Snapshot of September New Construction and Existing Home Sales

Hi Everyone,
   Welcome back to a beautiful Fall day with the potential for a substantial amount of pumpkin picking in the forecast.

   The September figures for both New Residential Construction and Existing Home Sales were released this week, and aside from fluctuations over the past few months, things look solid when compared side-by-side with the same time 12-months ago.

   New Residential Construction, as you might be aware, is broken down into 3 parts; Building Permits, Housing Starts, and Housing Completions. Housing Starts (Privately-owned housing starts), were up 15% from August, and 10.2% Above September 2010. This is very encouraging, especially for the Western Region of the U.S., which had figures that were substantially higher than the average (over both the 1-month and the 12-month periods). Building Permits and Housing Completions were also up over the longer-term, but not at the elevated levels as were the Housing Starts.

   Existing-Home Sales, which includes completed transactions for single-family, townhomes, condominiums and co-ops, dropped 3% from August, but are up over 11% from September 2010, per the National Association of Realtors® (NAR). In terms of regional variations, the long-haul big winner was the Midwest, checking in with in excess of a 17% jump in Existing Home Sales from September 2010 through September 2011.

   The chief economist for the NAR, Lawrence Yun, said that, “Existing-home sales have bounced around this year, staying relatively close to the current level in most months”, and he calls it "Irony" that the "affordability conditions have improved to historic highs and more creditworthy borrowers are trying to purchase homes", but, "the share of contract failures is double the level of September 2010", and he interpreted this as pointing to "an unfulfilled demand". Contract failures, incidentally, can result from a declined mortgage application, appraisal values below the negotiated price, issues resulting from the home inspection report, job loss, etc.

   In sum, Housing Starts up 10.2% from a year ago, coupled with a 11% increase in Existing-Home Sales from a year ago, would tend to point to improving market conditions. Do you agree? Do you disagree? Please explain - we'd love to hear your angle on these figures.

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Have a Great Weekend, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #NewConstruction #ExistingHomeSales #Residential #Housing #Building #Permits #singlefamily #cancellations #townhome #condo #Realtor #appraisal #NAR

The Appraisal Industry In The Post-Housing Meltdown Period

Good Morning,
   Glad you can make it with us on this Friday, and I hope your week has been outstanding.

   In the tumult of the Housing Crisis (or "meltdown", if you prefer to call it that), the Government has taken a stern look at all of the moving pieces of the Real Estate and Banking industry(ies). One vital piece included in this is the Appraisal Sector.

   "Appraisal companies must do more for less in today's market. In today's market they must be highly competitive and with foreclosures distorting comps, they are both rushed and pressured to bring in business.", says Robert Shemin, a NY Times Best Selling Real Estate Author-Expert. Shemin says that for example, "you'll find one block in a neighborhood where 3 home-buyers have paid $200, then 2 foreclosures happen at $110, and its a difficult business"

   Another professional, James Manning, says that "The banks & ABCs still control the appraiser by means of Appraisal Management Companies who distribute the appraisal orders and take a huge slice of the fee." He says that, "If you don't play ball, you are off the roster. I don't see how the industry can survive."

   Despite the market upheaval, Melinda Crump with Sageworks, Inc, has pointed to some private sector data for industries related to real estate, and said that, "sales in a number of industries trended downward alongside the housing market as expected. Sales, though, have increased now for the appraisers".

   Are you an Appraiser? How have recent changes and trends effected your business?

Have a Great Weekend, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

What Can Go Wrong During a Real Estate Deal?

Hi Folks,

   Glad to be back with you, and I hope you're week has been smooth sailing so far !

   Now, to take a look at some things that can go wrong and dampen your spirits, today we are looking at the wide spectrum of things that can go wrong during a Real Estate Sale. For the purpose of this story, I broke this down into 3 categories: Interpersonal Issues, Foreclosure-Related Issues, and all Other Issues that do not fall into the other two categories.

