Foreclosures increased again in January as banks continued to work through a large backlogs of defaulting loans in their books, RealtyTrac reports. The number of foreclosure filings — including default notices, scheduled auctions, and bank repossessions — increased 3 percent from December to January.
However, the numbers were significantly down compared to one year earlier, RealtyTrac reports.
Last month, one in every 624 households received a foreclosure filing — a drop of 19 percent compared to January 2011.
Banks had slowed their pace of processing foreclosures last year following a robo-signing scandal, in which banks were accused of approving foreclosure documents without proper reviews. Banks have changed some of their methods in processing foreclosures. Also, the $25 billion foreclosure settlement, announced last week, among the nation’s five largest banks and state attorneys general is expected to lead to a pick up in the pace of foreclosures.
The “frozen up foreclosure process is beginning to thaw,” Brandon Moore, CEO of RealtyTrac, said in a statement. For example, Florida had a 14 percent increase in foreclosure filings in January compared to a year earlier.
Many housing experts view an increase in foreclosures as an important step for the housing market to recover in clearing the glut of foreclosed homes on the market. Foreclosures have hampered home prices in many markets.
Thursday, February 16, 2012
Wednesday, February 8, 2012
“Tax deductions can make homeownership as affordable as renting.”
Unlike renters, homeowners get part of their monthly payments back at tax time. That's because the mortgage interest they pay is (in most cases) fully tax deductible.
For a mortgage payment of, say, $1,000 (principal and interest only), you could purchase a home for $151,426 if you put a 10% down payment on a 30-year loan at 8%. If your payments started in January, your first-year mortgage-interest tax deduction would be $10,862. Assuming you are in the 27.5% tax bracket, you would save $3,041 in taxes--that's $249 per month. So the $1,000 payment mentioned earlier is really $751 when computing the homeowner's tax advantage.
For a mortgage payment of, say, $1,000 (principal and interest only), you could purchase a home for $151,426 if you put a 10% down payment on a 30-year loan at 8%. If your payments started in January, your first-year mortgage-interest tax deduction would be $10,862. Assuming you are in the 27.5% tax bracket, you would save $3,041 in taxes--that's $249 per month. So the $1,000 payment mentioned earlier is really $751 when computing the homeowner's tax advantage.
Monday, January 23, 2012
How to Win the Mortgage Game When Relocating
The single smartest move you can make is to put off house hunting until you have a firm idea of your buying power. If you are pre-approved for a loan, you can save considerable time house hunting and mortgage shopping.
A pre-approved mortgage loan is an excellent guideline to help relocating home buyers know how much home they can afford. For the seller, pre-approval is proof that the buyer’s lender feels confident a loan commitment would not be a problem if all the financial documentation were in order.
Pre-Approval Benefits:
• Streamlines house hunting.
A pre-approval identifies how much money the transferee can obtain, so precious time isn’t wasted looking at too-costly homes.
• Offers peace of mind.
You know for sure how much home you can afford, and there is little chance a lender will not make the requested commitment.
• Prevents "house poor" homeowners.
Pre-approval reduces the possibility of you becoming overextended and unable to meet payments later on.
• Boosts bargaining power.
Pre-approved buyers tend to be in an advantageous position when bidding against other buyers, as sellers like knowing your loan is guaranteed.
• Pinpoints best mortgage option.
The pre-approval process helps you identify ahead of time which type of mortgage best meets your personal needs.
Before you jump into planning your move, there are some terrific services we offer to relocating families moving into or out of our area. Let us help you take advantage of them. Send us an e-mail or give us a call.
A pre-approved mortgage loan is an excellent guideline to help relocating home buyers know how much home they can afford. For the seller, pre-approval is proof that the buyer’s lender feels confident a loan commitment would not be a problem if all the financial documentation were in order.
Pre-Approval Benefits:
• Streamlines house hunting.
A pre-approval identifies how much money the transferee can obtain, so precious time isn’t wasted looking at too-costly homes.
• Offers peace of mind.
You know for sure how much home you can afford, and there is little chance a lender will not make the requested commitment.
• Prevents "house poor" homeowners.
Pre-approval reduces the possibility of you becoming overextended and unable to meet payments later on.
• Boosts bargaining power.
Pre-approved buyers tend to be in an advantageous position when bidding against other buyers, as sellers like knowing your loan is guaranteed.
• Pinpoints best mortgage option.
The pre-approval process helps you identify ahead of time which type of mortgage best meets your personal needs.
Before you jump into planning your move, there are some terrific services we offer to relocating families moving into or out of our area. Let us help you take advantage of them. Send us an e-mail or give us a call.
Wednesday, January 4, 2012
Did You Know That Parents Can Profit From Equity-Sharing and Help Their Kids?
Equity-sharing is a two-way street that lets everyone in the family reach their real estate goals:
• With parents’ cash help, a young married couple, for instance, can buy a home they couldn’t otherwise afford.
• With children sharing costs, parents enjoy both tax benefits and investment profits.
Example: In return for a 50% (figure varies) ownership interest, parents make $20,000 down payment on a $100,000 home.
The young folks live in the house and pay:
• Half the mortgage payments.
• Half the property taxes.
• All the maintenance costs.
The children can claim tax deductions for:
• Their half of the mortgage interest.
• Their half of the property taxes.
The parents do not live in the house. As investors, they can depreciate their half of the house (not counting the value of the land).
When the home is sold, the equity-sharers divide profits 50/50. Out of their share, the young folks repay the parents the $20,000 original down payment.
Such a system will work on any ownership percentage the co-owners agree on (a 25/75 split, etc.) It also is applicable in cases where co-owners are not related.
For more details on an equity-sharing purchase, your call or e-mail is welcome, We’ll be glad to share our knowledge.
• With parents’ cash help, a young married couple, for instance, can buy a home they couldn’t otherwise afford.
• With children sharing costs, parents enjoy both tax benefits and investment profits.
Example: In return for a 50% (figure varies) ownership interest, parents make $20,000 down payment on a $100,000 home.
The young folks live in the house and pay:
• Half the mortgage payments.
• Half the property taxes.
• All the maintenance costs.
The children can claim tax deductions for:
• Their half of the mortgage interest.
• Their half of the property taxes.
The parents do not live in the house. As investors, they can depreciate their half of the house (not counting the value of the land).
When the home is sold, the equity-sharers divide profits 50/50. Out of their share, the young folks repay the parents the $20,000 original down payment.
Such a system will work on any ownership percentage the co-owners agree on (a 25/75 split, etc.) It also is applicable in cases where co-owners are not related.
For more details on an equity-sharing purchase, your call or e-mail is welcome, We’ll be glad to share our knowledge.
Monday, December 26, 2011
Which Home Improvement Projects Offer the Best Returns?
When it comes to remodeling, exterior replacement projects have routinely rewarded home owners with more bang for their buck. This year is no different: REALTORS® recently rated many exterior improvements as among the most valuable home investment projects as part of the 2011-12 Remodeling Cost vs. Value Report.
“This year’s Remodeling Cost vs. Value Report shows the value of putting your home’s best façade forward, so to speak,” said National Association of REALTORS® President Moe Veissi. “Inexpensive exterior replacement projects are not only crucial to a home’s regular upkeep, but are also expected to recoup close to 70 percent of costs. Specific exterior projects such as siding, window and door replacements are part of regular home maintenance, so many homeowners are already undertaking them. These projects also do not require expensive materials and they have the added bonus of instantly adding curb appeal.”
