Moving day does not have to be stressful

by Dan Krell © 2010.

If it’s not the negotiating, the inspections, the mortgage process that makes you uneasy about the buying/selling process, then it’s the thought of moving. Yes, thoughts of moving and all that may go along with it can make even the most stable person break down.

The two main pieces of advice most professionals offer about moving include planning and organization. Planning your move will keep everything in perspective as you create parameters within which all the activities of your move will be completed. Organizing allows you to keep track of your activities and belongings during your moving period.

Much of the stress that is felt during the move stems from feelings of being overwhelmed by thoughts of everything that must be accomplished during your move. Mitigating the stress and emotion of the move is easier when you have a timeline (of actions and goals) that ends on the day you vacate the home. Having a daily goal will allow you to focus on the task at hand without getting distracted. Each day’s goal can be determined by going into each room noting what needs to be accomplished, including any ancillary activities that need to be completed.

An important aspect of a move is organizing what items are coming with you and what items can be thrown out or donated; this should be easy if you have already de-cluttered your home prior to selling. Staying organized during unpacking can be accomplished by making notes of room destinations for boxes; the notes can be detailed to include whose belongings are in each box as well the contents.

Moving to a new home is not a cheap endeavor; you are sure to spend money on the move even if you’re a do-it-yourselfer. The cost of moving can vary depending on the moving company and services you choose. Doing it yourself is not always the least expensive route; the total cost of a truck rental, packing supplies and your time may compare to the price of a limited service mover. If you’re busy, then you might appreciate a full service moving company that will do all of the packing for you. À la carte moving services may be easier on your pocketbook and also eliminates services you may not need. When shopping for a moving company, make sure they are reputable by checking their credentials and ensuring they are bonded and insured.

Portable storage units have become the “hybrid” of moving because it allows you to do all the work of loading your possessions into a container, but the delivery of the storage unit is carried out by a moving company. The storage unit can either be delivered to your new home or placed in storage until you are ready to unpack.

Moving into a new home is often associated with life events- the good ones and sometimes the not so good ones. Besides having to move, life events have their own challenges; so it’s often helpful to recruit as much help as possible, not just for the physical labor but for the emotional support too.

Although planning and organizing can minimize stress and drama, your plan may need to be flexible to adapt to any unforeseen obstacles; as Robert Burns’ poem To a Mouse testifies: “The best-laid schemes o’ mice an ‘men…(often go awry).”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 14, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

There are two sides to Strategic Default

As Strategic Default gains popularity among home owners; more questions are raised.

by Dan Krell © 2010.

Imagine, if you will, having the ability to separate yourself from your most troubling problem: a burden so great, you cannot sleep at night; a hardship so severe that it interferes not only with daily living, but family relationships; a misfortune so cruel, it causes daily misery.

No, this is not the “Twilight Zone,” but it must be how some home owners feel about owning a home with negative equity (the mortgage balance is higher than the value). The reality is that 41% of home owners recently interviewed for the “Trulia Realty Trac Survey: American Attitudes toward Foreclosure” (May 20, 2010 Truliablog.com) indicated that they would walk away from an upside-down mortgage.

Recently, a home owner confided to me of their regret of missing an opportunity for a strategic default. Now their options are very limited. Although they have been paying their mortgage in a timely manner, their plan was to downsize and then walk away from the larger mortgage.

According to nationally featured Youwalkaway.com (a website that advocates taking “financial control”), there is a distinction to be made between “walking away” and “strategic default”; the distinction is basically about the ability to make the choice. Walking away describes what financially challenged home owners do when they have no other option; whereas strategic default is when a financially sound home stops paying their mortgage because they decided that the consequences of foreclosure is an acceptable part of their long term financial plan.

If strategic default doesn’t appear to be the epitome of self importance in a world reeling from financial abuses, Freddie Mac Executive Vice President Don Bisenius (in a May 3rd Freddie Mac news report; FreddieMac.com) offers another view on the issue. Although he explained that strategic default is a personal choice, it usually does not take into account of externalities (“spill-over” effects). In other words, Mr. Bisenius explains that the person considering strategic default typically has a narrow focus and ignores the consequences of their actions on their neighbors and their community. In addition to becoming an eyesore as well as attracting unintentional animal and human activity, foreclosures have the potential of bringing down home values ultimately costing neighbors and the community financial and emotional capital.

