“As of October, the deadline for starting a home that could be completed in time for purchasers to take advantage of the $8,000 first-time home buyer tax credit had come and gone, and builders had no clear sign of whether Congress would extend the credit beyond the end of November,” explained Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “However, now that Congress has wisely moved to extend the tax credit into next year and expand its eligibility to more buyers, we hope and expect that this will have a substantial stimulative effect on home sales and help keep the housing market solidly on the road to recovery.”

“Builders were clearly in a holding pattern in October as the future of the home buyer tax credit hung in the balance,” agreed NAHB Chief Economist David Crowe. “This is not surprising, given the fact that the tax credit had been the primary driver of construction and sales in the summer and early fall. However, the fact that permits for single-family construction remained roughly unchanged in the month is an indication that builders are preparing for the possibility of more favorable housing market conditions in the future. That said, significant challenges continue to confront builders with regard to obtaining financing for viable projects and appropriate appraisal values on newly built homes.”

Single-family housing starts declined 6.8% in October to a seasonally adjusted annual rate of 476,000 units, the slowest pace since May of this year. Meanwhile, multifamily housing starts fell by a dramatic 34.6% to a seasonally adjusted annual rate of just 53,000 units – the slowest pace on record.

Combined starts activity fell across the board in October, with the Northeast posting an 18.8% decline, the Midwest a 10.6% decline, the South a 9.6% decline and the West an 8.5% decline, respectively.

Permit issuance, which can be an indicator of future building activity, fell 4% overall in October to a seasonally adjusted annual rate of 552,000 units, due primarily to a double-digit drop-off on the multifamily side. While single-family permits held virtually flat at 451,000 units, multifamily permits were down nearly 18% to 101,000 units.

Regionally, permit activity was mixed, with the Northeast posting no change for the month, the Midwest registering a 2% gain, the South posting a 5.8% decline and the West posting a 6.7% decline, respectively.

For more information, visit www.nahb.org.

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One in five (20%) Northeastern homeowners believe their own home gained value in the past 12 months, according to the survey. But in reality, 31% of homes in the region increased in value, according to the Zillow Q3 Real Estate Market Reports.

That translates to a Zillow Home Value Misperception Index of -6, which means Northeastern homeowners believe values performed worse than they did in reality – a first in Homeowner Confidence Survey history. A Misperception Index of 0 would mean homeowners’ perceptions were in line with reality.

Homeowners in the West were the least realistic in the country, with 28% believing their own homes’ values increased in the past 12 months. According to Zillow, 17% of homes in the region actually increased, resulting in a Misperception Index of 17.

The Midwest had a Misperception Index of 8, while the South had an Index of 15.

Nationally, 25% of homeowners believe their own home’s value increased in the last 12 months. In reality, 22% of U.S. homes gained value. But fewer than half (49%) believe their home’s value decreased over the past 12 months, while 72% actually decreased. That discrepancy between perception and reality resulted in a Misperception Index of 10.

U.S. homeowners were also more optimistic about the future of their own homes’ values than at any time in the past six quarters. Two in five (41%) say their own home’s value will increase in the next six months. An additional 43% say their home’s value will remain the same, with only 17% saying their home’s value will decrease.

“Homeowners are clearly confused about the housing market, and with good reason,” said Zillow Chief Economist Stan Humphries. “Home values in different parts of the country have shown varied performance in the third quarter. In the Northeast, they have shown significant stabilization. In the Boston metro area, values are even up from this time last year. That gives Northeastern homeowners a negative Misperception Index in the third quarter, the first time we’ve seen this.

“But across the rest of the country, homeowners are holding onto the hope that home values have performed better than they have in reality. Consistent with all previous surveys, homeowners also seem to be overly optimistic about future home values. While we have definitely seen some stabilization in recent months, there is a high likelihood that home values will see further declines driven by an increasing number of foreclosures coming into the market and, possibly, rising interest rates after the first quarter of next year. The homebuyer tax credits have the potential to stimulate demand and bring about a bottom sooner but, even so, we are very likely to see a sustained period of negligible appreciation in real terms. It seems that homeowners are still working under the assumption of a V-shaped recovery to home values when a long, L-shaped recovery is more likely.”

Pent-up Supply Steady at Nearly One-Third of Homeowners Who May Sell

The level of pent-up supply – a component of “shadow inventory” — remained relatively steady from the second quarter to the third. Nearly one-third (31%) of homeowners indicated they would be at least somewhat likely to put their home up for sale in the next 12 months if they saw signs of a real estate market turnaround. That is up slightly from 29% in Q2. Homeowners said that hearing more general good news about the economy (45%), the ability to sell their home for more than they paid for it (43%) and evidence of increasing home sales in the local market (43%) would be the primary indicators of a real estate turn around.

For more information, visit www.Zillow.com.

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If you got your loan during the boom, it was probably sold as part of a “securitized pool” and that is where our journey down the rabbit hole begins.

Leave your common sense behind, you won’t be needing that on this trip, things are a little backwards here.

Even before the ink was dry on your loan documents, literally, your loan had been pledged to part of a pool; the bank got back the money it loaned you and then bought a credit default swap to pay out in the event of a default. Given what they knew about some of the loans, that bet was a sure thing.

For more detail, see my blog at http://www.realtown.com/gwmantor/blog.

A lot of people made a tidy profit on your loan. And if you are in default, even more money will be made on your loan.

I have seen little to convince me that loan modifications or any government directed response will be a viable solution. According to the Government Accountability Office, as of last month, the government had provided some $1 million to banks in investor subsidies and incentive payments through its Home Affordable Modification Program.

That wouldn’t even be a respectable bonus for an entry level Wall Street data wonk.

It’s a band-aid on the San Andreas Fault.

Not long ago, the Treasury announced that half a million homeowners had enrolled in three-month trial loan modifications. The key words here are “had enrolled in.”

Those that have enrolled are getting the run around. Note this from an Associated Press report…“Government officials can’t say how many people have been turned down because of a typo, lost fax or an oversight by a poorly trained bank employee. But the Treasury Department acknowledges that far too many applicants have wrongly been rejected.”

An article in the Washington Post reported that in a very large sample of residential mortgages, only 3 percent of seriously delinquent borrowers received a modification of their mortgage that reduced their monthly payments in the year after they got into trouble, and only 8 percent of those borrowers received any kind of modification.

According to The Joint Economic Committee of Congress, the average loss to the lender is $50, 000 on mortgages actually foreclosed and resold. What isn’t clear is who they mean by “lender” as we know that the original lender sold the loan in tranches and we do not know who would be the party in interest.

One way to interpret that is that by foreclosing; the pretender lender actually stands to gain the selling price of the resold foreclosure, less $50,000. On a $200,000 sale that is a pretty good profit.

Nor, is that the only reason.

Consider this observation by Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. “Most important, there are no consequences to the banks for failure to do what they have promised to do.”

