Archive for December, 2009

Home prices rose modestly in October, mostly because of a flood of buyers seeking to take advantage of the government’s offer of a tax credit, data released Tuesday showed.

Underneath this apparent good news, however, were some disquieting signs of deterioration.

The Standard & Poor’s/Case-Shiller home price index, a widely watched measure of the housing markets in 20 metropolitan areas, rose 0.4 percent from September on a seasonally adjusted basis. It was the fifth consecutive month that prices were up.

But seasonal adjustments tend to hide any weakness in the cooler months, when fewer houses are sold. On an unadjusted basis, the index was flat in October.

“We’ve started to see the possibility of either a leveling off of prices for a few months or perhaps a double-dip,” said Maureen Maitland, the vice president for index services at S.& P.

Analysts have predicted for months that prices will resume their slump this winter, although most expect the drop to be moderate.

Housing remains under severe stress, and the government’s extensive and expensive support of the market is reaching its limit. While the tax credit has been renewed until next spring, its effects will probably diminish. And the Federal Reserve says it will gradually end its program to push down interest rates in the first quarter, in effect making houses more expensive.

Meanwhile, foreclosures are continuing to affect the market, and credit remains tight.

Dan Greenhaus, chief economic strategist for Miller Tabak and Company, wrote in a research note that “it is more than likely that prices have a bit further to fall which should help continue supply/demand rebalancing and help fix the ongoing issues in the housing market.”

The Case-Shiller index is down 7.3 percent from October a year ago and is off 29.5 percent from its peak.

Prices fell or were flat in nine of the 20 cities surveyed in October, the same as in September. But the recovery is beginning to diverge sharply by metro area, Wells Fargo’s chief economist, John Silvia, noted.

In the last three months, prices in San Francisco increased at an annual rate of 25 percent while Minneapolis was up 17 percent and Los Angeles rose 11 percent. Phoenix, long a laggard, rose 13 percent.

But New York, Portland and Boston were up less than 2 percent.

Las Vegas, the epicenter of the housing crash, shows no signs of recovery. Prices have fallen there for 38 months, and are now barely above the level at which they began the decade.

From the New York Times

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business.

Entering 2010, many home sellers feel they’re mired in the winter of their discontent, but there are signs the real estate market is on the mend. Sales activity is up, homebuilders are finally moving inventory and values are rising slightly in many American cities. At year-end 2009, mortgage rates stood at historic lows, spurring a wave of new applications.

But don’t be too jubilant. A recent report by Deutsche Bank estimates that by 2011, about 48 percent of all U.S. mortgages will be underwater. Short sales and foreclosures will continue to put pressure on home prices in 2010 as they work their way through the pipeline slowly. It was apparent in 2009 that lenders were holding back much of their foreclosure inventories and REO, or real estate-owned property, in an effort to keep values up.

Meanwhile, housing’s biggest economic driver — the job market — continues to stagnate as average unemployment remains high, at around 10 percent. So it’s no surprise the new year will ring in another buyer’s market, though with far more upside than in 2009. With that as a backdrop, here are 10 real estate tips for homebuyers and owners in 2010.

Tip 1: Take up Uncle Sam on his offer.

Might as well get a piece of that big stimulus pie while it lasts. At some point, the federal government will have to let the toddler walk on its own legs.

The $8,000 first-time homebuyer tax credit program that helped jump-start the real estate market in 2009 has been extended into 2010 and expanded. First-time homebuyers who sign a binding contract to buy a home by April 30, 2010, and close on it by June 30, 2010, qualify. The program’s maximum income limits have jumped from $75,000 to $125,000 for individuals and from $150,000 to $225,000 for couples.

For those who have owned their homes for at least five years and want to trade up to a different primary residence, a separate $6,500 tax credit has been added. Further, many homeowners who are underwater in their real estate loans are eligible for a loan-modification program with their current mortgage company or loan servicer through the Making Home Affordable Program.

Tip 2: Find down payment assistance.

There are several down payment assistance programs for first-time homebuyers at the federal and local levels. Other down-payment assistance programs that can piggyback ongoing federal programs are often available at the city, county and state level. Just conduct an Internet search for “down-payment assistance programs” with your locality’s name added.

Tip 3: Make home improvements now.

For households with access to credit, now may be the best time in years to fix up the homestead, either for a potential sale or simply for the sake of better living. Low financing costs, reduced construction materials costs and lower contractor costs make rehabs more affordable. Repairs that typically yield the highest returns are kitchen and bathroom makeovers with an emphasis on counters and cabinets. Get three different estimates. Then, factor in an additional 10 percent for those on-the-fly “change orders” that inevitably crop up. See home improvement strategies and checklists at Homegain.com.

Tip 4: Hire real estate agents and home inspectors wisely.

Now is not the time to hire a friend or relative as your real estate agent, especially with one of the most important transactions of your life on the line in this still-shaky market. You want someone who is well-connected with other agents, lenders and other fellow industry pros. Check credentials, references and recent performance histories.

