Category: Home Buyer

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Necessary reforms to save FHA

by Dan Krell
DanKrell.com
© 2013

home for saleAfter the financial and foreclosure crises, FHA became the workhorse that not only kept the housing industry afloat, but assisted many financially distressed home owners keep their homes. After taking the brunt of the crises and almost facing insolvency, it’s time for FHA to get back to helping home buyers who might not otherwise have the means of purchasing a home.

The Federal Housing Authority (also known as FHA) was established in 1934, to help jump start a housing industry that was decimated by the Great Depression. Much like the housing downturn of the recent “Great Recession” which followed a housing boom; the 1930’s housing bust followed a 1920’s housing boom. At a time when a majority of Americans rented, the FHA provided the means for would be home buyers to become home owners.

Unless you’re familiar with the FHA’s history, you might have questioned the use of FHA as a means to refinance home owners with underwater mortgages as well as assisting those in foreclosure. However, FHA has a history of assisting home owners facing financial uncertainty, as well as making mortgages available to home buyers during times when conventional lenders were not lending. And although many criticized such assistance programs as being unnecessary and wasteful; in retrospect, these measures were significant and necessary during an uncertain time for the housing industry – regardless of the outcomes.

Last year, the outcomes of mortgage and home owner assistance programs were highly criticized as being responsible for almost bankrupting FHA. Although many describe FHA’s woes stemming from being saddled with non-performing loans and a historic number of borrowers; Tami Luhby, in her January 24th 2012 article in CNNMoney (Has Obama’s housing policy failed?; cnnmoney.com), provides some insight to the crises related assistance programs’ lender related bureaucratic issues and low success rates. She reported that at the time of her article, the HAMP program only helped about 910,000 home owners refinance to lower interest rate mortgages instead of the planned 4 million; and the HARP program “… which was intended to reach 5 million borrowers, has yielded about the same results. Through October [2011], when it was revamped and expanded, the program had assisted 962,000…”

It comes as no surprise that after eroding capital reserves, congressional hearings were held late last year to address FHA’s losses. As a result, FHA plans to shore up its financial short falls by increasing mortgage insurance premiums, increased down payment requirements for loans in excess of $625,500, as well as tightening underwriting standards.

FHA’s survival may come down to its perceived role in housing industry. And of course, there is criticism from both sides: some argue that FHA’s losses have become an unsustainable burden; while others argue the tightening measures will hurt the housing market and limit home ownership.

So, when I read Jacob Gaffney’s January 15th lamentation about refinancing out of an FHA mortgage (Refinancing Away From the Government; With an FHA Blessing: housingwire.com), the planned FHA changes not only make sense, but is necessary to preserve the access to homeownership that FHA provides. FHA Commissioner Carol Galante’s response to Gaffney not only impressed him, but may sum up the FHA mission: “…The role of FHA is to enable homeowners. FHA helped you get your home, made it happen” …”If you find you can move on, then I’m pleased you have that opportunity.”

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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 © 2012 Dan Krell.

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Rude home buyers take note

rude home buyersHas increasing incidents of rudeness become tolerated, or is there an epidemic of narcissism? Rude home buyers are growing in numbers. Regardless, home buyers and their agents should be respectful of the home seller and their property.  After all, they are “guests” while viewing the home.

Rude home buyers take note

Although the majority of home buyers and real estate agents adhere to the “golden rule” and are polite and courteous, it’s not uncommon for a few to be bad-mannered and disrespectful. Of course, it’s alright for you to be honest about your feelings towards a home; and home sellers appreciate honest feedback. However, if the home is not to your taste or is not in the condition you expect; there is no need to lay on the insults as you peruse the home – rather, be honest to yourself and your agent, do the polite thing and excuse yourself. Don’t waste your time and energy walking through a home that is not for you.

Contrary to belief, “insulting” is not a negotiation tactic; there is a difference between being outright aggressive and assertive. Insulting the seller and their home can be counterproductive; there is a difference between being offensive about living conditions versus stating objective and factual information about the home’s condition. Rather than offering a lower price for a home based on your opinion of the home owner, a lower price makes more sense if you can make a case that the home needs updating and/or repairs.

Although most home buyers view homes with their real estate agent, many ride home buyers attend open houses alone. If you view homes with your agent, they may remind you of etiquette and behavioral expectations. However, if your agent acts disrespectful toward the seller and/or their property, it is not an excuse for you to follow suit.

