Tuesday, August 31, 2010

Sales Fall, Prices Rise

Existing-home sales were sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, NAR says. Existing-home sales dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009. Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales--accounting for the bulk of transactions--are at the lowest level since May of 1995. "Given rock-bottom interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly if the economy consistently adds jobs," says NAR Chief Economist Lawrence Yun. Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. 

Saturday, August 21, 2010

Today's Best Strategy to Get It SOLD!

—Price it right. Buyers have access to lots of data, and they'll know if your house is too expensive.

—Offer to pay some of the buyer's closing costs.

—Maximize exposure. Saturate the Internet and all forms of social media with your listing.

—Use great photos, not good ones. Make sure your house makes a great first impression.

—Make it sing. Listing information must be complete and well-written.

—Curb appeal matters. Spend a little money on flowers, new plants and fresh paint.

—Inside, your house should look fresh
, so make sure the paint, carpeting, light fixtures and appliances are updated and clean.

—De-clutter. Eliminate one-third to two-thirds of your stuff; hire a stager.

—Network. Sales come together because brains understand homes better than computers.

—Be patient. Statistics say that it takes 21 showings, not including open-house traffic, to sell a house.

Thursday, August 19, 2010

Do You Know the Red Flags of Mortgage Fraud?

Mortgage fraud is not going away any time soon. The FBI has been working with bureaus of investigation in states that recently passed residential mortgage fraud acts to stay abreast of the latest fraud tactics.

The FBI has found that fraudsters are evolving new ways to take advantage of others and hide their intent. For this reason, anyone involved in the mortgage industry needs to be educated on the red flags of possible mortgage fraud, such as those outlined below:

Flipping vs. Serial Flipping:A fraudulent flip is one that erroneously increases the value of the property by using an inflated appraised value. If a property was purchased for $175,000 and soon thereafter was sold for $500,000, most professionals would notice. However, serial flipping is trickier. Say a house sold for $175,000, soon after sold for $250,000, then $325,000, then $400,000 and then $500,000. Fewer professionals would even raise an eyebrow. This scheme takes more time, but the end result is the same: fraud.

Multiple Contracts & HUD-1 Settlement StatementsIn this scheme, unbeknownst to the seller, the contract and settlement statement that is sent to lender shows inflated sales price. This enables the buyer to obtain a higher mortgage. In the end, the seller believes the property was sold for $300,000, but lender, agent and buyer believe the sales price was $500,000 (the amount on which the agent’s commission is calculated).

Fraudulent Qualification DocumentsIn this scenario, the borrower’s ability to qualify for a loan is misrepresented by fabricated employment history, income, credit records, and bank statement balances. FBI calls this is an “emerging issue” and a result of sophisticated Photoshop and editing software.

Bogus Assignment FeesBuyer #1 enters into an assignable contract with the seller at an inflated price. Buyer #1 locates Buyer #2 who may be a co-conspirator or a na├»ve investor. Buyer #2 takes an assignment of the contract at the inflated price and agrees to pay Buyer #1 an assignment fee. Inflated appraisal is used and Buyer #2’s application may contain misrepresentations.

Bogus Liens or InvoicesA buyer contracts with a seller at an inflated price. At closing, the difference between the true sales price and the inflated contract piece is paid to a bogus shell company of the buyer or individuals affiliated with the buyer.

ChunkingChunking transactions are similar to flipping, but instead of multiple sales of the same property, it involves multiple loans to the same borrower. In this situation, a borrower purchases more properties than underwriting guidelines would allow or obtains multiple refinance loans secured by the same property.

Chunking usually begins with an unsophisticated borrower attending a “how to get rich quick” seminar. At or following the seminar, a third party contacts the unsuspecting borrower to encourage investment in a specific property with no money down. The third party acts as an agent for the borrower and simultaneously submits loan applications on the borrower’s behalf to multiple financial institutions for the various properties. The borrower may not be aware of this.

The third party acts as agent for the borrower during the closing, and often, unbeknownst to the borrower, pockets the loan proceeds. The “unsophisticated” borrower is left with numerous loans from various financial institutions and usually has insufficient cash flow to repay the debt.

Builder BailoutsThese bailouts often occur when a builder is highly motivated to move inventory that has been sitting in a declining or depressed market. According to the FBI, condominium conversions are particularly vulnerable to this type of fraud.