HouseLogic.com, NAR’s consumer Web site, includes dozens of remodeling projects, from kitchens and baths to siding replacements, which indicate the recouped value of the project based on a national average. According to the Cost vs. Value, seven of the top 10 most cost-effective projects nationally in terms of value recouped are exterior replacement projects. REALTORS® judged an upscale fiber-cement siding replacement as the project expected to return the most money, with an estimated 78 percent of costs recouped upon resale.
Two additional siding replacement projects were in the top 10, including foam-backed vinyl siding, expected to return 69.6 percent of costs, and upscale vinyl siding, expected to recoup 69.5 percent of costs. Three door replacements were also among the top exterior replacement projects. The steel entry door replacement is the least expensive project in the report, costing little more than $1,200 on average and expected to recoup 73 percent of costs.
The upscale garage door replacement jumped seven spots to number six this year, primarily due to the average cost of the project declining more than 15 percent nationally. The upscale and midrange garage door replacement projects are expected to return more than 71 percent of costs. One window replacement project — upscale vinyl — rounded out the last exterior replacement project in the top 10, expected to recoup 69.1 percent of costs.
“This year’s Remodeling Cost vs. Value Report shows the value of putting your home’s best façade forward, so to speak,” said National Association of REALTORS® President Moe Veissi. “Inexpensive exterior replacement projects are not only crucial to a home’s regular upkeep, but are also expected to recoup close to 70 percent of costs. Specific exterior projects such as siding, window and door replacements are part of regular home maintenance, so many homeowners are already undertaking them. These projects also do not require expensive materials and they have the added bonus of instantly adding curb appeal.”
HouseLogic.com, NAR’s consumer Web site, includes dozens of remodeling projects, from kitchens and baths to siding replacements, which indicate the recouped value of the project based on a national average. According to the Cost vs. Value, seven of the top 10 most cost-effective projects nationally in terms of value recouped are exterior replacement projects. REALTORS® judged an upscale fiber-cement siding replacement as the project expected to return the most money, with an estimated 78 percent of costs recouped upon resale.
Two additional siding replacement projects were in the top 10, including foam-backed vinyl siding, expected to return 69.6 percent of costs, and upscale vinyl siding, expected to recoup 69.5 percent of costs. Three door replacements were also among the top exterior replacement projects. The steel entry door replacement is the least expensive project in the report, costing little more than $1,200 on average and expected to recoup 73 percent of costs.
The upscale garage door replacement jumped seven spots to number six this year, primarily due to the average cost of the project declining more than 15 percent nationally. The upscale and midrange garage door replacement projects are expected to return more than 71 percent of costs. One window replacement project — upscale vinyl — rounded out the last exterior replacement project in the top 10, expected to recoup 69.1 percent of costs.
Tuesday, December 20, 2011
Thursday Morning with Mike
The first video in the series is on my website now http://www.cribbinrealty.com. Take a look and let me know what you think. It will be changing every Thursday.
Friday, December 16, 2011
Which Home Improvement Projects Offer the Best Returns?
When it comes to remodeling, exterior replacement projects have routinely rewarded home owners with more bang for their buck. This year is no different: REALTORS® recently rated many exterior improvements as among the most valuable home investment projects as part of the 2011-12 Remodeling Cost vs. Value Report.
“This year’s Remodeling Cost vs. Value Report shows the value of putting your home’s best façade forward, so to speak,” said National Association of REALTORS® President Moe Veissi. “Inexpensive exterior replacement projects are not only crucial to a home’s regular upkeep, but are also expected to recoup close to 70 percent of costs. Specific exterior projects such as siding, window and door replacements are part of regular home maintenance, so many homeowners are already undertaking them. These projects also do not require expensive materials and they have the added bonus of instantly adding curb appeal.”
HouseLogic.com, NAR’s consumer Web site, includes dozens of remodeling projects, from kitchens and baths to siding replacements, which indicate the recouped value of the project based on a national average. According to the Cost vs. Value, seven of the top 10 most cost-effective projects nationally in terms of value recouped are exterior replacement projects. REALTORS® judged an upscale fiber-cement siding replacement as the project expected to return the most money, with an estimated 78 percent of costs recouped upon resale.
Two additional siding replacement projects were in the top 10, including foam-backed vinyl siding, expected to return 69.6 percent of costs, and upscale vinyl siding, expected to recoup 69.5 percent of costs. Three door replacements were also among the top exterior replacement projects. The steel entry door replacement is the least expensive project in the report, costing little more than $1,200 on average and expected to recoup 73 percent of costs.
The upscale garage door replacement jumped seven spots to number six this year, primarily due to the average cost of the project declining more than 15 percent nationally. The upscale and midrange garage door replacement projects are expected to return more than 71 percent of costs. One window replacement project — upscale vinyl — rounded out the last exterior replacement project in the top 10, expected to recoup 69.1 percent of costs.
The 2011-12 Remodeling Cost vs. Value Report compares construction costs with resale values for 35 midrange and upscale remodeling projects comprising additions, remodels, and replacements in 80 markets across the country. Data are grouped in nine U.S. regions, following the divisions established by the U.S. Census Bureau. This is the 14th consecutive year that the report, which is produced by Remodeling magazine publisher Hanley Wood LLC, was completed in cooperation with NAR.
Source: NAR
“This year’s Remodeling Cost vs. Value Report shows the value of putting your home’s best façade forward, so to speak,” said National Association of REALTORS® President Moe Veissi. “Inexpensive exterior replacement projects are not only crucial to a home’s regular upkeep, but are also expected to recoup close to 70 percent of costs. Specific exterior projects such as siding, window and door replacements are part of regular home maintenance, so many homeowners are already undertaking them. These projects also do not require expensive materials and they have the added bonus of instantly adding curb appeal.”
HouseLogic.com, NAR’s consumer Web site, includes dozens of remodeling projects, from kitchens and baths to siding replacements, which indicate the recouped value of the project based on a national average. According to the Cost vs. Value, seven of the top 10 most cost-effective projects nationally in terms of value recouped are exterior replacement projects. REALTORS® judged an upscale fiber-cement siding replacement as the project expected to return the most money, with an estimated 78 percent of costs recouped upon resale.
Two additional siding replacement projects were in the top 10, including foam-backed vinyl siding, expected to return 69.6 percent of costs, and upscale vinyl siding, expected to recoup 69.5 percent of costs. Three door replacements were also among the top exterior replacement projects. The steel entry door replacement is the least expensive project in the report, costing little more than $1,200 on average and expected to recoup 73 percent of costs.
The upscale garage door replacement jumped seven spots to number six this year, primarily due to the average cost of the project declining more than 15 percent nationally. The upscale and midrange garage door replacement projects are expected to return more than 71 percent of costs. One window replacement project — upscale vinyl — rounded out the last exterior replacement project in the top 10, expected to recoup 69.1 percent of costs.