If you’re hiring an appraiser, make sure he or she is a veteran with at least five years of experience who’s appropriately state-licensed or state-certified. Because of potential conflicts of interest, don’t pick one based solely on a reference from a real estate agent. The same diligence should apply to hiring a home inspector. Conduct reasonably brief phone interviews with at least two or three before you choose.

Tip 5: Price accordingly, sellers.

This should be on every real estate seller’s priority list. In most of the U.S., there are few reasons that a house can’t go under contract in 60 days or less. The listings that generate activity while others gather dust are typically those whose owners have adjusted expectations based on comparably priced homes, or “comps.” That doesn’t mean you should drop your price precipitously on your well-maintained home to undercut the litany of poor-condition foreclosure homes. It just means “price to the present,” not to a fantasy market.

Tip 6: Don’t wait out the recovery.

Yes sellers, housing has been repriced. And by the looks of things, it will take years — even a decade or more — for values to return to their highs of two years ago. That potential loss you’re fretting over may only be on paper, especially if you’ve been in the house awhile. Example: Take a move-in-ready house that appraises for $250,000. Because there’s competing inventory, your agent advises you to take 10 percent off the price. Now you’ll be selling for $225,000. “Ouch,” you might say. But consider that you only paid $175,000 for the place in 2000. So how is a $50,000 profit, a loss? What’s more, if you’re planning to move up in the same or a similar market, you will likely realize that same 10 percent discount on your move-up purchase.

Tip 7: Think long term.

Buyers, don’t settle for “good enough.” Just because you’re getting a bargain doesn’t mean you’re getting a home that suits your long-term needs. Think functionality, neighborhood, location, access to services, highway access, work routes, schools, relatives and mass transit, and not price only. Do your homework, keep a cool head and carefully examine all the options. If you can spare the time, give yourself an extra month or two to make a decision. A house is a habitat first, an investment second.

Tip 8: Energy largesse.

Through Dec. 31, 2010, homeowners who buy and install specific energy-efficient windows, insulation, roofs, doors and heating and air-conditioning equipment can get a 30 percent tax credit for up to $1,500 of their costs on each product.

If you want to take it a step further, you can buy greener (and more expensive) energy-saving products, including solar energy systems, geothermal heat pumps, small wind systems, residential fuel cells and micro-turbine systems, and get 30 percent tax credit with no spending limit on each system, through 2016. Go to EnergyStar.gov’s Federal Tax Credits for Energy Efficiency for a complete summary.

Tip 9: Consider rent-to-own deals.

The current market has driven many former homeowners into rentals, where they have nothing to show for their payments. Rent-to-own or lease-to-own deals allow buyers to “tire-kick” a home for a designated period while paying a higher-than-market rent to buy down an eventual down-payment. This gets renters vested in a home while they repair their credit and also helps frustrated sellers generate an above-market revenue stream. Make sure to draft a very specific contract that spells out all the options.

Tip 10: Don’t take or make it personal.

Our homes have such a personal connection to us that we’re often challenged to turn them back into just plain houses when it’s time for us to sell. It is always best to remove personal effects such as pictures, knickknacks, mementos, trophies, greeting cards and the like before showing a house. (A good agent or home-stager should emphasize this.) There is a rule of thumb that you should count every item in every room of a for-sale home and eliminate or store 50 percent of them.

The buyers want to imagine themselves in the house for years to come and your excess decor and whatnots only distract from this vision. And don’t get defensive about colors or design patterns or flooring that you love. It’s OK to grit your teeth as you grin. Let your agent be the buffer. Remember, the customers (your buyers) are always right, unless, of course, they’re low-balling you.

From Bankrate.com

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author o fHeart and Sold: How to Survive and Build a Recession-Proof Business.

You may not be aware of the new appraisal requirements for a home purchase and how they’ve impacted the residential real estate market over the last few months. As a result of the new HVCC federal requirements, when a buyer applies for a loan to purchase a particular property, the appraiser for property must be chosen by a third-party appraisal service. In many instances, the appraiser assigned to the property is from outside the area and has no firsthand knowledge of the market being appraised.

Those of us who live and breathe residential real estate are well aware of the adverse effects this process can produce for both buyers and sellers, and how much more difficult it can make a successful close of escrow.

One of the key problems is the lack of knowledge these outside appraisers have on local residential markets. This brings into question: who really understands the true value of a home? Is it the experienced real estate agent, the buyer making the offer, or the appraiser crunching numbers based solely on statistics, who has never seen comparable properties? Does the appraiser know how to take into account the condition of the property, whether it’s been recently remodeled, the amount of flat land, the views, or the better location?

If you knew that when you bought or sold a home after May 1 of this year that your real estate agent was not allowed to speak to the appraiser, wouldn’t you be concerned? Isn’t it important for our professions to be working together and sharing important information about the market and home values? I’ve seen a number of deals fall through lately — at the last minute — because an appraiser who usually works in the Valley or Orange County turned in an appraised valuation that was far off the escrow sale price. As you can imagine, this can cause a deal to fall apart.

As professionals we were all on the same team until this change came along — make your concerns heard! CAR is supporting legislation that would put an 18-month moratorium on this new procedure, and I encourage you to contact your local legislators and ask them to do the same.

Here’s to all of our success!

