Real Estate Information

The Price Is Right!

2008-01-19T18:47:00.000-08:00

Bankrate.com
8 tips for pricing your home
Saturday January 12, 6:00 am ET
Cheryl Allebrand

It's tough being the seller in a buyer's market. But you can improve your odds with the right research.

In many cases, making a smart deal and getting the best price comes down to studying your market and being an educated seller.

"You've got to know more than you would have if you'd sold a year ago," says William Poorvu, professor emeritus at Harvard Business School and author of the upcoming book "Creating and Growing Real Estate Wealth." "If you want to protect yourself, you have to become knowledgeable."

8 factors to keep in mind as you prepare to sell:

1. Recognize that housing markets are local.
2. Analyze who is buying and selling in your market.
3. Ask the professionals.
4. Know what your house is worth.
5. Consider strategic pricing.
6. Rebate your "commission."
7. Evaluate whether you really have to sell now.
8. Assess the market where you plan to buy.

1. Recognize that housing markets are local.
Home prices are like the weather -- very different in different areas.

In many markets, home prices have actually gone up from last year, says Dick Gaylord, president of the National Association of Realtors.

In addition, demand will change depending on the price range and even the neighborhood. What you need to know: What's the demand for a house like yours in your area?

"You have to look at what's being sold and at what price," says Poorvu. "That's important."

Look at comparables for similar houses. Study prices and sales for one year ago, six months ago, three months ago and current numbers, says Gaylord.

What are the trends? Are prices going up or down -- and by how much? How many days are homes staying on the market? If they are on the market longer, how much of that could be seasonal? In many areas, spring and summer are the busy seasons.

Pay special attention to "the delta between the list price and the sales price," says Ron Phipps, broker with Phipps Realty in Warwick, R.I. That is, look for a meaningful relationship between list price and sales price. Perhaps most homes are selling for 5 percent less than the list price.

"An agent who works the market will be in the best position" to find "the tipping point between nice, attractive and interesting -- and being sold," Phipps says. You want to find the point between, "Hey, that's interesting," and "It's too good to pass up."

If you're not using a real estate agent, it's especially important to use the Internet, visit open houses in your area and study home sales in your Sunday paper, says Greg Healy, vice president of operations for ForSaleByOwner.com.

But you also need to realize that the paperwork alone only tells part of the story. While sales and prices are public, many times seller concessions are not.

2. Analyze who is buying and selling in your market.
What's your competition? Who are the buyers, and why are they shopping?

Do you live in an area like Phoenix, "a growing market with people coming in," says Poorvu. Or are you living in an area that doesn't attract a lot of new residents, where many shoppers are "bottom fishers" who don't have to buy but are "looking to pick up a bargain," he says.

Are you competing against a flood of new houses from builders eager to sell, or are you selling a newer home in an area where most of the housing stock is older?
3. Ask the professionals.
Don't ignore the elephant in the living room. When you interview real estate agents, ask about the market conditions for your area and price range.

Specifically, ask about the "absorption rate" says Phipps. What that means: In the current conditions with the current inventory, how long would it take the market to absorb or sell, all the houses on the market?

If the supply is much larger than the demand, ask potential agents how they would "price to offset that inventory," he says.

4. Know what your house is worth.
Talk to a handful of agents. Get an appraisal from a certified professional appraiser. Look at your comparables. Taken together, that information will give you a pretty good idea of what your home is currently worth.

5. Consider strategic pricing.
Here's how it works: If prices in your area are dropping 1 percent each month, and you want to sell within the next three months, you take 3 percent off your price right off the bat, says Phipps. So if you were going to put your home on the market for $400,000, you set the price at roughly $388,000.

The upside: You'll have the competitive edge over the guy who's dropping his price every month, without the air of desperation. Plus, in a market where prices are falling, you'll make more money if you sell quickly.

The downside: Predicting the market is a tough call, even for the pros. And it's really difficult to raise the price if your market starts to rebound, Phipps says.

6. Rebate your 'commission.'
If you're selling it yourself and need to move quickly, consider subtracting half of what would have been the commission from the sales price, says Healy. The standard commission is about 6 percent, so if you subtract 3 percent, your $300,000 house would go on the market for $291,000, he says.

Listing a home for "$9,000 to $10,000 under that value should create higher interest," especially if it's new to the market, says Healy.

The downside: If the house doesn't sell and you end up hiring an agent, you'll need to cover the commission, which may mean raising your sales price or taking a smaller profit.

7. Evaluate whether you really have to sell now.
If you want to get the best possible price for your home and the local market is tanking, "see if you can delay the sale," says Poorvu. Otherwise, in a lot of markets, sellers have "to be willing to accept a pretty good haircut over what they thought their home was worth last year," he says.

The downside of waiting: The market could decline or your circumstances could change to the point that you might need to sell quickly.

But for situations where the move is optional (or you might be able to rent the property until your local market improves), waiting is a solid option.

Just because you've already planted that "for sale" sign doesn't mean you can't change your mind if you're not seeing the interest you anticipated.

"If you know there are no sales or sales are decreasing, and you have the opportunity," taking it off the market is a decent solution, says Healy. "I think we're seeing a lot of that."

8. Assess the market where you plan to buy.
If you're selling one house and buying another, look at the market where you plan to move. Says Poorvu, "It might be that, with the housing there, it's a great time to buy."

Foreclosures

2007-11-04T05:19:00.000-08:00

Area foreclosures well below state and national figures

By KEVIN POST Business Editor,
Press of Atlantic City 609-272-7250
Published: Saturday, November 3, 2007

Atlantic and Cape May counties are trending better than the nation and rest of New Jersey on a key measure of real estate industry distress - household foreclosures.
In the third quarter, Atlantic County foreclosure filings declined 7 percent from the prior quarter while those in Cape May County increased 13 percent, both below the statewide foreclosure filing rise of 16 percent and far below the nationwide increase of 30 percent, according to RealtyTrac Inc.

For the year ending in the third quarter, Cape May County's rise in foreclosure filings was 10 percent and Atlantic County's was 46 percent, compared to 53 percent for the state and 100 percent for the nation.

The three-month period saw 436 filings in Atlantic County; 162 in Cape May County; 13,655 in New Jersey; and 635,159 in the nation.

Trends aside, local figures also showed fewer households in foreclosure per 1,000 households in southern New Jersey than elsewhere.

For the third quarter, Cape May County had 1.6 foreclosures per 1,000 households; Atlantic County had 3.5 in foreclsure; New Jersey had four foreclosures per 1,000 households; and the United States had 5.1 in foreclosure for each 1,000 households.
RealtyTrac is a foreclosure tracking firm based in Irvine, Calif.

Links by inform.com

Windmills

2007-09-01T02:14:00.000-07:00

Tilting toward windmills
The Times - NJ.com
Friday, August 31, 2007

The answers to our energy needs may be blowing in the wind.

New Jersey is thinking about harvesting wind power by allowing a series of windmills to be built off of the Jersey Shore. The idea is to produce renewable, "green" energy that will not pollute or contribute to global warming. It's like having your energy cake and eating it, too.

The Corzine administration is floating the idea of constructing as many as 80 wind- powered turbines that would tower 30 stories above the surface of the Atlantic Ocean somewhere between southern Ocean County and Cape May.

But not all environmentalists are onboard with the concept. Some are concerned that giant windmills will cause unforeseen problems and destroy the ocean view that lures millions of visitors and billions of dollars to the state's beaches. As Timothy P. Dillingham, di rector of the New Jersey chapter of the American Littoral Society, succinctly put it, "We are talking about building an industrial facility out in the ocean."

The Sierra Club of New Jersey, however, supports the wind farm plan. Director Jeff Tittel points out that the biggest threat to the shore is global warming, and if we do nothing about that, "there will be no Jersey Shore left." Tittel downplayed the visual impact the windmills would have, say ing that at a distance of three miles from shore, "they will look like a pencil," and at five miles they will not be seen at all.

Using wind as a source of energy is not a new concept, as il lustrated by the iconic windmills that have long graced the lowlands of Holland. What is new is the technology and scope of wind farming. A 200-turbine farm is planned 11.5 miles off the coast of Rehoboth Beach in Delaware, and a 130-unit farm is eyed for Nan tucket Sound, off the coast of Massachusetts. A total of 16 offshore wind farms already are operational in five European countries.

Still, the new high-tech wind farms are not balancing out as cost-effective for some areas. The Long Island Power Authority recently scrapped its plans to build a 40-turbine wind energy center in the Atlantic, when costs escalated past $700 million. Likewise, a plan to erect 170 turbines off the Texas coast in the Gulf of Mexico has been called off because of the potential cost.

Here in New Jersey, the administration is conducting a se ries of studies on the feasibility and the environmental and economic impacts "to push for ward with an offshore wind project," according to a spokesman for Gov. Jon Corzine. The governor's energy policy calls for 20 percent of the state's electricity to be wind- or solar- generated by 2020, and 80 percent by 2050.

It is a laudable goal. Wind has great potential to become an important part of our energy portfolio. But we encourage Gov. Corzine to take a cautious approach and make sure that the environmental and economic questions are answered before we allow the giant windmills to sprout up along our coast.

2007-08-24T21:32:00.000-07:00

Avoiding a Mortgage Meltdown
If the deepening lending crisis is an imminent threat, borrowers have options to improve their standing
by Emily Thornton and Lauren Young
McGraw Hill Business Week
August 24, 2007

You're reading stories every day about people losing their homes and life savings. You're wondering whether you could be the next casualty. Stop wondering. Do something. Right now.

