Real Estate News and Commentary

February 12, 2009October 5, 2019

Deterring and preventing home burglaries

Another sign of our troubled economy is the increase in incidents of crime. Unemployment and rising tensions can sometimes change behaviors in people who would otherwise be law abiding. Homes are being burgled by thieves who take what they can from garages, cars and homes; the thieves have also become brazen, as some have entered homes while the owners are inside.

Statistics reported by the National Burglar & Fire Alarm Association (NBFAA) indicate that a burglary occurs somewhere in the United States every 14.6 seconds. In about 84% of burglaries, the thief entered the victim’s home. Statistics from Pennsylvania indicated that 81% of break-ins occurred on the first floor; 34% of entries are through the front door. A Connecticut study reported that 12% of burglars entered through unlocked doors (alarm.org).

“Not to worry,” you say, you have a security system in your home. However, the NBFAA states that the security system is only part of the overall security plan. Home owners who rely solely on their security system for protection have higher incidents of break-ins than homeowners who use a combination of preventative measures and deterrents along with a security system.

Experts agree that burglars will spend about sixty seconds to break in to a home. If it takes longer than sixty seconds they move onto the next home; the longer it takes to break in, the higher the chance of being caught. Preventative measures will make it more difficult for someone to break into your home and increasing the chances of thwarting the criminal.

According to a pamphlet distributed by the Montgomery County Department of Police (“In Case of Burglary…Keeping Your Home and Family Safe”), the best way to protect your home and belongings is to secure your home. A simple way to begin securing your home is to lock your doors and windows. When you move into a new home, change the locks immediately. Keep ladders and tools out of site as burglars can use these items to get inside your home. Secure your shed and outbuildings with high quality locks.

Additional deterrents include interior and exterior lighting. A well lit exterior allows for easy identification of visitors as well as anyone attempting to break-in to your home. Motion sensors are often recommended so as to activate when people approach your home; these lights can also be set to activate when you are away. Having a monitored security system can be one of the most effective deterrents, but its efficacy is diminished if you do not activate the alarm.

If you plan to be away, security experts recommend identifying someone who can respond to emergencies that may occur in your home. Additional recommendations include stopping newspapers and mail service and having timed lights to give the appearance of someone occupying your home.

Many local police departments offer a free security survey of your home to help you identify areas in and around your home that are vulnerable to burglars. Security items often overlooked by home owners include: overgrown shrubs and trees that can offer burglars cover while attempting to break-in; unsecured sliding glass doors; unsecured garage doors; doors with inadequate locks and strike plates. Having your home surveyed doesn’t only increase crime deterrents, but it may also give you a little peace of mind.

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 February 9, 2009. Copyright © 2009 Dan Krell.

February 4, 2009October 5, 2019

Budgeting for home maintenance; the other housing crisis

Current economic conditions are creating another housing crisis. Even though credit is tight and savings are dwindling, don’t forgo regular home maintenance. Forgoing regular maintenance can not only possibly devalue your home, but also create larger problems that can potentially make your home unlivable.

Many first time home owners are surprised by the actual cost of home ownership. Some get caught in the trap of spending their savings to purchase their home without having any reserves for emergencies, let alone regular home maintenance. If regular home maintenance items are not attended to, these items can become expensive emergencies. For example, a small roof leak left unrepaired can wreak havoc on the roof, ceilings, and walls requiring extensive repairs, as well as the potential for mold.

Adding to the impending crisis is the fact that many home owners are so bogged down with debt that they cannot save enough money for regular maintenance items. A few years ago this wasn’t so much a problem because credit was easily available; qualifying for a home equity line of credit to pay for home repairs and renovations was easy. However, presently qualifying for a line of credit is difficult, let alone trying to keep one open.

Putting off home maintenance due to a clean home inspection may not be such a good idea. Having a home inspection can determine the overall condition of the home and give you some peace of mind when you purchase a home; but the inspection is limited. In fact the law governing Maryland home inspector licensure describes the limitations and exclusions of a home inspection as not being technically exhaustive and may not identify concealed conditions or latent defects. Additionally, a home inspector is not required to determine (among other items): the condition of systems or components that are not accessible; the remaining life of any system or component; the strength, adequacy, effectiveness, or efficiency of any system or component; any future failures of systems and components; compliance of the structure with applicable provisions of local ordinances, regulations, or codes; and the existence of any manufacturer’s recalls (COMAR 09.36.07.03).

Even new homes have maintenance requirements. Sometimes, poor craftsmanship or inadequate installation techniques necessitate repairs sooner rather than later.

Relying on your homeowner’s insurance to repair your home in case of a system or component failure may not be a good idea either as some insurance policies may limit damage/repair costs and/or not cover damages due to poorly maintained systems (insurance coverage varies; you should consult your insurance agent for clarifications to your policy).

