. Yun points to January's pending home sales as reaching the highest level since April 2010. The number rose from 95.1% in December 2011 to 97% this January – a 2% increase in one month.

Compared year-over-year, the January home sales level rose 8%, from 89.9%. The significance may be major. Pending sales are defined as homes that are under contract but have not yet closed. They are a leading indicator of the housing market since they represent future business that will only be confirmed statistically in the months ahead.

January's figures are significant on two fronts. First, year-over-year comparisons are true apples-to-apples comparisons -- and 8% represents the kind of substantial gain that can make headlines. Moreover, the comparison to April 2010 is also encouraging.

The new figures are the highest since April 2010, and that number was artificially inflated by the rush of buyers seeking to qualify for the then-impending expiration of the homebuyer tax credit. Yun is optimistic that these newest figures will translate into what he terms a "meaningful gain" this year as the market continues to stabilize.

“Meaningful” indeed! If Yun’s projection that once credit conditions normalize home sales could rise by 15%, it will also become likely that local prices will complete their turnaround and head…well, let’s just cross our fingers and think the obvious: “UP!” 

Renters Tempted by Local Bank Owned Homes

Saying that right now mortgage rates are low is like saying lead is heavy, feathers are light, and chocolate fudge sundaes taste good. Yet there are other less obvious observations you could make that stem from those same rock bottom mortgage rates. 

One of those involves our current local renters, and how this month’s low home loan interest rates impacts their housing choices. Put simply, many first time homebuyers are being attracted to the value proposition newly presented by local bank owned homes. The increase in the number of bank owned homes is part of the fallout from previous high foreclosure levels. Combined with the current low mortgage rates, the result is that, for the first time in a long time, some area renters may now be able to afford to buy a home for the same cost (or less!) they are currently paying in rent.   

Before anyone jumps at the chance to become a new home owner, though, they will be wise to take a look at some of the additional factors that come into play in any decision about whether to purchase one of those local bank owned homes. 

FHA loans are a key factor in making bank owned homes affordable. These government-backed mortgages offer relatively lenient lending standards and low down payment options.  Yet the very same loans can also present the first time homebuyer with a considerable stumbling block.  

To qualify for an FHA loan (as well as for some conventional loans), a home must be in what is deemed “saleable” condition. And bank owned homes - while often a great deal - can come with glaring problems that must be addressed before the ‘salability’ hurdle is cleared. Major foundation issues, for example, are pricey fixes.  Old, leaking roofs can also cause a loan to be held up.  Missing kitchen appliances, broken windows, falling-down fences are all items that can maddeningly delay or even derail the sale of local bank owned homes. 

Still, the idea of finding a great bargain cannot help but intrigue many current renters. And there are great deals to be had for those who pencil out the potential advantage that might result from targeting local bank owned homes.

If you are a first time buyer considering any area home purchase, let me put my experience to work for you.  A professional agent working in tandem with a qualified mortgage broker can help you first identify and then close on a great deal – not to mention helping avoid surprises at the eleventh hour! 

Should You Consider a Reverse Mortgage?

The recent unsettling financial climate and some still-unrecovered stock market losses have combined to present a large number of area homeowners with an unforeseen dilemma. At the threshold of retirement, these residents find that they are now cash poor and equity rich, uncomfortably pressed by a cash flow shortfall that threatens the peace of mind they have worked a lifetime to insure. They can take some comfort in the fact that they are far from alone in their situation. But that doesn’t solve the problem.  

For some local homeowners, a reverse mortgage is one option that may provide some of the cash flow needed to maintain a comfortable retirement. It is also true that a reverse mortgage is no quick fix that solves cash problems without any consequences. However, although a reverse mortgage is not the right fit for everyone, there are those who could greatly benefit from the advantages it offers.  

Individual details of reverse mortgages vary just as do the individual circumstances of their eligible borrowers, seniors over the age of 63.  The principal advantage of a reverse mortgage is that it enables senior citizens to remain in their home without worrying about a monthly mortgage payment.  Since a reverse mortgage is also usually tax-exempt, the effect can be considerable. As one senior, a Florida retiree, put it recently, “It’s as if a huge weight has been lifted off my back, I can now live more comfortably during retirement.” Since there are often no stringent income or credit history requirements, the reverse mortgage itself may be available when other loans are not.  

Of course, there are some serious implications that should be weighed before accepting a reverse mortgage offer. It is most common for a reverse mortgage to carry higher upfront fees than most other forms of financing. You can also expect that the amount of equity that will remain for heirs will be reduced, depending upon market factors. In the event of a violation in the reverse mortgage’s terms, the loan could possibly become due and payable at any time. Since that would undermine the whole purpose of the strategy, some serious pencil and paper work should go into the evaluating process – all the more so since it might also affect some need-based government assistance benefits.  Other factors should be noted, such as the fact that interest accrued cannot be deducted on taxes until the loan becomes due, and there will very possibly be a drag on your ability to liquidate equity.   

All in all, any area senior citizen who might seriously consider entering into a reverse mortgage should first consult an estate attorney and tax professional to get their practical advice.  In all cases, if you are a homeowner who is considering your options, give me a call to schedule a complimentary home evaluation.  Your local home may be worth more than you think -- and selling could turn out to be a superior option!