The 2011-12 Remodeling Cost vs. Value Report compares construction costs with resale values for 35 midrange and upscale remodeling projects comprising additions, remodels, and replacements in 80 markets across the country. Data are grouped in nine U.S. regions, following the divisions established by the U.S. Census Bureau. This is the 14th consecutive year that the report, which is produced by Remodeling magazine publisher Hanley Wood LLC, was completed in cooperation with NAR.
Source: NAR
Tuesday, December 13, 2011
BofA Considers Renting REOs Back to Former Owners
In facing large inventories of foreclosures, Bank of America is considering a program that would allow investors to buy a foreclosed home and then rent it back to the former home owner, HousingWire reports.
Bank of America is looking for ideas on how to handle the large inventories of foreclosures in some areas where demand hasn’t picked up.
"We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease," Ron Sturzenegger, who leads the bank's legacy asset servicing division, explained to HousingWire. "We would go to the customer and say, 'We'll do a short sale. Will you be interested in leasing your property back? We're still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on.'"
The program is still in very early stages and more details need to be worked out, Sturzenegger noted.
Source: “BofA Developing Foreclosure Rental Programs to Deal With Distressed Properties,” HousingWire (Dec. 9, 2011)
Bank of America is looking for ideas on how to handle the large inventories of foreclosures in some areas where demand hasn’t picked up.
"We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease," Ron Sturzenegger, who leads the bank's legacy asset servicing division, explained to HousingWire. "We would go to the customer and say, 'We'll do a short sale. Will you be interested in leasing your property back? We're still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on.'"
The program is still in very early stages and more details need to be worked out, Sturzenegger noted.
Source: “BofA Developing Foreclosure Rental Programs to Deal With Distressed Properties,” HousingWire (Dec. 9, 2011)
Friday, December 9, 2011
A Most Unpopular Room
A recent survey in a leading home & garden magazine found that the dining room is the least-used room in the modern American home. Because the dining room is typically used only for special occasions and formal gatherings, it may be wise to consider remodeling the room into an expanded kitchen or living space. Not only will this make your home more comfortable, but it also may boost your property value as well.
If you know someone who has been considering remodeling their home or perhaps moving into another home entirely, please have them call or email me. From listing their current home to finding them a property that fits their ever-changing needs, I can help make the right choices!
If you know someone who has been considering remodeling their home or perhaps moving into another home entirely, please have them call or email me. From listing their current home to finding them a property that fits their ever-changing needs, I can help make the right choices!
Wednesday, December 7, 2011
Sellers Overvalue Their Home’s Worth, Study Finds
About 76 percent of home owners believe their home is worth more than their agent’s recommended listing price -- that’s up from 73 percent last year, according to a new survey conducted by HomeGain of real estate professionals and home owners.
On the other hand, 68 percent of home buyers say homes are overpriced, with 32 percent saying homes are overpriced by more than 10 percent.
“Home buyers and sellers continue to remain apart as to home valuations with the vast majority of home owners thinking their homes are worth more than their agents and the market are telling them,” Louis Cammarosano, general manager of HomeGain said in a statement.
Source: “Three Quarters of Owners Continue to Overvalue,” RISMedia (Dec. 6, 2011)
On the other hand, 68 percent of home buyers say homes are overpriced, with 32 percent saying homes are overpriced by more than 10 percent.
“Home buyers and sellers continue to remain apart as to home valuations with the vast majority of home owners thinking their homes are worth more than their agents and the market are telling them,” Louis Cammarosano, general manager of HomeGain said in a statement.
Source: “Three Quarters of Owners Continue to Overvalue,” RISMedia (Dec. 6, 2011)
Monday, December 5, 2011
Secret Plan Revealed: Fannie Mae, Freddie Mac Planning On RENTING REOs?
Should Fannie and Freddie LEASE their massive inventory of unsold homes vs selling them as REOs?
This approach has been tested in Florida with very mixed results. Is the government clearing the decks to become the nations largest land lord?
Consider these facts:
“The ‘inflection point’ of REO sales that suggests the beginnings of a recovery probably won’t happen until 2014 Then it’s just a matter of how quickly the market will be able to absorb all those REOs,”” Rick Sharga
■Fannie Mae and Freddie Mac still hold more than 180,000 homes
■Fannie Mae sold more than 58,000 REO in the third quarter,
■Fannie disclosed that it sold their REO Assets for roughly 56% of the former loan balance…in other words, REOs sell for almost 60% less than what was owed.
■Fannie Mae has 122,616 as REOs. Freddie Mac has 60,000 REOs.
■For reference sakes it would take Freddie 15 years to sell its currently REO inventory based on market conditions. It would take Fannie nearly four years to sell their currently REO inventory (as our REO students know, Fannie is more efficient getting their assets on the market and sold)
■There are currently 11,000,0oo underwater owners.
Renting out REO properties would be a drop in the bucket — it wouldn’t clear much of the housing inventory and wouldn’t ease rising urban rents, but it would help shore up neighborhoods where housing prices took the biggest slide, and that makes it worthwhile.
The Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, is considering proposals for selling government-owned homes to investors, who would then turnaround and sell or rent them out. (The official request for policy ideas ishere.) It’s hoped that this move would help government agencies earn some much-needed revenue, boost neighborhood home values by getting buyers or renters into vacant homes and ease tight rental markets by expanding the supply of rental housing.
Even though Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) are national agencies, housing markets are local, which means that the vacant, foreclosed properties they own are concentrated in regions that were hit hardest by the housing crisis. Among larger metro areas, these agencies own the most foreclosed property – known as REO (real estate owned) – in Las Vegas and Atlanta, after adjusting for metro area size. Several metros in Arizona, Michigan and California are also among the top 20 metros where the government owns a lot of homes.
Generally, places that suffered most during the housing bust from severely falling home prices and high mortgage delinquency rates now have the highest concentration of these vacant, foreclosed government-owned homes. The big exception is Florida. While the Sunshine State experienced big price declines and lots of defaults, surprisingly few of the homes lost there have made it through the foreclosure process and can be put back on the market. Why is that? It’s because the foreclosure process in Florida takes a lot longer than in most other states. As a result, many of the Florida homes that the government and banks plan to put on the market someday are trapped in a slow limbo today.
Would selling these government homes to investors help neighborhoods? Yes. Vacant, foreclosed homes drag down the value of neighboring properties, so getting those homes occupied would help stabilize neighborhoods. A push to rent or sell these homes can and would help neighborhood home prices in areas where the government owns a lot of the homes – but such a policy wouldn’t do as much good for hard-hit Florida where the government has less REO to sell. The map shows where the government owns the most REO ready to sell (relative to total housing units) – and where getting those homes occupied could help local markets the most. The Southwest, inland California, northern Georgia and southeastern Michiganstand to gain the most from selling or renting out government REO.
But if you don’t live in a neighborhood with lots of homes that the government can sell or rent, then REO policies wouldn’t do you much good. Renting out these government-owned homes wouldn’t ease pressure on tightening urban rental markets. Renters typically live in bigger, denser cities, which are not where most of the government-owned homes are. In fact the typical location of a government-owned home is in a neighborhood with fewer renters, higher rental vacancies and where homes are more spread out. (FYI, this description is based on the housing characteristics of zip codes where these government REOs are located.) In short: you’d benefit if you live near government-owned vacant homes that get occupied, or if you’re looking to rent in neighborhoods where lots of overbuilding led to lots of foreclosures, but most people facing tight rental markets live far from these clusters of REO properties. Renting out government-owned homes wouldn’t give renters more options in most neighborhoods, which means that those same government-owned homes might have a tough time finding tenants.