It's impossible to know just how ugly things could become. But one thing is clear: The mortgage mess and market turmoil are signaling that you should prepare for the worst, while hoping for much better. This Five for the Money features ways you can do that.

1. Boost Your Credit Rating
The standards for loans and mortgages are getting tougher. Last year, consumers with a credit score of 650 points out of a possible 850 could expect lower interest rates. Now, the bar is up to 680. To avoid sky-high rates or outright rejection, start by going online to grab your free yearly credit report at annualcreditreport.com. The site, which provides results from all three credit reporting agencies, will let you know if you're being penalized for late payments or if you may have missed other credit problems.

Next, check out the most widely used credit score—the FICO score provided by Fair Isaac (FIC)—by going to myfico.com. For $15.95, you can learn how you rank compared with other would-be borrowers. If your ratings are below par, the best way to boost your borrowing profile is to make on-time payments and to keep the balances on your credit cards below 35% of their limits. Don't open new cards or rush out to close a bunch of them, either. Both actions will set off alarm bells.

2. Make a Deal
If you face problems making a mortgage or other payment, you have more options than you may realize. Don't throw away the threatening letters or ignore the phone calls. Instead, call your lender and make a deal. In a strange twist, struggling mortgage holders have gained—not lost—bargaining power. Banks, wary of being saddled with foreclosed homes, are more willing than ever to make special arrangements. Washington Mutual (WM), for example, plans to refinance up to $2 billion in subprime loans at discounted interest rates for customers who are up-to-date on their existing loan but anticipate payment problems in the near future.

No matter how painful, keep your bank informed of your situation. "The first day you can't make a monthly payment, you need to contact the bank, tell them what the problem is and how long the problem will persist," says Manhattan real estate attorney Andrew Sokol. Put a payment proposal in writing. Show the lender that whatever you plan to pay is the most you can afford, even if it is only the interest on your mortgage.

As a last resort, consider tapping your retirement account by taking a hardship distribution from your 401(k) or a premature distribution from an individual retirement account. Work with an adviser to minimize the taxes and penalties you'll face. "To save the farm, the negative consequences are worth it," says Mitchell Rubin, a certified financial planner in New York.

3. Re-Read Your Mortgage
The biggest mistake many homeowners made was assuming they understood the inch-and-a-half stack of mortgage documents they received on closing day. Do you really understand yours? If you have an adjustable-rate mortgage, it might be worth contacting a mortgage counselor or consumer lawyer to be sure that dangerous details aren't lurking in the fine print. They can figure out whether you face a sudden rate increase by examining sections explaining how your interest rate will be recalculated. If your rate is about to leap to a rate higher than it should be for your credit profile, "you need to start working on relief strategies right away," says Marie McDonnell of Truth in Lending Audit & Recovery Services. You may also have a right to cancel certain loans, known as a "right of rescission." It lasts for years if the terms weren't disclosed properly to you in writing.

4. Shop Around
Financial conditions are changing day by day, both for borrowers taking out first-time mortgages and for those who are refinancing. Even in upscale neighborhoods, "banks are reneging on commitments and then going out of business," says Jeffrey Seabold, CEO of Beverly Hills-based CS Financial, a private mortgage bank. Some mortgage brokers are readying back-up lenders—and you should, too. Line up both a second mortgage and broker. "You should have more than one deal in your sights," says Keith Gumbinger at financial publisher HSH Associates in Pompton Plains, N.J.

5. Rebalance Your Portfolio
During the housing boom, many people plowed every dollar they could into their homes. With most or all of their net worth in real estate, these consumers may find that the downturn has derailed plans for early retirement. Don't panic and try to sell your home in the middle of a credit crunch. Do start to think about ways to return to a healthier mix of investments. People in their 30s should put much of their net worth into equities and their homes.

But Christopher Cordaro, chief investment officer at wealth management firm RegentAtlantic Capital in Chatham, N.J., advises clients in their 50s and older to limit real estate to half their net worth. Of the share not in real estate, put 40% in fixed-income investments and the remainder in equities. A retiree should create a hefty cash reserve to weather a three-year bear market in stocks, says James Stehr, a financial adviser in Alameda, Calif. To get help with these decisions, check out the National Association of Personal Financial Advisors (napfa.org) and the Garrett Planning Network (garrettplanningnetwork.com).

Emily Thornton is an associate editor for BusinessWeek. Young is a Personal Business editor for BusinessWeek.

All Aboard!

2007-08-12T20:14:00.000-07:00

Officials want train service into Cape May
Staff Writer, (609) 463-6713
Press of Atlantic City
Published: Saturday, August 11, 2007
By BRIAN IANIERI

Inside the historic Tuckahoe train station, public officials on Friday afternoon pitched NJ Transit for $27 million in track repairs for an excursion line from Richland to Cape May.

More than a dozen elected officials from Cape May and Atlantic counties took a ceremonious train ride on the Cape May Seashore Lines to meet NJ Transit Executive Director Richard Sarles in Tuckahoe.

Meanwhile, inside a white Ford Explorer at the station parking lot, two Middle Township officials made their own pitch to Sarles, one with a significantly different tone.

They showed him photographs of decrepit trains and asked him to forgo any possible funding until Cape May Seashore Lines moves vandalized trains from tracks in Rio Grande.

The trains have been a sore spot for Middle Township officials for several years.

The concept of sweeping passenger railroad coverage down the shore has excited some southern New Jersey officials who want to increase tourism without increasing traffic jams and parking nightmares.

“There is a real interest to build this rail line,” Buena Vista Township Mayor Chuck Chiarello said inside the quaint Tuckahoe train station. “The infrastructure is around here. We're just looking for the missing link.”

The tracks run from Richland to Tuckahoe through Woodbine down to Cape May Court House and Cold Spring, terminating in Cape May.

But Cape May Seashore Lines owner Tony Macrie has been in a contentious relationship with Middle Township officials for years about vandalized trains stored on the tracks along Route 47 in Rio Grande.

Middle Township Solicitor James Pickering said the township did not want to stop rail line improvements, but wanted its issues addressed.

He and former Mayor Michael Voll, a vocal opponent of the trains in Rio Grande, met with Sarles before officials gathered in the Tuckahoe train station.

In March, Middle Township Committee even passed a resolution requesting it be notified of any federal, state or county government funding requests by Seashore Lines.

Officials estimate about $27 million is needed to repair train tracks, particularly those between Woodbine and Cape May Court House.

Dennis Township is seeking federal funding for a train station to be built in Dennisville, Dennis Township Administrator Jody Alessandrine said. Also needed, he said, is about $6 million in infrastructure for the tracks in the township.

This week, the state Department of Community Affairs announced it is lending $435,000 to Woodbine for track repairs, a parking lot and a new rail platform for the Cape May Seashore Lines excursion.

Chiarello sees a boon to the communities and businesses located alongside the tracks. He objected to the way Middle Township officials approached Sarles at the event Friday.

“Obviously we had a group of 25 folks that were there for the betterment of the project,” he said. “That was our mission today. I was a little blindsided, and I think it was inappropriate for Mike Voll to use that opportunity to bring up an issue that's totally unrelated to that project we’re working on. “It was more of an embarrassment. I felt it was an embarrassment to Middle Township to attempt to become a spoiler to what otherwise was a positive day.”

Meanwhile, Middle Township will probably start citing and fining Cape May Seashore Lines shortly for trains stored in Rio Grande, said Township Administrator James Alexis, who did not attend Friday's event.

“It's literally come to a boiling point with the residents affected by the sight of the cars and the level of deterioration they’ve reached, and we feel we’re not getting the cooperation of the rail operator,” Alexis said.

Township officials said they are concerned about the unsightly trains and the criminal element attracted to them after dark.

Township officials have said that, despite being assured the trains would be relocated, they have remained unmoved for several years.

Macrie said he is being vilified for an issue beyond his control.

The trains were in pristine condition when he first stored them in Rio Grande but have fallen victim to serious damage and vandalism, he said.

The trains are sprayed with graffiti, windows are cracked and doors are missing.

Macrie said moving the trains now requires fixing damage done to the tracks following storms in April.

“If you owned a car and someone was vandalizing it, and you had the opportunity to move it, wouldn't you move it?” Macrie said Friday. “We’re a small company. We’re not a gigantic operation.”

“Look at the stuff here,” Macrie said, pointing to the shiny silver and black trains on the tracks in Tuckahoe. “This is the way it looked when we placed it there.”

Meanwhile, the trains can be a lure for tourism, history and transportation, he said. In 2005, about 16,000 people took the train in and out of Cape May, he said.

“Our position is, here we would love to see mass transit coming into Cape May. We have significant traffic and parking problems,” said Lou Corea, Cape May City manager.

The train had run into Cape May previously but has not done so recently due to bridge repairs over the Cape May Canal, Corea said.

Inside the train station, Sarles told officials gathered that the project was on his radar, but that there were many other priorities in New Jersey as well. He stressed that federally earmarked money could move the project along.

Chiarello said he found the meeting encouraging

The large scale of the project could be done in pieces over several years.

“We can get this done, town by town, section by section. Rome wasn't built in a day,” he said.

On Friday, Voll and Pickering's presence and statements on Friday irked some who had gathered to pitch NJ Transit for funding.

After Sarles left, Voll and Pickering were arguing with Paul Mulligan, of the New Jersey Association of Railroad Passengers.

“You guys have a lot of nerve,” Mulligan said inside the train station, adding their statements could hurt the recent funding requests.