If you haven’t yet budgeted for home maintenance- start today! Freddie Mac recommends having a “home audit” to assess the maintenance needs of your home. To meet regular and emergency maintenance needs, some experts recommend an annual savings of one to three percent of the home’s value. Planning ahead can make home maintenance easier as well allow you to make informed decisions to possibly lower your maintenance costs (FreddieMac.com).

A sign of a home owner facing financial challenges is often manifested by their home’s disrepair. Homes that fall into disrepair are an indication that the home owner is struggling. If you or a neighbor needs assistance to create a home maintenance budget, contact a local housing counseling agency.

January 29, 2009October 5, 2019

Perfect storm of conditions provide bargains for homebuyers

This week the National Association of Realtors (NAR) reported that national home sales of existing homes improved this past December! The 6.5% jump in sales and reduce inventories of listed homes across the country is certainly good news. However the overall sales volume for the year was reported as being 13.1% behind those of 2007. In fact, the NAR reports that the national volume of existing home sales for 2008 is the lowest since 1997 (NAR.org).

Locally, the trends are similar. The Greater Capital Association of Realtors (GCAAR) reports data compiled from the local multiple list service (Metropolitan Regional Information Systems, Inc.); the data indicate that single family home sales in Montgomery County for December 2008 increased 23% from the previous month, and inventories fell from previous months. However, the volume of local single family home sales was also behind the volume for 2007 (GCAAR.com).

Lower home prices combined with relatively low mortgage interest rates may have been the right formula for December’s sales volume increase. Housing experts attribute home sales volume increases across the country to bargain hunters looking for good buys, including foreclosures and short sales. In a January 26th press release, NAR chief economist Lawrence Yun, was reported to say that “home prices continue to fall significantly” and that home buyers are “taking advantage” of the lower prices (NAR.org). Home prices also fell in Montgomery County, as median single family home prices fell about 14% from last year to $435,000 (GCAAR.com).

Additionally, mortgage rates remain relatively low. Freddie Mac’s “Weekly Primary Mortgage Market Survey” reported that a 30 year fixed rate mortgage to be 5.12% for the week of January 22nd (up from the 4.96% reported the week before) (freddiemac.com). So although mortgage rates are a bit higher than the past two months, rates are still close to recent historic levels.

In addition to taking advantage of lower home prices and mortgage rates, home buyers are also taking advantage of the FHA mortgage, which allow them to structure their purchase favorably. The FHA mortgage (HUD.gov), allows a home buyer to purchase a home with a low down payment (3.5% down) as well as allowing the home seller to contribute up to 6% of the sales price to the buyer’s closing costs. Additionally, the higher FHA loan limits (Montgomery County has a FHA loan limit of $625,500 as of December 16, 2008) have allowed home buyers to seek these advantages in homes that previously would not have qualified for a FHA mortgage.

As an incentive, the home buyer tax credit of up to $7,500 has received mixed reviews from home buyers. The tax credit, originally set to expire on home purchases through July1, 2009, actually needs to be repaid. However, syndicated columnist Kenneth R. Harney reported earlier this week (January 25, 2009) that congress is looking into removing the repayment requirement of the tax credit; removing the repayment requirement could add to the perceived value of purchasing a home.

Although recent home sales figures seem like a shimmer of light in a dark tunnel, many remain cautiously optimistic. Many housing experts agree that the new Administration and Congress must act quickly if any planned stimulus is to affect the spring housing market. Regardless, the present market offers an unprecedented combination of bargains, mortgage rates, programs, and government incentives.

January 23, 2009October 5, 2019

Relief from foreclosure relief scams

Foreclosure relief is big business; so are foreclosure relief scams. Foreclosure relief scams have been a long standing national problem. In fact, in their 2005 report titled, “Dreams Foreclosed: The Rampant Theft of Americans’ Homes Through Equity-Stripping Foreclosure Rescue Scams,” the National Consumer Law Center described foreclosure relief scams as fitting into three categories: phantom help, bailout, and bait and switch (consumerlaw.org).

Phantom help is described as the charging of fees (usually excessive), by a “consultant,” to make phone calls and complete paperwork that the home owner can typically complete on their own. In this type of scam, the home owner does not know that the “consultant” provided little (if any) assistance until it’s too late. The “consultant” usually disappears and the home owner is not only facing foreclosure, but has been scammed out of their hard earned money.

The bailout scam was popular among schemers in the earlier part of this decade when many home owners had equity in their homes. Although there are variations on this type of scam, typically the homeowner would arrange to buy their home back after the title of the home was conveyed to the “consultant.” Usually, the home equity is unknowingly stripped by the “consultant” and the home owner loses the home.