In a builder bailout, the builder may use a variety of ways to quickly dispose of the property. Some of the methods are:
  • Aiding in fraudulent borrower qualification.
  • Offering excessive incentives not disclosed to the buyer’s lender.
  • Offering no down payment by inflating the sales price by the buyer’s down payment and forgiving the buyer of that amount.
  • Inflating the sales prices and using bogus liens or invoices.

Straw Borrowers
This type of fraud intentionally disguises the true beneficiary of the loan proceeds.
It may be used to:
  • Conceal questionable transactions;
  • Replace a legitimate borrower who may not qualify for the mortgage or intend to occupy the property
  • Circumvent applicable lending limit regulations by applying for and receiving credit on behalf of a third party who may not qualify or want to be contractually obligated for the debt. The straw borrower may be a friend or relative of the true beneficiary, or merely a paid participant.

Mortgage Elimination
Mortgage elimination is an attack on an existing mortgage through forced cancellations and unusual cancellations (usually called a “declaration of avoidance”).

Purchase Disguised as Refinance
In this scenario, the buyer executes a contract for purchase and convinces seller to quitclaim the title to buyer prior to closing. This is done with or without a security deed from buyer to seller and is done without the payment of the sales price to seller. At this point, the buyer then applies for a refinance of the property instead of a property purchase.

Reverse Mortgage Fraud
The FBI calls reverse mortgage fraud an emerging type of scheme that takes years to identify. In this scenario, fraudsters identify foreclosed, distressed or abandoned properties and use straw buyers to commit occupancy fraud. Seniors are recruited to purchase the property from the straw buyers without the exchange of money. After living in the property for 60 days, the seniors obtain a reverse mortgage. A fraudulently inflated appraisal is used as justification, possibly based on repairs or renovations that may not have been performed. At this point, a lump sum disbursement of the equity is requested, which the fraudsters abscond with at closing. Unfortunately, this type of fraud usually is not discovered until after the death of the borrower.

Short Sales
Many argue that residential mortgage fraud cannot be involved in a short sale transaction. The misstatement, misrepresentation or omission of fact to the seller’s existing lender would not be in the mortgage loan process. Nevertheless, mortgage fraud is often involved! Not against the seller’s lender (although other crimes may be involved), but usually against the buyer’s lender. Sellers, agents, buyers, and others involved in the process find a way for the buyer to pay some money to the seller for the purchase of personal property or as rent for the buyer taking possession prior to closing.

The issue is whether the buyer made a misstatement, misrepresentation or omission of fact in the mortgage loan process for the new loan being obtained. If the buyer is paying $2,000 to the seller for personal property or rent that expenditure would have to appear on the Loan Application Form or itemized on the HUD-1 Settlement Statement. Otherwise, the buyer is misstating assets. The lender believes the buyer has $2,000 more in liquid assets than the buyer actually has. If the buyer became committed to pay $2,000 for a car or furniture prior to closing, this would have to be disclosed to the lender. That requirement is not changed merely because the payment is to the seller. Even if the seller has not committed residential mortgage fraud against the existing lender by receiving the undisclosed funds, the existing lender could refuse to accept the negotiated payoff.

Buyer brokers in particular, beware! How can a broker or agent avoid becoming involved in such fraudulent activity? Here is my advice:

  • Closely evaluate the “chain of sales”
  • Communicate with other agents involved in the most recent transactions
  • Consider if the sales price is congruent with the sales and list price of other homes in the area
  • Communicate with the loan officer…and your broker…if unsure
  • Consider the buyer’s apparent ability to qualify for the purchase
  • Avoid assignment fees payable to “original” buyers
  • Avoid multiple transactions involving the same borrower in a short period of time
  • Realize that any attempt to satisfy a mortgage without payment in full typically is NOT going to work. In a short sale, it might work, but ensure the lender has given written consent for the acceptance of a lesser amount…
  • …and, be sure the conditions for the lender to accept a lesser amount are fulfilled
Howell Haunson

Tuesday, August 17, 2010

July 2010 Market Report

Monthly Highlights for Greater Albuquerque

• July saw a 14.06 percent decrease in pending sales and 24.22 percent decrease in closed sales, when compared to the previous year.

• The median sale price for single-family detached home sales rose in July to $186,000, up 0.54 percent from the prevous year and up 2.76 percent
from the previous month.

• Active listing inventory for single-family, detached homes is at 5,803, up 5.97 percent from the previous year.

