3 Tips for Smart Vacation-Home Buying

Vacation homes are offering plenty of good deals at the moment. In many second-home hot spots, prices are still close to five-year lows. For example, single-home prices in second-home hotspot Napa, Calif., are down 47 percent from their peak in 2006, according to Fiserv.

If you have a buyer looking to cash in on vacation- or second-home values, an article at CNNMoney.com recently offered the following tips:

1. Is it rentable? Even for buyers who aren’t planning to rent it out, they may still want to consider the rental aspects of the property, particularly since a home’s rental potential can affect its resale value, says Catherine Jeffrey, a real estate professional in Fredericksburg, Texas. Buyers will want to check with the homeowners association or township to ensure that short-term rentals are allowed.

2. How do you plan to use the home? Your loan rate will depend on how you use the property. For example, if buyers intend to use the property primarily as a second home, they’ll pay about the same mortgage rate as a primary residence, says HSH Associates vice president Keith Gumbinger. However, if they plan to get rental income from the property, the property will be treated as an investment, which means they may need to pay as much as 25 percent for the down payment and pay up to one percentage point more in interest, Gumbinger says.

3. Are you eligible for the tax benefits? If the owners rent the house out for two weeks or less, they won’t have to report income to the IRS, and they’ll still be able to deduct property taxes and mortgage interest, experts say. If the owners stay in the home for less than two weeks or has 10 percent rental days, whichever is greater, they’ll be able to deduct operating costs, such as cleaning and maintenance fees, as well as the interest and property tax, says Rick Shapiro, a CPA in West Hartford, Conn. He suggests home owners talk with a tax expert to find out what tax benefits they are eligible for.

Source: “5 Things to Know About Buying a Vacation Home,” CNNMoney.com (April 5, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Critics: New Foreclosure Rules Don’t Do Enough

New rules for the nation’s largest mortgage servicers haven’t yet gone into effect, but critics are already speaking out, saying the new rules fall short of really addressing foreclosure problems and helping home owners.

In a settlement with federal banking regulators, new rules for mortgage servicers include requirements that servicers stop foreclosing while negotiating a loan modification, improve their processing systems, provide defaulting borrowers a single point of contact, and bring in a consultant to investigate complaints by home owners who were foreclosed on because of foreclosure processing errors in 2009 and 2010.

However, Alys Cohen of the National Consumer Law Center says the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”

Critics say the new rules need to do more to help home owners who are trying to modify their loans and stay in their home.

In a letter to the regulators, dozens of groups — including the Consumer Federation of America and the Center for Responsible Lending — are calling for the withdrawal of the agreement in favor of “specific and protective measures regarding loss mitigation, account management, and documentation.”

About 4 million home owners face foreclosure or are near to it, and housing analysts worry that adding those homes to already high inventories on the market will depress housing values even more.

Meanwhile, a coalition of all 50 state attorneys general and the Obama administration are working on a broader settlement to change the foreclosure process and keep more home owners in their homes. The settlement could include a multibillion-dollar penalty to banks. State attorneys general have also called for servicers to reduce the mortgage principal of struggling home owners, a move the servicers have strongly resisted.

The current agreement with bank regulators, does not “pre-empts our efforts,” says Attorney General Tom Miller of Iowa, who is leading the state attorneys general settlement.

Source: “New Rules for Top Mortgage Servicers Face Early Criticism,” The New York Times (April 11, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Growth Slows in U.S. Cities

In an analysis of 2010 Census data, University of Nevada Las Vegas urban studies professor Robert Lang says a decline in immigration and the recession contributed to slower growth in cities over the last decade.

Lang says some cities saw blacks relocating to the suburbs, even as cities attracted young professionals and empty-nesters; Washington, D.C., for instance, saw its population grow 5.2 percent despite a loss of black residents.

However, in most other cases, the added residents were not enough to cancel out the losses.

In locations like Charlotte, N.C., Nashville, and Orlando, Fla., immigrants chose to settle directly in the suburbs, bypassing cities altogether.

Of the 15 most populous cities in 2000, 14 lost residents or experienced declines in growth rates, with Philadelphia the only one to reverse a population decline from the previous decade.

Of the 35 cities that rebounded in the 1990s, Lang says Birmingham, Ala.; Detroit; Toledo, Ohio; and New Orleans saw the biggest decline in growth rates since World War II.