And even if the government sold all its REO to investors and those investors were able to find buyers or renters immediately, it would make only a small dent in the overhang of empty homes from the housing boom. Of all the REO homes currently owned by Fannie Mae, Freddie Mac and FHA, fewer than 100,000 units are currently listed for sale. (In total, including those not yet being marketed for sale, these agencies own over 200,000 homes.) There are over 3 million total homes on the market, plus millions more of “shadow inventory” – homes in default or foreclosure that aren’t on the market but are likely to be in the future. Getting people in 100,000 government-owned homes still leaves a lot of housing supply that will take years for the market to absorb.
So is this policy a misstep? No. It would help some of the most struggling neighborhoods in the country by getting vacant homes occupied. It leaves lots of big problems unsolved, but no one housing policy will fix what ails every local housing market. And, remember, housing is local, so the housing market is not just the federal government’s problem: state and local governments need to act, too. Florida loses out on the benefits of REO sales because its foreclosure process takes so long. Cities with tight rental markets need to boost supply by undoing regulations that make construction expensive or impossible. Just because one policy wouldn’t fix everything is no reason not to do it, but we can’t stop there.
This approach has been tested in Florida with very mixed results. Is the government clearing the decks to become the nations largest land lord?
Consider these facts:
“The ‘inflection point’ of REO sales that suggests the beginnings of a recovery probably won’t happen until 2014 Then it’s just a matter of how quickly the market will be able to absorb all those REOs,”” Rick Sharga
■Fannie Mae and Freddie Mac still hold more than 180,000 homes
■Fannie Mae sold more than 58,000 REO in the third quarter,
■Fannie disclosed that it sold their REO Assets for roughly 56% of the former loan balance…in other words, REOs sell for almost 60% less than what was owed.
■Fannie Mae has 122,616 as REOs. Freddie Mac has 60,000 REOs.
■For reference sakes it would take Freddie 15 years to sell its currently REO inventory based on market conditions. It would take Fannie nearly four years to sell their currently REO inventory (as our REO students know, Fannie is more efficient getting their assets on the market and sold)
■There are currently 11,000,0oo underwater owners.
Renting out REO properties would be a drop in the bucket — it wouldn’t clear much of the housing inventory and wouldn’t ease rising urban rents, but it would help shore up neighborhoods where housing prices took the biggest slide, and that makes it worthwhile.
The Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, is considering proposals for selling government-owned homes to investors, who would then turnaround and sell or rent them out. (The official request for policy ideas ishere.) It’s hoped that this move would help government agencies earn some much-needed revenue, boost neighborhood home values by getting buyers or renters into vacant homes and ease tight rental markets by expanding the supply of rental housing.
Even though Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) are national agencies, housing markets are local, which means that the vacant, foreclosed properties they own are concentrated in regions that were hit hardest by the housing crisis. Among larger metro areas, these agencies own the most foreclosed property – known as REO (real estate owned) – in Las Vegas and Atlanta, after adjusting for metro area size. Several metros in Arizona, Michigan and California are also among the top 20 metros where the government owns a lot of homes.
Generally, places that suffered most during the housing bust from severely falling home prices and high mortgage delinquency rates now have the highest concentration of these vacant, foreclosed government-owned homes. The big exception is Florida. While the Sunshine State experienced big price declines and lots of defaults, surprisingly few of the homes lost there have made it through the foreclosure process and can be put back on the market. Why is that? It’s because the foreclosure process in Florida takes a lot longer than in most other states. As a result, many of the Florida homes that the government and banks plan to put on the market someday are trapped in a slow limbo today.
Would selling these government homes to investors help neighborhoods? Yes. Vacant, foreclosed homes drag down the value of neighboring properties, so getting those homes occupied would help stabilize neighborhoods. A push to rent or sell these homes can and would help neighborhood home prices in areas where the government owns a lot of the homes – but such a policy wouldn’t do as much good for hard-hit Florida where the government has less REO to sell. The map shows where the government owns the most REO ready to sell (relative to total housing units) – and where getting those homes occupied could help local markets the most. The Southwest, inland California, northern Georgia and southeastern Michiganstand to gain the most from selling or renting out government REO.
But if you don’t live in a neighborhood with lots of homes that the government can sell or rent, then REO policies wouldn’t do you much good. Renting out these government-owned homes wouldn’t ease pressure on tightening urban rental markets. Renters typically live in bigger, denser cities, which are not where most of the government-owned homes are. In fact the typical location of a government-owned home is in a neighborhood with fewer renters, higher rental vacancies and where homes are more spread out. (FYI, this description is based on the housing characteristics of zip codes where these government REOs are located.) In short: you’d benefit if you live near government-owned vacant homes that get occupied, or if you’re looking to rent in neighborhoods where lots of overbuilding led to lots of foreclosures, but most people facing tight rental markets live far from these clusters of REO properties. Renting out government-owned homes wouldn’t give renters more options in most neighborhoods, which means that those same government-owned homes might have a tough time finding tenants.
And even if the government sold all its REO to investors and those investors were able to find buyers or renters immediately, it would make only a small dent in the overhang of empty homes from the housing boom. Of all the REO homes currently owned by Fannie Mae, Freddie Mac and FHA, fewer than 100,000 units are currently listed for sale. (In total, including those not yet being marketed for sale, these agencies own over 200,000 homes.) There are over 3 million total homes on the market, plus millions more of “shadow inventory” – homes in default or foreclosure that aren’t on the market but are likely to be in the future. Getting people in 100,000 government-owned homes still leaves a lot of housing supply that will take years for the market to absorb.
So is this policy a misstep? No. It would help some of the most struggling neighborhoods in the country by getting vacant homes occupied. It leaves lots of big problems unsolved, but no one housing policy will fix what ails every local housing market. And, remember, housing is local, so the housing market is not just the federal government’s problem: state and local governments need to act, too. Florida loses out on the benefits of REO sales because its foreclosure process takes so long. Cities with tight rental markets need to boost supply by undoing regulations that make construction expensive or impossible. Just because one policy wouldn’t fix everything is no reason not to do it, but we can’t stop there.
Saturday, December 3, 2011
Pros and cons of paying mortgage during short sale
Q: We just got multiple offers on my "vacation" house listed as a short sale. And so far, we have begged and borrowed to keep our mortgage current so our credit scores will be less bruised. But now that our house is in contract, do I continue to pay the mortgage? Our debt exceeds our income due to job and benefit loss.
Here's my bigger concern: Since we are current, I don't want the bank to reject the offers just because we have been current, although our financial papers will prove that our debt exceeds our income. --Cindy
A: There are a number of schools of thought and approaches to deciding whether to continue making your mortgage payments while you're selling your home on a short sale, and your ultimate decision will require you to weigh a number of factors and see where your personal calculus of your own values and interests comes out:
Legal: Legally speaking, you have an obligation to pay your mortgage and property taxes as long as you own your home. While you might very well make the decision not to for a number of reasons (see below), it's important to keep the legal contract you made to pay especially your mortgage in mind, as some lenders make efforts to reserve the right to come after you later for the deficiency (i.e., the difference between the sale price of your home and your mortgage balance). For this reason, it's not a bad idea to have a local real estate attorney involved in your short-sale transaction, to help you negotiate a complete release of liability for the mortgage.