As a matter of fact, there are a host of potential consequences to modifying a mortgage that haven’t been discussed, including, but not limited to, the Pooling and Servicing agreements governing the relationship between the lender and the investor, accounting rules and the seeming conflicts arising from altering the terms of a security, and a lack of record as to the real parties in interest.

As it turns out, in most cases, there isn’t even a legally authorized individual with the authority to modify the terms of a note that is part of a security package. The future of loans that may have been unlawfully modified creates even more uncertainty.

The largest obstacle to a modification is the anticipation of the payout on the Credit Default Swaps. Because these are unregulated, some mortgages may have been insured for multiple times the actual loan amount.

Only a default, not a mortgage write down, will trigger the pay out on the swaps. So now you know why all that loan modification paperwork gets lost all of the time.

The more modifications banks do, the more requests they will get, so it is definitely in their best interest to make it as difficult as possible so as not to open the floodgates. This could lead to investor backlash for not protecting the security interests of their fiduciaries.

Remember, they sold the note and got their money back. Why would they settle for a couple of thousand dollars from the government when they can foreclose on houses, resell them and bank hundreds of thousands in profit and, by reselling them, they keep filling their securitization pools with new loans?

What is now becoming apparent is that it isn’t in the best interest of the banks to voluntarily modify most mortgages. If you need mortgage relief, you will probably need to initiate legal action, and you will need a lawyer familiar with this area of the law. But because many securitized mortgages are bullet-proof to foreclosure, you may not need a modification to obtain relief.

George W. Mantor is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts. During a career that has spanned more than three decades, he has amassed experience in new home and resale residential real estate, resort marketing, and commercial and investment property. He is currently the founder and president of The Associates Financial Group, a real estate consulting firm.

Mantor can be reached at GWMantor@aol.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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A great way to deliver this is through audio podcasts. With podcasting, the sky is the limit. And most importantly, it can help position you as the authority on the market in your area. If you are thinking about starting your own podcast, you may want to think about a couple of different approaches. For example, your report could focus strictly on the “numbers” of what is happening in the market for the month or the quarter. Or you could talk about a timely issue, such as the homebuyers’ tax credit. Or you could create pieces that are relevant for a longer period, such as how to buy a home during the holidays.

Relaying the information through someone’s voice is much more personal than receiving a postcard or e-mail, so hosting a podcast can be effective in not just showing that you are a knowledgeable resource, but also for building relationships and trust with clients.

For example, at Evers & Co., we have been providing comprehensive market updates and tips on buying and selling in the current Washington, D.C., region market to our clients for years.

Recently, we have taken these market updates to a new level through audio posts or podcasts. These 2- to 3-minute audio files are easily uploaded to our firm’s website and distributed via e-mail to our contacts.

In addition, people interested in these market updates can subscribe to an RSS feed and receive the information as it is released, through a forum such as Google Reader. Tracking the number of subscribers is beneficial because it allows podcasters to see growth in their following, which helps justify the time commitment involved with planning, recording and promoting the podcasts.

Another group many real estate professionals may wish to connect with on a regular basis is the news media. Like agents, journalists’ schedules are becoming increasingly hectic as media outlets are reducing staff and vamping up reporters’ responsibilities to include blogging, conducting online chats and promoting their stories through social media platforms like Twitter.

When in need of a reliable source for an article, journalists value responsiveness so they can meet their often tight deadlines, as well as the “quotability” of the expert. This means that the source is able to express their ideas or opinions in a clear, succinct manner that is easily understood by a consumer audience with statements that can be seamlessly incorporated into the article as quotes.

Rather than scheduling an interview or waiting for a call back, journalists who receive an informative podcast often quote directly from the audio and save time without even having to connect with the source. Also, since the journalist can listen to the podcast multiple times, there is less of a chance that the source will be misquoted.

While podcasting is a great tool that may provide real estate professionals with an “edge,” agents should be mindful of the time commitment before jumping in. It’s also important to establish the frequency of podcast recordings and to keep up in order to convey reliability to potential clients and the media. To get started, podcasting equipment is available at electronics stores like Radio Shack, and editing software is available for purchase online. It’s certainly a valuable tactic to consider for your marketing toolbox.

Donna Evers, president and broker of Evers & Co. Real Estate (www.eversco.com) in Washington, D.C., has been communicating with media and the public through monthly audiocasts for about six months. She has more than 30 years of experience in residential real estate and is a frequent resource for print, radio and television journalists who cover housing market trends in the Mid-Atlantic region.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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In some markets, buyers continued negotiate large discounts. The Vero Beach, Florida market topped the list again in September, with buyers paying a median 8.1% off the final price of homes. Based on a median listing price of $235,000, that translates to a discount of nearly $19,000. The other top negotiating spots were also in Florida, with buyers in the Naples, Sarasota and Panama City markets negotiating more than 7% off the final listing price of their new homes.

On the other end of the spectrum, buyers paid more than asking price in seven metro areas. Most of these were the California markets that have been hardest-hit by foreclosures. In Stockton, buyers paid a median 2.4%, or about $4,500 more than asking price. In Las Vegas, buyers also paid more than asking price (a median 0.5% or $836).

Here is a list of 10 markets where sellers are getting more than asking price.

One note about homes still on the market: 22.7% of them had a price cut as of the end of September, and sellers cut a median 6.5% off.

For more information, visit www.Zillow.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

For more headlines on RISMedia.com, be sure to see:
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There also have been government stimulus programs that have added to taxpayers’ take-home pay or given some homebuyers a tax credit. All these factors need to be taken into account when planning your taxes.

“Things are different this year for a lot of people in situations they’ve never been into before because of the economic times,” said Jimmy Averitt, tax partner at accounting firm BDO Seidman LLP in Dallas. “Those need to be assessed before the end of the year and compared with what occurred in prior years to get a handle on what their tax situation is,” he said. “You need to be doing that right now.”

Here are the possible tax implications of scenarios created by the ailing economy:

Generally, if you owe a debt to someone and they cancel or forgive that debt, the canceled amount may be taxable. However, the government offers a tax break to help homeowners who lost their home to foreclosure. Under the law, a taxpayer whose principal residence was foreclosed on does not have to claim the amount of debt canceled as income.

Debt reduced through a loan modification also is exempt. A loan modification makes mortgage payments more affordable by reducing the interest rate or lengthening the term of a mortgage. Up to $2 million of forgiven debt is eligible for this exclusion; the limit is $1 million for married couples filing separate tax returns. The provision applies to debt forgiven in 2007 through 2012.

If you’ve been laid off, your taxable income could “well be significantly lower when you start taking into account exclusions and dependency deductions,” Averitt said. That could leave you in a situation where your tax deductions exceed your income. If your deductions exceed your income and you need money, you could tap your retirement plan if you’re over age 59 1/2, Averitt said.

In those cases, the tax paid on the withdrawals will be largely offset by your deductions. If you’re younger than 59 1/2 and make withdrawals from your retirement plan, you’d have to pay a 10% penalty on top of the tax owed. That’s why James A. Smith, a certified public accountant in Dallas, says tap your retirement funds only as a last resort. “I also don’t advocate starving to death,” said Smith, managing director at Smith, Jackson, Boyer & Bovard, PLLC.