The bait and switch scam is what it is exactly what it sounds like. The home owner unknowingly conveys the title of their home to the “consultant,” while believing they are signing loan documents.

In response to the growing number of consumer complaints (as well as legitimate business inquiries), the Maryland Commissioner of Financial Regulation posted an advisory late last year to consumers as well as those in the business of loss mitigation, foreclosure prevention, and similar services (www.dllr.state.md.us/finance). The advisory is a reminder that the Protection of Homeowners in Foreclosure Act (PHIFA) is in force to protect home owners as well as pursuing predators. PHIFA describes who is protected, prohibited practices (including foreclosure rescue transactions), foreclosure consulting contract terms, mandatory disclosures, and the home owner’s right of rescission.

Under PHIFA, a “foreclosure consultant” is described as anyone who systematically solicits home owners to offer foreclosure consulting services, which includes (among other services) loan modifications, forbearance services or loan reinstatement services. To add credence to their services, some foreclosure consultants are or work with real estate agents, loan officers, or title companies.

PHIFA prohibits upfront fees of any kind to be collected by foreclosure consultants. A foreclosure consultant cannot receive any compensation until they have performed every service described in their contract. Additionally, foreclosure consultants cannot receive payment from third parties (real estate agents, loan officers, title companies, etc.) connected to the services provided to the home owner unless the payments are fully disclosed to the home owner, listed on the settlement sheet, and does not violate (other) law.

If you are in default or in foreclosure and have been contacted by someone promising foreclosure relief (by negotiating a loan forbearance, modifying the terms of your mortgage, or even facilitating a short sale) do your homework and make sure the consultant is legitimate. You can get more information about PHIFA by contacting the Commissioner of Financial Regulation; and of course, consult with an attorney.

January 15, 2009October 5, 2019

Are we arrogant to think we can bailout of a recession?

Last week more bailout legislation was introduced in Congress. The legislation is not a new proposal, but rather it embraces previous bailouts and stimulus packages to refine and focus a plan of attack on all economic fronts (including the real estate and auto industries). H.R. 384, also known as the TARP Reform and Accountability Act of 2009, was introduced in congress by Rep. Barney Frank (D-MA) on January 9th.

Although the legislation is titled the TARP Reform and Accountability Act of 2009, it is not only meant to refine the original TARP (Troubled Assets Relief Program). However, by looking at the content, you will see an orchestrated effort to solve problems not anticipated by previous acts as well as widening efforts to stabilize the economy. You can view the entire legislation on the internet (http://www.govtrack.us/congress/billtext.xpd?bill=h111-384).

The legislation is broken down into seven sections: modifications to TARP and oversight; foreclosure relief; auto industry financing; clarification of authority; improvements to HOPE for Homeowners program; homebuyer stimulus; and FDIC provisions.

Title I describes the proposed refinements and limits to the original TARP funds as well as provide conditions for additional funding. This includes compliance and accountability; limits on executive bonuses as well as corporate divesture of private jets; provide TARP funds to smaller community institutions; and increase size and authority of oversight.

Title II describes foreclosure relief including relief programs through TARP funds and loan modifications programs. Loan modification programs are to be administered with standardized systems as well as requirements for borrowers and property types.

Title VI describes a home buyer stimulus program with special mortgage interest rates. The program is proposing to “stimulate demand for home purchases and reduce unsold inventories of residential properties” by making available “affordable interest rates on mortgages.” Although the program is for home purchases, it may also be available to refinancing as well. However, there is a caveat describing the possible targeting of such a program to areas hardest hit by the foreclosure crisis.

Notwithstanding the attempted efforts by our Government to shorten the ongoing effects of the financial and foreclosure crises, a recent study indicates that we may have no choice but to endure the aftermath. A paper by Carmen M. Reinhart (University of Maryland) and Kenneth S. Rogoff (Harvard University), titled The Aftermath of Financial Crises, analyzes previous global financial crises and compares the resultant recessions. Additionally, the length and severity of recessions were compared to non-crises recessions.

Reinhart and Rogoff describe average historical post financial crises effects as reducing home prices by as much as 35% over six years, increasing unemployment rates by as much as 7% over four years, and rapidly expanding government debt (not attributed to bailouts, but rather to a declining tax base). Their conclusion is that recessionary effects have already eroded equity values equivalent to historical recessions even though today’s governments have more monetary flexibility and have acted differently than their predecessors.

Although it appears that we may have to endure the effects of the recent financial crisis, there are expectations for government bailouts to soften the blow. However Reinhart and Rogoff warn that we should not “push too far the conceit that we are smarter than our predecessors.”