VA Financing may be a significant factor in the residential real estate market in 2013. VA Financing has been a factor off and on again over the years based upon the number of eligible Veterans in the population. In the south where there are large numbers of large military bases, as well as a large number of military retirees and eligible ex-military civilian retirees, VA Financing has been a fairly consistent factor in the residential real estate market, but in the Northeast as well as other sections of the country with minimal active military, VA Financing has not been a significant factor in many years.
Why has VA Financing not been a factor? Well, it has to do with who can obtain VA Financing. VA Financing has a very limited pool of people that can take advantage of the program. The way the program works is a lender makes a loan to an eligible individual and the VA guarantees the loan; if the VA borrower defaults on a loan, the lending institution is typically made whole and the VA takes responsibility for the loan and its costs, but the VA rarely if ever actually funds the initial loan. VA Loans can be sold by the initial lender to other lenders, or investors, or held in the initial lender’s portfolio as well, but in the last thirty years the majority of VA Loans have been sold into Ginnie Mae loan pools, so the loans are effectively funded on the secondary market like most other home loans today. VA Loans will be a growing factor in the 2013 market because of the large number of VA eligible service members that have been created by our country’s recent overseas military engagements and the way these engagements have been handled. The US military called heavily upon National Guard and Reserve forces over the last decade more so than at anytime since World War II as a proportion of our military. Traditionally Reserve and Guard Troops do not have enough active time in the military to be eligible for VA Financing or other benefits, but since the military chose to use Guard and Reserve troops in our most recent military campaigns a much larger pool has been created, especially in New England where Reserve and Guard Troops have significant repeated tours of duty, many of whom where on continuous rotations through conflicts. While New England does not have any really large military installations when compared to say, Georgia or South Carolina, we do have a long tradition of Reserves and Guard Troops – going back to Lexington and Concord in the Revolutionary War – the military needed to take advantage of it to execute its plans. This has meant that all these men and women now have 180 or more days of continuous active military service which is the minimum threshold for VA eligibility.
So here’s who’s eligible for a VA Loan: Veteran’s with 181 days or more of continuous active military service that have been honorably discharged from the armed forces of the United States, their spouses and/or their unmarried widows or widowers. VA Loans can only be used to purchase a property that is intended as a principal residence of the VA borrower; they can not be used to purchase an outright investment property. VA eligible borrowers can use their eligibility to purchase a multi-family property in which they intend to occupy one or more of the units as their home as long as the property has four or less units. VA eligible borrowers do not have to pay off or refinance the VA loan if their circumstances change and they no longer choose to occupy the property they financed through the VA due to an unforeseen circumstance.
VA Loans have some unique features which typically makes them the very best for an eligible borrower to purchase an eligible property: VA Loans do not require any down payment; there is no limit on the amount of seller concessions that may be paid by a seller on behalf of a buyer – I have had VA purchases where the seller paid all the buyers closing costs, pre-paid items and paid off the buyers credit cards and car loans!
VA Loans currently are not available to domestic partners that are unmarried or same sex couples that are married unless both individuals are eligible for VA benefits. Often in this situation if one party is eligible (if they have enough income) the home is just purchased in a single buyers name and an equitable right to the property is transferred over to the non-eligible domestic partner after closing, however the VA buyer will always be the only oblige on the mortgage to the VA.
By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT
active military, Afghanistan, Air Force, Army, Army Reserve, Coast Guard, domestic partner, financing, Georgia, Ginnie Mae, honorable discharge, Iraq, Marine Corps, Military, National Guard, Navy, new England, real estate, real estate market, refinance, residential, same sex couple., secondary market, South Carolina, US Military, VA, Veterans, Veterans Affairs, world war II
After what feels like an election cycle that has lasted forever (over eighteen months in New Hampshire) perhaps we can get on with the business of running our lives and business in a stable environment. While I’m not a great fan on what has happened over the last four years in Washington, at least we know where we are and given no great new changes in the economy or in Washington and there are some realities that are pretty apparent.