Conventional wisdom says to defer income and accelerate deductions to reduce your federal income tax. But Averitt said that for many people who have seen their family incomes slashed, this may be the year to go against conventional wisdom. That could mean deferring some deductions, such as local property taxes, until next year, when your income could be greater.

If you’ve been collecting unemployment, know that for 2009, the first $2,400 of unemployment compensation is excluded from tax. All unemployment compensation beyond the first $2,400 is taxable.

If you’re hunting for a job, keep track of the miles you drive, fees you pay for parking or tolls, employment agency fees, resume preparation fees, long-distance calls and other costs associated with your search. You may be able to claim these expenses as a miscellaneous deduction on your tax return.

The larger paycheck you received tied to the Obama stimulus plan could end up taking a bite out of your federal income tax refund, or even leave you owing taxes, observers says. The stimulus plan lowered federal income tax withholding rates, which results in more take-home pay and less money going toward taxes. The downside is some taxpayers may end up with not enough taxes being withheld to cover what they owe in 2009. As a result, some taxpayers may need to increase their withholding amount by reducing the number of allowances claimed on their W-4 form. However, with so little time left this year, the impact of making such a change may be muted.

Single taxpayers working at more than one job and married couples filing jointly where both spouses work, are the most likely groups of taxpayers to be caught short, tax experts said.

Taxpayers who have concerns about whether their withholding amounts need to be adjusted can use the withholding calculator at the Internal Revenue Service’s website to determine their correct level of withholding.

Congress has expanded and extended until April 30 a popular credit for first-time homebuyers. The $8,000 tax credit would have expired Nov. 30. “You can claim the credit on your 2009 tax return as long as you have a binding contract by the end of April and you close by the end of June,” said Neil Allen, spokesman for CCH, which provides tax and accounting software and services for tax professionals. If you file your return before you close on the purchase, you can file an amended return to claim the credit. The program was expanded to include up to a $6,500 tax credit for existing homeowners wanting to move up to a new home, as long as they have lived in their current residence for five consecutive years out of the last eight.

If you buy a new vehicle by Dec. 31, you can deduct state and local sales taxes paid on up to $49,500 of the purchase price, whether you itemize or not. The tax break starts to phase out if your modified adjusted gross income is $125,000 or more for single taxpayers and $250,000 or more for joint filers.

(c) 2009, The Dallas Morning News.

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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Erin Mitchell

Director of Program Development

The Move Advocate

www.themoveadvocate.com

Few things are scarier than moving long distance.

Ask people about their last move and you are likely to hear a few horror stories that rival some of the best Halloween films out there.

As a successful real estate professional, you can add value to your clients’ total transaction by referring them to a reliable move management company. Move management companies are able to pass on significant discounts and benefits not available to individual customers. Some even provide dedicated “move advocates” to help clients manage the logistics of their move.

Because they typically operate on a referral basis, be sure the move management companies you speak with have a policy that ensures high-quality van line providers.

The Move Advocate, an international move management company based in Scottsdale, Arizona, prescreens the van lines it recommends and manages them to strict service-level agreements.

Flip open the Yellow Pages or type “moving” into a search engine and you are deluged with all sorts of moving services and van lines. People are frequently overwhelmed with the research involved to determine which companies are reputable and whether they are going to receive the best value. The Move Advocate takes the legwork out of that process.

Move management companies differ in the level of service and number of van line and relocation partners in their network.

When you are referring your clients to a move management company, or they are looking for one on their own, consider the following:

1. How long has the move management company been in business?

2. How many van lines are in their network of providers?

3. What are the service level requirements van line partners must meet?

4. What extra benefits does the move management company provide?

5. Does the move management company charge for its services?

6. Can the company service both U.S. and international moves?

7. Is a representative available 24/7 if there is an issue?

8. What extra benefits can the move management service provide your customers?

9. What is the van line referral process?

10. How is the move management company compensated?

There are times when surprises are fun, and a little bit of scary is a good thing. Not when it comes to moving long distance. By referring your clients to a reliable move management company, you are demonstrating your commitment to their total relocation needs.

For more information, visit www.moveadvocate.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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“Previous versions of the homebuyer tax credit were successful in helping put a floor on declining home prices and the economic recession as a whole, but they lacked a few key elements necessary to create a sustainable recovery,” said Weichert. “Congress and the President should be commended for not only recognizing the impact the existing credit has had on our economy but for also understanding the need for even further action.”

The new bill extends the existing $8,000 tax credit for first-time homebuyers until April 30, 2010. The enhanced tax credit also gives financial incentive to a larger crop of buyers by providing a $6,500 tax credit to current homeowners, who have lived in their home for five consecutive years in the past eight years, and by increasing the income limits for eligible home buyers to $125,000 for singles and $225,000 for couples.

To avoid the demand for quick closings that was created by the previous tax credit, time has also been added to allow for closing the home purchase. As long as buyers have a binding contract by April 30, they will then have through June 30, 2010 to close the transaction and be eligible for the tax credit.

In Weichert’s view, the most vital component of the current bill is the expansion of the tax credit to include repeat buyers. While the tax credits that have been in effect have clearly stimulated home sales and eased price declines in the affordable, first-time buyer market, they have not had the desired “trickle-up” effect on mid- to high-priced homes.

“This new bill should help spread the recovery we are seeing at the entry-point level to the rest of the housing market. Clearly it was already a great time to purchase for first-time buyers. But this expanded credit coupled with low interest rates and affordable home prices makes it a great time to purchase now for current homeowners too. If you have been wanting to trade up or think that might be in your near future, the current market conditions really make it financially attractive to do so before April 30,” said Weichert.

Weichert was also optimistic about the effectiveness the enhanced tax credit would have on the overall economy. “Housing has always been a key economic driver. It is no surprise then that as housing has begun to recover that we are also seeing a rebound on Wall Street, a decline in the job loss rate and the first quarterly increase in our gross domestic product in a year. I think the extension and expansion of the homebuyer tax credit will help keep that positive momentum going.”

For more information, visit www.weichert.com.

For more information about the extended tax credit on RISMedia.com, don’t miss:

• The First-Time Homebuyer Tax Credit – A Consumer’s Point of View
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The FHA, the federal agency that insures low-down-payment home loans for private lenders recently said it was relaxing its building underwriting guidelines as a way of helping the struggling sector ride out the downturn. The move could help boost sales in condos by making more FHA mortgages available to borrowers.

“The best way to bring back some level of security is to get new buyers into those vacant units. You can’t do that until new homeowners have access to financing,” said Meg Burns, director of the FHA’s single-family program development. The new rules—which are temporary—come after more than a year of more stringent standards from lenders, who, after suffering major losses on condos, began vetting and disqualifying condominium projects for purchase loans, regardless of whether home buyers qualified.