Home sellers deserve respect

Being respectful of home sellers and their properties is not only expected, it is a good strategy. If you’re unsure about a situation, ask your agent how to act/respond. However, here are some general etiquette tips while viewing homes (alone or with your agent): Be respectful of the occupants by adhering to showing instructions; don’t show up unexpected and demand to see the home; if you cannot keep an appointment, make sure the occupant is notified; be respectful of the property; follow showing instructions in the home seller’s absence, such as requests to remove shoes; in the case of potentially dangerous situations, such as a gas odor, a tripped security alarm, unexpected power failure, etc – alert your agent and/or the proper authorities immediately; if you bring children with you – always keep an eye on your children; never eat in the home, as it could leave a mess in the home; leave the home as you entered it by locking all exterior doors and shutting off the lights as necessary; criticism is best left for a later time – your comment s may be overheard by others; if the home is not to your liking – politely excuse yourself from the home.

Rude home buyers often sabotage their transaction

Remember that even though you are rightly focused on your housing needs, you are a guest while viewing others’ homes. And although there is no expectation for you to offer positive feedback – there is an expectation for you to be respectful of the owners and occupants of the home. At some point the roles may be reversed and you will be the home seller expecting others to respect you and your home.

Original published at https://dankrell.com/blog/2013/01/31/rude-and-narcissistic-home-buyers-take-note-home-sellers-need-respect-too/

by Dan Krell
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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 © 2013 Dan Krell.

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Hire a real estate agent

hore a real estate agentWhy should you hire a real estate agent? Home buying and selling without an agent is not for everyone.

A somewhat prophetic Howard Schneider proclaimed in a 1995 article “For Better or for Worse” (published in Mortgage Banking; 56(1), 110) that a combination of technology and industry consolidation would drastically change the real estate landscape by the end of the 1990’s.

Schneider discussed technology changing the relationship between Realtors® and consumers such that through the development of technology, home sellers and buyers would be able to interact without the use of a real estate agent. He quoted John Moore, then president and CEO of Genesis Relocation Services, “If you can get the word out about your property efficiently to the mass market, you can avoid paying the full brokerage commission…” and “…within five years, most homes will be able to see listings around the country on interactive T.V.”

What Schneider described actually happened,  and is now called “the internet.” The growth of the internet during the first decade of the 21st century allowed home buyers and sellers to interact with each other like no other time. The technology was a boon for those who decided to go it alone, and not hire a real estate agent.

Of course the internet was only a piece to the larger puzzle of the early 2000’s. It seems that for a very brief time, just placing a sign in the yard was enough to spread the word of your home sale.  Deciding price, financing, and closing all seemed to be a “no-brainer.” But five years after the housing boom, it’s evident that not everyone can sell real estate “by owner.” Many moved back to hire a real estate agent.

One of the top reasons for selling or buying a home without a real estate agent is the perception of saving money. People who decide to sell without an agent don’t see the value of hiring an agent; while some buyers who decide to buy without an agent believe they can reduce their sale price by the commission amount.

Although hiring an agent may not be a god fit for some, many value what an agent can bring to the transaction. Real estate agents are housing-market experts; besides knowing neighborhood trends, they can provide detailed market analyses to assist in formulating a listing or sale price for home sellers or buyers. Agents facilitate offers, transactions, and negotiation. They are up to date on legislation affecting home buyers and sellers; agents know the seller’s/buyer’s obligations, including compulsory disclosures and forms. And of course, there is the time aspect (how much is your time worth?).

Reasons to hire a real estate agent

Talented real estate agents are sales and marketing specialists. These agents know how to interpret home sale data to determine a price, and the best times to list/buy your home. Additionally, they know how to prepare and present your home to prospective home buyers and promote it to grab home buyers’ attention.

Getting back to Schneider’s article, he concluded that regardless of technological advances and the inclination toward mergers to an increasingly centralized industry with few big players. It’s ultimately about nearby professionals who have the knowledge of the local market. It’s basically who can personally assist you through your transaction. Personal attention cannot be under-emphasized, especially when the transaction is demanding or emotionally charged.

Are you better off without a real estate agent? You might think that technology has made it easier for you to go it alone; but, if you want a relatively smooth transaction with little drama – hire a professional.

Original located at https://dankrell.com/blog/2013/01/24/thinking-of-buying-or-selling-a-home-without-an-agent-hire-a-professsional/

by Dan Krell
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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 © 2013 Dan Krell.

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Bold predictions for real estate and housing

by Dan Krell
DanKrell.com
© 2012

fortuneWe survived the “Mayan Apocalypse” of 2012, so what’s in store for the housing market and the real estate industry in 2013?

The “Long Slog:” Although analysts disagree about the date of the housing market bottom, most agree that the national housing market bottomed out sometime time in 2009-2010.  Many looked forward toward 2012 to be a phenomenal year for housing and a return to normalcy.  Certainly 2012 housing figures were better than those of 2011, but in many areas of the country (including locally), the market fell short of outperforming 2010.

Unlike the occasional Pollyanna story about the local housing market, analysts expect “the long slog” or “the long grind” that will take years (emphasis on the plural) to get back to normalcy.  No matter how you articulate it, and barring future economic setbacks, experts describe the climb out from the bottom as a long, slow trudge that will have high and low points along the journey.