   Human beings tend to fudge things up on their own without much help. "The worst problem I ever encountered in a real estate deal arose from the Sellers trying to be nice people and letting the Buyer stay in the house the weekend before the closing", says Michael D. Caccavo, an attorney in Vermont. As Caccavo explains, " The Buyers got in, found a lot of problems that they hadn't noticed during inspection, and most of all claimed the plumbing, which was mostly galvanized pipe, needed to be replaced with copper. They raised the issues over the weekend, and continued pressing for concessions during the closing, including several long conversations with the realtor who was away on vacation. The closing took 4 hours instead of 1 and the realtor caved and gave back a lot of commission to the buyer just to make the deal happen". Learning a hard lesson, he says, "Never again will I allow a client to let the buyer stay in the property before closing".

   Vickie Smith of Ark Essentials Publishing says that she had a bad experience she bought a home and then the previous owner took over a month to vacate, and she says that during that time, "we were paying the mortgage and he lived there rent free. After two months he picked up his Bully Barn. We should've had some stipulation that he paid $x per day until he totally vacated!". Adam Kruse, a Broker with The Hermann London Group, says that he had someone who had to postpone their divorce at the last minute so the sale of their home could go through before the foreclosure happened, and he says that, "it was a really touchy deal, and we actually ended up closing it."

   Jennifer De Vivo, a Realtor with the De Vivo Team at Charles Rutenburg Realty, provides some things that can and will go wrong sometimes with Foreclosure-Related deals. As De Vivo, says, "Foreclosures cause people to do funny things that can ruin months of work in an instant". De Vivo describes one of the worst stories she has come across: "Once a week out before closing a vandal busted the garage door open. At first it was a dent, but then they came back and practically destroyed it leaving it hanging horizontally. The worst of it was that when I called the listing agent (I represented the buyer), they did absolutely nothing. I took matters into my own hands and pasted no trespassing signs in bright orange throughout the home exterior. My husband and partner went with one of our helpful investor clients and righted the garage door. My buyers were troopers through it all and still bought the home which was in foreclosure and the absentee owner was oversees.

   De Vivo also describes another incident: "We had another incident where we represented a buyer in a short sale situation. We closed on a home on a Friday, and over the weekend the original owner came in and stole the entire kitchen and bathroom vanities, even the toilets! Luckily my partner called the title company on Monday morning minutes before the title had been filed and was able to cancel the deal and get our clients' money back. Whew!"

   As a Real Estate Investor, Jeff Swaney has come across additional issues during Real Estate deals.

   Swaney says that Appraisal problems, which he calls, "the most rare issue from the past" is becoming more common now. He describes this as follows: "The lender orders an appraisal and then rejects their own ordered appraisal due to their underwriter initiated computer based desk top review (also called an Auto Valuation Model, or AVM). The problem for the buyer is that most standard purchase and sale agreements have an appraisal contingency, but NOT a lender initiated AVM value contingency. This means that a buyer would be contractually required to buy the home even if the lender cuts the value and the loan amount. The reason is that the actual appraisal was OK, but the lender did not like it. If the buyer has this situation occur, they must close and pay the difference in loan amounts out of pocket, or they will lose their earnest money. Buyers need to be aware of this possibility and have their agents draft a lender induced valuation reduction contingency in their contract, or they face significant exposure.

   Liens that are filed, but not yet recorded at the local courthouse, is another major issue Swaney has seen. he says that, "There is typically a gap period between the time a lien is filed and when it shows up in courthouse records. Most closing agents will require a seller to sign a gap provision that affirms the seller is not aware of any liens that have not been paid off against the house. The buyer's title insurance policy should discuss this as well. I have been to closings where prior liens were not caught and the title becomes "clouded" causing a delay or cancelling of the transaction.

   Finally, Swaney points to issues with Home Owners Association (HOA) liens, and says that, "For most foreclosures, junior liens are wiped out after the foreclosure auction or lawsuit. The only normal exceptions are property taxes and state and federal tax liens. HOA's get around this provision by simply reassessing the past due liens against the next homeowner. Beware of this because the second most powerful group to fight is the local HOA! You could find yourself as a seller stuck with paying an old (prior owners lien) off if you sell a property purchased at the local foreclosure auction. This can cause transactions to fail as the seller is not willing to pay the past bill and wants to fight the HOA. Good luck doing that. The HOA's know that it will cost you more to fight the bill than just pay it!"

   Real Estate Deals are tough! That's why it is a field that requires determination, guts, and meticulous attention to details...and sometimes a little bit of luck. Any comments? Suggestions?

Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #realestate #foreclosure #realtor #realestateinvesting

Crazy Hazy Appraisal Madness

Hi Folks,
   Hope your week is coming along great, so far.

   Well, considering the fact that we put a man on the moon and that we have found cures to a vast amount of the illnesses that have plagued mankind, you would think we would have this appraisal thing licked by now, right? Well, not exactly !

   To bolster this argument, this morning, I read a story on Yahoo Finance about a couple that were looking to purchase a specific home, and who shelled out $1600 for 7 appraisals, each of which was different than the other...and some of them by substantial amounts. Ultimately, due to this fiasco, the couple wound up renting the home that they actually wanted to purchase, but could not due to the scattered and lower appraisal(s).

   Since a majority of the trades on the stock exchange are done via computer, isn't there a way to have a universally-accepted appraisal program that spits out a figure? Perhaps there can be 3 programs (as with credit scores/FICO), with a Low, Middle, and a High. In that case, lenders can choose to accept the middle price, an average, or some other computation. I realize that my Appraiser friends are turning bright red with anger, but it should be a system that is created, organized, and computed by Appraisers, and they would still need to go on-site to verify all features of the property.

   Please don't yell at me for this one...but I am a stickler for automating procedures to minimize variation and errors. What are your thoughts on this proposal?

Have a Great Day, and Happy Rent-to-Owning !
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com


Tags: #appraiser #appraisal #finance

What Can Go Wrong With Rent to Own ?

Hi Folks,
   It's Friday ! Hope your week has been phenomenal.

   As our title suggests, today we will be looking at some issues that may arise when doing a Rent to Own Transaction, as well as a few solutions to help you out.

   A common problem in this economy is the steady decrease in home prices. This represents an overall problem for the market in general, but it has a specific effect on a Rent to Own deal. For example, Aaron Galvin, Managing Broker of Luxury Living Chicago, says that if a tenant has been renting a private condo or a home for the last year with a specific purchase price which was established at the beginning of the lease term, a decrease in property value will impact the decision of the tenant to buy the property. If the tenant was ready to buy the home, he obviously does not want to overpay.

   Galvin proposes the following solution; "Do not establish a purchase price when signing a lease. Instead, a tenant should disclose their desire to ultimately purchase the property at the end of the lease term and negotiate a percentage of rent back toward the final purchase price.", so, in other words, "No dollar amount should be set until the value of a home is determined at purchase time." This would, of course, be in writing, and agreed to by both parties.

   Gary Parkes, a Mortgage Lender with Acopia Home Loans, suggests some additional solutions, including a few proactive ones. Parkes says that using a realtor, and "having them thoroughly research the comparable properties will help minimize the likelihood of that happening.", however, if this advanced planning does not work and the "house appraises for lower than the agreed price you have a few possible solutions that can resolve this issue."

   Parkes says that, "in a majority of cases the seller will ask for a copy of the appraisal to review and will lower the agreed upon sales price to match the appraisal.", however, if the seller is, "unable or unwilling to do that, the next option would be to meet half way or pay the whole difference." He reminds us that you can decide to pay more that the appraised value, but, "the lender will base how much they lend you on the lower of the sales price or appraised value.". Fortunately, he points out that a situation like this typically is resolved and the purchase does occur.

   Another potential issue is due to potential human interactions, or "PHI", as I like to call it. Shuki Haiminis, President of Lofts.com, has presented an example of this type of issue. Haiminis brought a couple to see a loft development, which they loved so much, that instead of just renting it, they want to do a Rent to Own transaction. The developer hesitantly agreed, but the couple assured him that, "there was no way that they would not be buying the unit."

   Ultimately, the process went forward, and the developer, "put his own money and labor into customizing the space for them with their specific requests.", and Haiminis says that, "While he would probably have made some of the changes, in solely a rental deal he definitely would not have put in as much as he did."

   What was the end result? A Negative PHI...the couple split up! So, "not only did they not buy the Loft but they had to terminate the rental lease as well." Haiminis said that the developer, "should have required a small down payment maybe equal to one months rent to show good faith." This is a good point. Builders/Developers - pay attention to that one !

   Some other things that can happen along the way are issues with the down payment funds and with income statements, and Parkes, who experiences things from the buying aspect daily, and has examined each of these for us.