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The moral/ethical perspective: Morally and ethically, some homeowners view themselves as having an obligation in line with their legal commitment to pay all these items. Others look at the various factors beyond their control that have forced them to short-sale their home, like the decline in property values and the weak employment market, and have made a decision that their personal moral imperative weighs in favor of protecting their family finances and children's education funds. In that vein, some make the conscious decision to stop paying once they're in a short-sale situation or on a clear path to foreclosure.
Financial/business: Once you know 100 percent that you'll be divesting of your home in some way, shape or form, continued investments in the property can seem to easily fall into the "throwing good money after bad" bucket, looking at the situation from a strictly business and financial perspective. There is also a strong sentiment among many real estate professionals that if you keep your mortgage current, while applying for a short sale or loan modification of any sort, you decrease the chances that your lender will approve of the sale.
The theory goes that if you are current on your payments, you can't possibly have the level of hardship you must claim (and the lender must believe you have) for them to agree to waive the deficiency amount and release you from the mortgage.
I've seen very mixed feelings on this in the real estate industry; on this point specifically, you should definitely talk with your listing agent and your local attorney, and take their advice into account -- they might have worked with this bank in the past and be able to shed light on how staying current or falling behind may affect the success prospects of your short sale application.
Credit/ability to buy again: Right now, you are probably fixated on getting out from under this onerous debt, as virtually every homeowner in your situation is as a matter of course. But I've worked with a number of folks through this entire experience of going upside down, losing a home through a foreclosure or short sale and financial recovery, and I know that before too terribly long, you could very well be looking to buy a home again. Just be aware that most lenders will impose a two- to three-year waiting period after you have a short sale, if you were in default on your mortgage at the time the short sale closed (sometimes the waiting period is as long as seven years, depending on what type of loan you're trying to use to buy your new home).
However, if you do not default on your loan and are able to get your lender to green-light your short sale, you can qualify for an FHA mortgage immediately. I don't know your personal situation, and it's been my experience that the majority of homeowners who have a financial hardship severe enough to even attempt a short sale need a couple of years to get back on their feet, but if you think you'll want to buy another home anytime sooner than two years from now, you'll need to stay current on this mortgage.
Just as there are many factors your bank will weigh in determining whether to allow your short sale to close, and on what terms, you have a lot of considerations to weigh in deciding whether to continue making your mortgage payments while you await their decision. I can't urge you strongly enough to include your real estate agent and an attorney in your decision-making process.
By Tara-Nicholle Nelson, Monday, November 28, 2011.
Inman News™
Here's my bigger concern: Since we are current, I don't want the bank to reject the offers just because we have been current, although our financial papers will prove that our debt exceeds our income. --Cindy
A: There are a number of schools of thought and approaches to deciding whether to continue making your mortgage payments while you're selling your home on a short sale, and your ultimate decision will require you to weigh a number of factors and see where your personal calculus of your own values and interests comes out:
Legal: Legally speaking, you have an obligation to pay your mortgage and property taxes as long as you own your home. While you might very well make the decision not to for a number of reasons (see below), it's important to keep the legal contract you made to pay especially your mortgage in mind, as some lenders make efforts to reserve the right to come after you later for the deficiency (i.e., the difference between the sale price of your home and your mortgage balance). For this reason, it's not a bad idea to have a local real estate attorney involved in your short-sale transaction, to help you negotiate a complete release of liability for the mortgage.
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The moral/ethical perspective: Morally and ethically, some homeowners view themselves as having an obligation in line with their legal commitment to pay all these items. Others look at the various factors beyond their control that have forced them to short-sale their home, like the decline in property values and the weak employment market, and have made a decision that their personal moral imperative weighs in favor of protecting their family finances and children's education funds. In that vein, some make the conscious decision to stop paying once they're in a short-sale situation or on a clear path to foreclosure.
Financial/business: Once you know 100 percent that you'll be divesting of your home in some way, shape or form, continued investments in the property can seem to easily fall into the "throwing good money after bad" bucket, looking at the situation from a strictly business and financial perspective. There is also a strong sentiment among many real estate professionals that if you keep your mortgage current, while applying for a short sale or loan modification of any sort, you decrease the chances that your lender will approve of the sale.
The theory goes that if you are current on your payments, you can't possibly have the level of hardship you must claim (and the lender must believe you have) for them to agree to waive the deficiency amount and release you from the mortgage.
I've seen very mixed feelings on this in the real estate industry; on this point specifically, you should definitely talk with your listing agent and your local attorney, and take their advice into account -- they might have worked with this bank in the past and be able to shed light on how staying current or falling behind may affect the success prospects of your short sale application.
Credit/ability to buy again: Right now, you are probably fixated on getting out from under this onerous debt, as virtually every homeowner in your situation is as a matter of course. But I've worked with a number of folks through this entire experience of going upside down, losing a home through a foreclosure or short sale and financial recovery, and I know that before too terribly long, you could very well be looking to buy a home again. Just be aware that most lenders will impose a two- to three-year waiting period after you have a short sale, if you were in default on your mortgage at the time the short sale closed (sometimes the waiting period is as long as seven years, depending on what type of loan you're trying to use to buy your new home).
However, if you do not default on your loan and are able to get your lender to green-light your short sale, you can qualify for an FHA mortgage immediately. I don't know your personal situation, and it's been my experience that the majority of homeowners who have a financial hardship severe enough to even attempt a short sale need a couple of years to get back on their feet, but if you think you'll want to buy another home anytime sooner than two years from now, you'll need to stay current on this mortgage.
Just as there are many factors your bank will weigh in determining whether to allow your short sale to close, and on what terms, you have a lot of considerations to weigh in deciding whether to continue making your mortgage payments while you await their decision. I can't urge you strongly enough to include your real estate agent and an attorney in your decision-making process.
By Tara-Nicholle Nelson, Monday, November 28, 2011.
Inman News™
Thursday, December 1, 2011
Fannie Mae Halts Foreclosures for the Holidays
Fannie Mae says it will suspend evictions for single-family foreclosures and two- to four-unit properties during the holiday season, from Dec. 19 through Jan. 2, 2012.
“The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” Terry Edwards, executive vice president of Credit Portfolio Management for Fannie Mae, said in a statement. “No family should have to give up their home during this holiday season.”
While the holiday moratorium is in place, legal and administrative proceedings for evictions may continue, but “families living in foreclosed properties will be permitted to remain in the home,” Fannie Mae announced in a statement.
Source: Fannie Mae
“The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” Terry Edwards, executive vice president of Credit Portfolio Management for Fannie Mae, said in a statement. “No family should have to give up their home during this holiday season.”
While the holiday moratorium is in place, legal and administrative proceedings for evictions may continue, but “families living in foreclosed properties will be permitted to remain in the home,” Fannie Mae announced in a statement.
Source: Fannie Mae
Wednesday, November 30, 2011
Foreclosures Continue to Weigh on Home Values
Distressed homes continue to chip away at overall home prices across the country, but the “plunging collapse of prices seen in 2007-2009 seem to be behind us,” David Blitzer, chairman of the Index Committee at Standard and Poor, said in a recent statement.