Home sale prices: When real estate fell into a seemingly endless downward spiral in 2008, some sectors continued to do well.  Homes priced at and above one million dollars continued to outperform other sectors of the housing market through 2011.  The “upper bracket” sector began to show weaknesses in the early part of 2012; as luxury home sales slowed, mid-range home sales picked up momentum.  However, activity flipped toward the end of 2012; as upper bracket activity increased significantly, while activity in other price sectors decreased.  Until fiscal cliff, debt ceiling, and other government budget debates are resolved; local upper bracket home sales will be inconsistent during 2013.  This market bifurcation can skew local monthly average home sales figures, as well as possibly distorting monthly marketplace snapshots.

Hyper-local real estate: Regional and local variances in home sale prices will require home buyers and sellers to continue to focus on hyper-local data to determine selling prices.  One of the best ways for you to clarify neighborhood sales trends is to consult a local real estate agent for recent neighborhood comparables.

Mortgages & Appraisals:  Getting a mortgage may become be increasing difficult in 2013.  Recent reports of FHA losses and a possible bailout could force new guideline changes to help the venerable mortgage program.  Because of increased foreclosures and delinquencies, there is talk about FHA becoming increasingly credit score reliant, and increasing mortgage insurance premiums for riskier borrowers.

Appraisals will continue to be a lightening rod of criticism and a source frustration.  Since its inception, the Home Valuation Code of Conduct was confusing to everyone, and eventually became a scapegoat for many seemingly inconsistent valuations.  However, a low sales volume due to lack of resale inventory will also create issues with appraisals.

Pent-up demand: No need to worry about interest rates – yet.  Keeping mortgage interest rates low, the Federal Reserve has commented on continued purchases of mortgage backed securities as part of a larger stimulus program.  However, continued low mortgage interest rates may not be the reason for home buyer activity as much as pent up demand.  However, home buyers waiting on the sidelines to purchase a home have been met with low resale inventories during 2012.  For many home owners, the general lack of home equity remains the major reason to not sell a home; and it’s also a reason for low resale inventories to continue through 2013.  Continued low inventory environment will create a competitive environment for home buyers.

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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 © 2013 Dan Krell.

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Build your dream home and avoid a nightmare

by Dan Krell
DanKrell.com
© 2012

custom homeThe fact that home sale inventory has dropped off compared to recent years is not news. The reduced number of homes for sale has made it more difficult for increasingly discerning home buyers to find the “perfect” home. And for some, a perfect home even goes beyond a new “spec” home or new home development; so they consider a custom home as a way to uncompromisingly have all the features they really want in their new home.

There are many pros and cons to building a custom home. As you might imagine, one clear advantage of building a custom home over buying a resale is that you can choose your home style and floor plan to fit your taste and lifestyle. Customizing a resale to fit your needs has its limitations; besides the physical limitations of the home itself, you may encounter issues with zoning and/or a HOA. Buying a spec home or a home in a new home development also has limitations; you are typically limited to the home styles and floor plans offered by the builder (and some will not comply with customization requests).

Planning to build a custom home takes time and money. Choosing the right contractor and architect is highly important. Designing the home you want requires time for permitting and construction. Weather is often an impediment; poor weather conditions can prolong the process and possibly increase your construction costs.

Next, you’ll need to find a place to build your dream home. Finding the perfect lot can sometimes be difficult, depending on the type and size of home you’re planning. Among the many things to consider: you need to make sure that the lot is zoned appropriately, as well as being large enough for the home you choose to build. Additionally, you should consider utility availability to the lot: is public water and sewer available; is natural gas available. Other issues that could affect your lot: clearing trees, easements, and/or protection areas.

Custom HomeIf an unimproved lot is not found to meet your needs, another option is to buy a “tear down.” A tear down is an old home that is torn down to build a new home on the existing lot. Of course, there are issues that need to be addressed when going this route as well. Besides encountering building issues similar to those of an unimproved lot, you may encounter additional zoning and permitting constraints with a tear down.

Unless you’re willing to pay for your project with cash, you’ll have to secure financing. Depending on your project, there are various loans are available so consult your lender about terms and qualifying criteria. Some loans may combine the acquisition of the land and the construction; and other loans could provide the loan for the construction, and then convert to a permanent mortgage.

Although it’s great feeling to build the home of your dreams, you should also consider its resale. Tastes vary, so your idea of a dream home may not be everyone else’s. A large amount of non-traditional customization could not only turn off future home buyers, but could very well hurt your sale price.

Building a custom home requires due diligence. The Maryland Home Builder Registration Unit (of the MD Office of the Attorny General)provides consumer information about purchasing new homes and the Home Builder Guaranty Fund (www.oag.state.md.us/Homebuilder/index.htm).

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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 © 2012 Dan Krell.

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