Improvements in Mortgage Market Bodes Well for Housing in 2008

Washington, DC, Oct. 10, 2007 – Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the National Association of REALTORS. Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales.  “Conforming loans are abundantly available at historically favorable mortgage rates.  Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he said.

Yun said it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales.  “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year – a lot of people are, in fact, buying homes,” he said.  “One out of 16 American households is buying a home this year.  The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”

He emphasized all real estate is local with naturally large variations within a given area.  “Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year,” Yun said.  “Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments.”

Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006.  New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring.

“A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun said.  Housing starts, including multi-family units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006.

Renting vs. Buying

Many renters feel buying a home is an impossible dream. But consider this: A landlord expects to make a profit after paying the mortgage, taxes, insurance, repairs and other expenses. His only “income” for the rental property is the rent paid by the occupants. As time goes on, and the value of the property increases, rents rise and his profit margin grows. Rents in Columbus, Ohio are expected to increase by 4 percent this year and will continue to grow in the future.

If you want more control over your housing, and more importantly a share in the profits, buying is the choice for you. If you’d prefer to continue putting money in your landlords pocket and adding to his net worth, don’t make any changes and continue renting. But before you choose, please consider the following.

The basic premise of renting: Someone buys a property whether it be a single family home or a 300 unit apartment complex. They find people to pay their mortgage for them and in return they allow those people to live there. You are always buying a house, but when you are renting you are just buying it for someone else. 

Lets say that you are renting an apartment with two of your friends. All three of you pay the same amount each month for the right to live there. But when you move out, what do you have to show for your time and money spent at the apartment? I will help you with the easy ones…NOTHING! Now, lets say that you owned the house and rented 2 rooms to those friends of yours. Your roommates are paying at least 2/3 of the mortgage for you (it’s quite possible that they will actually be paying more) and YOU get to deduct all of the mortgage interest from your taxes each year!  So, by keeping those same roommates you were living with before and simply having them live in YOUR home, you can reduce your tax burden and save thousands of dollars each year! No to mention you’re also building equity in that home and are on the fast track to owning it! 

Inventory levels are at their highest levels ever and as a result of this prices have been easing downward. Today’s buyers not only have access to a great variety of homes for sale then any other year in history but Interest Rates are still hovering around 40-year lows. There has not been a better time to buy a home in our country’s history!

Think home prices are too high? You can buy an 2-bedroom condo in Dublin for under $100,000! As mentioned supply currently far exceeds demand, which is forcing those who need to sell to make drastic price reductions! This is exacerbated by the increased number of foreclosed and short sale homes (a short sale is a sale in which the lender agrees to accept a price below what the current owner actually owes on the home and is an effort to avoid foreclosure) currently on the market. There are many options available to buyers offering payments right around, or perhaps even less than what you are currently paying in rent. 

In this current market it’s not uncommon to find a $150,000 home priced $15-$20K below market value. For those holding a winning lotto ticket or looking to buy their $1,000,000 dream home, there are motivated sellers in this price point willing to sell well below market value, some as much as $200,000 or more!

So again, if you’re thinking of buying a home there has never been a better time to do so! Rates are low, inventory levels are high, sellers are anxious and prices are down but will rebound as inventory levels begin to stabilize and the market returns to a level of equilibrium.

Think before you rent. Begin the path to financial freedom now and call us!

Did Developers Build a Housing Bust?

Home builders that rushed into the mortgage business in recent years joined lenders and Wall Street in halting the housing boom. 

Elizabeth and Armando Motto are living a real-estate nightmare with a new breed of monster: the big home builder as lender. In November 2005, the couple, who have four children, agreed to pay $540,000 for a newly built three-bedroom house in suburban Clarksburg, Md., near Washington, D.C. Rather than send them to a bank, the builder, Beazer Homes USA Inc., offered to provide a mortgage itself in an arrangement of the sort that helped fuel the long housing boom across the country.

But when it appeared that the Mottos might not qualify financially for the loan, things took a troubling turn. Beazer, according to the couple, inflated the pair’s earnings in loan-application documents by incorrectly stating they were collecting rental income from the house they were leaving. “I don’t want to misrepresent myself,” Elizabeth said in e-mail correspondence with Beazer’s outside mortgage service, dated July 14, 2006. But in the end, the couple signed the documents, and soon after they closed on the Clarksburg house.

They now regret it. The Mottos moved to Clarksburg, but they haven’t succeeded in unloading their previous home in Rockville, Md. They have nearly $1 million in mortgage debt on the two dwellings. With $145,000 in family income, Elizabeth says, they are “on the brink of foreclosure” on both houses. “We are so broke.”