“This might be an entree for traditional and conventional lenders to return to the marketplace. Symbolically, it’s a pretty significant move,” said Peter Zalewski, a condo market analyst and broker with Condo Vultures in Bal Harbour, Fla.

The temporary rules are effective for most of the coming year and will help the marketplace transition into a new set of tougher guidelines that bring FHA into closer alignment with the project underwriting practices of Fannie Mae.

Earlier this year, Fannie implemented a slew of new regulations governing condo projects that some claim have strangled the market by stigmatizing condo loans in tough markets such as Florida.

Similar to Fannie regulations, the FHA is also now singling out those markets for special attention by approving projects itself, rather than lenders. Burns said lenders and investors were reluctant and even “scared” to lend money, prompting the agency to step in as a way of calming nerves. “We’re coming in and saying we’ll approve the projects and back them so you will feel confident and comfortable lending in this environment,” Burns said.

Securing the blessing of the FHA is important because it allows borrowers to get loans that require down payments of only 3.5% and qualify under less burdensome terms. Most conventional loans now require 20% down, keeping creditworthy borrowers on the sidelines. In some new projects, lenders have asked for down payments of as much as 40 to 50%.

Among the new, temporary rules is a measure extending a deadline allowing lenders to submit mortgage loans for spot approval in buildings that have not been approved for FHA lending. The administration had said the so-called spot loans would be eliminated by the end of the year but the new deadline is February 2010.

The new guidelines also:

-Increase from 30% to 50% the number of units in a project that can be financed with FHA loans. FHA, however, will make exceptions, even allowing up to 100%, when buildings meet an additional set of more stringent criteria.

-Require at least 50% of units in a complex to be owner-occupied or sold to owners who plan to live in the units. Bank-owned units may be disqualified from the percentage calculation.

-Reduce a presale requirement in new construction to 30%, compared to 70% for loans from conventional lenders.

“This temporary guidance represents incredible leniency in terms of financing standards and loan standards,” Burns said. It’s hard to say how many buildings may benefit from the new rules, but mortgage brokers and real estate observers applauded the reprieve. “This should really help some of the stalled projects if they can get their buildings approved,” said Grant Stern, a mortgage consultant in Bay Harbor Islands, Fla., who specializes in Fannie Mae and FHA guidelines. “A lot of these buildings looking to sell out the rest of their inventory should be able to get FHA approval to close out the projects.”

But there will be more hurdles to overcome beginning Dec. 7. That’s when a bevy of additional regulations take effect, including a provision that withholds approval from buildings where more than 15% of unit owners are past due on association fees.

(c) 2009, The Miami Herald.

Distributed by McClatchy-Tribune Information Services.

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Statewide sales of existing condominiums in the third quarter rose 56% compared to the same time the previous year. This marks the fourth consecutive quarter for increased statewide sales in both the existing home and condo markets compared to year-ago levels.

Statewide sales activity in 3Q 2009 also increased over 2Q 2009’s sales figure in both the existing home and existing condo markets, Florida Realtors’ records show. For 3Q 2009, statewide sales of existing homes rose 2.82% over the 2Q 2009 figure; existing condo sales statewide in 3Q 2009 increased 0.37% over the 2Q 2009 level.

To gain insight into current trends in Florida’s real estate industry, the University of Florida’s Bergstrom Center for Real Estate Studies conducts a quarterly survey of industry executives, market research economists, real estate scholars and other experts. “Most economists think the recession is over, but people are afraid to spend money as unemployment keeps going up, which creates problems for every sector of the real estate market,” said Tim Becker, the center’s director.

On the positive side, survey respondents expressed increasing optimism about their own business outlook, and predicted great opportunities for future investment. Becker noted that the euro’s favorable exchange rate against the dollar and the availability of desirable commercial property at low prices is encouraging international investors. “Everybody thinks that Florida will rebound because we have so much going for us – the sun shines every day and there are a lot of advantages to living here,” he said. “Foreign investors see that too and believe their prospects are good for long-term investments.”

All of Florida’s metropolitan statistical areas (MSAs) reported increased sales of existing homes in the third quarter compared to the same three-month-period a year earlier, while 17 MSAs showed gains in condo sales.

The statewide existing-home median sales price was $145,400 in the third quarter; a year earlier, it was $185,600 for a decrease of 22%. The 3Q 2009 statewide existing-home median sales price was 1.25% higher than 2Q’s statewide existing-home median sales price of $143,600. According to industry analysts with the National Association of Realtors® (NAR), sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is a typical market price where half the homes sold for more, half for less.

In the year-to-year quarterly comparison for condo sales, 14,797 units sold statewide for the quarter compared to 9,488 in 3Q 2008 for a 56% increase. The statewide existing-condo median sales price was $106,100 for the three-month period; in 3Q 2008, it was $160,100 for a decrease of 34%.

Low mortgage rates remain another favorable influence on the housing sector. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 5.16% in 3Q 2009; one year earlier, it averaged 6.32%.

For more information, visit www.floridarealtors.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

The Deed for Lease Program is designed to help borrowers who aren’t eligible or haven’t been able to sustain other work-out solutions, including a modification, according to a news release.

Participating borrowers voluntarily transfer their property deed back to the lender; the lender then leases the house back to the borrower at a market rate for up to a year. After the period is up, there’s a possibility of a term renewal or a month-to-month lease arrangement, the release said.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, vice president of Fannie Mae, in the release. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

To qualify, the home must be the borrower’s primary residence, and he or she needs to be released from any subordinate liens on the property. The borrower also has to document that the new market rental rate doesn’t exceed 31% of his or her gross income.

“This policy takes advantage of the fact that in many former bubble markets, ownership costs are likely to be far higher than the cost of renting an equivalent unit, if the homeowner purchased their home near the peak of the market. In many cases this gap can be dramatic,” said Dean Baker, co-director of the Center for Economic and Policy Research, in a separate release.

“For example, the savings on a moderate-priced home purchased near the peak of the market in the Washington, D.C., area could be more than $1,300 a month. The gap between ownership costs and renting in the Los Angeles area could be almost $2,000 a month,” he said. “Many homeowners who could not sustain mortgages based on the original purchase price, even with sharp reductions in interest rates, can afford the market rent.”

Baker called the Deed for Lease Program a “very big step” toward giving families facing foreclosure more housing security.

“Families that like their home, their neighborhood, or the schools for their children will have the opportunity to stay in their house even after foreclosure,” he said. “This is also good policy for neighborhoods that have been hard-hit by foreclosures. The Deed for Lease Program will keep the homes occupied rather than being an eyesore and a potential safety hazard.”

But Baker does have one criticism of the program: He said the guaranteed lease period should be longer than a year—possibly contingent on timely rent payments and proper upkeep. “Nonetheless, the new policy by Fannie Mae is an important step forward in dealing with the housing crisis,” he said.