Source: “Most Major U.S. Cities Show Population Declines” USA Today (04/07/11)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

NAR: March Existing-Home Sales Rise 3.7%

Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.

Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”

NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010.

Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.
“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.

“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-downpayment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the downpayment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun said.

A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in March, compared with 34 percent of homes in February; they were 44 percent in March 2010.

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Report Unveils Tactics of Loan Scammers

One in nine home owners are more than 90 days behind on their mortgage payments, which has prompted loan modification scams that promise to rescue home owners from foreclosure doom to skyrocket.

Four fair housing organizations released findings this week uncovering some of the most popular loan modification scam tactics after a yearlong investigation of about 80 companies.

According to the report, some of the common scam tactics used were:

* 55 percent required an upfront fee to begin work or required a low initial fee to conduct minimal work — such as reviewing loan documents — on behalf of defaulting home owners.
* 43 percent guaranteed or promised they would be able to secure a loan modification even prior to learning about the home owner’s financial limitations.
* 24 percent advised or encouraged home owners to stop making their mortgage payments or to stop contacting their lenders.
* 16 percent guaranteed a loan with a lower interest rate, between 2 and 6 percent.
* 12 percent discouraged home owners from getting free help from government-approved housing counseling agencies.

The report was issued by The National Fair Housing Alliance, The Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia, and the Miami Valley Fair Housing Center.

Source: “Undercover Investigation Reveals Mortgage Scammer Tactics,” HousingWire.com (April 6, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Is This Really a Buyer’s Market?

With falling home prices and higher inventories, most of the public views real estate as a “buyer’s market,” in which buyers hold more of the control and sellers will more eagerly accept lower offers just to sell.

Not so fast, say buyers and sellers. More buyers are finding the sellers in the driver’s seat.

Buyer Young Hammack gave up looking for homes for a while after being outbid on three properties in California. “It’s a false buyer’s market,” Hammack says. “If you think prices are cheap, wait until you start putting offers in.”

Many sellers may be unable or unwilling to lower their home prices — mostly because they may be underwater on their mortgage — so buyers are increasingly finding lower offers than list price denied. Buyers, on the other hand, may be reluctant to agree to a deal if they don’t feel like they are getting it at a deep discount, industry insiders say.

Traditional buyers also are finding even buying a foreclosure can be difficult as they’re increasingly outbid by investors who are willing to pay cash.

“There’s a shortage of attractive inventory,” says Glenn Kelman, chief executive of Redfin Corp. “Customers just keep getting outbid on the houses that they want.”

Real estate professional Steve Capen with Keller Williams Realty in St. Petersburg, Fla., says that the homes most in demand among buyers often don’t require much repair work and are located in good school districts and choice neighborhoods near transit hubs.

“What’s selling is the cream of the crop, and they sell fast,” Capen says. “If it’s not cream of the crop, it’s getting hammered.”

Source: “Buyers’ Market? Stressed Sellers Say Not So Fast,” The Wall Street Journal online (April 25, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Where You’ll Find the Most Stubborn Sellers

On average, sellers reduce their list prices after about 2.5 months by 8 percent when a property hasn’t sold yet, according to a new report by Trulia.com, which analyzes non-foreclosure listings of residential properties between March 2010 and 2011.

After making one price reduction, 35 percent of those sellers will make a second price cut too.

However, Trulia found some sellers tend to be a little more “stubborn” when it comes to slashing prices, waiting 80 days before making an initial listing price cut.

According to Trulia, these stubborn sellers are most often found in:

* New York City
* El Paso, Texas
* Charlotte, N.C.
* Cleveland
* Raleigh, N.C.
* Louisville, Ky.
* Kansas City, Mo.
* Memphis, Tenn.

Cities That Don’t Slash Prices Enough Initially

Other sellers don’t seem to cut their prices enough the first time around and likely will have to slash prices further. According to Trulia, those sellers are most often found in:

* Phoenix
* Mesa, Ariz.
* Jacksonville, Fla.
* Baltimore, Md.
* Chicago

Meanwhile, Trulia found that Minneapolis, Minn., was the state quickest to cut prices, slashing prices after an average of 45 days. Other major cities in California–such as Oakland and Sacramento–also were more quick to offer discounts, ranging from 49 to 53 days for the first price cut.