Beazer, one of the dozen or so large publicly traded builders that have started or stepped up mortgage-lending businesses to put more buyers in freshly finished houses, declines to discuss specific customers. The Atlanta company has much more than the Mottos to worry about. On Aug. 1, its stock fell nearly 18% on rumors that it was preparing to file for Chapter 11 bankruptcy court protection — which Beazer swiftly denied, calling the Wall Street gossip “scurrilous and unfounded.” Just five days earlier, Beazer revealed that the Securities and Exchange Commission had elevated an informal inquiry into its mortgage business to a formal investigation. The company warned that criminal penalties could follow. Earlier this year, Beazer received a subpoena from the Justice Department seeking documents related to its home loans. The company also is under civil investigation by the North Carolina Attorney General’s Office.

Leslie H. Kratcoski, Beazer’s vice president for investor relations and corporate communications, says in an e-mail that the company “intends to continue to fully cooperate with all related inquiries but does not have further comment at this time.”

Egged on by Wall Street

A diverse cast of characters combined to launch the once-in-a-lifetime housing boom of the past five years. Traditional mortgage companies and banks unleashed a barrage of loans, many to borrowers with iffy credit histories who didn’t bother to read the fine print about upwardly mobile interest rates. Wall Street egged on the often-reckless underwriting by buying vast quantities of home loans for repackaging as securities. Now that the boom has fizzled and foreclosure rates are rising, the important role of large home builders as lenders is coming into sharper focus.

In addition to spitting out subdivisions, many of which now stand half-empty, builders jumped into the mortgage business to a degree they hadn’t before. Wall Street provided the same encouragement it offered other lenders. Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only and other risky loans. In some cases they attracted clientele who couldn’t afford conventional mortgages. In others, builders allegedly violated federal lending standards to get customers to sign on the dotted line. KB Home paid a record $3.2 million settlement in July 2005 to resolve allegations by the U.S. Department of Housing and Urban Development that the builder’s mortgage unit overstated borrowers’ income, among other practices, to obtain loan approvals. KB, which denied wrongdoing, sold its loan business before settling.

“Home builders really started to push these more aggressive mortgages down the throats of potential buyers to boost sales,” says G. Hunter Haas IV, who, as head of mortgage research and trading for Opteum Financial Services, had an insider’s perspective on the proceedings. Opteum has served as a middleman between Wall Street and builders. The Paramus, N.J., firm provided developers with financing for their mortgage operations, then resold the loans to investment banks, which packaged them as securities and hawked them to hedge funds and insurance companies. The whole process added liquidity to the market and made it easier for developers to build and sell expansively.

But by early this year, Opteum’s home-loan business was going sour. The investment banks and their clients were rejecting builder-originated loans as too shaky and likely to go into default, Haas explains. Some homes were turning out to be worth less than builders had claimed, and some borrowers didn’t have the income noted on applications. “Home builders were getting sloppy, and Wall Street was giving more scrutiny,” Haas says. In June, Opteum decided to get out of home-loan brokering.

Until the market turned, the growing heft of the largest developers made it easier for them to obtain Wall Street financing for their mortgage businesses. Once dominated by modest local firms, the industry in the past two decades has seen the emergence of sizable publicly traded corporations such as Pulte Homes, Lennar and Centex, each of which has a market capitalization of $7.5 billion to $8.5 billion. The 10 largest builders together had revenues of $98.8 billion last year, up from only $9.3 billion in 1992. Public companies built 27% of all new homes in 2006, compared with 8% in 1992. And in Denver, Las Vegas and Phoenix — markets that were scorching hot until recently — public companies put up 55% or more of the new houses.

Busy developers that provided Wall Street with equity-underwriting business discovered they had friends in the investment banking world. “Once builders got larger and a little bit more predictable, they were able to borrow money from various credit markets, borrow from Wall Street, and expand more easily,” says Thomas W. Smith, a building-industry analyst with Standard & Poor’s Equity Research, which, like BusinessWeek, is owned by The McGraw-Hill Companies.

For a while during the boom, the big builders could do no wrong in Wall Street’s eyes. The Dow Jones U.S. Select Home Builders Index surged 290% from October 2002 to July 2005 as the profits of the 10 biggest developers more than tripled. But the pressure to beat quarterly expectations didn’t relent when more and more new subdivision homes stood empty. Providing loans to financially marginal buyers was one way some developers tried to prop up their financial performance, says S&P’s Smith. “You’re trying to support earnings at high levels, so it’s conceivable that greed gets into people’s minds,” he says.

Now the bust is taking a brutal toll. In January, industry analysts predicted that the 10 biggest builders would have average earnings per share of $3.69 for 2007; the latest forecast is for a loss of $1.18.