PDF File Read the full July 2010 Market Report 

Sunday, August 15, 2010

How to Choose a Home

Finding the home that is right for you can be a time-consuming process. The experts at Move.com offer the following tips to help make sure you don’t just settle for a home, but instead find the home that is perfect for you. 

Once you've settled on a couple of neighborhoods where you would like to live, it's time to pick out a few homes to view. Your wish list can remind you which features are absolute requirements and which amenities you'd like to have if possible. When narrowing down your home search, consider:

-Types of homes
-Home purchase considerations
-Home comparison chart
-What to do when you’ve found the right home for you

Types of homes
In addition to single family homes (one home per lot), there are other forms of home ownership to consider as you begin looking for the next place you will call home:

-Multifamily homes: Some buyers, particularly first-timers, start with multiple family dwellings, so they'll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.
-Condominiums: With a condo, you own "from the plaster in" just as you would a single house. You also own a certain percentage of the "common elements"—staircases, sidewalks, roofs and the like. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowners association administers the development.
-Co-ops: In a few cities, cooperative apartments are common. With those, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own apartment. A board of directors supervises management. Monthly charges include your share of an overall mortgage on the building.

Home purchase considerations
Most buyers' first consideration, after neighborhoods are chosen, is the number of bedrooms. As you begin to view homes, keep the following purchase and resale considerations in mind:

-Weigh your needs, budget and personal tastes in deciding whether you want a home that’s a newly constructed, an older home or a home that requires some work—a ‘fixer-upper.’
-One-bedroom condos are more difficult to resell than two-bedroom condos.
-Two-bedroom/one-bath single houses generally have less appeal than houses with three or more bedrooms, and therefore less appreciation potential.
-Homes with ‘curb appeal,’ (a well-maintained, attractive and charming view-from-the-street appearance) are the easiest to resell.
-When resale is a possibility, don't buy the most expensive house on the street, or anything that is unusual or unique. The best investment potential is traditionally found in a less expensive, more moderately sized home on the street.

Home comparison chart
While house-hunting, it's a good idea to make notes about what you see because viewing several houses at a time can be confusing. Create a comparison chart before you begin looking at homes so you can keep track of your search, organize your thoughts and record your impressions.

When you’ve found the right home
Before you begin the home buying process, resolve to act promptly when you find the right house. Every Realtor has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then revealed that "we always promised my Dad we'd sleep on it, so we'll make an offer tomorrow." Many times the story has a sad ending—someone else came in that evening with an offer that was accepted.

Resolve at this point that you will act decisively when you find the house that’s clearly right for you. This is particularly important after a long search or if the house is newly listed and/or under-priced.