For the third quarter, market research firm CoreLogic reports about 22 percent of all borrowers with residential homes are “underwater,” owing more on their mortgage than their home is currently worth.
"The negative equity portion definitely continues to be one of the major issues for the housing market, [and] the overall economy as well," Anika Khan, an economist with Wells Fargo Securities, told Market News International.
The states with the highest percentage of borrowers with negative equity, according to CoreLogic are:
•Nevada: 58 percent
•Arizona: 47 percent
•Florida: 44 percent
•Michigan: 35 percent
•Georgia: 30 percent
"Home prices continue to come down due to the number of distressed transactions, be it short sales or foreclosures or REO, and we expect that pace to continue into 2012," Khan told Market News International.
Source: “Analysts: Distressed Sales Still Weighing On US Housing Market,” Market News International (Nov. 29, 2011)
For the third quarter, market research firm CoreLogic reports about 22 percent of all borrowers with residential homes are “underwater,” owing more on their mortgage than their home is currently worth.
"The negative equity portion definitely continues to be one of the major issues for the housing market, [and] the overall economy as well," Anika Khan, an economist with Wells Fargo Securities, told Market News International.
The states with the highest percentage of borrowers with negative equity, according to CoreLogic are:
•Nevada: 58 percent
•Arizona: 47 percent
•Florida: 44 percent
•Michigan: 35 percent
•Georgia: 30 percent
"Home prices continue to come down due to the number of distressed transactions, be it short sales or foreclosures or REO, and we expect that pace to continue into 2012," Khan told Market News International.
Source: “Analysts: Distressed Sales Still Weighing On US Housing Market,” Market News International (Nov. 29, 2011)
Sunday, November 27, 2011
“The heart buys a place to live, the head buys a good investment, together they buy the perfect home.”
With a price tag involving many zeros, buying a home fits squarely into the investment category. Yet, choosing a home strictly as an investment may not be a great idea. If you ignore your lifestyle needs and aesthetic preferences, you could get unhappy enough to sell your investment long before it can provide a return.
Look for a balance between your personal needs and your financial goals by paying attention to appreciation rates in the area; neighborhood amenities; purchase and maintenance costs; size and architectural style; and proximity to work, schools, friends, shopping and entertainment.
Look for a balance between your personal needs and your financial goals by paying attention to appreciation rates in the area; neighborhood amenities; purchase and maintenance costs; size and architectural style; and proximity to work, schools, friends, shopping and entertainment.
Tuesday, November 22, 2011
Should You Consider Listing Your Home During the Holidays?
As the holidays approach, I’m always asked the same questions:
•Should we keep our property on the real estate market or take it off?
•Do we list now, wait until after the first of the year, or hold off until spring?
In the past, conventional wisdom said you shouldn’t try to sell a home during the holidays. However, the old thinking doesn’t really apply any longer — thanks to the Internet and hectic lifestyles as well as traditional rules of supply and demand.
Whether to sell or not at the end of the year has to do with your particular situation and market. But in general, here’s some real estate advice about why you should consider listing your home during the holidays, or even in January.
Buyers are always looking for properties online
Historically, potential home buyers felt that the holidays were too hectic for home shopping. They were preoccupied with planning parties, cooking meals, buying presents or planning vacations. Going out with a real estate agent to look at properties conflicted with a busy holiday schedule. This made perfect sense — before the Internet, smart phones, and tablets came along.
In my opinion, traditional buying and selling seasons have evolved as a result of instant, ubiquitous access to property listings. Someone who is serious today about buying real estate is always looking.
Our hectic lifestyles also play a role. Often, serious buyers are working hard and not shifting into holiday mode until the last minute. Even during the holiday break, they’re squeezing in work. They’re already staying “on the grid,” so why not continue monitoring the real estate listings in their area too?
The inventory — and the competition — is usually lighter during the holidays
Despite our always-on access to property listings today, there’s still a lingering perception that the year-end holidays aren’t a good time to list a home. Similarly, if your property has been sitting on the market for months, conventional wisdom says to give it a rest during the holidays. Given these factors, we end up seeing the inventory for good homes tighten up this time of year. But buyers are still out there looking at real estate and no doubt wishing there were more properties available.
In fact, if I have a seller who has been talking about selling, is truly motivated, is flexible on timing, and has a home that truly sparkles, I often suggest they list right after Thanksgiving. There’s still a window of several weeks to get buyers into your home before the end of the year. And those buyers flipping through listings at their kid’s soccer game will be so excited to see something new and awesome hitting the market — especially if there’s a lack of good inventory in their area. Those motivated soccer moms and dads are the ones who’ll take the time to see your home, regardless of what the calendar says.
Home been on the market too long? This could be a great time to lower the price or change your strategy
If your property has been sitting on the market for months, most buyers and their agents will see it as stale or overpriced and disregard it — no matter how great it is or how light the competition currently is.
In that scenario, it’s time to take action, and the year-end holidays can be a golden opportunity to shift course. Making a dramatic price reduction or overcoming some major obstacle that has been preventing the sale might be just the right thing to do this time of year. If you had lower offers early on but you weren’t ready to accept them, or you keep hearing that there are issues with the way your property shows, this could be your chance to show the market you’re listening and serious about selling. The motivated buyers will notice you and take a look.
You even stand a chance of getting a sale closed before the end of the year; I’ve seen it happen. As always, before you make any big changes, talk it over with your real estate agent.
Don’t want to be bothered during the holidays? List your property in January
Admittedly, the thought of keeping the house clean, holding open houses, and vacating to accommodate last-minute showings during the holidays is a deal killer for some. If so, consider listing your property after New Year’s Day.
Traditionally, we don’t see much inventory coming on the market in January. It’s cold in most places, and many sellers prefer to wait until the spring, a more conventional time to sell. As a result, we don’t see much inventory in January. And yet, each January my phone rings with new buyers wanting to get into the market. Or I’ll hear from on-the-fence buyers who may have lost interest earlier in the year and are now suddenly motivated again.
There’s something about the beginning of a new year that galvanizes people. The motivation to buy could be due to year-end tax planning, with buyers seeing how much they owe and how owning a home could help. It could be because of New Year’s resolutions to finally stop spending money on rentals and invest in property. Maybe a rich relative gave them money for a down payment (wouldn’t that be nice?).
Whatever the motivation, for sellers it means one thing: There can be an increase in demand at a time when inventory is traditionally low — resulting in less competition from other sellers. If you’re motivated to sell your home, you’ll have an even more “captive” audience in January.
•Should we keep our property on the real estate market or take it off?
•Do we list now, wait until after the first of the year, or hold off until spring?
In the past, conventional wisdom said you shouldn’t try to sell a home during the holidays. However, the old thinking doesn’t really apply any longer — thanks to the Internet and hectic lifestyles as well as traditional rules of supply and demand.
Whether to sell or not at the end of the year has to do with your particular situation and market. But in general, here’s some real estate advice about why you should consider listing your home during the holidays, or even in January.
Buyers are always looking for properties online
Historically, potential home buyers felt that the holidays were too hectic for home shopping. They were preoccupied with planning parties, cooking meals, buying presents or planning vacations. Going out with a real estate agent to look at properties conflicted with a busy holiday schedule. This made perfect sense — before the Internet, smart phones, and tablets came along.
In my opinion, traditional buying and selling seasons have evolved as a result of instant, ubiquitous access to property listings. Someone who is serious today about buying real estate is always looking.
Our hectic lifestyles also play a role. Often, serious buyers are working hard and not shifting into holiday mode until the last minute. Even during the holiday break, they’re squeezing in work. They’re already staying “on the grid,” so why not continue monitoring the real estate listings in their area too?
The inventory — and the competition — is usually lighter during the holidays
Despite our always-on access to property listings today, there’s still a lingering perception that the year-end holidays aren’t a good time to list a home. Similarly, if your property has been sitting on the market for months, conventional wisdom says to give it a rest during the holidays. Given these factors, we end up seeing the inventory for good homes tighten up this time of year. But buyers are still out there looking at real estate and no doubt wishing there were more properties available.
In fact, if I have a seller who has been talking about selling, is truly motivated, is flexible on timing, and has a home that truly sparkles, I often suggest they list right after Thanksgiving. There’s still a window of several weeks to get buyers into your home before the end of the year. And those buyers flipping through listings at their kid’s soccer game will be so excited to see something new and awesome hitting the market — especially if there’s a lack of good inventory in their area. Those motivated soccer moms and dads are the ones who’ll take the time to see your home, regardless of what the calendar says.
Home been on the market too long? This could be a great time to lower the price or change your strategy
If your property has been sitting on the market for months, most buyers and their agents will see it as stale or overpriced and disregard it — no matter how great it is or how light the competition currently is.
In that scenario, it’s time to take action, and the year-end holidays can be a golden opportunity to shift course. Making a dramatic price reduction or overcoming some major obstacle that has been preventing the sale might be just the right thing to do this time of year. If you had lower offers early on but you weren’t ready to accept them, or you keep hearing that there are issues with the way your property shows, this could be your chance to show the market you’re listening and serious about selling. The motivated buyers will notice you and take a look.
You even stand a chance of getting a sale closed before the end of the year; I’ve seen it happen. As always, before you make any big changes, talk it over with your real estate agent.
Don’t want to be bothered during the holidays? List your property in January
Admittedly, the thought of keeping the house clean, holding open houses, and vacating to accommodate last-minute showings during the holidays is a deal killer for some. If so, consider listing your property after New Year’s Day.
Traditionally, we don’t see much inventory coming on the market in January. It’s cold in most places, and many sellers prefer to wait until the spring, a more conventional time to sell. As a result, we don’t see much inventory in January. And yet, each January my phone rings with new buyers wanting to get into the market. Or I’ll hear from on-the-fence buyers who may have lost interest earlier in the year and are now suddenly motivated again.
There’s something about the beginning of a new year that galvanizes people. The motivation to buy could be due to year-end tax planning, with buyers seeing how much they owe and how owning a home could help. It could be because of New Year’s resolutions to finally stop spending money on rentals and invest in property. Maybe a rich relative gave them money for a down payment (wouldn’t that be nice?).
Whatever the motivation, for sellers it means one thing: There can be an increase in demand at a time when inventory is traditionally low — resulting in less competition from other sellers. If you’re motivated to sell your home, you’ll have an even more “captive” audience in January.
Sunday, November 20, 2011
“Most home fix-ups take more elbow grease than money.”
Getting your home ready to sell doesn't have to be an expensive proposition--in most cases, it shouldn't be. Few remodeling projects pay back 100% of their cost. Why spend lots of money preparing your home to sell if you can't raise its price enough to cover your expenses?
The ideal type of preparation should put your home in good working order and make it attractive. Needed repairs, fresh paint, removing clutter, a thorough cleaning, a trim landscape--they're all relatively low-cost (if high-energy) things you can do to ensure the highest profit possible from your home sale.
The ideal type of preparation should put your home in good working order and make it attractive. Needed repairs, fresh paint, removing clutter, a thorough cleaning, a trim landscape--they're all relatively low-cost (if high-energy) things you can do to ensure the highest profit possible from your home sale.
Friday, November 18, 2011
Housing Picture Expected to Brighten in 2012
STILL NOT GOOD GOING UP .25% THAT IS NOTHING. WHAT IS THE MARGIN OF ERROR 2-3%?
Better times are ahead for the real estate market in the new year, according to several forecasts and recent surveys.
Fiserv, a financial information services firm, predicts that 95 percent of the 384 metro areas it tracks will see prices rise in 2012.
Many surveys and economists are forecasting a very modest increase for the housing market in the new year, but after several years of dropping prices and rising foreclosures, even the slightest increase would signal a glimmer of hope for the market. In a survey by MacroMarkets of 100 economists and real estate professionals, respondents reported home values will likely rise slightly at 0.25 percent in the new year.
The real estate market still faces a large backlog of foreclosures that it must work through in many markets. As such, price gains through 2015 will likely just be around 1.1 percent, according to the survey. However, this is a reversal after a forecast of 2.8 percent decline in median home values for this year.
Foreclosures continue to weigh on many markets and are preventing home values from stabilizing, economists say.
"The water is very deep in the living room, but it's no longer getting deeper and is starting to recede,” says Mark Fleming, CoreLogic's chief economist.
Low interest rates on mortgages mixed with more affordable housing for families in the median income range are expected help the market in its rebound in 2012, economists say.
Source: “A Smaller House Will Make a Big Difference,” Money Magazine (Nov. 14, 2011)
Better times are ahead for the real estate market in the new year, according to several forecasts and recent surveys.
Fiserv, a financial information services firm, predicts that 95 percent of the 384 metro areas it tracks will see prices rise in 2012.
Many surveys and economists are forecasting a very modest increase for the housing market in the new year, but after several years of dropping prices and rising foreclosures, even the slightest increase would signal a glimmer of hope for the market. In a survey by MacroMarkets of 100 economists and real estate professionals, respondents reported home values will likely rise slightly at 0.25 percent in the new year.
The real estate market still faces a large backlog of foreclosures that it must work through in many markets. As such, price gains through 2015 will likely just be around 1.1 percent, according to the survey. However, this is a reversal after a forecast of 2.8 percent decline in median home values for this year.
Foreclosures continue to weigh on many markets and are preventing home values from stabilizing, economists say.
"The water is very deep in the living room, but it's no longer getting deeper and is starting to recede,” says Mark Fleming, CoreLogic's chief economist.
Low interest rates on mortgages mixed with more affordable housing for families in the median income range are expected help the market in its rebound in 2012, economists say.
Source: “A Smaller House Will Make a Big Difference,” Money Magazine (Nov. 14, 2011)
Sunday, November 13, 2011
INSPECTIONS:Smart Strategies To Make A Home Inspection Work For You
Whether you're buying or selling a home (or both), pay special attention to how a home inspection can serve your interests. A professional home inspection protects both buyers and sellers from legal action sparked by problems found after a home is sold.
Buyers have long been advised to include a home inspection contingency in their purchase offers. The cost--$300 or so--is well worth the information it buys, protecting the purchaser from costly surprises later on. In fact, many homes harbor problems their owners aren't even aware of until a professional inspector points them out. (That's why some savvy sellers have been getting their homes inspected before putting them on the market.)