Ghost towns

Sheer overbuilding, a symptom of every housing bubble, is the most obvious explanation for the new ghost towns sprinkled around the country. But increased builder lending helped feed the trend. Statistics are scarce because developers don’t break out their lending revenues, but some analysts track “capture rates,” or the percentage of home sales financed by builders themselves. Pulte Homes, the largest developer by market cap, had a capture rate of 90% last year, up from 64% in 2000, according to Daniel Oppenheim of Banc of America Securities. No. 3 Centex had a rate of 80% for the fiscal year that ended in March, up from 61%.

By the time marginal buyers fall behind on their payments, the builder has usually sold off their loans to Wall Street. But the human fallout can be found in neighborhoods around the country.

Several developments built recently near Columbus, Ohio, by Dominion Homes Inc. are scarred with empty houses, overgrown yards and front windows with neon-orange foreclosure stickers. Dominion often offered “buy-down” mortgages in which it forgave or reduced early payments, according to borrowers. One young couple, Travis and Kelly Gunther, say this enticement helped persuade them to borrow all of the $180,300 they paid in 2004 for a Dominion home in a neighborhood called Williams Creek. Kelly has worked intermittently as an executive assistant; her husband, a plumber, recently went to Iraq to work for a private contractor. Kelly claims Dominion told her the couple’s initial monthly payment of $1,160 would rise $100 a year, to $1,360 in 2006. Instead, the payment rose by more than $200, to $1,599. She says Dominion salespeople described homeowner-association fees of $50 a year that ballooned to $285, and taxes turned out to be double the company’s projection.

Although she feels misled, Kelly concedes that she and Travis didn’t carefully scrutinize the fine print spelling out their loan terms. “I wanted the house with the tree-lined streets,” she says. Earlier this year the Gunthers lost their Dominion home in a foreclosure and are moving to a nearby rental apartment.

Adrian Lee, a firefighter in Pataskala, Ohio, is negotiating to avoid foreclosure on the new four-bedroom house he bought from Dominion in 2004. “I know I’m in too much house for what I can afford,” he says. Admitting that he shares blame for his predicament, Lee says of the Dominion sales team: “They didn’t explain the [$163,800] loan to me. I didn’t know after the buy-down mortgage that my payment would be so high. The same people who help you get a home won’t help you maintain and keep it.”

The foreclosure next door

Lori M. Steiner, a senior vice-president with Dominion, says in an e-mail that the Dublin, Ohio, company doesn’t discuss individual customers. But Dominion says it diligently reviews each sale to make sure buyers are financially prepared to take on the mortgages they seek. The company says it has done extensive research in the Columbus area and that the spike in foreclosures there reflects broader economic problems that have nothing to do with its financing business. Ohio, hurt by a loss of manufacturing jobs, has one of the highest foreclosure rates in the nation, along with California, Florida, Michigan and Texas.

Even some home buyers who are content with their loans claim they’ve been injured by builders’ lending to others. Robert V. Phillips, a lawyer in Rock Hill, S.C., represents residents of a subdivision in Columbia, S.C., who allege in a federal court suit that the value of their homes has fallen as a result of foreclosures stemming from Beazer’s reckless mortgage practices with other customers. The suit, which seeks class-action status, claims that Beazer salespeople encouraged prospective buyers to “falsify information on loan applications.” This made it “inevitable that the subdivisions … would experience a foreclosure rate which significantly exceeds the statewide average,” and that has hurt the value of the plaintiffs’ houses, the suit alleges.

Beazer has filed a motion to dismiss the action, noting that the plaintiffs don’t claim to have been misled or directly harmed by the company. “The complaint,” Beazer argues, “is based upon speculative allegations of causation and conclusory statements.”

For More Information Visit http://www.JasonOpland.com

Stop “Pre-Approval” Credit Card Offers & Prevent Identity Theft

 

Letters promising 0% financing and no annual fees pile out of mailboxes every day, but the number of letters hawking new credit card deals and insurance offers can be maddening.

Reducing the number of unsolicited credit and insurance offers you receive

If you decide that you don’t want to receive prescreened offers of credit and insurance, you have two choices: You can opt out of receiving them for five years by visiting www.optoutprescreen.comor you can opt out of receiving them permanently by calling toll-free 1-888-5-OPTOUT (1-888-567-8688). The telephone number and website are operated by the major consumer reporting companies. When you call or visit the website, you’ll be asked to provide certain personal information, including your home telephone number, name, Social Security number, and date of birth. The information you provide is confidential and will be used only to process your request to opt out.