Certainly, the consequences of not paying your mortgage are dire. Among which include: losing your home, negatively affecting your credit, and the possibility of being sued by your lender (state laws differ on deficiency judgments). Clearly anyone would be affected by these consequences; however some believe that the personal long term benefit far outweighs any consequences.

There is the growing ethical and moral debate about strategic default. Although for some home owners, “walking away” is the final chapter of failed attempts at mortgage modification and short sales; while for others, it is a deliberate maneuver to attempt to cut their short term losses in the belief that they are better off in the long run.

Since the long term benefits of strategic default is tied to future events, it may be possible that we may one day determine that the hedging against our homes and communities for a short term personal gain was “short sighted” due to the long term personal and collateral losses; which, in the end may say more about a person than their financial savvy.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 7, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Official Support for Manufactured and Modular Housing

by Dan Krell © 2010

Politicians don’t always vote along party lines. Take for example House Resolution 584, which passed the House of Representatives on vote of 408 to 4 (19 not voting). Timing notwithstanding, the resolution entitled “Recognizing the importance of manufactured and modular housing in the United States,” was overwhelmingly passed in anticipation of National Homeownership Month (which is June); and as of May 25th 2010, recognizes the third week of June as Manufactured and Modular Housing Week.

H. Res. 584 (thomas.loc.gov) recognizes that manufactured and modular housing is not only critical in meeting the housing needs of the country, but it is also a viable industry that employs approximately 70,000 factory and retail employees that generates annual sales of approximately $6Billion. Additional recognition is directed to the use of cutting edge technology and high production standards in the construction of manufactured and modular homes; production facilities adhere to the National Manufactured Housing Construction and Safety Standards Act of 1974, which governs construction, engineering, quality, safety, and systems performance, as well as promoting innovation in safety and efficiency.

According to the Manufactured Housing Institute (factorybuilthousing.com) and the National Modular Housing Council (modularcoucil.org), a manufactured home is built in a controlled environment and then shipped to the site for installation; modular homes are built from components that are fabricated in the controlled environment and then shipped to the home site to be assembled. The MHI includes panelized and pre-cut homes in the definition as manufactured housing. Manufactured and modular homes are built to meet or exceed state and local housing codes, as well as federal Manufactured Home Construction and Safety Standards (also known as “the HUD code”).

The benefits of manufactured and modular housing include affordability, quality, and amenities. Excluding the cost of the land, the MHI estimates that the cost of a manufactured or modular home could be 10% to 35% less than a home built on-site (depending on size and complexity); financing the construction of a manufactured or modular home is less expensive and may even eliminate any interim financing (such as a construction-permanent loan) that is typically required for on-site building.

Due to the fact that manufactured and modular homes are built in a controlled environment (essentially a “factory”), all aspects of quality is constantly and carefully controlled during construction. Unlike on-site construction, where quality inspections are random and inconsistent, manufactured and modular housing fabrication quality specialists constantly monitor fabrication to ensure the final product meets or exceeds all codes. Additionally, the controlled environment protects the materials from weather and almost completely eliminates construction delays.

Amenities and features are no longer absent from manufactured and modular homes. Although these homes are built with standard amenities and features; home buyers can choose options that meet their comfort level as well as meeting their family needs. Additionally, manufactured and modular housing industry proponents tout their high volume purchasing power to lower the cost of home buyer choices of appliances and upgrades.

Manufactured and modular housing is gaining wider acceptance because of affordability and durability. Consider that many national home builders use manufactured components in constructing their larger communities; while some custom home builders use manufactured components or modules to create some of the most luxurious and expansive homes in the area. Who knows; your current or future home may be partially or completely manufactured or modular.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 31, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Shadow inventory dictates direction of housing market

by Dan Krell © 2010

Housing markets are not out of the woods yet. To know where housing is headed, you need to follow the “shadow inventory.” It is estimated that the shadow inventory will be dictating the direction of the housing market for the next twelve to thirty-six months; and contrary to some recent optimistic reports, it could get ugly.