By Paige Tepping

Thursday, August 12, 2010

Changes to Mortgage Underwriting May Affect Many Buyers

The real estate industry and especially the mortgage industry have been overwhelmed with changes, regulations and consolidations recently. In the last couple of months, many transactions nationally have experienced delayed closings or worse as a result of the application of new guidelines affecting APR, Good Faith Estimates (GFE), Truth in Lending (TILA) and condo project approvals to name a few.
There is one more issue that is critical for real estate agents, loan officers, and anyone else who deals with consumers purchasing a home or obtaining a refinance. Effective with applications on or after June 1, 2010, Fannie Mae has issued new lender mandates (FNMA LL-2010-03 Loan Quality Initiative) on a national basis that, if not understood properly, could have devastating consequences for many buyers and sellers. We want to be certain that everyone understands the implications of the new rules and ensure that all interested parties know what they need to know to minimize negative repercussions.
The intent of this initiative is to assure that all applicant information is disclosed and is honest and accurate as of the moment of closing. Lenders will now be required to re-pull credit report information just prior to closing, re-verify employment, validate Social Security numbers, verify intent to occupy and verify that all parties to the transaction have been checked against the national “excluded party” list, which is managed by HUD and by the General Services Administration. Changes in any of these factors are likely to result in a re-underwrite, the need for additional documentation, or suspension of loan closing.
The most onerous of these is the credit re-pull. It is important that this is done as a “soft pull” so it does not show as an inquiry, which could potentially change the borrower’s credit score. Firms will, however, have to match the outstanding debts and inquiries with the report used to approve the loan. Additional credit or increased balances that change the debt-to-income ratio more than 2% (or less if it now exceeds guidelines) will require the loan to be suspended and re-submitted to underwriting.
Any additional delinquencies will result in a new, full credit re-pull and re-underwriting, utilizing the new credit. Any and all inquiries from other lenders or credit suppliers must be verified by the credit bureau and certified that new debt did not occur. If new credit has been extended, the new debt must be included in the borrower’s debt-to-income ratio and the loan must be re-underwritten.
Other considerations are W-2 employees that may own more than 25% of a business, mandating business returns and cash flow analysis and full disclosure of child support and alimony. Changes could render the applicant unqualified or could delay the closing. As a result of TILA, GFE and risk-based pricing changes, additional debt could result in re-pricing the loan due to a change in credit score, which even if approvable, would delay the closing three business days as re-disclosure would be required.
So How Do We Manage the New Process?
Real estate agents and lenders must impress upon the applicants the need for full and honest disclosure at the time of application, during the loan process and at closing. Buyers must be cautioned against applying for new credit during the process, changing jobs (30-day pay stub requirements are being enforced), and charging to their credit cards. It is imperative that they notify the lender if anything changes from application to closing.
We must all be aware that an applicant that signs an erroneous initial or final closing application could be committing fraud. Lenders choosing to approve loans without the proper loan quality processes and documentation are only endangering the buyer. Any lender or real estate agent that encourages someone to falsify information could be equally responsible. It is noteworthy to mention that many loans go through an immediate quality control audit post closing, so this could affect highly qualified applicants as well. Identified fraud of this nature could be investigated by the FBI.
While this new policy was implemented first by Fannie Mae, it is already a mandate of all national lenders and, based on experience, will soon be required on every loan. It is important to keep this in mind on every deal, not just ones that may involve Fannie Mae.
By Jim Dinkel and Ken Trepeta

Top 10 Metros With Predicted Price Climbs

Housing prices are about to turn around, predicts financial services technology firm Fiserv.

David Stiff, chief economist at Fiserv, says home prices will fall 32.9 percent from 2006 through early next year. But by early 2014, he believes they will climb an average of 7.2 percent from 2010 levels, with some areas skyrocketing.

Fiserv believes these 10 metropolitan areas will see the most growth in the next four years.

1. Washington State: Bremerton-Silverdale, +44.7 percent
2. Oregon: Bend, +33.6 percent
3. Michigan: Detroit-Livonia-Dearborn, +33.1 percent
4. California: Napa Valley, +31.7 percent
5. Nevada: Carson City, +31.6 percent
6. Florida: Panama City-Lynn Haven-Panama City Beach, +26.9 percent
7. Arizona: Flagstaff, +26 percent
8. New Mexico: Sante Fe, +25.8 percent
9. Wyoming: Cheyenne, +23.7 percent
10. Alaska: Anchorage, +20 percent

Source: Bloomberg BusinessWeek

Tuesday, August 10, 2010

10 Low-Cost Tips to Improve Your Home's Appeal

When selling your home, the goal is to sell it quickly for the highest price while investing as little as possible in renovations. With a limited budget and a little effort, you can greatly increase your home's appeal by focusing on what prospective buyers can see on their first visit. The experts at BuyOwner.com offer the following recommendations for preparing a house for sale and staging it for showings. 

Tip #1: Refresh the exterior

First impressions count when it comes to selling a home. Most buyers won’t even leave their car if they don’t find the exterior appealing. The best ways to improve your home’s exterior include: 
-Repairing and/or replacing trims, shutters, gutters, shingles, mailboxes, window screens, walkways and the driveway. 
-Painting siding, trim and shutters and lamp and mailbox posts. 
-Pressure washing vinyl siding, roofs, walkways and the driveway. 
-Washing windows. 

Tip #2: Spruce up the lawn and landscape
Home buyers associate the condition of your lawn and landscaping with the condition of your home’s interior. By improving the outside, you affect buyers’ impression of the entire property. The best ways to enhance the yard include: 
-Mowing and edging the lawn. 
-Seeding, fertilizing and weeding the lawn. 
-Keeping up with regular lawn maintenance by frequent watering.
-Trimming and/or removing overgrown trees, shrubs and hedges. 
-Weeding and mulching plant beds. 
-Planting colorful seasonal flowers in existing plant beds. 
-Removing trash, especially along fences and underneath hedges. 
-Sweeping and weeding the street curb along your property. 

Tip #3: Create an inviting entrance
The front door to your home should invite buyers to enter. The best ways to improve your entry include: 
-Painting the front door in a glossy, cheerful color that complements the exterior. 
-Cleaning, polishing and/or replacing the door knocker, locks and handles. 
-Repairing and/or replacing the screen door, the doorbell, porch lights and house numbers. 
-Placing a new welcome mat and a group of seasonal potted plants and flowers by the entry. 

Tip #4: Reduce clutter and furniture
A buyer cannot envision living in your home without seeing it. A home filled with clutter or even too much furniture distracts buyers from seeing how they can utilize the space your home offers. If you have limited storage space, you may want to consider renting a temporary storage unit to place items you wish to keep. The best ways to declutter your home include: 
-Holding a garage sale to prepare for your move, getting rid of unnecessary items.
-Removing clutter such as books, magazines, toys, tools, supplies and unused items from counter tops, open shelves, storage closets, the garage and basements.
-Storing out-of-season clothing and shoes out of sight to make bedroom closets seem roomier. 
-Removing any visibly damaged furniture. 
-Organizing bookshelves, closets, cabinets and pantries. Buyers will inspect everything.
-Putting away your personal photographs, unless they showcase the home. Let buyers see themselves in your home.
-De-personalize rooms as much as you can.

Tip #5: Clean, clean, clean
The cleanliness of your home also influences a buyer's perception of its condition. The appearance of the kitchen and bathrooms will play a considerable role in a buyer's decision process, so pay particular attention to these areas. The best ways to improve these areas include: 
-Cleaning windows, fixtures, hardware, ceiling fans, vent covers and appliances. 
-Cleaning carpets, area rugs and draperies. 
-Cleaning inside the refrigerator, the stove and all cabinets. 
-Removing stains from carpets, floors, counters, sinks, baths, tile, walls and grout. 
-Eliminating house odors, especially if you have pets. 
-Considering air fresheners or potpourri. 

Tip #6: Make minor repairs
The small stuff does count, especially with first-time home buyers. Without dismissing the importance of repairing major items such as a leaky roof or plumbing, you do not need to spend money on replacing these items. Instead, focus on the minor repairs that will make your home visually appealing. The best ways to improve your home include: 
-Repairing ceilings and wall cracks. 
-Repairing faucets, banisters, handrails, cabinets, drawers, doors, floors and tile. 
-Caulking and grouting tubs, showers, sinks and tile. 
-Adding fresh paint to ceilings, walls, trim, doors and cabinets. 
-Tightening door handles, drawer pulls, light switches and electrical plates. 
-Lubricating door hinges and locks. 

Tip #7: Showcase the kitchen
The heart of any home is the kitchen. If you are going to spend any money on renovations, this is the one area where you will see the greatest return. Even with a modest budget, focusing on a few key areas can make a great difference in getting the asking price for your property. The best ways to showcase the kitchen include: 
-Replacing cabinet doors and hardware. 
-Installing under-cabinet lighting. 
-Replacing light fixtures. 
-Replacing outdated shelving with pantry and cabinet organizers to maximize space. 
-Baking cookies or cupcakes for a showing, to create a homey smell.

Tip #8: Stage furniture
Furniture placement can enhance the space of your home while giving buyers an idea of how to best utilize the space with their own belongings. Take some time to rethink how different areas in your house could be used. Some ideas to think about include: 
-Moving couches and chairs away from walls in your sitting and family rooms to create cozy conversational groups. 
-Creating a reading corner in the master bedroom. 
-Clearing an empty room to set up a reading space. 
-Turning an awkward space into a home office. 
-Setting the dining room table with your best china.
-Set wine glasses in front of the fireplace or next to a Jacuzzi tub.

Tip #9: Light up the house
Create a sense of openness and cheerfulness in your home through its lighting. To improve the lighting try: 
-Opening shades and drapes to let the sunshine warm and brighten rooms. 
-Installing brighter light bulbs in rooms that tend to be dark. 
-Adding additional lamps for ambient lighting. 
-Turning on all the lights for a showing.

Tip #10: Add fresh touches
You can easily add color and style to your home by adding fresh touches throughout. Some ideas to consider include: 
-Placing fresh floral arrangements in the entry and master bedroom. 
-Placing bowls of bright-colored fruit in the family room and the kitchen. 
-Filling an empty corner with a potted leafy plant. 
-Setting new hand soap in the bathrooms.
-Displaying fresh towels near sinks.
By Paige Tepping