Clearly, housing has bottomed and there are signs of a kind of stability in residential housing. The majority of sales are Bank/lender owned properties; a record number of which are selling for cash. My own experience is that about thirty percent of sales are cash. I have spoken with other REALTORS in our area a few have reported cash sales as high as forty percent and a few have reported cash sales of around twenty-five percent, but all are in agreement the cash sales represent a huge chunk of the residential business at this time. The drivers here are the truly low interest rates that savers can earn on any cash reserves they may have, the difficulty in obtaining financing generally and the difficulty in obtaining financing specifically on bank/lender owned properties due to the generally poor condition of these properties. The Federal Reserves continued commitment to keeping interest rates low into 2014 means this is likely to remain a major part of real estate sales into the future.
The end of the loan modification programs from Fannie Mae and Freddie Mac means that the message is clear to borrowers: if you want to keep your house you must pay the mortgage. These programs were almost criminally maladministered and sent mixed messages to home owners. Many homeowners stopped making their mortgage payments so that they could take advantage of these programs and actually ended up loosing their homes. The disappearance of these programs is likely to stabilize the housing market more than any other single event. More stable housing market = fewer foreclosures = better prices = housing recovery, although it will still take years to work through the backlog of homes in various stages of foreclosure.
The current administration remaining in office in Washington is also probably good news for housing and the average home buyer. It is more likely that the current administration will act to support the concept of a secondary market for home mortgages through Fannie Mae and Freddie Mac. Proposals put out by some of the more conservative supporters of the Republicans in the last election cycle to dismantle Fannie Mae and Freddie Mac and to have required huge down payments would have been a greater drag on housing and the economy than any of the various proposed limitations on interest deductions on home mortgages. Any thing that eases housing lending will be good for a recovery in housing.
Banks/lenders have been far more proactive about foreclosing on properties in recent weeks and months. They have been quicker to act on delinquencies and been quicker to act in putting properties on the market than at anytime in the last five years.
The primary focus in housing sales for the foreseeable year or more is likely to be bank/lender owned properties. Until a significant share of the foreclosure back log is burned up through new sales, foreclosures will be the driving force in house prices leaving little or no room for price increases through this and most regions of the country with first timers and investors being the primary source of buyers.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
2012 Election, bank, cash, economic crisis, Election, financing, first time buyers, foreclosures, housing market, investors, Keene, lender, loan modification, MA, NH, real estate, REO, VT, Washington
What is an REO? REO stands for “real estate owned” – it is a class of property owned by a lender. Most consumers don’t realize it but lenders that have REO Properties have very strict guidelines for the agents that work for them as Neighborhood Listing Agents helping dispose of REO inventory. The first tasks that REO Agents are charged with by lenders are to make sure that all transactions are done in compliance with all applicable local, state and Federal laws. The last things anyone wants in the REO industry is to have a property tied up or a sale to fail do to non-compliance with the rules. Legal issues, tenancy status, zoning and code violation, recording of deeds etc often make the initial phase of getting properties on the market slower than many anxious buyers would like, particularly if a buyer has targeted a property for some time. Any title issues need to be resolved no matter how long it may take even though it may be mind numbingly long to the uninitiated buyer. That being said, in the case of all these things, consumers are well served to be patient – as a general rule any problem not resolved prior to closing can come back to haunt an REO homebuyer tenfold after closing, and the REO seller’s work diligently to resolve these issues. After the legal issues, there are three basic areas that all REO sellers’ have made of super importance and abundantly clear to their agents: these are Information Security, Anti-Blight Campaigns and Relocation Assistance Programs.
Information Security is a huge concern to all of us in today’s hyper technological world of money and transfers; we’ve all heard horror stories about identity theft. REO Seller’s, who use the internet extensively to manage their assets, don’t want consumer data lost or used inappropriately. Most non-REO trained real estate agents are part-time and do not have extensive computer skills – many “do business the way we always have” and actually can be dangerously ambivalent to the level of private information. REO Sellers know that part-time and “old time” real estate agents are on the top of the target list for professional identity thieves and want to know that the REO Agent’s they hire are doing all they can to protect consumer’s personal information. REO Agent’s typically are required by the bank’s that list REO properties with them to follow these basic policies: 1. Maintain lockable file cabinets. 2. Have a clean desk policy – meaning files are left out of unsecured storage when they are not in use. 3. Confidential documents should be shredded not just thrown in the garbage. 4. Use encrypted e-mails when sending personal information. 5. Never send copies of checks, checking account numbers, Social Security numbers or credit information over the internet. 6. Avoid clicking on unknown links. 7. Maintain written Security Policies and make sure they are understood and enforced within the organization.