“Shadow inventory,” simply put, is the term used to describe properties that are not yet for sale, but is expected to be listed for sale. The term is loosely used and generally refers to homes that are already owned by banks as well as homes in the process of foreclosure. However, some analysts broaden the scope of the term to also include homes that have seriously delinquent mortgages and/or in the process of a short sale.

Alarms about a threatened housing recovery due to the nationwide shadow inventory have been ringing since early 2010. Although recent reports of increased sales have been undeniably due to home buyer tax credits, economists doubt that any gains in the housing market will carry into July (one qualification for the home buyer tax credit is to close by June 30th). Even Lawrence Yun, Chief Economist for the National Association of Realtors, stated in a May 24th NAR press release (Realtor.org) that although there was an expected increase in existing home sales in April, sales will “temporarily fall back” when the home buyer tax credit expires.

Although it is expected that home buyer demand will diminish in the absence of a home buyer tax credit, a sudden exponential growth of home inventory has the potential to erode not only home buyer confidence but home values as well. It is clear that such an inventory surge can wreak havoc, as evidenced by the foreclosure surge of 2007-2008; but analysts cannot agree on the extent of the problem. Estimates of shadow inventory range from a conservative 1 million units to an astounding 6 million units.

A Standard and Poors analysis published February 16, 2010 (The Shadow Inventory Of Troubled Mortgages Could Undo U.S. Housing Price Gains) made clear the correlation between property liquidation and home value depreciation. And although the reduced number of foreclosures in the past year was due in part to attempts in assisting home owners to keep their homes (through mortgage modification programs), the inevitability of liquidating $473.4 billion in loans (which is equated to 1.75 million homes) was temporarily delayed. It is possible that home prices may again begin to depreciate as these troubled loans are liquidated (standardandpoors.com).

First American Corelogic appears to concur (Home Price Index Report – April 2010) with the premise of the S&P’s report. Although Corelogic’s Loan Performance Home Price Index (HPI) revealed an increase from February 2009 to February 2010, the report states that market stabilization has been widely due to government intervention through foreclosure prevention programs, Federal Reserve purchases of mortgage backed securities, and home buyer tax credits. Due in part to the expected conclusion of Federal Reserve purchases of MBS and home buyer tax credits, the HPI forecast from February 2010 to February 2011 is projecting a decline (corelogic.com).

Housing will undoubtedly be affected by shadow inventory. However, the affects of shadow inventory disposition may largely depend on other economic factors and government intervention; which includes (but is not limited to) employment, interest rates and foreclosure prevention programs.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 24, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Should I stay or should I go?

by Dan Krell © 2010

Many home owners are content to stay put in their homes. Talking to home owners seeking larger spaces, many are just not convinced they need to move. This is more of a phenomenon for home owners who already traded in their “starter homes.” For many of these home owners, planning expansions combined with interior design to create functional and large spaces is an alternative to (once again) engaging the process of selling and purchasing real estate.

Expanding a home can be accomplished in a variety of ways; homes can be expanded vertically and/or horizontally. In some cases, home owners make major renovations such that the home style is dramatically changed.

To build additions, expansions, or total renovations, consulting with licensed professionals is a necessity. Some home owners decide to hire independent architects and contractors, while others hire a design-build firm that has all the necessary talent “in-house.”

Weighing the options to expand or move can include financial and personal considerations. Home owners might consider the financial aspects that may include (among other items) the cost of the move (including Realtor commissions, taxes, lender fees), as well as differences in mortgage payments as compared to the cost of the expansion. Personal considerations may include thoughts of a home’s location; for example: some home owners find it difficult to leave a neighborhood that has been their home for many years, while others say moving would make their commute to work an inconvenience.

More information about home renovation/expansion as well as the design-build concept can be obtained from the Design-Build Institute of America (dbia.org) and the Mid-Atlantic Chapter of the Design-Build Institute (dbia-mar.org). The Maryland Home Improvement Commission offers useful consumer information and advice (www.dllr.state.md.us/license/mhic/mhiccon.shtml) on home improvements.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.