Appraisal SHAKEUP

HOW TO COPE WITH THE NEW RULES FOR APPRAISALS

Challenging. Problematic. Wild. Bizarre.

These are but a few of the choice words REALTORS® have used to describe the new Home Valuation Code of Conduct (HVCC), which dictates certain practices lenders must follow with respect to appraisals related to loans they intend to sell to Fannie Mae or Freddie Mac.

The HVCC was worked out through an agreement between Fannie Mae, Freddie Mac, and the New York Attorney General’s Office (NYAG) in response to an investigation by the NYAG into Fannie and Freddie. The purpose of the HVCC is to insulate the appraisal process from undue influences by placing tight controls and restrictions on the ordering of the appraiser, as well as guidelines for communicating with the appraiser during the process. HVCC is a private agreement.

HVCC does NOT apply to FHA or VA loans.

The code, which became effective May 1, specifically prohibits practices that may influence or attempt to influence an appraiser’s opinion of a home’s value. For example, the code requires lenders to order appraisals themselves, rather than accept any appraisal completed by an appraiser who was chosen, hired, or paid by a mortgage broker, real estate agent, or other third party. The code allows an appraisal to be transferred from one lender to another, but only if the original lender gives written assurance that the appraisal is HVCC-compliant and the new lender accepts that assurance.

REALTORS Report HVCC Snafus

The HVCC mentions real estate brokers only parenthetically, yet REALTORS® have reported a variety of negative effects on real estate sales transactions.

Specifically, REALTORS® have noticed:

> A significant (and otherwise inexplicable) increase in the cost of appraisals.

> Valuations that have differed dramatically from perceived market values.

> An increase in alleged factual errors in appraisals.

> Delays of several days or as long as three weeks in completion of appraisals.

> Appraisers who’ve been assigned to value properties as far as 40 miles away.

New Rules Require New Practices

So how can REALTORS® cope with those challenges? Here are some suggestions:

>Allow for delays. Mary Lynn Pinto, a mortgage broker and broker/owner of Bayshore Real Estate Services in Salinas, says brokers need to write into real  estate sales contracts longer timeframes for removing appraisal contingencies. “The recommendation is to allow more time for contingency removal and contract periods,” she says. “We have a little less control than we used to in setting the contract dates.”

> Qualify the appraiser. Guy Rivera, a senior loan officer with Pacific Riviera Mortgage in Santa Barbara,

says REALTORS® should qualify the appraiser when he or she makes an appointment to inspect a home.To do so, the REALTOR® should ask about the appraiser’s experience and knowledge of the local area, Rivera suggests. A few questions REALTORS ® might want to ask are:

* How long have you appraised homes in this area?

* How many properties do you typically appraise in this area each month?

* How many properties do you typically appraise each day or on a given day?

* What are your data sources and how often are those sources updated?

If an unqualified appraiser shows up to inspect a home, the REALTOR ® should not let him into the home, Rivera suggests.

“We sent back a Ventura County appraiser who came up to do an appraisal in Santa Barbara County. We sent him away,” he says.

> Offer comparable sales data. The HVCC states: “It would be inappropriate for an appraiser to use

comparable sales data provided by the real estate broker who is handling the sale of the subject property, unless the appraiser verifies the accuracy of the data provided with another source and makes an independent investigation to determine that the comparable sales provided were the best available.”

That seems to suggest REALTORS ® can provide comps, but appraisers may choose to refuse, reject, or ignore the REALTOR ® ’s information if the appraiser can’t verify the accuracy of the information or

determines that other comps are better suited for the purposes of the appraisal.

Pinto says the REALTOR® should give the appraiser a current comparable market analysis (CMA) and explain the local market areas, even though that extra effort may be burdensome and the appraiser’s response may be disappointing.

“Don’t pull out the CMA you did to get the listing and hope that will work. You have to update it and give it to the appraiser at the time of the inspection. Don’t wait until after the inspection, and don’t do it through the lender,” she advises.

Here’s a related tip from Rivera: The REALTOR® may want to black out the sales prices on the comps that are given to the appraiser to allow him or her to accept the information and look up the details as part of his or her own investigation.

“Black out the prices, but have like properties and educate the appraiser as to the neighborhoods,” he suggests.

> Complain to Congress. REALTORS ® may have little opportunity to lodge formal complaints about the

HVCC through the mechanics of the code itself since the Independent Valuation Protection Institute (IVPI) envisioned within the code has not been implemented. The IVPI was supposed to set up and operate a telephone hotline and e-mail address to receive complaints.

Given that lack of redress, REALTORS ® should call their elected representatives and make their concerns heard, Pinto suggests. California Congressman Gary Miller has introduced H.R. 3044, which would place an 18-month moratorium on the recently imposed HVCC. C.A.R. is supporting H.R. 3044, and is asking California’s Congressional Delegation to sign onto the bill as a cosponsor.

“We are working hard to get an 18-month postponement,” Pinto says. “I would encourage REALTORS® to get a hold of their Congress people.”

HVCC Help

Office of Real Estate Appraisers: Stay abreast of California HVCC developments at www.orea.ca.gov.