   Down Payment Money: Parkes says that, "Many people do not realize that they will have to explain where any non-payroll deposits came from and many people do not like having to answer these questions for privacy reasons". Lenders often look over the previous 2 months of bank statements, and they will need to know where the money came from. Parkes suggests that you, "have an account with the money sitting there already for 2 months.", so that you do not need to, "source all your deposits", and that, "Even if you are receiving a gift for a down payment, these same factors can be applied to the gift giver."

   Income: Parkes warns that if you are considering buying a home within the next few years, you need to, "be careful in the amount of write-offs you take on your tax returns", since, "Lenders use the tax returns to determine income in our current lending environment-even for those salaried borrowers such as teachers, non-commissioned employees, etc.". Additionally, he says that, "Yes, you will have to pay more in taxes but it will help you qualify for a loan. It is a tough pill to swallow, but by planning ahead you can prepare", since, "A lender will generally look at the previous two year tax returns in determining income."

   Ultimately, there are pros and cons with any type of real estate transaction. The pros of Rent to Own are being able to try a home before buying it, and being able to get into a home you might not normally be able to under your current circumstances. For a seller, being open to Rent to Own gives you an extra tool to help sell your home, and to have a serious tenant who could potentially own the home and will treat it as if it is already their own home.

Have a Great Weekend, and Happy Rent-to-Owning !

5 Tips for Selling a For Sale By Owner (FSBO)

Hi Everyone,

Today, I'd like to discuss 5 very important tips for anyone trying to sell their home on their own. This type of arrangement is often referred to as For Sale By Owner, or FSBO.

Tip #1: PRICING: In order to determine a fair selling price for your home, you need to investigate home prices in your area. You'll want to review not only the prices that homes are listed for, but what they have sold for as well. Your best resource for this information will be your local newspapers. You can even take a trip down to your local government office to check out more details from the mortgages that have been obtained by new homeowners in your area and saved ("recorded"). These documents are public domain, and it takes a little time to get the gist and flow of how to do this research, however, there are usually plenty of clerks available to take your questions. Some other ideas: talk with real estate agents in your area, and check around for appraisers in your own network of family and friends. If you can connect with an appraiser, you can ask them for a general rule of thumb for pricing on your home, and perhaps they can make a few suggestions to increase the value. Finally, you can always shell out a few hundred bucks for an actual appraisal of your home, but most often that will not be required.

TIP #2: LEGALITY: Whenever you are talking about the sale of a big ticket item such as your home, it is always good advice to retain an attorney and/or consult with your local Title Company. To check if your state is a Title State or not, please refer to this handy resource: http://title.grabois.com/

TIP #3: MORTGAGE: I am a firm believer in lining up all of your "ducks" in advance. Before you get to the physical process, you'll want to consult with some mortgage brokers and banks to educate yourself on the financing side of selling your home. This goes both ways, in that, if you make a good contact with one of these individuals or institutions, you can always refer a potential buyer to them, since they would already be familiar with your situation from your previous discussions with them.

TIP #4: ADVERTISING: This is where you want to do your homework on creating your Ad. Check on the Web and in your local papers to see the most common Ad format. Once you have done your research, create an electronic copy of your Ad, perhaps in Microsoft Word. In addition, you will want to have high-quality images of your home, for the interior and the exterior. For the exterior photos, make sure you get a sunny day when you take the photos. Why? Would you be more excited about a photo of a potentially new home when the photo is framed by a grey, cloudy, and rainy day vs a bright, sunny day with blue skies? It's all psychological.

TIP #5: MARKETING: It's time to plaster your Ad everywhere - starting with the Internet. There are a lot of free sites - but with free sites sometimes comes the "time-wasters". The old adage, "You get what you pay for" certainly applies. In addition, there are forums, discussion boards, and many other places that will allow you to announce your home, of course, once you have passed the proper permission steps unique to each of those specific sites. Should you decide to also accept Rent to Own as an option to purchase your home, you can always place your "Home Available" Ad on our website, as a For Sale By Owner (FSBO), as well as a Rent to Own (Click Here to Sell Your Home).

So there you have it. Once you start receiving offers that are in your price range, this is where your attorney, title company, and ultimately, your mortgage broker, will come into play.

Have a great 4th of July Holiday, and Happy Rent-to-Owning !!