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

“Three consecutive monthly declines is unprecedented for our report, and on first blush an indication that the foreclosure tide may be turning,” said James J. Saccacio, chief executive officer of RealtyTrac. “However, the fundamental forces driving foreclosure activity in this housing downturn—high-risk mortgages, negative equity, and unemployment—continue to loom over any nascent recovery. And despite all the efforts and resources directed at helping homeowners avoid foreclosure, we continue to see foreclosure activity levels that are substantially higher than a year ago in most states.” 

Nevada, California, Florida post top state foreclosure rates
Despite a 26% decrease in foreclosure activity from the previous month, Nevada continued to document the nation’s highest state foreclosure rate—one in every 80 housing units received a foreclosure filing in October. A total of 13,842 Nevada properties received a foreclosure filing during the month, a 4% decrease from October 2008 and the first ever year-over-year decrease in Nevada since RealtyTrac began tabulating the year-over-year change in January 2006. Nevada default notices were down 10% from October 2008, and scheduled foreclosure auctions were down 6% from October 2008, while bank repossessions were up 8% from October 2008. A new foreclosure mediation program implemented by state law (AB 149) in July may be slowing the inflow of distressed properties into the foreclosure pipeline. 

With one in every 156 housing units receiving a foreclosure filing in October, California posted the nation’s second highest state foreclosure rate for the second month in a row. A total of 85,420 California properties received a foreclosure filing during the month, a decrease of 1% from the previous month but still nearly 50% above the total reported in October 2008. The state’s default notices and scheduled foreclosure auctions were up 120% and 73% respectively from October 2008, when California foreclosure activity was in the midst of a three-month trough after a law (SB 1137) requiring lenders to give distressed homeowners extra notification before initiating foreclosure took effect in September 2008. 

Florida posted the third highest state foreclosure rate, with one in every 168 housing units receiving a foreclosure filing in October. A total of 51,911 Florida properties received a foreclosure filing during the month, a nearly 6% decrease from the previous month and a decrease of 4% from October 2008. It was the first year-over-year decrease in overall Florida foreclosure activity since July 2006. 

Other states with foreclosure rates ranking among the nation’s 10 highest were Arizona, Idaho, Illinois, Michigan, Georgia, Maryland and Utah. 

Four states account for more than 50 percent of national total
Four states accounted for 52% of the nation’s total foreclosure activity in October: California, Florida, Illinois and Michigan. 

Illinois posted the third highest state total after California and Florida, with 19,946 properties receiving a foreclosure filing in October—a 56% spike from the previous month and the highest monthly total for Illinois since RealtyTrac began issuing its report in January 2005. The state’s foreclosure rate jumped from No. 11 in September to No. 6 in October, and it was the only state with a foreclosure rate in the top 10 to post a monthly increase in foreclosure activity. A recent state law (SB 2513) that gives distressed homeowners an extra grace period to seek counseling to help avoid foreclosure may have created some pent-up foreclosure activity in the state. After the law went into effect in April, Illinois foreclosure activity decreased for three straight months before beginning to climb again. 

Michigan registered the fourth highest state foreclosure activity total despite a nearly 2% decrease from the previous month. A total of 16,468 Michigan properties received a foreclosure filing in October, an increase of nearly 45% from October 2008. 

Other states with totals among the 10 highest in the country were Nevada (13,842), Arizona (13,345), Georgia (12,468), Texas (11,798), Ohio (11,646) and New Jersey (7,435). 

Three states account for all top 10 metro foreclosure rates
Despite a 27% decrease in foreclosure activity from the previous month, Las Vegas continued to document the nation’s highest foreclosure rate among metropolitan areas with a population of at least 200,000. One in every 68 Las Vegas housing units received a foreclosure filing in October—more than five times the national average. 

Seven of the top 10 metro foreclosure rates were in California, led by Vallejo-Fairfield at No. 2 and Modesto at No. 3, both with one in every 81 housing units receiving a foreclosure filing. Other California cities in the top 10 were Riverside-San Bernardino-Ontario at No. 4 (one in 83), Bakersfield at No. 6 (one in 97), Merced at No. 7 (one in 100), Stockton at No 8 (one in 116), and Sacramento-Arden-Arcade-Roseville at No. 10 (one in 130). 

Metro areas in Florida accounted for the remaining two spots in the top 10: Cape Coral-Fort Myers at No. 5 (one in 92) and Orlando-Kissimmee at No. 9 (one in 117). 

For more information, visit www.realtytrac.com. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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A “short sale” is a sale where the bank accepts as full value a price that’s less than what’s owed on the property. The debt is forgiven (although not always without some tax consequences), a foreclosure is avoided, a buyer gets a good deal on a property, the bank saves thousands of dollars in legal fees and the real estate agent makes a commission. Elegant. Practical. Simple. But as we’ll see, not really quite so simple. 

Short sales were never intended to be a mass market solution. Rather, they were relatively rare occurrences that took place when an unfortunate homeowner had a financial catastrophe—a job loss, a divorce, a medical problem—at precisely the same time his or her home lost significant value. When that happened, a loss mitigation manager at a bank would research the market, review the homeowner’s financial documents, carefully consider whether the borrower and loan in question met the criteria to justify a short sale and act accordingly. 

This approach worked well when there was one request a week or every few months. But with over 1.1 million homes in various stages of foreclosure in the RealtyTrac database, the workload for these loss mitigation managers has exploded from several a month to hundreds a week, with no drop-off in the amount of paperwork or research needed. So there are unavoidable delays in simply processing the volume of paperwork. 

But it gets worse. Each lending institution has slightly different versions of short sale forms. Property valuations, even—perhaps especially—appraisals, are in a state of flux, so loss mitigation managers are struggling to determine whether a short sale offer is reasonable or just plain silly. And there are some accounting issues: in many cases, lenders may opt to decline a good short sale offer today so that they can defer the loss (even though it may be a much greater loss) to a subsequent quarter—or even later. 

And there’s more. A second loan on a property makes it much more than twice as difficult to execute the sale. The second loan either needs to be negotiated away completely or satisfied with some nominal payment. In other cases, the holder of the primary mortgage may find it better financially to foreclose, wipe out the second lien, and simply use that amount as a discount to sell the property at a profit. Similarly, if there’s mortgage insurance on the note, the investor may decide it’s better to foreclose, collect the insurance, and let the insurer worry about getting value for the house. 

So why all the hype? Well, with the REO pipeline clogged and choking, and loan modification programs failing to make a dent in foreclosure numbers, short sales represent an opportunity to feed the demand for discounted properties while reducing the number of foreclosures. What can you do to help make this happen? What does the government have in mind? We’ll cover all that and more in next month’s column. 

Rick Sharga is senior vice president at RealtyTrac. 

For more information, visit www.realtytrac.com. 

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RISMEDIA, November 10, 2009—That is one of the most common objections to purchasing real estate where there is a community Association requiring the payment of regular dues and fees. These can range from less than a hundred dollars per month, if for example the only service is streetscaping, to upwards of a couple of thousand dollars for a luxury penthouse. Depending on square footage and amenities, most fees range between $250 and $750. 