Remember that if you have joint credit relationships, like a mortgage or a car loan with a spouse, partner, or other adult, you may continue to receive some prescreened solicitations until both of you exercise your opt-out right.

Why would someone opt out — or not?

Some people prefer not to receive these kinds of offers in the mail, especially if they are not in the market for a new credit card or insurance policy. They may prefer to opt out to limit access to their credit report information for credit and insurance solicitations, or to reduce some mailbox “clutter.” However, some companies send offers that are not based on prescreening, and your federal opt-out right will not stop those kinds of solicitations. Many of these solicitations include information which in the wrong hands can lead to indentity theft and opting out is a great way to reduce the likelihood of your indentity being stolen. 

As you consider opting out, you should know that prescreened offers can provide many benefits, especially if you are in the market for a credit card or insurance. Prescreened offers can help you learn about what’s available, compare costs, and find the best product for your needs. Because you are pre-selected to receive the offer, you can be turned down only under limited circumstances. The terms of prescreened offers also may be more favorable than those that are available to the general public. In fact, some credit card or insurance products may be available only through prescreened offers.

Does opting out hurt my credit score?

Removing your name from prescreened lists has no effect on your ability to apply for or obtain credit or insurance.

If I decide to opt out, how long will it be before I stop getting prescreened offers?

Requests to opt out are processed within five days, but it may take up to 60 days before you stop receiving prescreened offers.

What if I opt out and then change my mind?

You can use the same toll-free telephone number or website to opt back in.

Will calling 1-888-5-OPTOUT or visiting www.optoutprescreen.com stop all unsolicited offers of credit and insurance?

Calling the opt-out line or visiting the website will stop the prescreened solicitations that are based on lists from the major consumer reporting companies. You may continue to get solicitations for credit and insurance based on lists from other sources. For example, opting out won’t end solicitations from local merchants, religious and charitable associations, professional and alumni associations, and companies with which you already conduct business. To stop mail from groups like these — as well as mail addressed to “occupant” or “resident” — you must contact each source directly.

What other opt-out programs should I know about?

The federal government has created the National Do Not Call Registry — a free, easy way to reduce the telemarketing calls you get at home. To register your phone number or to get information about the registry, visit www.donotcall.gov, or call 1-888-382-1222 from the phone number you want to register. You will get fewer telemarketing calls within 31 days of registering your number. Your number will stay on the registry for five years, until it is disconnected, or until you take it off the registry. After five years, you will be able to renew your registration.

The Direct Marketing Association (DMA), a trade association for businesses in direct, database, and interactive global marketing, maintains a Mail Preference Service that lets you opt out of receiving direct mail marketing from many national companies for five years. When you register with this service, your name will be put on a “delete” file and made available to direct-mail marketers. However, your registration will not stop mailings from any organizations that are not registered with the DMA’s Mail Preference Service. To register with DMA, send a letter to:

Direct Marketing Association
Mail Preference Service
PO Box 643
Carmel, NY 10512

Or register online at www.the-dma.org/consumers/offmailinglist.html.

The DMA also has an EMail Preference Service to help you reduce unsolicited commercial emails. To “opt-out” of receiving unsolicited commercial email from DMA members, visit www.dmaconsumers.org/offemaillist.html. Your online request will be effective for one year.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit http://www.ftc.gov/or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

For More Information Visit http://www.JasonOpland.com

RottenNeighbor.com

 

A new website promises to help you find your dream home in your dream neighborhood. It does so, by tracking and locating “rotten neighbors”.

RottenNeighbor.com is being marketed as a tool for home buyers and real estate agents.

It is open and anonymous. You can post anything about your neighbor and he can post anything about you.

At the corner of Cedar and Rio Grande in Colorado Springs, a house sits on the market.

Potential buyers might feel discouraged to buy it, because of an anonymous posting on the website.

It describes a nearby neighbor as “a disgrace to the community… filthy, rude and obnoxious.”

In another Colorado Springs neighborhood, one posting describes a family as “trailer trash.”

Another posting gets right to the point: “Thankful we’ve moved.”

The real estate business has never seen or heard of anything like RottenNeighbor.com and while it may serve as an effective tool for home buyers, homeowners should consider the consequences of disparaging their neighbors in public arenas such as this. Homeowners need to realize that these types of remarks do not paint a pleasant picture of the community and they are sure to reduce demand for homes in their neighborhood which in turn translates to decreased property values. Furthermore, unruly neighbors are unlikely to appreciate this approach and the chances of a positive response to such critism is very low. 