A sales contract may include one of two types of inspection contingencies:
1. A "general contingency" inspection clause stipulates that the contract is contingent on the buyer conducting a "satisfactory" professional home inspection. The contingency specifies a certain number of days for the buyer to conduct the inspection and report back to the seller, and allows the seller time to respond to the inspector's findings.
With a general contingency clause, if the buyer dislikes anything in the inspection results and chooses not to go forward with the transaction, the contract is null and void. Obviously, this type of contingency favors the buyer.
2. A "specific contingency" spells out particular criteria that must be met before the buyer can back out, e.g., the owner's failure to fix a problem identified by the inspection. The buyer can't just walk away for any reason. Although not ideal for buyers, this type of contingency offers more protection than no home inspection clause at all.
Checking It Out
The most reputable home inspectors are members of The American Society of Home Inspectors (ASHI) and are bonded, licensed and insured.
What do these professionals look at?
ASHI Standards of Practice require that an inspection evaluate the following:
• Structural Components
• Exterior
• Roofing o Central Air Conditioning
• Heating
• Plumbing
• Electrical
• Insulation and Ventilation
• Interiors
It's equally important to understand what a professional inspector is not supposed to do.
An inspector can't tell you everything you want to know about a house. Remember, inspectors are generalists who have a fair amount of information about all home systems but usually are not experts on any of them.
Professional inspectors are not supposed to fix problems they find. How much would you trust someone if you knew they were looking for a repair job while searching for defects in the home? If a major problem is found, ask a reputable contractor how much it would cost to repair or replace it.
Don't expect the inspection report to include the condition of every single nail, electrical wire or piece of plumbing. Inspectors check out the overall systems, not all the joints and nail pops (unless they are visible).
Inspectors can't give you the reason for the defects they find. Their job is to find defects, not to explain them.
Don't expect a listing of cosmetic concerns--that's the buyer's job.
The inspector has no way of telling how long a system will last and shouldn't volunteer an opinion about it. The inspection is not intended to be a guarantee of future performance.
Non-Contingent Inspections
As many real estate markets in the nation have heated up, buyers have increasingly been making purchase offers without including a home-inspection contingency. In an active market, this strategy can help make your offer more attractive to a seller, even though it puts you at risk for purchasing a home with problems that could be expensive to correct.
If you're considering foregoing the home-inspection contingency, think seriously about having the home inspected anyway. Finding out ahead of time what you'll need to fix will help you budget more realistically for your home purchase. For example, you may want to make a smaller down payment so you'll have the cash you need for repairs.
Another reason to order a non-contingent inspection is if you're thinking about purchasing a home warranty. These warranties can afford you some protection in case a system in your home malfunctions, but they will not cover "pre-existing defects." If something does go wrong later, your home inspection report can help you prove to the warranty provider that the problem did not exist when you purchased the home.
Seller Benefits
Especially in slow markets, sellers do well to order home inspections (and make needed repairs) before putting their homes on the market. Being able to show that your home has a clean bill of health can encourage purchase offers from skittish buyers and speed your contract settlement.
Even if you're selling in a seller's market, you may want to accept a contract with an inspection contingency or have your home pre-inspected. Letting buyers know about defects you don't intend to correct will help provide protection against legal action later. More and more buyers have been filing after-purchase lawsuits against home sellers for major defects found in homes that were not inspected before settlement. Whether such lawsuits are successful or not, they represent a real hassle for sellers.
Give us a call if you have any questions about ordering professional home inspections. We would be happy to provide you with a list of reputable inspectors in the area.
Buyers have long been advised to include a home inspection contingency in their purchase offers. The cost--$300 or so--is well worth the information it buys, protecting the purchaser from costly surprises later on. In fact, many homes harbor problems their owners aren't even aware of until a professional inspector points them out. (That's why some savvy sellers have been getting their homes inspected before putting them on the market.)
A sales contract may include one of two types of inspection contingencies:
1. A "general contingency" inspection clause stipulates that the contract is contingent on the buyer conducting a "satisfactory" professional home inspection. The contingency specifies a certain number of days for the buyer to conduct the inspection and report back to the seller, and allows the seller time to respond to the inspector's findings.
With a general contingency clause, if the buyer dislikes anything in the inspection results and chooses not to go forward with the transaction, the contract is null and void. Obviously, this type of contingency favors the buyer.
2. A "specific contingency" spells out particular criteria that must be met before the buyer can back out, e.g., the owner's failure to fix a problem identified by the inspection. The buyer can't just walk away for any reason. Although not ideal for buyers, this type of contingency offers more protection than no home inspection clause at all.
Checking It Out
The most reputable home inspectors are members of The American Society of Home Inspectors (ASHI) and are bonded, licensed and insured.
What do these professionals look at?
ASHI Standards of Practice require that an inspection evaluate the following:
• Structural Components
• Exterior
• Roofing o Central Air Conditioning
• Heating
• Plumbing
• Electrical
• Insulation and Ventilation
• Interiors
It's equally important to understand what a professional inspector is not supposed to do.
An inspector can't tell you everything you want to know about a house. Remember, inspectors are generalists who have a fair amount of information about all home systems but usually are not experts on any of them.
Professional inspectors are not supposed to fix problems they find. How much would you trust someone if you knew they were looking for a repair job while searching for defects in the home? If a major problem is found, ask a reputable contractor how much it would cost to repair or replace it.
Don't expect the inspection report to include the condition of every single nail, electrical wire or piece of plumbing. Inspectors check out the overall systems, not all the joints and nail pops (unless they are visible).
Inspectors can't give you the reason for the defects they find. Their job is to find defects, not to explain them.
Don't expect a listing of cosmetic concerns--that's the buyer's job.
The inspector has no way of telling how long a system will last and shouldn't volunteer an opinion about it. The inspection is not intended to be a guarantee of future performance.
Non-Contingent Inspections
As many real estate markets in the nation have heated up, buyers have increasingly been making purchase offers without including a home-inspection contingency. In an active market, this strategy can help make your offer more attractive to a seller, even though it puts you at risk for purchasing a home with problems that could be expensive to correct.
If you're considering foregoing the home-inspection contingency, think seriously about having the home inspected anyway. Finding out ahead of time what you'll need to fix will help you budget more realistically for your home purchase. For example, you may want to make a smaller down payment so you'll have the cash you need for repairs.
Another reason to order a non-contingent inspection is if you're thinking about purchasing a home warranty. These warranties can afford you some protection in case a system in your home malfunctions, but they will not cover "pre-existing defects." If something does go wrong later, your home inspection report can help you prove to the warranty provider that the problem did not exist when you purchased the home.
Seller Benefits
Especially in slow markets, sellers do well to order home inspections (and make needed repairs) before putting their homes on the market. Being able to show that your home has a clean bill of health can encourage purchase offers from skittish buyers and speed your contract settlement.
Even if you're selling in a seller's market, you may want to accept a contract with an inspection contingency or have your home pre-inspected. Letting buyers know about defects you don't intend to correct will help provide protection against legal action later. More and more buyers have been filing after-purchase lawsuits against home sellers for major defects found in homes that were not inspected before settlement. Whether such lawsuits are successful or not, they represent a real hassle for sellers.
Give us a call if you have any questions about ordering professional home inspections. We would be happy to provide you with a list of reputable inspectors in the area.
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