Taken out of context, the amount can seem outrageous. But, when considered from a prospective of value received, you can be pretty certain that you are getting one of the last great bargains. 

When evaluating the HOA monthly fee, it is important to consider three things: how was the number arrived at, what does it cover, can anything be done for less? 

1. How is the HOA fee determined? 

In California, and probably most other states, developers must obtain state approvals before their projects can be offered to prospective buyers. Part of the submission process for developments with an Owners Association is the creation of a detailed budget for the operation and maintenance of the common area and the provision of necessary services. 

Developers want to project the most positive scenarios in order to keep HOA dues low and not discourage prospective buyers. And, they are also aware that a $500 per month Association fee equates to another $100,000 that the buyer could have spent for the home. The higher the Association fee, the less the borrower/buyer can spend. 

On the other side, the State wants to establish a realistic budget that will allow for proper funding well into the future. For the consumer, that process of compromising means that the budget is as realistic as it can be at the time it was created. 

The main thing to keep in mind is that the developer will be paying the Association fees on all unsold property within the Association. The developer is not the one benefiting from high fees so there is no reason to blame them. 

2. What does the HOA fee is cover? 

It’s also important to consider what is included. Amenities very widely from project to project; high-rises cost more to operate and maintain than low rise buildings. 

One of the responsibilities associated with real estate ownership is the obligation to maintain and protect the improvements from deterioration, damage, weathering, etc. Living out in the burbs you need a garage full of tools and a lot of weekends to stay ahead of nature. 

Depending on the type of development, there could be a need for a lot of landscape maintenance. That takes labor, and labor is expensive 

If there are common areas such as a lobby, pool, gym, or even hallways, they need to be cleaned regularly, maintained occasionally, painted often, and replaced over time. Garages must be swept and windows washed. 

Then there is liability, property and other forms of insurance, and possibly a security force. 

What utilities are included? Are water, sewer, electric, gas, trash and cable billed individually or are some paid collectively through the Association? 

Then there is usually a management Association looking after things, paying the bills, and communicating all of that to the homeowners. 

3. Can it be done for less? 

Add it all up and you’ll see that the economies of scale allow for a high level of service at a true cost far lower than you could do it yourself. 

And remember, it is your building and your Association. You want to protect your investment and to have the kind of amenities that will allow for profitable reselling in the future. Serve on your Association board. If you can economize, you can lower your HOA fee. 

But, don’t lose sight of the fact that you are paying for important services with a volume discount. It isn’t just an expense; it’s protecting your investment.

George W. Mantor is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts. During a career that has spanned more than three decades, he has amassed experience in new home and resale residential real estate, resort marketing, and commercial and investment property. He is currently the founder and president of The Associates Financial Group, a real estate consulting firm.

Mantor can be reached at GWMantor@aol.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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Consumer credit fell by $14.8 billion to $2.46 trillion in September, down 4.7% compared with a year ago. Outstanding credit can fall if consumers pay off balances, or if lenders write off bad loans. 

Outstanding balances have fallen in 12 of the past 14 months. Credit fell a revised $9.9 billion in August, revised down from the original estimate of a $12 billion drop. Before the steady decline during this recession, outstanding consumer debt had more than tripled in the 16 years between 1992 and 2007. The figures are not adjusted for inflation. 

Although consumer debts have fallen by $126 billion since July 2008, household wealth has tumbled by $11 trillion, said Joshua Shapiro, chief economist for MFR Inc. Consumers have only begun to deleverage. The figures do not include mortgages or other debts backed by real estate, such as home-equity loans. 

The decline in September was led by another huge drop in revolving debt, such as credit cards, which fell $9.9 billion to $889 billion, or a 13.3% annual rate.

Nonrevolving debt — such as auto loans, student loans and other personal loans — fell $4.9 billion to $1.57 trillion, or a 3.7% annual rate. Nonrevolving debts had increased in August at a 0.2% pace, largely because of higher auto sales due to the cash-for-clunkers subsidy. For the third quarter, outstanding debt fell at a 6.1% annual rate after a 6.6% annual decline in the second quarter, which was the largest percentage decline since 1980. Credit-card debt fell at a record 10% annual rate in the third quarter after sinking at a 9.7% pace in the second quarter and 9.6% in the first quarter. Nonrevolving debt fell at a 3.8% annual rate in the third quarter. 

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Year-over-year home values in the United States declined for the 11th consecutive quarter, falling 6.9% to a Zillow Home Value Index of $190,400. However, the rate of year-over-year decline shrank for the third quarter in a row, meaning home values did not decline as dramatically year-over-year in the third quarter as they did in the second or the first. 

In addition, the Zillow Home Value Index remained relatively flat in the short term, declining 0.4% from the end of the second quarter to the end of the third quarter. The Zillow Home Value Index measures the value of all homes in an area, and the Q3 Zillow Real Estate Market Reports encompass 156 metropolitan statistical areas (MSAs). 

Foreclosure re-sales remained high, making up more than one-fifth (21.4%) of all U.S. home sales in September, and made up the majority of sales in several MSAs including the Merced, Calif. MSA (74.2%), the Stockton, Calif. MSA (69.3%), the Madera, Calif. MSA (68.7%), the El Centro, Calif. MSA (68.1%) and the Las Vegas MSA (67.5%). Additionally, 26.9% of home sales nationwide sold for less than what the seller originally paid. 

“The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third,” said Zillow Chief Economist Stan Humphries. “It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure. 

“The next several months will be critical to the housing market. Previously, we’d been expecting to see increasing foreclosure rates during the real estate market’s slow winter season, a confluence of events that would likely drive inventory up and prices down. But now, with the extension of the $8,000 first-time homebuyer tax credit and a new $6,500 credit for some repeat homebuyers, we could see a bump in demand that could partially offset the increased supply of foreclosed homes on the market. The credits are likely to bring continued stabilization in prices over this period, versus the price declines that we almost certainly would see otherwise. Whether this stabilization will be sustainable after the tax credits expire, however, is yet to be seen. Some of the demand that we are buying with tax credits we are also borrowing from the future, and will likely have to pay for later in the form of weaker-than-normal demand.” 

Some markets across the country showed encouraging signs in the third quarter. Home values increased year-over-year in 24 of 156 MSAs and remained flat in an additional 16. Only nine MSAs – including the Merced, Calif., State College, Penn., and Salisbury, Md. MSAs – showed increasing year-over-year declines. 

The Milwaukee and Boston metropolitan statistical areas were the largest markets to show positive year-over-year changes in home values, with the Zillow Home Value Index rising 2.6% in Milwaukee and 1.6% in Boston. 

For more information, visit www.Zillow.com. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight. 

The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. “If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010,” Nicholas said. “It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.” 

The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. “This means that more people will qualify for the credit – especially in parts of the country with higher costs of living,” Nicholas said. “This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.” 

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples: 

-The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others

-If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit).

-The credit applies even if you have co-signers on your mortgage loan 

For more information, visit www.CMPSInstitute.org. 

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-Stage it virtually. This option is aimed at empty homes, because photos of bare walls and floors can make online shoppers lose interest. You just snap photos of the empty rooms and send them to a virtual stager, who uses computer imagery to “furnish” them. The photos can be posted online or used in marketing materials. Prices range from around $200 for three rooms to $325 for five rooms, although rates vary by city.

-Pay for a plan, but provide the muscle. Many stagers will work as consultants, touring your house and offering suggestions on presenting it. Barb Schwarz, founder of the International Association of Home Staging Professionals, says the average fee for a consultation is $350. Then it’s up to you to do the cleaning, decluttering and rearranging. Kiplinger’s suggests renting a portable storage unit if you have a lot of stuff to store. One company, PODS, will deliver the unit to your driveway for $75, transport it to a secure storage facility for another $75 and charge you a monthly storage fee of around $150, depending on where you live, the time of year and other factors.

-Add some pizzazz. Sometimes a few decorative extras can update or neutralize a home’s decor. You may be able to negotiate with a staging company for decor items such as wall art, area rugs, lamps or other accessories.

-Focus on a few rooms. Hire a stager to redo just the entryway, main living area, kitchen or master bedroom. Stagers usually charge $75 to $125 an hour. Ignore secondary rooms, or do them yourself once you’ve seen how the pro works. 

(c) 2009, Akron Beacon Journal (Akron, Ohio).

Distributed by McClatchy-Tribune Information Services.

The survey, the fifth annual Energy Pulse® survey conducted by Shelton Group, found that consumers are reverting to their old priorities as the recession wanes- perhaps at the expense of the environment. 

“Energy efficiency is back to playing second fiddle, competing with more visible and exciting home improvement projects,” said Suzanne Shelton, whose firm conducted the study. “Anyone selling energy-efficient products must either focus heavily on the aesthetic or comfort aspects of their products or play up their environmental benefits in a big way.” 

The survey, which polled 504 Americans by telephone in September 2009, asked consumers: “Assuming you were suddenly given $10,000 to make home improvements, which two of the following would you choose?” The top answers were: 

-Refinish the kitchen or bathroom (37%)
-Replace carpet or add hardwood or tile (33%)
-Replace windows (31%)
-Replace HVAC/furnace (23%)

Last year’s top answers were:
-Replace windows (35%)
-Replace HVAC/furnace (27%)
-Remodel kitchen or bathroom (26%)
-Replace carpet or add hardwood or tile (25%) 

Among the survey’s other findings:
-Consumers are willing to watch their energy bills go up more than 70%, on average, before feeling forced to make energy-efficient home improvements. Respondents said their bills would need to go up an average of $129 a month to make them undertake renovations. “We call this phenomenon the ‘Apathy Gap,’ the price people are willing to pay to do nothing,” Shelton said. “Here consumers are willing to waste more than $1,500 a year, or more than $4 a day, before they’ll take action. For that same amount, a homeowner could install insulation or purchase one or two new ENERGY STAR® appliances to start seeing immediate savings.” 

-There is a lot of pent-up demand for solar power. The survey asked, “How likely would you be to buy a solar electricity system for your home, knowing that a mid-size system that would provide around 63% of the average household’s electricity, costs $35,000 to $40,000 that could be offset by a $2,000 federal tax incentive along with additional rebates in many states.” 

Twenty-eight percent said they would be likely or very likely to buy such a system. Fewer than 1% reported they already had such a system. “This indicates an enormous potential market for solar,” Shelton said. “Consumers have been waiting for solar to become more accessible and more affordable. Now, with prices projected to fall even further, and with new federal tax incentives greater than they’ve ever been – up to 30% of the cost of the system for qualifying taxpayers- solar power will be on the rise.” 

-Consumers have good intentions – but not very good follow-through. Surveys over the past five years, including this year, show consistently large discrepancies between intentions and actions. Every year, for example, around 20% or more consumers say they’re planning to get an energy audit, yet the percentage of U.S. homeowners who’ve actually gotten one has languished in the 10-15% range. 

“That’s why we now refer to home energy audits as the ‘colonoscopy’ of energy efficiency,” Shelton said. “Everyone knows they should get one, but too few actually do.” 

For more information, visit www.sheltongroupinc.com. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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Maria Patterson: Please begin by explaining what the 203k program is.
Dennis Walsh: The FHA Section 203k program was originally introduced by HUD in 1978 as a program to rehabilitate and repair single-family homes. HUD considers this an important tool for revitalizing neighborhoods and increasing homeownership. What’s unique about the 203k is that it’s a single mortgage loan that provides funds to purchase a home and make repairs and improvements. It’s intended for owner-occupants to purchase and renovate one- to four-unit residential and mixed-use properties. A simpler version, the Streamline 203k, was introduced in 2005. This version offers less documentation and lower loan fees for renovations that don’t exceed $35,000. 

MP: Why does today’s market present the ‘perfect storm’ conditions for the 203k program?
DW: The reality is, the market has changed and, as always, change brings new opportunities. First, look at all the distressed properties out there that need repair and renovation. So many of these homes haven’t been properly maintained and others have been damaged somewhere along the line—the furnace is missing, the kitchen is gone, or the carpeting rolled up and carried away. 

Secondly, conventional financing is simply out of reach for the majority of people. Without 20% or 25% to put down on a home and a perfect credit score, most Americans can’t get a conventional loan. However, with less-than-perfect credit and as little as 3.5% down, you can get an FHA loan, including the 203k. FHA financing opens up home-buying opportunities for many more people. 

Teresa Walsh: Keep in mind that with FHA financing, it’s critical that the house meet certain code standards—if it doesn’t, you can’t get an FHA loan. There are lots of homes out there that could be sold if the needed work was done. And most people recognize that homes needing repair and updating are some of the best deals available—great homes in great neighborhoods that need a little love.

So the question is, how does a buyer take advantage of a great deal on a home that needs work done? Where does the money come from to make the improvements? Some might run up charge cards at higher interest rates, or tap into savings or even retirement funds, but that’s usually not the best financial decision. The 203k loan offers an ideal solution. 

MP: Given these advantages, why haven’t 203k loans been more prevalent?
DW: There was no need to go through the process of FHA loan approval a few years back. We went through a long period of time where mortgage money was easily available to almost anyone who could fog a mirror—so use of FHA financing all but disappeared. It’s a whole new world now and, as a result, the use of FHA financing has grown to record levels. 

It’s also about awareness. You may have noticed that the U.S. government has not won many marketing awards! The FHA has had no mandate or funds allocated for marketing the 203k loan or providing training and support to real estate professionals. 

There’s also the fact that the 203k approval process is also a little more complicated than a conventional loan. For example, you’re required to secure renovation costs from an established, licensed contractor and deliver a package of the proper paperwork to the lender to secure FHA approval. This can be challenging for the average buyer, as well as agents without the training and resources. 

MP: Is an FHA loan a government loan? Will an increase in FHA lending add to the country’s deficit and overall economic problems?
DW: The great news for taxpayers is that this is not a program that requires the federal government to allocate billions of dollars of support. The FHA does not actually provide mortgage funds, but instead provides lenders with insurance that protects them against losses in the event of homeowner mortgage default. This reduces the lenders’ risk, allowing them to offer loans to buyers with less-than-perfect credit and with lower down payments. Lenders must follow specific guidelines established by FHA to qualify for this insurance. 

The FHA is funded entirely by proceeds from mortgage insurance included in the mortgage payments. As a result, the FHA is the only government agency that is entirely self-funded—operating at no cost to the American taxpayers! Additionally, the home construction and community development driven by FHA programs stimulate the economy through job creation, tax revenues and more. 

MP: What’s the concept behind RE-buildUSA?
DW: RE-buildUSA is designed to simplify the 203k loan process for everyone involved—to drive greater awareness, provide training and a support platform to allow real estate professionals to work most successfully with buyers, lenders, contractors and inspectors. 

Realtors involved in the program receive training to earn a 203k Specialist designation, a membership program for ongoing support and a technology program to facilitate 203k projects. We will work with Lowe’s to provide premier service to RE-buildUSA members and their customers. 

MP: Mark, why was it important for Lowe’s to get involved with RE-buildUSA?
Mark Malone: We, at Lowe’s, fully understand and empathize with each agent out there trying to keep and grow their business in today’s economy. We are here to support their business any way we can, and 203k presents new opportunities for Realtors to build business. We want Lowe’s to be the back-pocket resource for all things home improvement, so it’s a natural for us to be involved in RE-buildUSA. 

MP: Has RE-buildUSA officially launched?
DW: The first phase of our website, re-buildusa.com, is now live, with additional development under way. We’re scheduled to be launching the password-protected membership area some time in December. 

To become a 203k Specialist, an agent must complete approximately five hours of interactive self-paced coursework online. They then gain membership in the RE-buildUSA program, which helps them reach consumers interested in the 203k program, plus continued training and support. 

MP: What does an agent receive for becoming a member of RE-buildUSA?
TW: Agents will be featured in an online membership directory so that home buyers interested in working with a 203k Specialist can go to RE-buildUSA.com and find them. Members will also be able to identify themselves as a 203k Specialist on their websites and in their marketing. Members can access the RE-buildUSA membership site to download forms, checklists and sample marketing materials, as well as forums and a blog, highlighting up-to-date news, trends and best practices. RE-buildUSA is a one-stop shop for members, providing them with access to marketing materials, inspectors, lenders and a direct connection to Lowe’s to help their customers coordinate the bidding and renovation activities. 

MP: If I’m a real estate professional, why do I want to become a 203k Specialist?
DW: We’re showing real estate professionals how the 203k program works because it will help them sell more homes and help more Americans move into homeownership. We’re also excited that we can work together as an industry to reduce the inventory of foreclosed homes and get our housing industry back to greater stability. 

TW: When the market started to turn, a lot of agents steered away from listing foreclosures because it’s difficult business. There are a lot of out-of-pocket expenses, loads of paperwork, security issues and other challenges. Many other agents steered away from short sales because they didn’t want to deal with those headaches. Those, however, who recognized the opportunity and jumped in with both feet, are reaping the benefits today. So, I advise agents not to sit back and pass up the opportunity that now presents itself with the 203k program. Right now, the door is wide open all across America. 
DW: I think it’s also important to recognize that while this is a here-and-now opportunity, it’s also a long-term opportunity as well. Many people are not aware that more than 80% of the homes in America were built before 1990—that’s over 100 million homes that are 20 years old or older. Almost every one of these homes need some amount of repair and updating. It’s our belief that almost every single real estate professional is going to need the education we provide through RE-buildUSA to offer expertise in the 203k as well as other similar loan programs that come along in the future. 

MP: How is Lowe’s helping Realtors in today’s difficult market?
MM: Lowe’s has three main ways in which we help Realtors close more business. First, our free marketing tool, available to all Realtors, allows agents to send 10%-off coupons to their clients before they buy to help them envision how they can turn that house into a home. Second, we know what an effect foreclosures and distressed properties have had on housing and we want to empower agents to get those homes fixed up as quickly and cost effectively as possible. Realtors can download a 10%-off coupon to pass along to a trusted contractor or use it themselves to get these distressed properties to a presentable and, hopefully, sellable state. Third, and probably the most exciting, RE-buildUSA will help deliver a turnkey solution for agents who have buyers utilizing the 203k loan. 

MP: If I’m a consumer, why do I want to work with a 203k Specialist?
TW: First off, most consumers don’t really understand the program, what improvements can be made, how to find a lender, steps in the process…there are an awful lot of questions that need to be asked and answered. A RE-buildUSA 203k Specialist will help them understand 203k details and options, evaluate available properties, compare neighborhoods and introduce them to an FHA-approved 203k lender. They’ll also coordinate the appropriate home inspection and help them evaluate the renovation work and the potential impact on the value of the home.

Just as in short sales and foreclosures, home buyers find it very difficult to wade into these waters without the help of an expert. 

MP: How will a buyer benefit by choosing to work through Lowe’s for their 203k improvements?
MM: Safety, satisfaction and savings. All of Lowe’s installers are licensed*, bonded and insured so you can trust our team with the safety and the security of your buyer’s new home. We also stand behind the quality of our work with a 100% satisfaction guarantee. Don’t forget, the everyday low prices of the product in our stores insure home buyers will get the most value for their hard-earned dollars. 

MP: How will working with a 203k Specialist benefit the lender?
DW: Lenders tell us all the time that it’s very difficult to work with a consumer or agent who doesn’t understand the program. They also agree that working with real estate agents supported by RE-buildUSA training and resources will make life much easier for them—leading to smoother loan approvals and closings. Because of this, a number of lenders are already gearing up to work more closely as partners with RE-buildUSA members. 

MP: Why is the 203k program a critical program for today’s particular market conditions?
MM: We know that this is a different real estate landscape than we have ever dealt with before. Consumers are not in the same mindset as three or four years ago. More first-time home buyers are entering the market than ever before and we all need to be ready to help them learn how to make a house a home. Realtors are repositioning themselves to be even more of a trusted resource for home buyers, many of whom are gun-shy as they re-enter the market. Lowe’s is committed to the partnership we have with the National Association of Realtors and now with RE-buildUSA. We want to support Realtors in any way we can. 
DW: I hear a number of agents telling buyers and sellers that we’re in a “correcting market” and waiting for things to return to “normal.” So what does the typical buyer or seller do? They’ll most likely sit back and wait until the market’s corrected! 

We’re in a different market—a new market with new realities and new opportunities. Agents who are the first on the block to become 203k Specialists can take advantage of these opportunities right here, right now—and position themselves for the future as well. RE-buildUSA is about all of us working together to solve today’s problems and making a long-term investment in the stability of America’s housing industry and economy. 

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