The first step in dealing with an unruly neighbor should be to simply approach them and discuss your concerns with them. If you find this to be to intimidating you might consider bringing along another neighbor for support. If this initial effort fails to yield the desired result or if you’d simply prefer to remain anonymous you might consider contacting the President of your Homeowner’s Association. Homeowner’s Associations serve many functions one of which is maintaining the quality of living in the neighborhoods they serve. You have the right to the enjoyment of your private property as well as your neighborhood as a whole and if a member of your community is interfering with that enjoyment, or failing to maintain their property to the standards of the overall community, you should initiate efforts to let this individual and other members of the community know this type of behavior will not be tolerated! 

For most, their home is the largest financial asset they will ever own and an investment in their families future, as such it’s value should be protected. Unruly neighbors, in their various forms can drive down property values and should be delt with swiftly, but appropriately! Publicly disparaging your neighbor is not an appropraite approach to resolving such matters and both you, and your community would be better served if you were to employ the alternative approaches mentioned above.         

As for home buyers looking to acquire this type of information on the neighborhoods and homes they are considering, RottenNeighbor.com isn’t a bad start however, I’d also suggesting knocking on doors and getting to know the new neighbors for yourselve! 

Additionally, home buyers might check out local police department websites to review crime statistics or to search for potential sexual offenders in the area. Finally, you might also contact the local homeowners association.

The Best Investment

In times of economic uncertainty, the wisdom of buying property remains unchallenged. Ask the 73 million Americans who currently own homes why they made the decision to stop renting. They will describe the numerous financial advantages and the personal satisfaction of investing in real estate.

Owning your home means that your monthly payment contributes to your own net worth instead of your landlord’s, as the equity in your property builds up over time. Real estate values continue to grow at an average rate of 10 percent each year, and during the last decade, most homeowners have reported even more dramatic gains. Furthermore, you home is typically a leveraged asset, that is if you purchased your home with a mortgage you likely did so with a down payment of less tan 20%. While you may have only put 20% down, you earn the appreciation on your homes total value and thus is you buy a $200,000 home the appreciation you would earn in that first year f ownership would be $20,000 (rather than $4,000 on your $40,000 downpayment). And a fixed rate mortgage ensures that you won’t be subject to periodic rent increases, so you can plan your monthly budget with confidence.

Low mortgage interest rates have enabled more Americans than ever before to realize their dream of home ownership and save on income tax. Homeowners can deduct 100 percent of their mortgage interest payments and their property taxes, and new tax law benefits have allowed many to sell a principal residence and bank tax-free profits of up to $250,000 per individual or $500,000 per couple.

Real estate is still the best investment!

For Additional Information visit http://www.JasonOpland.com

The Risk Of Un-permitted Improvements & Additions

Home improvement projects and additions have increased in popularity much in response to Home Improvement Shows as well as Do-It-Yourself Clinics offered by stores such as Home Depot & Lowe’s.  While most homeowners will contract with a professional when taking on larger projects, many are hiring unlicesed contractors or simply choosing to tackle these projects on their own in an effort to reduce their costs and in many cases are attempting to reduce these costs even further by not filing for permits. If you’re considering purchasing a home that’s had un-permitted additions and/or improvements made to it here are four factors that determine how concerned you should be about un-permitted work:

1. Significance
2. Workmanship & Code Compliance
3. Effect on resale
4. Possible future requirement to permit or remove

1. Significance
If we’re talking about an un-permitted patio cover or professionally done kitchen remodel, I wouldn’t sweat it. Few people pull permits for them. But a family room addition or extensive electrical work done by the owner or an unqualified individual is more significant, and cause for concern.

2. Workmanship & Code Compliance
Like any home you buy, hire a professional home inspector. Ask him or her to look extra hard at un-permitted additions. Many are built fine, but others are weekend projects by unskilled homeowners. If well-built but not code-compliant, you could still face problems in #4 below.

3. Effect on Resale
If sellers know about it, they must disclose un-permitted work when they sell. There’s no guideline, but my rough rule of thumb is: if it’s well-built, an un-permitted room is worth 50% of a permitted room. Obviously, that means it should have a likewise impact on what you’ll pay right now.

4. Possible Future Requirement to Permit or Remove
The city rarely hears about un-permitted additions unless a neighbor complains or a city inspector notices it (typically that happens when checking other work you ARE permitting). Once aware, they’ll make you remove or permit the work. Permitting means you’ll pay penalties (I know YOU didn’t build it, but the city doesn’t care) and bring it up to current code, which could be easy or costly.

…in summation:

When buying…

1. Don’t sweat minor un-permitted items (provided #2 is OK)

2. Decrease your offer by appx 50% of the added value of an un-permitted room

3. Have it inspected. If poorly built, ask the seller to credit you the cost of bringing it up to standard

Why Isn’t My Home Selling?