Source: “America’s Most Stubborn Home Sellers,” Fortune (April 5, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Don’t Just Walk Away From Mortgage, Survey Says

Some Americans who owe more than what their house is currently worth are opting to walk away from their mortgage. But a new survey finds Americans don’t agree with home owners who make that choice.

Sixty-percent of Americans say it is “never OK” for home owners to stop making payments on their mortgage, according to a new survey of 1,000 American adults by FindLaw.com, a legal information Web site. However, 34 percent say it’s OK for home owners to walk away from their mortgage if they are no longer able to make their monthly payments.

Only 3 percent of those surveyed said home owners should be able to walk away from their mortgage anytime they want.

“Many home owners are currently facing very difficult and complicated situations involving their home mortgage, in some cases even including the threat of foreclosure,” says Stephanie Rahlfs, an attorney and editor for FindLaw.com. “But before making any major decisions, home owners should consult with financial and legal professionals, including accountants, real estate attorneys and financial advisers. Any major change to a mortgage situation could lead to serious and unanticipated consequences involving taxes, contract law, credit scores, ability to borrow in the future, potential for lawsuits, and much more.”

Source: “Most Americans Opposed to Homeowners Walking Away From Mortgages, Says New FindLaw.com Survey,” FindLaw.com (April 5, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

GOP Senators Join Efforts to End Fannie, Freddie

Sens. John McCain, R-Ariz., and Orrin Hatch, R-Utah, proposed a bill Thursday that would phase out government-sponsored enterprises Fannie Mae and Freddie Mac in five years or privatize them.

The bill comes on the heels of several similar Republican bills that have been proposed in the House.

While the proposed bill calls for Fannie and Freddie to be dismantled, the senate bill also calls for the GSEs to take steps such as charging higher fees and decreasing the size of their mortgage portfolios so that private banks can step up to take on a bigger piece of the mortgage market.

Fannie and Freddie, as well as other federal agencies, backed about nine in 10 mortgages in the past year.

“Never again can we allow the taxpayer to be responsible for poorly managed financial entities who gambled away billions of dollars,” McCain says.

McCain’s bill is similar to the one proposed in the House by Rep. Jeb Hensarling, R-Texas. Earlier this week, House Republicans also introduced eight smaller bills that take a “bite-sized approach” to winding down the GSEs.

The National Association of REALTORS® urged Congress this week to not move too fast in reforming Fannie Mae and Freddie Mac.

“NAR strongly agrees that the existing system failed and that reforms are needed. However, redesigning a viable secondary mortgage model that will protect taxpayer dollars and serve the country’s home owners today, and in the future, can only be achieved through a methodical, measured effort,” 2011 NAR President Ron Phipps said in testimony before the House Subcommittee on Capital Markets this week.

“REALTORS® agree that increasing private capital in the mortgage finance market is necessary for a healthy market and for reducing the government’s involvement. However, proposed legislation that relies only on private capital to operate the secondary mortgage market will slow, if not stop, the housing and economic recovery.”
Source: “Republicans Advance Effort to Kill Government-Run Housing Giants Fannie Mae, Freddie Mac,” Associated Press (March 31, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC

Home Inspections Can Spur Haggles Over Price

More buyers are using home inspection reports as leverage to get a price cut or get sellers to pay for extra repairs, says Harris Gross of Engineers for Home Inspection in Cherry Hill, N.J.

“The result depends on the financial position of the seller and the comfort zone of the buyer,” says Noelle M. Barbone, manager of Weichert REALTORS® in Media, Pa. “We are a coupon-clipping society,” with buyers trying to save every penny they can, she adds.

But home inspectors caution that home inspections are not intended to note every tiny defect and they aren’t there to “pass or fail a house.” Instead, the home inspectors job is to describe the overall condition of the home and indicate which components and systems may need repair or replacement, according to the American Society of Home Inspectors.

A home inspector’s standard report will cover the condition of the following:

* Heating system;
* Central air-conditioning system (temperature permitting);
* Interior plumbing and electrical systems;
* Roof, attic, and visible insulation;
* Walls, ceilings, floors, windows, and doors;
* Foundation, basement, and structural components.

Some larger home inspection companies may offer even additional reports, such as for termite inspection and radon testing.

Buyers should accompany home inspectors during the inspection of the house and take a notebook or voice recorder and camera to use as future reference, suggests Weichert REALTORS® agent Diane Williams.

Source: “Home Inspections an Essential Tool for Buyers,” RISMedia (April 4, 2011)

Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC