FHA Makes Changes

On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund - ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.

By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed.

FHA announced changes in the following areas:

· The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.

· Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.

· FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium.

· Seller concessions will be reduced to 3 percent from 6 percent.

FHA will make the following lender enforcement changes:

· FHA will implement credit watch terminations at lender underwriting.

· Public reporting of lender performance through scorecard system will be implemented.

· FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.

· FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.

· FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.

FHA is an integral part to the continued recovery of the real estate industry and the overall economy. NAR will continue to work with FHA, the Administration, and the Congress to ensure FHA can fulfill its mission while providing for the safety and soundness of the insurance fund. NAR is committed to assisting FHA as they balance risk management with creating homeownership opportunities across the country.

For NAR’s one-page summary brief on this issue, click here.

Anticipation

There is always an excitement about going away as the time approaches and the anticipation starts building towards the day or the event. Isn’t that true with you too? For me it definitely is!

Well, for me, next week is rebarcamp Ohio and I am getting excited about it. It is my first barcamp to go to. I am been wanting to go to one of them since I first heard about them in New York City before the Inman Conference. Since then, I have been following the rebarcamps in Atlanta, Charlotte, Philadelphia, Boston, Phoenix, and San Francisco. Here is a link to the sites:

Fortunately for me, Bobby Carroll from Dakno Marketing was there to video stream many of the sessions and I was able to participate in a small way and pick up some good ideas and tips. Use this link to watch the next one if you can’t attend the next one.

You might ask, What is a rebarcamp? It is an unconference where real estate agents and others get together to learn from each other. It has grown out of a desire for real estate agents to network and improve their business by using social media.

Since their inception last year in August at the Inman Conference in San Francisco, they have sprung up all over the country. Once again real estate agents are taking the lead to use and promote the newest technologies in their business.

Are you? If you aren’t call me, no twitter me at @RochesterREguy and I’ll get you started.

Crazy Job! With People or Alone?

This job of real estate that I have been working at for the past 31 years is a crazy job! From the outside looking in, it seems as though I would be with people all day, driving buyers around to houses, showing them through the houses, writing up offers, negotiating on the offers, spending time at home inspections, sitting through the mortgage appointments, and on and on!

However, the truth of the matter is I spend most of my time alone!

Does that surprise you?

More of my day is spent researching and searching for homes for my different buyers, phone calls following up on showings of my listings for feedback, calling contractors for quotes on repair items, phone calls to the mortgage companies to find out what documents they still need for the mortgage application, phone calls to the buyers and sellers, driving to listings to show buyers and their agents through my listing, and on and on!

The fun part of this job is when you are with people. However, you can’t have one without the other. The time I spend working alone is what pulls it all together.

So if you are thinking of looking into real estate as a career, a question I would ask you is, “How do you do working on your own?” Have you done anything like that before? If you aren’t good at working alone or have never done it before, this job may be very difficult for you. I love this job because I love being with people and have the ability to work well on my own.

Private Mortgage Insurance Backlash

In the old days if you got approved for a loan at the bank for a home mortgage, the private mortgage insurance was an automatic. The private mortgage insurance (PMI) was a protection policy the banks required if you were putting less than 20% down. It would insure the first 20% of the loan so the banks would feel safe in loaning you the money.

This has worked very well for decades to keep the whole system moving. The PMI companies have been making tons and tons of money from you and me on all our home mortgages which we did not default on.

Suddenly because of the banking industry screw up, the PMI companies have displayed a “knee-jerk” policy. You know the concept of the pendulum swing? Well, they are at the extreme right with over-critiquing every application that crosses their desk! Not only is it adding weeks on to the process, but they are turning down solid deals for insignificant reasons!

I could go on and on about this whole craziness going on in the home mortgage process, but I think I have said enough. If you have had a problem with the PMI companies with your home mortgage process, tell me about it.

How much is your Home Worth?

Whether you are selling or buying or refinancing or paying taxes, it’s important to know how much your home is worth.

Many people will tell me what their tax assessment is and think that it represents their home’s worth. Others will measure their home’s worth by comparing it with homes that are on the market or even worse, homes that have expired on the market.

The value your home has is never a fixed value. It is constantly changing with the economy. The interest rates affect it, the world economy affects it, the local economy affects it, and the real estate market affects.

Fortunately for us that live in Rochester, our home values have increased each year for the past 30 years that I have been in the real estate business until 2008 when they dropped slightly, about 1-3%.

What Realtors do to determine your home’s value is to do a CMA, comparative market analysis, which is a snapshot in time of your home. It is arrived at by a careful review of the recent sold homes that are similar to your home in square footage and features.

Usually we also have to make some additions or subtractions for features present or absent in the sold homes as they are compared to your home. This is a subjective valuation by the Realtor doing the CMA. Because of this subjective value, you could get different values for your home if you were to have several Realtors do a CMA for you.

This is why it is important for sellers who are interviewing several agents for listing their home that you don’t want to make your decision based on the highest price received from an agent, because they could be too high in their subjective additions. You need to look at the agent’s years in the business, experience, credentials, and marketing plan.

So if you would like to know you home’s worth, just call me or a Realtor in your area and we will be happy to meet with you and work up a CMA on your home.

Is the Tax Stimulus Working?

People are always asking me: How is the real estate market is? Once they know you are a REALTOR whenever they see you this question comes out. I’m not sure if they are interested in a detailed answer or a five second answer or if they are interested because they own property or a home.

Either way, I usually make it short and in most cases, put a positive spin on it because that’s just the way I am. If you know me, you know I’m a very positive upbeat person that looks on the bright side of things. I’ve always been this way!

Now, let’s get back to “How is the real estate market?” It would be good to hear from you how the tax stimulus is working in your part of the country. For Rochester, New York, it is working very well. The homes that are in the lower price range are flying off the market, getting multiple offers! It is really crazy!

From here it looks like the $8,000 tax credit is doing the trick for getting the homebuyers off the fence and into the market as first-time homebuyers. But…..we need a tax credit for the other homebuyers who are not first-time homebuyers to get the rest of the real estate market going. I believe this is what is needed to get the whole economy going with all the services that drive off the real estate industry.

So then, “How is the real estate market?” not bad, but it could be a whole lot better! Tell me how your real estate market is doing.

We need the small local investor!

I wrote up an offer this past week for a small investor to buy a foreclosed single family home in a suburb of Rochester. As I was working with it, I realized how much the neighborhood needs this “small investor!”

I had sold a home in this neighborhood a few years earlier and I was familiar with the values of the homes. At $70,000, this home was selling for $50,000 under what the average values are for this neighborhood. This small investor was going to clean, paint, carpet and repair this home, then put it back on the market for a price that would match the values of the neighborhood. In other words, flip it, a word that refers to process of buying a home, fixing it up quickly and selling it for a profit.

Nobody out there is giving these guys any assistance! Nobody is making it easy for them. They are using their cash and hard work! They are taking all the risks! The end results are a house is restored to its neighborhood value. Hopefully they will end up with a profit to make it all worthwhile too!

Think about it, who else is doing something like this with no government involvement? Next time you see one of these guys, give them a thumbs up! We need the small local investor now more than ever! Our neighborhoods need them. The economy needs them!

Federal Bailout—Helping Banks? or Homeowners?

We have all been reading and hearing about the bail out programs for the banking industry. The numbers are staggering of the billions of dollars appropriated by the government for this relief!

Those of us in real estate know how this developed and how the banking industry created their own problem by lowering the standards for getting a loan, especially for the investors.

Today thousands of homeowners are upside-down with their mortgages. This means they owe more on the loan than the property is worth. When this happened, the investors walked away from the properties, leaving them vacant. I remember hearing from a Realtor in Las Vegas after the crash that there were over 10,000 homes vacant that had never been lived in. Wow! Can you picture that?

However, a homeowner who is living in their home with their family, has no choice but to stay and stick it out. So along comes the government, spending yours and my tax dollars to bail out the banking industry. Many of us were naïve in thinking that the plan would include the individual homeowners who at no fault of their own was put in a bad situation.

This all hit home to me yesterday when I met with a homeowner who had lost her income because of the economy and had been struggling for the past 10 months to keep her head above water.

She had not made a mortgage payment since August, but had tried to contact the bank to talk to someone who could offer some advice or help. No luck! Months had gone by and suddenly she gets a letter saying they are going to help her! Wow, really??

Tell me if this is helping her, they sent her a document to sign within 5 days which was a new mortgage document. Here are the terms, they were adding $12,000 in late charges and attorney’s fees to her mortgage balance, then charging her 7% when the going rate is 5% and then amortizing the remaining loan over 40 years!

Doesn’t it make you mad? It does me! What is this money, yours and my tax money, being used for if not for people who have been affected by the downfall of the economy? I would like you to join me in contacting your representatives and senators and ask then why aren’t the American people being helped! Thanks, if we each do what we can, it will make a difference!

The Upside & Downside of Home Inspections

I was sitting in a Board of Directors meeting this past week reviewing a new addendum form to approve for our Association to use for the inspection contingency in a purchase and sale offer. There was considerable discussion as to whether the buyer should have to indicate who they were selecting to do the inspection, whether it was Uncle Harry, a licensed home inspector, an engineer, a builder, etc. After all the discussion, the final decision by the Directors was the buyer did not have to disclose who they were choosing to do the home inspection for them on the addendum form.

The reason there was so much discussion around this rather simple item, was because of the experience all of us have had the past several years with home inspections. There are the home inspections that the buyer has their Uncle Harry do for them and he either talks about the selling price and everything else except the house or he finds fault with everything in the house.

Then we have the inspections done by a builder that compares everything to a new home and nothing is to code in the older home.

It seems that features that are characteristic of an older home are overlooked during the initial visit or even second visit, but with the home inspector, suddenly they aren’t acceptable. And even though the buyer may have negotiated off the sales price to address them after he buys the house, they ping the seller again with the list of repairs and ask for a credit at closing from the home inspection.

Inspections can and are an escape route for a buyer, plain and simple. If they want out of the deal after signing, the home inspection provides the door to escape. That’s the way it is and there is no changing it!

Home inspections are part of the process now and they are here to stay with the upside and downside they bring to the home buying process!