The answer probably lies less with your real estate agent whom you entrusted to sell your home and more with the overall market.  Your agent may be diligently marketing your home using; the Internet, print media, open houses, the MLS and other promotional media. This promotional activity continues to attract buyers. Nothing new here.

 

The answer actually lies much beyond your local market, and in the financial capital markets. The money for the mortgage to purchase your home is not as readily available to borrowers as it was just a few months ago. I will not attempt to delve into explaining the capital markets, however, I will highlight briefly, where mortgage brokers and banks get the money to lend to buyers.

 

The bank is but one party involved in providing money for the buyer loan. The mortgage broker, or bank where the buyer makes application and receives the loan, will pool millions of dollars of mortgages, in what they call “traunches” and sell the paper (loan) to a wholesaler, who will through Wall Street brokerage firms create securities. These “traunches” are used to segment investor credit criteria and repayment risk. Investors purchase these mortgage backed securities, ultimately providing the money/liquidity back to the banks. These securities are an “IOU” to the ultimate investor who purchases the paper secured by the buyer mortgage.

 

Over the past few years, investors were caught up in the housing boom, which prompted them to loosen their credit requirements. This excitement provided “easy” mortgage money, however, it is the investor who assumes the ultimate credit risk for getting his principal returned through the normal amortization of the buyer’s mortgage.

 

Now back to your home and why it is not selling.

 

These investors, due to the increasing mortgage default rates have abruptly tightened their criteria for buying these securities (which are backed by mortgages). This credit tightening criteria is ultimately passed on to the buyer. If the buyer now does not meet the tighter credit standards of the investors, banks will not approve new loans causing buyers to be unable to obtain financing.

 

This tighter underwriting criterion has drastically reduced the number of buyers able to obtain funding, which has created a housing bottleneck. As such, your home is now sitting on the market for that qualified buyer or for the markets to open up again.

Investors have over tightened their criteria while they attempt to ascertain their current exposure. As these investors determine exactly how exposed they are, they will then begin to formulate their risk tolerance, which will be adjusted for this new market . When these new risk tolerance levels are set investors will return to the market and begin buying the loans and restoring liquidity to the market. How long this will ultimately take is anyone’s guess, however, some investors have already returned to the market and the rest will soon follow.   

The Real Estate Business Explained

Selling your home is one of the biggest financial decisions of your life. Unfortunately, the vast majority of sellers know nothing about marketing or how homes get sold. This leads to millions of sellers each year getting far less for their homes than they should. You must choose the best way to sell your home and protect your investment and I hope to help you do just that!

Before you can choose how to sell your home, you must understand what actually sells homes. Most people believe that homes sell because of ads however, the fact is that only 17% of homes sell from advertising and only 2% sell because of someone wanting the house featured in an ad. This may sound a little strange, so let me explain.

Real Estate companies do not advertise homes to sell them. There is only a 2% chance that a home will sell because someone calls about its ad. Most likely, when a call is received on the ad, the caller will find something about the house that doesn’t work for them, and the real estate agent who took the call will then direct them to another home which does meet their specific needs. That said, there is about a 10% chance that the home will eventually sell as a result of someone calling about a different house, and then be directed towards the home in question. This is why people who try to sell their own homes get so frustrated. They have limited themselves to just 7% of the buying market! They can’t even tap into the 10% that sell from people calling about other houses, since they don’t have other houses to refer callers to or from. So what else sells homes? Well approximately 15% of homes will sell as a result of For Sale Signs, 3% from Open Houses, and 5% from fliers and print or newspaper advertising. That said, the total chance your home will be sell as a result of one of these traditional methods is about 23%.

So why do real estate companies even advertise? Well, real estate companies advertise for three different reasons, and none of the reasons have anything to do with selling the house in the ad. The main reason they advertise is to get future home listings. Real Estate Companies realize that when homeowners make the decision to sell, they often look for the company doing the most advertising, and assume that company will be the best at marketing their home. The second reason real estate companies advertise is to get buyers. The more houses they advertise in print and news publications translates to more calls from buyers and thus more transactions the company will be a part of. While many of these transactions will involve homes listed by other companies, the real estate company doesn’t care, just as long as the buyer finds the home they are looking for and it receives a commission on the transaction. Finally, real estate companies advertise because the homeowners expect their homes to be advertised. It’s unlikely these sellers understand that this gives them only a 17% shot at the market, but the real estate companies understand that their clients will get thoroughly upset if they don’t see their home advertised in the Sunday paper every week.