Anti-Blight Campaigns have become significant factors in the REO business over the last few years. Banks with REO Properties and Foreclosed homes do not want consumers to be go down the street and be able to pick out the REO’s do to lack of yard care and basic maintenance. Fannie Mae and Freddie Mac as well as many large regional banks know that the money they spend on maintenance will be paid back to them many times through quicker, easier sales requiring less discounting of price. Code Violations, unsecured properties, health and safety issues are all issues that the Full Time Professional REO agent is supposed to handle for the REO Seller. The REO agent is the number one point of contact and serves as the eyes and ears of the REO seller in neighborhoods. REO sellers are increasingly following up with random property checks and requirements for weekly dated photos to be sent to assist in verifying that the lenders REO’s are properly cared for and marketed.
Cash for Keys and Relocation Assistance Programs once unknown are now common place in the REO Industry. These programs are designed to help the occupants of homes that have gone to foreclosure move on. Many times REO properties are occupied by the former owners who have become what is legally know as “Tenants at Sufferance”. Many times they occupied by the friends, relatives or tenants of the Former Owners, any and all of whom need to have their occupancy resolved before the property can be sold as an REO. It is not unusual for an owner to have moved out of a property after it has gone to Foreclosure and rented it after the Foreclosure – this is not actually a valid lease – but the occupants needs still have to be addressed in some form. Most REO institutions have strict policies for agents who negotiate with occupants of Foreclosed Properties: 1. The owner’s of REO are making a Relocation Assistance Program/Cash For Keys offer to encourage occupants to leave as soon as possible – less time than an eviction would take. 2. REO Institutions have a range of offers that a REO Agent can make general determined by the property type location and condition. REO agents are not allowed to offer less than these amounts. 3. REO agents are expected to deal with occupants honestly ethically and fairly but remember they do work for the REO Investor and must keep the REO Investors interests first.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
cash for keys, financing, forclosed, foreclosure, former owners, lease, Occupants, Owners, real estate, realtor, relocation assistance, REO, REO Agent, Tenants
By Dick Thackston
2012 is likely to be defined, in the real estate world, by three “E’s”: Expectations, Employment and Europe/Economy. No matter what your political belief system is, no matter how much or how little money you have, these three factors will permeate American life and the economy more than any others in the next eleven and a half months.
Expectations: In the world of sales there is an old truism, “To live with the classes sell to the masses!” those will be the watch words for real estate this year. 2012’s real estate will almost certainly only be about first time buyers and large volumes of REO properties being sold to investors. Both first time buyers and investors have some striking similarities: both groups feel they are buying at the bottom of the market and both groups have an expectation of housing prices increasing over the next three to five years and both groups have an expectation of rents remaining and going higher. (Personally, I agree with both groups.) First time buyers not only have the family formation/nesting instinct driving them into purchasing, but they have the ever increasing cost of renting versus home ownership. Most first time home buyers are renters now and are looking at homes that will have monthly mortgage payments 15-20% below their current rent. Landlords/Investors are looking at the exact same equation from the other side and seeing that almost anything they buy now will have positive cash flow of at least 10% and often up to 20%. The group that is melting away at this time is the investors looking to buy, fix and flip, the risks are too great of carrying a vacant property or over improving and taking a hit in what is in fact a flat market, and of course move-up buyer’s remain effectively locked out of the market for the foreseeable future. Until move up buyers can sell and move there is likely to be no updraft in the real estate market, but when it does begin it will be huge.
Employment: In New Hampshirefor sure, the Northeast in general and for the nation probably, employment getting better.New Hampshire has experienced job creation. Not dramatic but some. GivenNew Hampshire’s favorable tax and business environment it’s not really surprising that it would be one of the first parts of the country to recover. New England more generally seems to be getting better although not at the same rate as New Hampshireand the nation, well let’s face it would be hard to screw things up much more – which is a perverse kind of improvement actually. So as workers become more secure in their outlook on employment, they become more confident that they can cope with a mortgage payment and the other cost associated with home ownership, and are feeling much better about leaving their apartments and Mom’s basement. This is having a very noticeable effect on stabilizing the market at the bottom.
Economy: The macro-economic environment remains dicey. I almost headed this section “Europe” as my third “E” but really it’s bigger than all that. The United Sates is no longer insulated from the rest of the world economically. I doubt that this was ever really true, but we felt it was true and we certainly acted as if it was true. The United States remains the world’s largest economy however it remains subject to outside shocks: Tsunami & nuclear disaster in Japan, economic slowdown in China and most dramatically European debit crisis – country by country bad news out of Europe send shocks through our financial system and impacts our banking sector. The largest of these in public perception is Europe which is unlikely to be resolved anytime soon and will continue to drag on the world economy. China seems to have better managed its financial affairs – easier in a totalitarian state – and seems likely to have a softer economic landing than Europe.
What’s the take away from all this? Housing is stabilizing now; sales volume is likely to increase significantly; good deals from a buyer’s perspective are likely to remain the norm for the next eight to twelve months; no real appreciation in real estate as an asset class is likely and value added efforts for renovations will remain high risk till after the end of 2012.
buyer, buying, China, debt crisis, economy., Employment, Europe, Expectations, Financial, financing, First Home Buyers, first time buyer, first time buyers, first time home buyers, foreclosure, housing market, housing market recovery, housing recovery, investors, Japan, Keene, landlord, Landlords, Massachusetts, monadnock region, move up buyer, New Hampshire, northeast, Peterborough, political belief system, positive cash flow, real estate, realtor, REALTORs, recovery, REO, Sales volume, seller, selling, short sale, time home buyers, totalitarian, Tsunami, Unemployment, Vermont
By Dick Thackston
I continue to read about mortgage credit terms such as Credit Scores, Down Payment Requirements, and so forth being eased on home purchases. Federal Reserve Senior Loan Officer Survey still reports historically tight standards. Part of the problem from what I’ve seen, is values coming in low on appraisals after the buyer and seller have come to terms, which in my opinion, reflects tightened appraisal standards. (Appraisers don’t want to be held responsible for over valuing properties – as they have been in the past – even though local market conditions support values.) It’s odd because in my experience appraisers who “know local areas” almost always have a clear sense of what is going on in a market; the biggest problem is large un-named government backed lenders that bring appraisers in from 200 miles away that often do not have a sense of the nuances for local markets that even underwriters can pick up from a desk 2000 miles away. Ultimately, sloppy work is sloppy work and it creates a drag on the entire process.
If home prices are stabilizing, as many people feel they are, this will actually be a bigger problem because house prices will no longer “always be lower than last month” and buyers will be bidding up prices which won’t be adequately reflected in comparable sales from a few months earlier. Low appraisals serve to drive prices down and create a self fulfilling cycle of ever lower prices. If appraisers are better able to justify the sellers price this may in fact be a key to breaking the cycle of pain in real estate we have seen.
Lenders have clearly been working to slow the pace of REO properties coming on the market; to be sure there are plenty of lender owned homes available and they still represent the majority of sales in all market despite everyone’s desire to deny the fact; this decline in the speed at which REO properties are coming on the market is likely to be a big part of stabilization. Once there is any perception of stabilization in the market it seems likely to me that many buyers will “pile into the market” and then be confronted with the challenges of getting a new loan – back to the appraisal and underwriting issues. The entire process is likely to be painful but rewarding for those with the constitution to push through: sellers and buyers both.
Re-financing has gone nuts by all reports from our friends in the lending business with home mortgage rates at historical, probably lifetime lows, loan officers actually have trouble keeping up with the volume of business they are processing. The good news here too is that a much lower percentage of these home mortgage re-finances are taking cash out unlike the past re-financing booms, this time the home mortgage re-finances seem to be more focused on actually reducing cash flow burdens on households, where as in the last fifteen years the home mortgage re-finance booms have been more focused on stripping homes of their equity to finance current consumption.
Mortgage lending in 2012 is probably less consumer friendly than in most of the last twenty years in the sense of underwriting standards and appraisal issues, however loans are being made and the process is sufficiently painful so that borrowers seem to really be paying attention to their reasons for going through the process and is getting done in a way that will lead to a healthier housing market in the foreseeable future.
appraisal, appraisal standards, appraiser, asset management, asset manager, borrower, buyer, consumption, credit score, down payment, equity, federal reserve, financing, foreclosure, government backed loans, interest rates, lender owned homes, lenders, local market conditions, Market, Mortgage, mortgage credit, mortgage lending, mortgage rates, real estate, real estate market, realtor, refinance, refinances, REO, reo properties, seller, short sale, sloppy work, stabilization, Thackston, underwriter, underwriting
WHAT’S REAL ESTATE GONNA BE LIKE IN 2012? By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT
2012 is looking like it’s shaping up to be the year of the buyer. The winter months so far here in the Northeast have been unusually busy with buyers poking around virtually ever listing – mind you it has not been hundreds or even dozens of buyers coming out to Open House like in the mid 2000’s but there’s been plenty of action. Over the holiday week virtually every REO listing I have has had one or more showings.
Conventional wisdom says that the buyers are going to remain primarily investors and first time buyers.
The investors were out in force in the month of December probing banks and making low offers hoping that banks would take massive price hits to get properties off their books and closed by 12.31.11. I don’t know of any of these offers that went anywhere, clearly these investors do not understand the obligations or objectives of asset manager’s or company’s working out REO inventory on behalf of investors. The truth is that it costs very little to hold a property and with rare exception the REO assets are priced to the market and there is NO incentive for REO assets to be dumped just because it’s the end of the year. As a practical matter most lenders run on fiscal years that don’t end on 12.31 so it’s just another day – many do not even use natural quarters of the year for the end of their businesses. That being said many excellent transactions were originated in the month that were great opportunities in the medium and long time frames. I had one experienced investor come into my office and talk for about forty-five minutes today about how he has changed his strategy to conform to the current climate. Now mind you this man has been buying, selling and building houses in this region for over thirty years. Traditionally he has picked up land and renovation projects in the down turns and built new homes or renovated and flipped, but he has changed his tack for now. He can’t build profitably and doesn’t want to “build for practice” so he’s banking land assets and buying moderately poor condition homes and stabilizing them with the plan of renting them out. I asked him how many did he plan on doing and he said he’s done nine clean-up and rent outs in the last six months of 2011. His business model is to acquire single family homes and renovate for a total of $75,000 or less which gives him about a 20% gross return based upon is average rent of $1,200. Not bad when you look at your other investment alternatives.
First time buyers are also out in force. They are of course first time buyers and have lots of information, most of which is bad, and lots of input from family, most of whom know less than the first time buyers. These folks are getting transactions together and they are closing, but it is very painful for them because regardless of the input from REALTORS who are actually trained as a buyer’s representative, (like me I am both an Accredited Buyer’s Representative and an Accredited Buyer’s Representative Manager through the National Association of REALTORS), they tend to listen to friends and family who bought homes at sometime in the past, and this is definitely not your Uncle Louie’s real estate market. Big changes for buyers are that no REO Manager will consider an offer that doesn’t have a high quality pre-qualification letter along with it – these REO managers don’t do wishful thinking, they want to know that the buyer can perform or they won’t consider tying up inventory. Other big changes are that when the REO contracts are accepted and they call for closing by a specific date there are penalties to the buyers for not closing on time or not completing inspections on time. The REO managers aren’t kidding when they say as is where is and close on time – this is very different from what most buyers came to expect in the last few years of the real estate boom. Most sellers and their agents became really flexible on dates and repairs because they knew intuitively no mater what the buyer wanted they were still making a killing on their property: that would not be the REO market – no matter what the REO’s are loosing money for the investors behind them and they are tremendous opportunities for the buyers who will live in them for a period of years and pay down there loans and sell later in a better time.
assets, financing, first time buyer, foreclosure, homebuyer, investment, real estate, real estate market, realtor, REO
The Great Recession that has shaken the American Economy and Housing Market over the last five years has taken many would be home buyers out of the market and loaded the Home Buyer psyche with skepticism however it has not generated an increase in the demand for buyer brokers. In fact if anything the willingness of buyers to contract with Buyer Brokers appears to be in decline and the willingness of agents and agencies to provide buyer brokerage services appears to have declined.
Buyer Brokerage, properly understood by the consumer and properly handled by the Buyer Broker is an excellent program and an excellent service for any home buyer in today’s market.
The top ten things when getting involved in Buyer Brokerage follow:
# 1. Find a Buyer Broker that you feel you can know like and trust. This person is going to need to have both your attention and confidence. Remember you’re not hiring them to be your best friend you’re hiring them to help you make solid business decisions.
# 2. Understand that you are HIRING the Buyer Broker which means you will be responsible for PAYING the Buyer Broker. Most agents will be happy to accept as compensation whatever fee is offered through their local MLS however sometimes listing brokers will not pay a fee or will not pay a reasonable fee and it will be your responsibility to handle this cost. Discuss this in detail when you hire the Buyer Broker.
#3. ONLY HIRE A BUYER BROKER WITH TRAINING IN BUYER BROKERAGE. Lots of agents and agencies will agree to be paid as a buyer broker but very few have actually training in Buyer Brokerage. The top level of training for a Buyer Broker is an Accredited Buyer Representative Manager a designation offered exclusively through the National Association of Realtors, Real Estate Buyer Agent Council.
#4. Have some idea of what you want and were you want to live. It’s the Buyer Broker’s job to help you figure out the best value for you but you need to understand your own needs and wants so the Buyer Broker can help you figure things out.
#5. Listen to the Buyer Broker. Most Buyer Brokers can send you to good service providers: Loan Officer’s, Title Companies, Home Inspectors etc and do so to help you get good service – no other reason, really.
#6. Find out if your chosen Buyer Broker requires a retainer and how that’s handled. Many Buyer Broker’s require a retainer when you contract for services. Most refund that after a successful closing, some do not establish how this item is handled when you sign your contract.
#7. Establish the level of service you expect and the level of service your Buyer Broker is ready willing and able to provide. Some buyer brokers will check zoning, building permits and title issues; some will not work with For Sale by Owner and non-MLS listings be clear about how these issues are handled.
#8. Establish an exit plan. Sometimes relationships just don’t work out or sometimes your situation will just change. Be clear at the beginning of your relationship with the Buyer Broker how things can be ended if you don’t feel the relationship is working out.
#9. Understand the agency laws in your state. Every state has different rules governing the actions and relationships of the real estate agents with the public – no two are exactly the same.
#10. Make sure you know who the boss is. When contracting any licensed professional for services make sure you know who they report to and who regulates Buyer Brokerage in your state. There is NO STATE where Buyer Brokerage is regulated by the REALTORS.
American Economy, Bellows Falls, buyer, buyer broker, buying, Dick Thackston, economy., financing, First Home Buyers, first time buyer, home buyer, housing market, Keene, Massachusetts, monadnock region, New Hampshire, Peterborough, realtor, recession, The great recession, Vermont, Winchester
By Dick Thackston
Whether the US Economy is entering or has entered a double dip is a hard call and seems less than clear to most of us. Remember as President Nixon famously said over forty years ago: “Unemployment’s a matter of perspective which mostly depends on whether you’re working or not.”
Happily, New Hampshire and Vermont are among the most economically successful states in the country at this time. New Hampshire gained approximately 12,000 jobs from the peak of unemployment and Vermont has gained 5,700 in the same time frame. To be sure both states still have a net loss since 2008 however both states show that they are making the long crawl back from the bottom. New Hampshire’s economy is outperforming the US economy overall by adding jobs faster which has lead to increasing income and spending and our lower unemployment and is likely to do so in the foreseeable future according to most Economists.
So where’s housing?
Why aren’t prices stable and buyer’s buying at such low interest rates?
House prices have fallen about 20% overall in New Hampshire: more in the poorer areas and on poor quality properties and less in the wealthier areas and better quality properties. The number of homes available for sale in New Hampshirehas ranged from twelve to sixteen months worth of inventory over the last three years and seems to remain in that range.
Why is that?
If homes are selling at some pace why can’t we get ahead and drive the amount of inventory down to a more manageable backlog and generate some appreciation and good news? There are several critical factors: consumer age, nature of inventory, consumer confidence and banking regulation.
Since the year 2000 the populations of New HampshireandVermonthave seen their highest growth rate in the categories ages 55-64 and 65+. This seems to be driven by two major dynamics. The low rate of economic growth means younger families are not as attracted to the region as they might be to other more dynamic regions and the tax climate is very favorable to wealthier households that tend to be older. Older consumers tend to not spend as much in general and tend to not be as mobile in housing. They tend to stay put reducing the velocity of sales in the region.
The inventory of available homes in our region tends to be of poor quality over all – to be sure there are many fine homes in excellent condition available – which generate little or no interest in housing consumers of any demographic. During the housing bubble these homes sold at unreasonable high prices because they might be the only property available to many consumers most of whom might have been better off without the property. Many of these properties have no future and this is the range where we see sales in the region in the < $50,000 range. The prices often reflect lot cost minus the price of removing existing structures. Even at that low price level there is very limited demand and these properties are likely to remain a glut on the market statistically for years not months.
Consumer confidence remains weak. If economic uncertainty is to remain the ruling dynamic for the foreseeable future is it any wonder that household savings is likely to continue increase dynamically? Is it any wonder that large corporations are mimicking households as a rule and holding on to large amounts of cash at a time when lending is not guaranteed to be available to even the most qualified of borrowers?
Banks have positive economic incentives to hold up foreclosures and release them onto the market slowly. The longer banks hold delinquent properties off the market the longer they can put off recognizing losses so they look better to both regulators and investors but more significantly they aren’t forced to compete with themselves and there is an increasing trend among lenders to work out short sales with their delinquent accounts. Most industry analysts in the mortgage banking industry expect a surge in short sales in the next twelve to eighteen months. Shortsales reduce lender losses by so estimates as much as $50,000 per property and is far better from a public relations point of view with the consumer that has is over mortgaged.
So what’s the best plan for the average consumer at this time? For seller’s it’s simple: be realistic about your price; if you’re over mortgaged select a REALTOR with success handling short sales and begin working with your lender early in the process. This is likely to allow you to obtain the best terms from both your lender and the home buying public. For buyer’s it’s more complicated: understand what you really want and can afford; get pre-approved by a lender early in the process – bank owned properties and shortsales won’t normally consider any offer from a buyer that can’t produce a pre-approval from a lender with a contract; and most importantly understand that the really inexpensive properties are mostly trash and will not be financeable – there are no free lunches in housing!
Bellows Falls, buyer, consumer, consumer confidence, Dick Thackston, economist, economy., financing, First Home Buyers, first time buyer, foreclosure, housing market, Keene, lender, Massachusetts, Mortgage, New Hampshire, Peterborough, real estate, realtor, REALTORs, REO, short sale, Unemployment, Vermont, Winchester
By Dick Thackston
Distressed properties are the biggest part of the real estate business today. Of the distressed properties that are on the market and selling now the majority are not bank owned REO properties rather the majority of distressed properties on the market and selling today are “Short Sales”. Short sales are properties where the home owner owes more than the current market value of the home and is attempting to sell the property and have the bank write down the loan balance on the home.
Generally, Short Sales properties are in better condition and are still financeable with normal condition than properties that have gone to foreclosure because the home owner still lives in the home and maintains it as their own. These seller’s generally are looking to maintain their credit and are just people caught in the trap created by a declining real estate market over the last five years and have to move on for one reason or another.
National data services show that 12% of all homes that closed nationwide in the second quarter of 2011 were short sales; that’s up from 10% from 10% for the same period in 2010! Effectively a 20% increase.
The reason for the increase appear to be multifold: it appears that more home owners have come to accept that their home will not increase in value without improvements in the property or the economy that are outside their ability or control and their reason’s for needing to move generally revolve around job and/or family changes as well as just a plan old need to move on.
Another major factor in this phenomenon has been banks & lenders that hold mortgages. Banks & lenders have come around 180 degrees from where they were five years ago. Five years ago very few banks & lenders would even consider a short sale, they like most home owners expected prices to maintain or recoup in a few months, but today they have come to realize increasingly that it is in their best interest to work with troubled home owners to resolve mortgages where the homeowner is upside down on the loan. To be sure this has resulted from pressure from the government in Washington as much as from market forces but overall it is good news and likely to pave the way to a more stable and prosperous housing market in the future but getting the dead weight of over mortgaged homes through the system. As an example Bank of America has announced that it expects to complete around 100,000 short sales in 2011!
The key to a successful short sale experience is consistently an agent who has the background and experience to complete a short sale it is not an easy process even now. It generates many times the paperwork and problems of any other sale. The team at R.H. Thackston & Company has been completing short sales since the Savings & Loan crisis of the early 1990’s and has the experience and knowledge to serve you in managing a distressed property sale. Since the beginning of 2011 we have completed on average 3.5 distressed property sales every month.
buyer, Dick Thackston, financial institutions, financing, first time buyer, foreclosure, housing market, Keene, lenders, Massachusetts, New Hampshire, News, Peterborough, real estate, REALTORs, REO, Savings and Loan, selling, short sale
I want to buy land and build a house. What’s up?
By Dick Thackston CRB, ABRM, ABR
Many people that have been looking for land and been surprised to find land prices have not fallen nearly as much as residential housing if at all. Many more desirable building lots have remained unchanged in price or even increased in price a real shocker for the first time land buyer or people looking to build.
Here’s why!
First and most importantly land sales were never driven up by the mortgage lending boom over the last few years. Many people don’t realize it but land was, is and will likely remain a largely cash sale: no easy financing means, no inflation means and no deflation. To buy a building lot there are only a few avenues a buyer can take: Cash, Owner Financing or a construction loan.
Construction loans are traditionally hard to obtain and are only given to the best most qualified buyers – basically people who don’t need to borrow the money. They typically require high down payments, are interest only and balloon within six months to a year of closing. Normally before a bank will agree to make a construction loan they will require full architectural prints and bids for all phases of construction not normally what the home handyman has in mind. These loans are typically made by smaller local banks rather than larger national institutions smaller banks are under significant pressure to improve their portfolios and avoid “high risk” loans such as construction loans so they mostly don’t make them.
Once you find you land and money to buy it the next problem is materials costs. While there are certainly sales in local lumber yards and liquidators of back inventory it may be difficult or impossible to count on exactly what you need being available when you need it for new construction if that was you planned route for materials. Buying new materials for construction projects has actually never been more expense. Remember two things a piece of plywood is a piece of plywood whether it goes on a house in New Hampshire or a house in Chunking China. There’s a building boom going on in China right now sucking up much of the world’s building supplies such as lumber, copper wiring, window glass, shingles etc and driving price up!
Labor is tighter than you might think. There is plenty of unskilled labor available but licensed plumbers and electricians have laid off many of their helpers and trainees so they have maintained or even increased their costs. Most towns and cities will require that at least these two trades be licensed in a new construction project.
The greatest value and easiest projects remain renovations of lender owned properties, (REO’s). If a buyer has limited cash and time there are very favorable opportunities with REO’s which are eligible for special financing through the FHA’s 203K program. In a normal lending/home buying market lenders, REALTOR, Home Buyers and Seller’s run like the wind from the FHA’s 203K program however in today’s economic climate new rules have been implemented to make the program more viable and allow the average homebuyer up to thirty thousand dollars for post closing renovation work without bids being obtained before closing – that’s a lot of home handyman work!
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