If conventional ads sell 17% of homes, what makes up the other 83%?The answer is Internet marketing and Realtor-to-Realtor contact. More specifically here’s what sells homes: the Multiple Listing Service, lots of phone calls, postcards to agents, marketing meetings, faxes, broker e-mail lists, website listings, and web commercials. These are the the tools of our trade and the things that sell real estate today. Not passing out fliers. Not open houses. Not yard signs. Not quarter-page full-color ads. These things certainly help but more than anything else they are done to make sellers happy, get more sellers in the future, and build a larger buyer pool, but 83% of sales occur because of Realtor-to-Realtor contact and Internet marketing. That’s not to say that the other 17% should be ignored. Every percent is a good percent; it just all needs to be put into perspective when you decide how to sell your home.

There is no national conspiracy to set commissions at 6%.Homes sell because of Realtor-to-Realtor contact, and it’s important to understand how commissions work. Some people believe that after a home sells the listing agent takes a big bag of money equal to 6% of the home’s value, and deposits it into his or her private bank account. While it would be nice for us if this were true, this is not the case. When we Realtors sell a home at 6%, we plan to make about a 1% profit. Generally 3% goes to the buyer agent and 3% goes to the listing agent. Of the 3% that goes to the listing agent, approximately 1% of this will be taken by the broker (that is the listing agent’s company), about 1% will be spent on advertising, and the listing agent will ultimately receive a profit of approximately 1% for making the whole thing happen.

So what options do you have for selling your home? Three actually… First, you can sell your home on your own. Secondly, you could list with a discount broker. Finally, you could list with a full-service company. Using an average agent should net you about 14.9% more in the final selling price than if you sold For-Sale-By-Owner. Using a good agent should benefit you even more. If you decide to sell on your own, you have a 9% chance of actually getting market value or better for your home, however, the overwhelming majority of the 9% that get a good value are selling directly to a family member or friend. The remaining 91% of For-Sale-By-Owners will either eventually give up and use a Realtor, sell for below market value, or stop trying to sell the home out of frustration. Again the average For-Sale-By-Owner loses 14.9% of their home’s value! Using no agent at all means that you may think you did a great thing by avoiding commissions, but you almost certainly have lost out financially and put yourself at considerable legal risk. Ohio is one of the most litigious states and there are multiple disclosures and many procedures that you must follow, by law, when selling a home. Last year in Ohio there were over 15,000 real estate lawsuits, and over half of them involved a For-Sale-By-Owner, even though For-Sale-By-Owner properties make up less than 5% of all transactions. Please don’t try to sell your home yourself, especially in Ohio.

The next worse thing you can do is use a discount broker. Discount brokers only sell 4% of all the properties that make it all the way through the escrow process. Now, don’t get me wrong, discount brokers get far more than 4% of the listings, but many of their listing will expire or have to be reduced in price for the property to sell. Once again, by trying to save a little on commission, you will be hurting yourself when it comes to the final selling price. Discount brokers who will sell your property for a 4% or 5% commission do so by making drastic cuts to their advertising budgets. Cutting out the 1% on advertising won’t hurt you too bad, but it is still cutting you out of about 17% of how homes get sold. Cutting anything off the buyer agent’s commission is a really bad idea. This almost certainly means less customers, less offers, a longer selling time, and a lower final selling price.

But it gets even worse, some companies say they will sell your home for only a 1.5% or 2% commission. These places almost always cut the buyer agent’s commission entirely, which usually means they are barred from putting their listings on the local Multiple Listing Service! What you usually end up with is a bad experience as these companies focus entirely on 17% of the market they can reach with ads, while ignoring the 83% of the market that would have helped capture the actual market value of your home. By attempting to save a few percentage points on a sales commission these sellers end up surrendering a significant amount of their home’s value, that’s if their home actually sells! Once again, there is no conspiracy that keeps the national average for commissions at 6%; that’s simply what it takes to sell a home right!

So how do you make the most money and stay protected? It’s no secret, like the customers in over 90% of all successful transactions, the best way to stay financially and legally sound is to hire a full-service brokerage. A full-service brokerage is most likely to fetch you the highest sales price, get you the most money for your home, protect your legal interest and make the total sales process as smooth as possible. Full-service brokers usually have home warranty plans, referral networks, teams of contractors, inspectors and appraisers, in-house mortgage departments, and technological tools that help the whole process along! If you’re considering selling your home, would like to request additional information on the sales process or have any other questions please email or call us at 614.332.6984 and let us know how we may be of assistance.

What Stinks? Cheap, Easy & Natural Methods For Freshening Up Your Home

You don’t have to be an aromatherapy aficionado to know that smells have the ability to trigger strong emotions and associations. Baking cookies can bring you back to the comfort of your childhood while freshly cut grass can return you to childhood summer camp. Unfortunately, it also works in the other direction: a neglected garbage can under the sink may take your mind to the city dump on a hot day.

Everyone has been unlucky enough to come home to a house that smells less-than-perfect. There’s the fish you cooked up a couple of nights ago combined with the leftover omelets that was scraped into the garbage this morning. Oh, and then there’s that pesky pet odor. It’s enough to instantly drain away any excitement you had about coming home and I is sure to turn off potential buyers.

Walking through the door needn’t be an assault on your olfactory organs. Preventing and eliminating odors can be achieved quickly, naturally and with stuff you probably already have around the house. And forget those fake-smelling canned air fresheners—you can do much better than that without spending a penny.

The Garbage Can
Is the garbage can frequently unpleasant and stinky? If so, throw a couple of dryer sheets into the bottom of the can to help keep odors at bay. Coffee grounds make the garbage smell a little more bearable, so when it really stinks toss grounds in the trash instead of saving them for the garden. A few scoops of cat litter will work, too.

We know cleaning the garbage can isn’t the most satisfying of chores, but taking the hose to it will make it a little less gruesome.

The Carpet
Nothing traps odor more than your carpet. Ask a stranger to put their nose to your carpet and they’d probably be able to deduce that you have three dogs, a cat, and that someone in your house used to smoke.

Never fear, baking soda is here! Sprinkle the stuff liberally through a sieve and onto the carpet. Let it sit for a half an hour and then vacuum. For particularly smelly areas (like the spot where Spot relieved himself, twice) wet the area with warm water and a few drops of essential oil or white vinegar, and then sprinkle with baking soda. After the spot is dry, use the vacuum again.

The Freezer
Ever treat yourself to a scoop of ice cream only to discover that it tastes exactly like your freezer? We have all had this gross-out moment but it needn’t happen again.

To eliminate freezer-stench in a jiffy, simply put a rolled-up newspaper in the freezer overnight. The paper will absorb any foul odors. (The newspaper method will also work on your cooler). If this doesn’t do the job completely, pour a little vanilla extract onto a rag and wipe down the shelves.

The Fridge
Keeping a box of baking soda in the fridge is one of the best ways to absorb lingering leftover odors. Remember to change the box out every couple of months because it will stop working. If the smell really packs a punch, drastic measures must be taken. See if you can clear a rack of your fridge and sprinkle the baking soda onto a couple of plates or a cookie sheet. If this isn’t possible, pour some into a few small dishes or into coffee filters and place them on every tier.

Cleaning the fridge is never fun but get in the habit of tossing out anything remotely suspicious regularly and you’ll keep foul odors at a minimum. Do this at least weekly, ideally the night before the garbage is collected. That way those leftovers won’t sit in the trash for too long.

When you go for the all-out clean (which we recommend at least every 3 months), combine equal parts white vinegar and warm water and go to town. If it really stinks, use it at its full strength. Vinegar is a great sanitizer and deodorizer.

The Sink
Nothing says rot like a few days of garbage disposal neglect. Who would have thought all those little orts could transform into such a giant stench?

First, run extremely hot water down the drain for a minute or two. (This will help flush out debris and is great for preventing clogs in your pipes.) Then, toss lemon and/or orange peels down the disposal and let it grind until it’s all gone. You can find more strategies for a sweet-smelling disposal here. (if your micro-wave could use a deep cleaning try tossing a few lemon peels in a bowl of warm water and place in the micro-wave on high for few minutes, this will help break down some of the mess making it easier to wipe up.)  

The Whole House
If a funky smell has moved in and wants to stay, fight back with vinegar. Pour a little vinegar into a number of glass jars and place them throughout the house. Let them sit overnight and the odor should be gone by morning.

For that “I just baked cookies” smell, rub vanilla extract onto your light bulbs. When the lights are turned on the sweet aroma will float throughout the house.

Boil water and a few sticks of cinnamon on the stove for a half an hour. Citrus rinds, mint and cloves will also work.

Look into different essential oils. They smell lovely and can lift the mood, heal, even keep insects away. One of the best parts about essential oils is that you can mix them to create a personal combination based on the scents that most appeal to you.

Escape from Smell Hell
Even the cleanest people encounter foul odors around the house now and then. The good news is that these smells are easily destroyed with everyday household items rather than perfumed aerosols found at the grocery store. Baking soda and vinegar will clean and deodorize just about everything and anything. Tackling bad smells the natural way actually absorbs the odors instead of just covering them up. So, don’t keep running from that funky stench; kill it off once and for all.