“If you think they're going to give that guy (Macrie) $27 million,” Voll yelled, “you must believe in the Easter Bunny.

To e-mail Brian Ianieri at The Press:BIanieri@pressofac.com

Vacation Homes

2007-06-22T18:25:00.000-07:00

Tax Tips for Vacation Home Owners
By Tracy Byrnes
TheStreet.com Contributor
6/22/2007 12:39 PM EDT

I would love to own a little place at the beach someday. Of course, since I'm a Jersey girl, it would have to be down at the Jersey shore. But nothing too big, just something comfy and close to the water that my kids and I can enjoy
Sounds dreamy to me.

But these days, folks with summer homes are not so enamored.

With increasing energy costs, rising adjustable-rate mortgage payments, and the high price of gas, many folks are finding that sweet little escape at the beach is nothing but a money pit. As a result, many vacation-home owners have no choice but to consider renting out the place for a few weeks to help defray the costs.

Once you get over the notion that a stranger will be sleeping in your bed and using your toilet, it's actually not all that bad -- at least on the tax front.

A Freebie From Uncle Sam?
Depending on how long you rent out your home, the rental income may actually be tax-free.

"If you rent your vacation home for no more than 14 days during the year, the rent you receive is tax-free," says Bob Scharin, RIA senior tax analyst from Thomson Tax & Accounting, a part of the Thomson Corporation (TOC - Cramer's Take - Stockpickr - Rating).

And you don't even have to report that income on your tax return. So take the money and run! Even better, you can still can deduct your mortgage interest and real-estate taxes on "Schedule A" -- Itemized Deductions, as if you never rented out your home.

Just don't go thinking you're a landlord now. If you rent your home out for 14 days or less, you're not and you therefore cannot deduct any rental expenses.

This tax rule is nothing new. You can also rent out your principal residence for up to 14 days and pocket the money too. So if you're going on vacation anytime soon, consider renting out your home and getting your vacation paid for.

But I Want to Be a Landlord!
If you instead decide to rent out your fabulous little summer place for more than 14 days, then feel free to call yourself a landlord.

And introduce yourself to "Schedule E" -- Supplemental Income and Loss, because you'll need to report the income you receive from rentals that exceed 14 days. While you'll now owe tax on that money, you'll also be able to deduct some corresponding rental expenses.

The rules for deducting rental expenses are not entirely straightforward -- no surprise. First, you'll need to quantify the time you rent the house vs. The time you live there.

Then decide which camp you fall into:

Do you use the place as a vacation home and rent it on occasion?
Or do you rent it out mostly, and sporadically use it for personal use?

Here are the arcane technical rules for the first scenario: Your vacation home is rented for more than 14 days and your personal use exceeds the greater of 14 days, or 10% of the rental days. Translation: You use it more than you rent it.
In this case, the rental portion of your deductions also should be reported on Schedule E. Things such as mortgage interest, real-estate taxes, rental agent fees, cleaning and maintenance costs, insurance premiums, utilities and depreciation are just some of the things you can list. Basically anything out-of-pocket that helps you keep up the home can now be deducted.

But since you use the house for pleasure more than "business," your expenses cannot exceed the gross income you make from rents. However, any excess deductions can be carried over to a subsequent year.

The part of your deductions that represent the personal use of the house still should be reported on Schedule A. In very simple terms, let's presume that only 15% of the usage is rental. Then only 15% of the mortgage interest goes on Schedule E. The remaining 85% should be reported on Schedule A.

Now, if you answered "yes" to the second question, and the home is more of an rental property (not a fun-family beach home), then it should be treated accordingly(The technical rule is ridiculous: It says that if you personally used your vacation home for fewer than the greater of 15 days or 10% of the days it was rented out, it is not considered a residence. Huh?)

Basically, if you don't fall under the first scenario, your home is probably a rental property. That means your deductions are no longer limited to your rental income, so the sky's the limit. However, they still must be allocated between your personal and rental use so the appropriate portion must still go on your Schedule A. The upside is that the piece that's allocated to your rental income can be unlimited.

Big note: now that it's a rental property, you can't deduct your mortgage interest on Schedule A any more. That's because it's not a second home for you and your family -- it's an investment property.

And one more big tip: "If you are going to rent any of your homes for more than 14 days, just be sure to keep good records of both your rental and personal-use pattern, and the expenses you incur," Scharin advises.

April is a long way off, so get your documentation now. And then, if Uncle Sam ever comes knockin', you have backup.

So enjoy your beach house. Rent it out and make some money. Just be sure to change the sheets between visits.

Beaches - Disappearing Act

2007-06-18T17:10:00.000-07:00

Jun 18, 2007 7:28 pm US/Eastern

Disappearing Beaches A Major Shore Concern
CBS 3, Philadelphia
Cydney Long
Reporting

(CBS 3) OCEAN CITY, N.J. Aside from the stretch on five mile beach, also known as the Wildwoods, Jersey Shore beaches are disappearing.

Local leaders met on Monday in attempt to figure out how to combat the growing problem.

The beaches are crucial to the South Jersey economy as tourism is the number one industry in the Garden State.

The long walk in the hot sand to your beach towel and umbrella near the surf, whether you know it or not, gets shorter every summer.

"We've probably lost 500,000 cubic yards in last two years," Avalon Emergency Manager Harry DeButts said.

Some of Avalon's north end beaches have lost the equivalent of 125 feet of sand from the dune to the water.

And that is why concerned residents, politicians, the Army core of engineers and other experts met Monday for the annual Cape May County beach conference.

"It's an effort to learn what Mother Nature is doing and to work with her, not against her," DeButts explained.

"The majority of people who come down the shore, come because they want to enjoy our beaches and our bays, if we lose that we lose that, we lose a major economic initiative in state of New Jersey," Assemblyman Jeff Van Drew said.

Ocean City, Sea Isle, and Strathmere utilize geo-tubes to create an artificial dune that will not erode.

"To protect the shore, it's simply pumping sand into a geo-textile fabric, in effect they are long sausage like shapes, and they create a barrier along the shoreline to protect the property behind it," Ocean City engineer George Savastano explained.

But they say the best alternative, though costly, is to replenish the sand and 25-year shore resident Harold Purvis may have put it best.

"The people love the beach, if the beach wasn't here, we wouldn't have any body coming," Purvis said.

Ocean City spends roughly $8-10 million a year every three years for beach replenishment.

Vacation Homes

2007-06-15T20:24:00.000-07:00

Sales Of Vacation Properties Rise
By: Joe Register, The Bulletin
06/15/2007

Vacation home sales and investment home sales together accounted for 36 percent of all new and residential transactions. With these results, is it really a good time to buy a vacation or investment property?

In 2006, more than one million people bought vacation homes. These million home sales represent an increase of 4.7 percent over the preceding year. This according to the National Association of Realtors (NAR), industry experts who say that this data from NAR is good news for people who want to buy a vacation home.

According to Christine Karpinski, author of How to Rent Vacation Properties by Owner, 2nd Ed: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment (Kinney Pollack Press, 2007), vacation home sales and investment home sales together accounted for 36 percent of all new and residential transactions. With these results, is it really a good time to buy a vacation or investment property?
The general public tends to view the real estate market as a whole. But Karpinski points out that that there are different segments to the real estate market, and not all of the segments respond in the same manner or at the same time.

Residential sales, i.e. a house bought as a primary residence and investment purchases are two separate and distinct markets. So don't let the gloom-and-doom-sayers discourage you, and don't let the sluggish real estate market in your area do so either. You are on a whole different playing field, says Karpinski.

While vacation home sales are up, investment home sales are down by nearly 30 percent since 2005. This can be good news for vacation homebuyers because fewer speculators in the market means less demand and, as we have discussed in this column before, lower demand equals a drop in prices. If you are buying a vacation home for your personal use, not having to compete with speculators will allow you to take your time and make a thoughtful purchase that you can feel good about.

You don't have to be wealthy to purchase a vacation home. Karpinski points out that even if you cannot comfortably afford two mortgages, it is not difficult to offset the cost of the mortgage. She adds that you can rent it out part of the time and enjoy it at others. She notes in her book that if you rent out your home for only 17 weeks out of the year, you can still break even.

You may feel at the time that you purchase a vacation home that you do not want to rent it out. Even so, it is wise to make sure that such an option is available to you, should you ever in the future wish to do so. Having that safety net of being able to rent out your vacation home could prove beneficial in the future. Be sure to check to see if the homeowners association or municipality has, as many do, prohibitions against short-term rentals. Buying in an area that does not permit short-term rentals could eliminate the possibility of a safety net and could negatively affect your resale value.

Vacation homes that can be rented typically hold their value better because more people are able and willing to buy such a house.

Joe Register is a Realtor practicing in the Delaware Valley. E-Mail your questions to 4sucasa@comcast.net.or call 215-657-8100.

©The Evening Bulletin 2007

Foreclosures

2007-06-13T18:32:00.000-07:00

ABC 'World News' Uses Questionable Data in Home Foreclosure Story
Report states foreclosures up 90 percent, although source admits its own foreclosure data is susceptible to error.

By Jeff Poor
Business & Media Institute
6/13/2007 6:36:08 PM

ABC’s “World News with Charles Gibson” reported foreclosure statistics furnished by RealtyTrac, a commonly used barometer of the real estate market, on its June 12 broadcast. “Today we learned that more than 176,000 home foreclosures were filed last month,” said Gibson. “That is more foreclosures in one month than have ever been filed before. And it’s 90 percent higher, almost double the number filed in May of 2006.”

However, the data furnished by RealtyTrac, including the data furnished in the ABC report, are often subject to misinterpretation, according to Rick Sharga, vice president of marketing at RealtyTrac.

Sharga told The (Newark, N.J.) Star-Ledger “the company decided to fine-tune its figures because too many people – including the media – were misinterpreting the foreclosure numbers.”

According to the Star-Ledger story, the data supplied by RealtyTrac count every step in the foreclosure process separately, which in some localities could be as many as three to four steps, thus counting a single foreclosure up to four times. The June 12 issue of The Star-Ledger reported that starting as early as next month, RealtyTrac would fine-tune its data and publish the number of unique filings in addition to its current report of new filings.

That would make a huge difference, the Star-Ledger’s Sam Ali wrote.

“The change is expected to dramatically decrease the number of foreclosures in any given state, according to RealtyTrac,” Ali wrote. “Under the change, New Jersey could find itself in the middle of the pack, instead of having the 12th-highest foreclosure rate in the country under RealtyTrac's current reporting system.”

This report didn’t prevent ABC News from running a story about the RealtyTrac numbers.

“After a break in foreclosures in April, real estate analysts thought they were seeing a promising sign, but not so,” said ABC’s David Muir. “The number of foreclosures is roaring back. This is when the real estate market is supposed to pick up.”

Muir blamed lenders for the spike in foreclosures. “What’s behind it?” said Muir. “Thousands of homeowners lured in by those easy-to-get mortgages, even if you had little cash and poor credit.”

Sharga, who had admitted his own numbers could be flawed, was featured in the ABC story and said “there were a lot of exotic and it turns out, fairly toxic loan types that were out in the marketplace over the last couple of years.”

ABC offered several examples of people who lost their homes to foreclosure; however, they tended to be indicative of cases of financial irresponsibility and not necessarily signs of a struggling economy.

“I would work with the electric company and pay a month late,” said Lori Johnston, a foreclosed homeowner with a second mortgage in Richardson, Texas. “But, then I would be a month behind and that next bill would be due. It just … snowballed.”

One source the ABC story cited was a real estate broker who specialized in foreclosed properties. He placed blame on the industry and not the ones who defaulted on their loans.

“I know that it’s heartbreaking to have home ownership or the dream of home ownership and then you get it and lose it,” said Kenneth Sessions, an Oakland, Calif., real estate broker. “But, I believe that a lot of these people were put in these properties that they couldn’t afford from day one.”

ABC News has even gone as far as posting a Web site seeking those who are struggling with their home loans. The site provides a form for contact information so an ABC News producer could contact them.

This is just the latest example of the media’s blaming lenders and not individuals for overly risky borrowing.

Vacation Homes and Second Homes

2007-06-13T14:25:00.000-07:00

Second Homes for Recreation, Retirement
Houston Chronicle
June 13, 2007, 1:13PM

By EILEEN ALT POWELL AP Business Writer
© 2007 The Associated Press

NEW YORK — For years, the wealthy have bought second homes to use as vacation retreats and benefit from the appreciation of the property. Increasingly, middle class families are looking more seriously at the second home market _ especially baby boomers who want to line up a home now for retirement later.

"The demand for second homes is big and growing," said Joseph H. Badal, president and chief executive of Thornburg Mortgage in Santa Fe, N.M. "Baby boomers are feeding the second home buying now, and young families are also in the market."

But buying a second home requires a major financial commitment, so consumers need to think carefully before taking the plunge.

"Many people discover too late that the cost of a second home outweighs the benefits," Badal said. "There's the mortgage, insurance, taxes ... and maybe they don't use it as much as they thought. It really requires planning."

Although rising interest rates have been slowing home buying in general, the market for second homes has remained strong, according to figures from the National Association of Realtors.

As sales of primary residences and investment homes dropped last year, sales of vacation homes rose nearly 5 percent to a record 1.07 million from 1.02 million in 2005, the Washington, D.C.-based trade group said.

The Realtors said the typical vacation home buyer was 44 years old, came from a household with a median annual income of $102,000 and purchased a property that was about 215 miles from his or her primary residence. Nearly 80 percent of buyers said they wanted to use their second homes for vacations or as family retreats, while nearly 30 percent saw their second homes as a primary residence in the future.

Pat Dougherty, 41, who operates a dry cleaning business in Erie, Pa., and his wife Stephanie wanted a second home in a warm locale they eventually could retire to.

Two years ago, they purchased a doublewide mobile home on an acre of land beside a lake in Mooresville, N.C.

"The idea is to use it as a vacation home for now," Dougherty said. "But I'd like to retire there someday and build a home on the site."

In the meantime, the Doughertys and their three children enjoy swimming and fishing in the freshwater lake, he said. The children, who range in age from 12 to 16, also are interested in attending colleges in North Carolina, which would give the family even more reason to use their second home.

Jim Gillespie, president and chief executive of Coldwell Banker Real Estate Corp., which helped the Doughertys find their property, said second home buyers need to consider many of the same issues as first home buyers.

"First, you need to determine the best location for the property," he said. "Do you want to be on the water? Where it's warm? In a traditional retirement area like Arizona or Florida, or closer to the grandchildren?"

Then, he suggested, a would-be buyer should visit the locale several times, including in off seasons.

"Spend vacations there, even rent for short periods of time," he said. "That way you can make sure it has the culture you want, that you feel comfortable."

Craig Venezia, author of "Buying a Second Home," published by Nolo books, said families need to take a hard look at the costs before buying.

The interest rate on mortgages for second homes can be higher than on primary homes, and how much of the interest can be written off at tax time depends on factors including whether the house is used only by the owners or rented out.

"A lot of people figure they can afford the down payment but they forget about the additional costs, which can be considerable," he said. These include homeowners insurance, flood insurance, property taxes, repair and maintenance costs, a management company's fees if the property is rented out and a monthly fee if it's part of a condominium or gated community.

And while renting out a second home can help cover the cost, there can be drawbacks, Venezia said.

"People find it can take more time to manage the property than they anticipated," he said. "Suddenly what they thought would be this kickback, income-generating place has become a big burden."

Venezia also suggests families should not be pressured into buying when they're not ready _ or when the market isn't in their favor.

"I have seen some impulse buys of second homes, and it isn't pretty," he said.

Caution is especially important in those areas that have been overbuilt or where price appreciation has been rampant, including Florida and California, he said.

Holding off shouldn't be a problem, he added, because "the market is likely to be flat for a while" as rates rise and unsold home inventories are worked off.

___

2007-05-29T05:51:00.000-07:00

The flip side of 'irrational exuberance'
Journal and Courier

On Friday, the National Association of Realtors reported that the sales of existing homes fell by 2.6 percent in April -- the slowest sales pace since June 2003. Meanwhile, for the ninth month in a row, the median home price dropped.

That's more bad news for those looking to sell their homes, as the housing bubble continues to deflate.

Nationally, the new median price of home prices is $220,900, according to the association. That's an 0.8 percent fall from the median price a year ago.

If homeowners are losing sleep over what for them may be their biggest investment, they can thank speculators and mortgage brokers for starters.

When home prices were soaring during the 1990s, investors bought, renovated and sold properties and made money -- gobs of it. "Flipping" houses became a national trend.

At the same time, credit-challenged homeowners, hungry for a mortgage, found help from subprime lenders who offered them loans at higher interest rates. The increased accessibility to mortgages put more buyers in the market. Home prices soared.

Remember the stock market boom of the 1990s, when former Federal Reserve Board Chairman Alan Greenspan urged caution?

"How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" he asked during a 1996 speech at the American Enterprise Institute.

The same kind of "irrational exuberance" took the housing market by storm. His comment, now as much a part of the American economic vernacular as the term "supply and demand," could easily apply to the overheated housing market that saw prices increase by double-digit percentage points.

Now homes aren't the get-rich-quick investments they once were.

But there are glimmers of good news, especially for the Midwest.

As reported Friday, the sales decline for existing home here -- 0.7 percent -- was significantly smaller than the one experienced in the Northeast, which saw sales drop 8.8 percent. The correction continues to be worse for homeowners in more expensive areas of the country, such as Connecticut and California.

Economists are crossing their fingers for a modest recovery in 2008. So are we.

In the meantime, hold on.

And if you happen to be in the market for a home, celebrate. For you, all this is good news.

Vacation Homes

2007-05-29T05:46:00.000-07:00

Vacation homes: a booming trend
JIM BUCHTA
Minneapolis Star Tribune
Last update: May 26, 2007 – 10:17 AM

While primary home sales fell 4.1 percent last year, according to the National Association of Realtors, sales of vacation homes rose 4.7 percent to a record 1.07 million. They represented 14 percent of all real estate purchases, up from a 12 percent share in 2005.

What's driving that trend? Leisure-seeking baby boomers, who were younger and wealthier last year.

"The rise in vacation-home sales is based on strong demographic and lifestyle factors, with only modest interest in renting their properties to others," according to David Lereah, NAR's chief economist.

Here's a snapshot of the characteristics of 2006 second-home buyers and their purchases.

WHO ARE THEY?

Median age in 2006: 44

Median age in 2005: 52

Median household income 2006: $102,200

Median household income 2005: $82,800

Marital status: 78 percent married

WHERE ARE THEY?

Distance from primary residence: 215 miles

Closer than 100 miles: 42 percent

More than 500 miles: 32 percent

Rural areas: 29 percent

Resorts: 24 percent

Suburb: 22 percent

Urban area or central city: 10 percent

WHAT'S NEARBY?

Close to an ocean, river or lake: 66 percent

Close to recreational or sporting activities: 39 percent

Close to vacation or resort areas: 38 percent

Close to mountains or other natural attractions: 31 percent

THE DRAW

Beach, lake or water sports: 57 percent

Boating: 38 percent

Hunting/fishing: 32 percent

Golf: 21 percent

Biking, hiking or horseback riding: 20 percent

Ski/winter recreation: 17 percent

Tennis: 9 percent

WHAT ARE THEY BUYING?

Detached single-family house: 67 percent

Condos: 21 percent

Town houses/row houses: 8 percent

Other: 4 percent

New construction: 44 percent

WHY DID THEY BUY IT?

Family retreat: 79 percent

Diversify investments: 34 percent

Primary residence in future: 28 percent

Tax benefits: 25 percent

Use by family member, friend or relative: 22 percent

Extra money to spend: 21 percent

To rent: 18 percent

HOW MUCH DID THEY PAY?

Median price 2006: $200,000

Median price: 2005: $204,100

Paid cash: 25 percent

HOW MANY DO THEY HAVE?

One vacation home: 86 percent

Two homes: 12 percent

Three or more: 2 percent

55 percent said they were likely to purchase another one within two years.

JIM BUCHTA

Vacation Homes and Second Homes

2007-05-13T17:37:00.000-07:00

On the House Thinking 2d home? Hold on, investors
By Al Heavens
Inquirer Columnist
May 13, 2007

If you were thinking about investing in the vacation-home market, it appears you have missed the boat, so to speak.

The National Association of Realtors reports that vacation-home sales rose 4.7 percent to a record 1.07 million in 2006, from 1.02 million in 2005. But NAR also reports that sales of investment homes fell sharply, down 28.9 percent to 1.65 million in 2006, from a record 2.32 million in 2005.

The big drop in investment sales cut second homes' share of the resale market to 36 percent in 2006, down from 40 percent in 2005. By contrast, primary-residence sales fell 4.1 percent to 4.82 million in 2006, from 5.02 million in 2005.

"We expected the drop in investment sales because speculators left the market in 2006, which caused investment sales to fall much faster than the primary market," said David Lereah, NAR's chief economist. "But the rise in vacation-home sales is based on strong demographic and lifestyle factors, with only modest interest in renting their properties to others."

(Coincidentally, Lereah is leaving his post this month, after seven years, to become executive vice president of Move Inc., which operates NAR's official Web site, Realtor.com, and Move.com.)

In 2006, the typical vacation-home buyer was 44, had a median household income of $102,200, and purchased property that was a median of 215 miles from his or her primary residence. About 42 percent of the vacation homes purchased last year were closer than 100 miles, and 32 percent were 500 miles away or farther.

The median age of the vacation-home buyer declined last year, from 52 in the 2005 second-home-buyer survey. Lereah said he anticipated the decline because there are now 44.7 million people in their 40s, and this larger age group will be driving the market in the coming decade.
"The demographics favor vacation-home sales [instead of sales to investors] because large numbers of consumers are in the prime buying ages, and buyers want recreational property for personal use - investment is a secondary consideration," Lereah said.

In listing their reasons for purchasing vacation homes - they could pick more than one reason - 79 percent of the 1,412 buyers who responded to the NAR survey said they wanted to use the homes for vacations or as family retreats; 34 percent wanted to diversify their investments; 28 percent planned to use the properties as primary residences in the future; 25 percent bought for the subsequent tax benefits; 22 percent bought the homes for use by family members or friends; 21 percent had extra money to spend; and 18 percent planned to rent the houses to others.

Twenty-nine percent of vacation homes were purchased in rural areas, 24 percent in resorts, 22 percent in suburbs, and 10 percent in an urban area or central city, the survey showed.
Sixty-seven percent were detached single-family homes, 21 percent condos, and 8 percent townhouses or rowhouses. Four percent fell in the "other" category.

One-quarter of vacation homes were purchased in the Northeastern United States, 13 percent in the Midwest, 38 percent in the South, and 25 percent in the West.

Investors may be down but not out in the second-home market. The survey showed that the sale price of the typical investment property in 2006 declined 18.6 percent, to $150,000, from $183,500 in 2005. By comparison, the median price of a vacation home in 2006 was $200,000, down only 2 percent from $204,100 in 2005.

"The drop in investment prices comes as no surprise, but for vacation-home prices to edge down in a record market is a bit puzzling," Lereah said.

"It may result from a large dumping of inventory on the market by speculators, especially in the condo sector, with long-term second-home buyers taking advantage of the glut and buying at negotiated discounts," he said.

This underscores that housing should always be viewed as a long-term investment, providing solid returns over time.

Part of the drop in the median investment price results from investors shifting away from pricier markets like Florida, Nevada and Arizona, and into affordable locations such as New Mexico, Idaho, Utah, Georgia, Tennessee, and the Carolinas

Excuses, excuses, excuses

2007-04-21T04:55:00.000-07:00

How to Turn Excuses for Not Buying a Home into the Reality of Home Owning Benefits

Hard-core renters can come up with all kinds of reasons to avoid real-estate purchases. Here are some of the usual stories — and why they just don't wash
By Colleen DeBaise, SmartMoney

RISMEDIA, April 23, 2007-(MSN.com)-A good chunk of the U.S. population refuses to give up renting. We're not sure how many renters are stubborn holdouts because the U.S. census doesn't measure in terms of obstinacy, although we do know that the majority of Americans-about 69%-own their own homes.

For many, the American dream is simply out of reach for financial reasons. But for others, it's not the money, it's the . . . well, we've come up with five reasons why people don't want to buy real estate.

We've enlisted the aid of experts — Stacy Francis and Nancy Flint-Budde, certified financial planners in New York City and Salem, N.Y., respectively, and Mark Schussel, a spokesman for the Chubb Group of Insurance Cos. in Warren, N.J-to counter these excuses and knock some sense into the real-estate-challenged.

Excuse No. 1: "Everyone is way too insane about real estate."

Count this as the "protest" renter — the person who perpetually rents, who thinks he's too cool for school and doesn't want to be one of those people who talks about renovation projects at a cocktail party. (The true "protest" renter also protests cocktail parties.) Such people might also fear growing up, becoming their parents, owning guest towels, etc.

Counter: Well, owning your own home is indeed a responsibility, and if you're not ready for it, then don't do it. Of course, you'll miss out on nice tax breaks for mortgage interest and property taxes, which make owning a compelling proposition for many. Not to mention, you're not exactly building equity when you split the rent with the roomies (but hey, it does help with the cable bill).

"I look at renting as writing a check and throwing it out in the garbage," says Francis, who often advises clients on buying apartments in Manhattan. For many people, buying a home is their first crack at building their net worth over the long term, she says. The traditional way to ease into homeownership is to buy something like a condominium or town house, so your weekends aren't spent at the home-improvement store picking up weed whackers.

But be careful: You might feel like a real adult once you own. "You are no longer at the whims of your landlord to raise your rent or sell your building," Francis says. "It really gives you stability."

Excuse No. 2: "Renting is a good deal."

Truth be told, there is some logic to that. After all, if something breaks in your rental apartment, you just call your landlord. You don't spend money on pricey renovations. Heck, you don't have to pay property taxes. And if you've got enough money for a down payment, why dump that cash into an expensive home when you could use it to buy something like stocks instead?

Counter: Many people consider their home an investment. "We call it a use asset," says Flint-Budde. "It's an asset that you own, and you hope it will appreciate, but you are using it along the way."

That means even if your home doesn't appreciate as much as your favorite stock or exchange-traded fund, you still gain because it doubles (hopefully) as a nice place to live. Homes historically appreciate over time, so if you are able to hold on to your abode for a minimum of five years, you'll likely see a significant increase in value, Flint-Budde says. In its latest report, the National Association of Realtors, said typical sellers are still experiencing healthy gains on the value of their homes over the past five years, even in areas where prices have fallen recently. The group estimates that the median five-year price gain is 41.8%.

Would you still rather build your securities portfolio than buy a house? "If you have to turn around and pay $1,000 a month to rent somewhere, you may have less available to put into stocks," Flint-Budde points out. "And at the end of the day, if you put some into stocks and some into real estate, you would have diversified your portfolio more."Oh, and for those averse to paying taxes? Don't fool yourself. Even renters pay property taxes. That's often what most of your rent check goes to pay, and your landlord-not you -gets the tax deduction.

Excuse No. 3: "Buy a house on my own? Then I'll really never get married. What do I do next — buy a cat?"

OK, so we hear this one a lot from women. Well, interestingly enough, research has found that single women are leaping into real estate. In 2006, they accounted for 21% of home buyers, up from 14% in 1995, and well ahead of single men, who made up only 9%, according to NAR research. Yet many women confess they are hesitant to buy a home on their own. Shouldn't they be waiting for Mr. Wonderful to come along and sweep them off their feet?

Counter: Tsk, tsk, says Francis, who hosts "Savvy Ladies" seminars to counsel women on personal-finance decisions. She's heard this excuse hundreds of times from female clients. "I call it the Prince Charming syndrome," she says. "They put their life on hold until they find that Prince Charming. What it really comes down to is that women are just as capable as men at doing things on their own and starting to live their life for now."

One thing Francis reminds women, regardless of their marital status, is that they're more apt to live longer and need more money in retirement. A home is a perfect way to begin building wealth, she says. Women in general are hesitant when it comes to not only buying a home but investing, looking for a new job or asking for a raise. Accept that you are not going to be comfortable with the process, but do what you can to prepare for it, such as reading books on real estate, or doing research on the Internet, Francis says. Buying a home is a smart decision in many ways.

"Women who have actually purchased homes tend to have more equitable relationships," she says. "They are choosier and decide to be with men who they want to be with for emotional reasons, not financial reasons."

Excuse No. 4: "I'm afraid of commitment."

Funny, we hear this excuse more from men. But seriously, there are some meaty issues here. Many people aren't sure they want to commit to a certain city, especially if they are building a career and possibly switching jobs. And despite the fact that we're a nation of debtors, some people perish the thought of taking on an enormous mortgage. Others are worried about the possibility of outgrowing their home, perhaps because they're considering starting a family or having more children.

Counter: As excuses go, this one isn't bad. Most experts recommend that you stay in your house at least three to five years, to recoup costs associated with closing and to see an increase in the home's value. Plus, you need time to weather the ups and downs, such as shifts in interest rates that can quickly turn a healthy seller's market into one where the buyer calls the shots.

In addition, from a tax perspective, you need to own your home for at least one year to qualify for the 15% capital-gains tax rate on profits; own it for more than two years and there's no tax on the proceeds from a sale (up to $250,000 for singles, and $500,000 for married couples). Flint-Budde says she tells clients, especially first-time home buyers, to purchase a home only if they plan to live there at least five years.

Research has shown that home buyers put thousands of dollars on credit cards upon moving into a home "because they need so many things — they never needed a garden hose before," she says. "There are some real cost issues with moving into a house."

Francis says she tells clients to put buying on hold "if you've had some traumatic thing happen in your life — maybe it's the loss of a spouse or a divorce, or a job change," she says. "Sometimes it's good to just sit for a few months so when you do go out there and purchase a home, it suits your needs."

Francis also recommends that home buyers have enough for a 25% down payment and a stable job. If you don't, then "it may not be the time," she says.

Excuse No. 5: "I'm worried about disaster striking."

No doubt about it — this is a valid concern. In recent years, a Category 5 hurricane, a terrorist attack and a documentary about the certainties of global warming have struck fear in the hearts of many potential home buyers. But should it stop you from buying a home?

Counter: Nope. Historically speaking, property values bounce back, especially if the disaster happens in a desirable area. Real estate in Manhattan, for instance, has soared in value since the 2001 terrorist attacks. Despite mudslides, earthquakes and smog, property along the California coast is still the most sought-after in the country. What to do if you're really worried? Before you buy, call in a loss-prevention specialist, who can analyze a home's design and construction to see how likely it could survive a catastrophe, Chubb's Schussel says.

Then, if you really want peace of mind, beef up your insurance. For starters, people who are investing in expensive homes in vulnerable areas should make sure their policies include guaranteed-replacement-cost coverage, which would protect you during rebuilding if the prices of labor and material surged, Schussel says. Make sure your policy covers debris removal, rebuilding to code and additional living-expense coverage, in case it could take you months or even more than a year to rebuild, he adds. There's a good chance you might not want to rebuild if disaster strikes, so check to see if your policy provides an optional cash settlement so you can decide whether you're "taking the money and running," he says.

In places where flooding is a concern, many homeowners get basic coverage through the National Flood Insurance Program. Upscale customers may want to buy additional flood coverage (offered by private insurers) to supplement that, he says.

Source: 1=9323" target=_blank>http://realestate.msn.com/selling/Article2.aspx?cp-documentid=4706111>1=9323.

Time to Buy Vacation Home

2007-02-06T15:11:00.000-08:00

Dreaming of buying a second home? Now might be the perfect time

By: Jolene Anderson
Journal Newspapers
02/06/2007

Now may be the perfect time to consider buying a vacation home. Whether the motive is increasing your real estate investment portfolio or purchasing a dream retreat in advance of retirement, this may be the time to begin the search for a second home. While many more buyers will be competing for the same properties in the spring and summer when the weather improves, late winter can be a great time to begin the search for a second home property.

Since the favorable tax laws went into effect in 1998 that essentially did away with the capital gains for sellers who wish to trade down to a smaller residence, more buyers are seeking to purchase a second home for future retirement. The rationale for many 45 to 55-year-old buyers is to buy now while prices are relatively low.

The National Association of Realtors released a survey that showed 83 percent of vacation home buyers used real estate agents. The typical buyer searched seven weeks to find their second home and looked at six properties. Eighty-three percent financed with a mortgage and made a median down payment of 22 percent. Although 45 percent used savings for a down payment, 29 percent used equity from a previous home.

Other interesting statistics published by the National Association of Realtors revealed one out of three single family, condo and new homes were second home sales. The last two years have been records for second home sales. Another recent survey indicated there are 6.6 million vacation homes and 37.2 million investment units in the United States compared with 72.1 million owner-occupied homes. (Source: www.realtor.org).

Whether you're longing for a personal retreat to escape from the city such as cabin in the mountains, a home by the beach or on a golf course, vacation homes are very appealing to many baby boomers. With the largest purchasing power in America and many looking to retire in the next 10 years, the demand for vacation homes from this group is predicted to remain strong for several years.

Once a home has been selected, many buyers are searching for a way to realize income from their property. While some may elect to rent their vacation property through a property management firm that is familiar with the local area where the property is located, others choose to rent through one of the online services available. Clearly, there are more options available now for renting and managing vacation homes with the growing demand for vacation rentals and the services available through the Internet.

Christine Karpinski, author of How to Rent Vacation Properties by Owner: the Complete Guide to a Savvy Financial and Emotional Investment, and Profit from your Vacation Home Dream (both books available on Amazon.com), and director of Owner Community for HomeAway, Inc. provides some valuable insight for strategic planning.

Karpinski began her research 10 years ago by talking to a lot of owners who currently owned vacation homes. This research led to her teaching seminars on how to rent vacation homes. According to Karpinski, because most of the tenants are homeowners themselves, renting vacation homes is much easier than managing long term rentals.

The average weekly rate is $1,656 and from a survey conducted through CyberRentals.com, it was determined that the average property is rented out 20 weeks or more per year. That means that the average vacation home brings in more than $33,000 in rental revenue each year.

For those who wish to purchase vacation homes for future retirement, Karpinski offers a few words of wisdom: "Buy with your wallet, not with your heart," she said. "Spend time up front doing your research. Avoid making hasty decisions. Don't look for the ultimate today. Buy what you can afford now. If all you can afford is a condo in the destination where you are looking to buy your vacation home, start small and buy a condominium there. Have a fall back strategy. In 10 years when you retire, can you afford a large mortgage?"

A keen observer of trends, Karpinski noted that plans can change in a few years. Many people who buy vacation homes now thinking they will live in the home once they reach retirement age, may change their mind about living in the home once their grown children begin having children of their own. The desire to be close to their grandchildren alters their plan to actually move in the vacation home, which leads them to consider renting the property.

Vacation homeowners who self-manage say they do so for two reasons: Bottom line revenues and having complete control.

Eighty-four percent surveyed say it's not difficult to self-manage, even from afar. One-third of those surveyed live more than a six-hour drive from their vacation rental home. They rated difficulty levels on all aspects of renting their properties, the most difficult part was managing the cleaning and maintenance, but only 20 percent found this to be a problem.

Interest rates are low and winter is traditionally slower for sales of vacation homes in the Pacific Northwest. This is a great time to begin shopping to see what properties are available and which communities offer the lifestyle or value you desire.

©Journal Newspapers 2007

Condo Hotels

2007-01-07T23:53:00.000-08:00

Ten Benefits Of Owning A Condo Hotel

Submitted by Adrian Dunbaker on January 7, 2007 - 10:47am. Home and Leisure | Real Estate

You may have heard about the latest trend in vacation homes – condo hotels. Suddenly, consumers have the ability to own a second home in a wonderful destination without any of the hassles of ownership. To see why the condo hotel concept has so much appeal, consider these benefits:

1. You can own a piece of a world-class property. Most condo hotels are of three- to five-star quality.

2. You’ll have a vacation home in a fantastic destination. Most condo hotels are located in premium locales – on the beach, near golf courses, next to ski slopes and in bustling downtowns. Miami Beach, Fort Lauderdale, Orlando, Myrtle Beach, Las Vegas, Chicago and the Bahamas are some of the most popular condo hotel locations.

3. Use your vacation home when you want. Flexibility in use means you always have a place to “get away from it all.” When you’re not using your vacation home, place it in the rental program.

4. A professional management company will take care of all maintenance and operational issues. Most condo hotels are managed by premier hospitality firms, often the biggest names in the business, Ritz-Carlton, Trump International, Hilton, Starwood and Hyatt, to name a few.

5. You receive approximately half of the rent revenue your condo hotel unit generates when you’re not using it. The management company takes care of renting your condo for you. The revenue helps offset your costs of ownership. Plus, most management companies have sophisticated reservation systems and invest in professional marketing, enabling them to keep your unit rented far more than you likely could on your own.

6. The management company deals with the guests. Part of the hassle-free nature of condo hotel ownership is that the management company handles everything regarding guests, from attracting them to checking them in and out of the hotel and solving any problems that arise during their stay.

7. You’ll have access to luxury hotel services. Unlike a single-family home, in a condo hotel vacation home, you can take advantage of all the perks of the hotel such as a brand-name spa like Canyon Ranch or Elizabeth Arden Red Door, concierge, room service, fitness facilities, pool, fine dining restaurant and more.

8. Share your condo hotel unit with family and friends. The unit is yours, so you decide how it’s used. Want to lend it to your Aunt Betty and Uncle Lou? No problem.

9. Purchase your condo hotel unit with traditional financing or even as part of a 1031 exchange. A variety of loans are available to invest in condo hotels. Condo hotels also qualify for tax-deferring strategies like 1031 exchanges.

10. Realize appreciation when you resell your condo hotel. Like traditional real estate, over time your condo hotel unit has potential to appreciate. Because of its quality location, professional hotel management and on-site luxury amenities, the value of your vacation home should increase. You keep the profits when you sell.

By Joel Greene

Foreclosures

2006-11-16T06:37:00.000-08:00

Foreclosures piling up with family debt
By MICHAEL MILLER Staff Writer, (609) 463-6712 and SABA ALI
Press of Atlantic City
Published: Thursday, November 16, 2006

CAPE MAY COURT HOUSE — Tammy Garrison nearly lost her childhood home to a sheriff's sale Wednesday, but a postponement gave her a month's reprieve.
The lender foreclosed on this Lower Township home last fall. Garrison said her mother suffered a disabling injury and could not work.

“My father built this house. I grew up here. It is extremely important to me,” she said.

She hopes she can save the home by taking over the mortgage. In the meantime, the auction has been rescheduled for December.

The region is seeing more sheriff's sales. New Jersey is leading the Northeast in the number of foreclosures, according to the real-estate advisory firm Foreclosures
.com. The firm said New Jersey has seen 23,272 foreclosures so far this year, or about 63 percent more than all of last year.

Relatively few of these homes wind up for sale in county courthouses, Cape May County Sheriff John Callinan said.

“So much goes on behind the scenes. The banks negotiate and try to work things out,” he said.

His office has sold 114 Cape May County properties at auction through November compared with 95 all of last year and 91 in 2004. Ocean County, too, has seen more auctions: 150 so far compared with just 99 in all of 2005. In Cumberland County, auctions were up slightly over last year.

Callinan said wildly fluctuating numbers make it hard to gauge trends. But one thing is constant. Each auctioned property has its own story, he said. Occasionally, the property owners attend the auction in the hope that the bid price will exceed the amount owed. Any surplus usually goes to the property owner.

“It's tragic. Some of them have just given up. People sometimes are working on slippery sands. It's a sad thing,” he said.

On Wednesday, a home at 4 E. 11th St. in Ocean City sold for $226,300 in just the second bid.

Ocean County Undersheriff Wayne Rupert said changes in bankruptcy law give homeowners fewer outs, driving more properties to auction.

“Now you can only get one bankruptcy in 12 months. That's made a difference,” he said.

The downturn in the real-estate market has scared off most speculative investors at sheriff's sales.

“It went from competitive to cutthroat. Now the market is starting to drop down,” he said. “Almost all of the properties we've sold have gone back to the bank or lender. The local investors are holding off until values level off. Then they'll start picking them up.”

Pasquale Arcuri is a buying exception. On Wednesday, this waiter from Wildwood attended an auction in Cape May County. His wife had a baby four months ago. Now they are looking to move out of their rental home into their first house. He has become a regular at these weekly auctions.

“I'm just trying to get a small family home at the right price,” he said.

Arcuri said he does not relish the idea of picking up the pieces of someone else's ruined life. But booming property values in Cape May County limit his choices, he said.

“It's a shame these things happen,” he said.

In Cumberland County, finance counselor Lisa Ortiz dedicates most of her time lately to helping families keep their homes off auction rolls.

She works for Affordable Homes of Millville Ecumenical Inc. This nonprofit typically helps first-time buyers find homes. Instead, she has been busier helping people keep theirs.

The organization counseled 52 families, most of which were able to keep from losing their homes, compared to 17 last year, said Donna Turner, the group's director.

Turner said she is growing more dismayed by the changing nature of their mission.

“This is not what we went into the business of homeownership for,” she said.

The organization rehabilitates old houses in Millville and sells them at an affordable rate. It also prepares first-time buyers for the financial responsibility of homeownership. It only counsels homeowners referred to it by banks and mortgage lenders.

Increases in foreclosures usually follow a slowdown in the housing market, a jump in the unemployment rate or spikes in property taxes or energy costs, said Richard Perniciaro. He is an economist and director of the Center for Regional and Business Research at Atlantic Cape Community College.

Lending institutions relaxed some rules, making it easier for buyers to purchase homes but easier to default on mortgages, he said.

Perniciaro said some buyers never consider the associated costs of homeownership such as insurance, property taxes and utility bills.

The typical family that walks through the doors for foreclosure counseling has two incomes and two to three children. They owe $10,000 in credit-card debt and are three months behind in mortgage payments, Turner said. The family uses its credit cards for living expenses and has no real savings, she said.

The situation gets worse when one of the incomes disappears due to a divorce, death or job loss.

Counseling begins with a review of the family's spending and budget. This helps Ortiz build a case to take to the lender so the family can pay down debt while keeping its home.

“The biggest misconception homeowners come to us with is that the bank is after their house. In fact, the bank will do whatever it can to help them repay their loan,” Ortiz said.

The publicly traded mortgage firm Freddie Mac provides several options to borrowers who face foreclosure, spokesman Brad German said. This improves the lender's delinquency rate on loans.

A 2005 company survey found that in more than half of foreclosures, the borrowers never contacted the bank for fear of embarrassment and the ultimately misguided belief they could catch up on their own.

Last year, the Millville nonprofit was able to help 85 percent of referrals keep their homes. This year, that success rate has dropped to 70 percent, Turner said.

Too often, residents in debt wait too long to ask for help, she said.

When that happens, their homes and dreams are put up for auction in lonely courthouses.

Questions and Answers

2006-11-14T05:01:00.000-08:00

Ask George & Chuck: Questions from Consumers
by George Stephens & Chuck Jacobus
Realty Times
November 14, 2006

Question (NJ): My girlfriend and I are buying a condo unit in NJ. I am self-employed, and am not on our mortgage application. We want to know how to ensure that the house is equally both of ours and will go fully to the other person should one of us die. Do we put me on the title and deed at closing? Can we do this if I am not on the mortgage app? What effect will this have on us when we get married?

Answer: Since you are not currently married, you and your girl-friend can co-own the condo either as Tenants In Common or as Joint Tenants With Right of Survivorship. NUPPLegal defines these two methods of ownership as:

Tenancy in Common: In a tenancy in common, all owners have equal rights to use the property. Ownership shares may be equal, however, unequal shares may be arranged by deed or other written contract. An advantage of tenancy in common ownership is that each co-owner is free to transfer or bequeath his/her interest to anyone he/she chooses.

Tenancy in common is the most common way for unmarried people to own property together. Married couples also can use this form of co-ownership, but more often choose joint tenancy or tenancy by the entirety.

Joint Tenancy with Right of Survivorship: Any two (or more) people can own property-typically real estate or a bank account-in joint tenancy with rights of survivorship. When one of them dies, his or her share automatically goes to the surviving owner. The phrase "as joint tenants with full rights of survivorship" or similar wording (governed by state statute) must appear in the deed. A joint tenant cannot use a will to leave his or her share of joint tenancy property to someone else. If all joint tenants die simultaneously, no one owner has survived any of the others, each joint tenant's interest in the property passes by their will.
Sometimes owners decide to change ownership of property from joint tenancy to tenancy in common in order to leave their interests to someone other than the surviving joint tenant(s). In most all states, transfers out of joint tenancy into another form of co-ownership can be done even if the other joint tenant objects.

You may, however, need to be listed on your mortgage application as a co-purchaser, even though your credit is not used for loan qualification purposes, in order to have both of your names appear on the deed. We recommend that you check with a mortgage company as to the best way to disclose your co-tenancy of the condo.

Question (GA): I am a real estate agent in Georgia and have an exclusive right to sell listing on a piece of property for 5.5 million. The owner is a reasonably good client but will always try to talk me down on commissions. Last week he told me that he had taken a contract on this property but had not said anything to me because, there were still a couple of contingencies and he wanted me to continue to show it. Apparently he is going to pay a commission to an individual who constantly shows property and receives a commission, but who is not licensed.

From what I understand, he is sometimes paid by the buyers and sometimes the sellers. Naturally, I was shocked but kept my cool until I had talked with an attorney and my broker. What can be done to the person who is getting my commission? I do understand I have a claim against the seller but I also want to stop this individual from this practice.

Answer: If you have an Exclusive Right To Sell listing agreement (as opposed to an Exclusive Agency Agreement), then your first choice should be to enlist your broker's agreement to sue for the commission if and when it becomes appropriate.

We are surprised that neither your real estate broker nor the attorney with whom you stated that you spoke advised you to contact the Georgia Real Estate Commission ("GREC") and file a complaint against this unlicensed person. Are there substantive additional facts that make contacting GREC and/or filing a complaint unwise?

Question (CA): My wife and I are looking to buy a second home and also a section 8 rental in the Houston/Sugarland area. Our daughter and soon-to-be son-in-law live in Sugar Land. Can you recommend an affordable area?

Answer: We suggest that you register as buyer prospects on the Houston Association of REALTORS® website at har.com, under "Find a Home, Find a REALTOR&Reg;." That site is set up to specifically allow you to familiarize yourselves with homes and Realtors before you make any commitments. Once you develop a list of probable homes in which you have an interest, you will also have a list of Realtor Firms that are active in that area. Interview an adequate number of real estate brokerage firms to select the firm with which you feel the most comfortable, and then do enter into a written Residential Buyer/Tenant Representation Agreement with the firm you select.

Question (WI): I am a licensed loan originator in Wisconsin. In regards to compensating a third party for business, it is my understanding that compensating someone for a sale is against the law. Can the third party company and I have an agreement to make a donation to "cancer foundation" for every sale that I generate? Or what if I would like to know if I can pay the third party company X amount of dollars for every application I submit instead of for each sale generated.

Answer: First we must advise you to seek competent legal counsel licensed to practice in Wisconsin, to obtain the answers to your two questions. As a general response made with the understanding that our response is not legal advice, the State of Wisconsin Department of Financial Institutions requires Loan Originators to not only be licensed, but to also comply with the applicable Wisconsin statutes as well as the applicable federal statutes pertaining to residential mortgage loans (see USC Title 12 Chapter 27)

We advise you to pay special attention to USC Title 12 Chapter 27 Section 2607 since the fines for non-compliance are $10,000 or one year in prison, or both for each violation. There may also be other Wisconsin statutes and/or Rules that must be complied with such as Deceptive Trade Practices to avoid advertising and/or marketing noncompliance.

However, having said the above, it seems to us that if you paid for any advertising or promotion materials that are given out to customers of the third party (including postage if they are mailed), and the car dealership, moving company, or other third-party gave them out as a "thank you for doing business with us," and furthermore you paid the third-party a market rate for providing the thank-you gift, then no "thing of value" has been paid or received by you or the third party (in excess of the actual cost to produce and distribute), and so you may be okay. However, that is why we caution you to obtain an opinion from a Wisconsin licensed attorney who is experienced in mortgage lending and laws that apply to Mortgage Brokers and Loan Originators.

Published: November 14, 2006

Home Staging

2006-11-13T04:37:00.000-08:00

Home staging takes listing from drab to fab
A little fix-up work is all that's required of sellers
Monday, November 13, 2006

By Dian Hymer
Inman News

Staging a house for sale is a concept foreign to many home sellers. But, it has been immensely popular in the San Francisco Bay Area where sellers have reaped huge benefits from their efforts.

You don't have to fix up your home before selling. A home can be sold in virtually any condition, if it's priced right. There are basically two reasons why sellers go to the effort and expense to prepare their homes for sale. One is that it helps to bring a higher price. The other is that it usually results in a quicker sale.

It's imperative to make cost-effective cosmetic improvements in order to realize an increase in profit when you sell. Major renovations made just before selling -- such as completely remodeling kitchens and bathrooms -- are not cost-effective. Although they improve the appeal of the home, you aren't likely to recoup the full amount of your investment on a quick turnaround.

But other cosmetic improvements such as refinishing hardwood floors, replacing outdated floor coverings, removing old window coverings (and leaving them off, in most cases), replacing outmoded light fixtures and painting are worth the money. The reasonsuch fix-ups tend to bring a higher price is that most people have difficulty imagining what a house will look like fixed up. You do the fix-up work so that you don't leave the sale of the house to chance.

Fixer-uppers appeal only to certain buyers who usually want a break on the price to compensate for the condition of the property. By sprucing the property up for sale, you appeal to a much broader audience. The more interest there is, the more chance there is for a sale at a higher price.

The goal of fixing up a house for sale is to get it into move-in condition. Let's say your home has an older, dated kitchen. In its present condition, it's a turnoff to buyers who haven't the time and resources to remodel it. By painting outdated cabinets, painting the walls in a trendy decorator color, changing cabinet knobs, updating light fixtures, changing the floor and adding stainless-steel appliances, your kitchen won't be new. But, it will appear fresh and inviting.

You make cosmetic improvements to overcome buyers' objections. If you sold your home with a dismal kitchen, most buyers would discount the house because they couldn't live with the kitchen.

You open your home up to a larger pool of buyers by doing the improvements mentioned above. Rather than rejecting the house, buyers feel they can move right in without first having to a lot of work. And, you accomplish this without major remodeling; just sprucing the home up to an acceptable level.

HOME SELLER TIP: Sellers often resist spending money on a property they're selling. This is particularly so in the current market, where they may have less chance of receiving multiple offers and a generous price. However, properly preparing your home for sale can give you an advantage in today's challenging market.

Buyers are pickier than they were a year ago when home prices were rising quickly. Currently, appreciation is flat, at best. Many buyers are concerned that prices are falling. So, their enthusiasm for paying huge prices regardless of the condition of the property has waned. Buyers are looking for value.

Getting a house fixed up for sale takes time and money. A good real estate agent can be an invaluable ally in this endeavor. In fact, you should consult with your agent before embarking on any projects to ensure that you make value-enhancing improvements.

THE CLOSING: Resist the temptation to show your home before it's ready. You could lose a prospective buyer who can't visualize how your house will look after the improvements are done.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

Feng Shui for Home Owners Associations

2006-11-11T03:52:00.000-08:00

Feng Shui HOA
by Richard Thompson
November 8, 2006
Realty Times

Feng Shui (pronounced "fung shway") is the ancient Chinese art of placement. The goal of Feng Shui is to achieve harmony, comfort and balance, first in one's environment and then in one's life.

Feng Shui translates literally to "wind-water," the two mediums where life exists.

Feng Shui is used to create a living space in harmony with nature. Careful orientation of furniture can attract good karma or repel bad. While there is considerable skepticism about the validity of Feng Shui, the goals of harmony, comfort and balance are certainly those that to which every HOA should aspire. However, in the legalistic environment that haunt many HOAs, these goals may seem far away.

Many HOAs live under "The Rules." Whether spelled out in the governing documents or concocted by an ill or well meaning board, The Rules are there to establish lines which should not be crossed. Those that espouse the need for The Rules often believe they are ironclad and black and white. When it comes time to smite a rule breaker, there is no mercy.

There are various reactions to The Rules:

To some HOA residents, The Rules have little relevancy because they state the obvious: don't bug your neighbors or let your kids or pets run wild.

Others ignore The Rules because they don't apply (I don't have a dog, jet ski, RV or like to play loud music).

Others don't like rules in any form, so violating The Rules is a crusade. (You can't tell ME what to do!).

Then there are those that go about living the way they do, violating The Rules as they go, because [shouting], "It's my God given right as an American to enjoy my property any way I want to, Amen!"

But after all is said and done, the vast majority of HOA residents just want to live in harmony. Most have learned basic give and take behavior when very young and need little instruction as adult.

Those that didn't learn then are slow to change if they change at all. Thus, the sticking point really is what to do with scofflaws which represent a tiny percentage of the whole.

Feng Shui instructs how to harness the mystical powers of nature. One aspect of Feng Shui that drives skeptics to distraction is that the same end can be achieved by different means. The same furniture arranged in different patterns can produce the same harmonious results.

In the same fashion, little used techniques by HOA boards are mediation, accommodation and compromise. The world is not black and white and neither is an HOA. The board actually has the latitude to make deals when it makes sense to do so. An example of this would be a resident that parks a junk car in his driveway which is in direct violation of the HOA's rules.

The board could do battle with this character and spend endless emotional and HOA capital to win the battle. But win, lose or draw, the guy is still a jerk and likely to engage the board on another battlefield on another day. You just can't win with some people. So, the board can just choose not to play and spend its time dealing with those that are more receptive. The board doesn't need to win every battle. Concession can be the greater part of honor.

With a situation like this, it's in the HOA's best interest not to fight. As the saying goes, "Never wrestle with a pig. You both get dirty and the pig likes it." Let the record state: "The board informed the resident of the rule violation repeatedly, mediation was rejected and the board decided that compromise was in the best interest of the HOA."

So take the Feng Shui approach. Rather than putting up rule barriers that attract challenge, craft "harmonious living philosophies" that attract compliance. Most want to live in peace, so craft an environment where harmony can thrive. Then, simply deal with the occasional tough case. Even Feng Shui homes occasionally have to take the trash out, just not every day. Go you and do likewise.

For more on how harmonizing an HOA , see Regenesis.net

Published: November 8, 2006

Fixing Up

2006-10-21T05:47:00.000-07:00

How Much is Too Much to Fix up Your House?
by M. Anthony Carr
Realty Times
October 20, 2006

As with any resale product, the person trying to sell said product will usually try to make the product look as new as possible to ensure the highest profit available. In reviewing many of the homes on the market today, however, some sellers don't get that notion.

Don't make the mistake of the seller who, knowing full well that buyers were coming by, not only failed to do a fresh clean up, but also left his underwear on the exercise bike, a pan of crusty macaroni and cheese on the stove and debris throughout the yard.

There are some task items any seller should consider when selling a house. Even if you decide to sell "as is," a little soap and water could put a few more bucks in your pocket. With that in mind, let's look at what sellers should look at doing with any house they want to put on the market; what to do when you want to get a little more money; and how to compete with the Joneses when looking to prepare your home for sale.

Any House

All homes going on the market should receive a deep cleaning. This is the cleaning that you do when … well, you would never do it unless you're selling your house (or you're just an absolute neatnik. This involves scrubbing every cranny of the house. Nothing goes unscrubbed. I would suggest bringing in a professional group to get this done and plan on spending a couple hundred bucks (maybe more) to get the house ready for your new buyer.

Next, declutter the house. Go ahead and rent a huge storage unit and fill it up. Plan this with a bunch of pre-made boxes that have lids you can tape shut and label. Take extra kid's toys to charity. Donate all clothes that are even a bit too tight or out of date. Remove excess furniture (or even cover with matching covers).

Repair and paint where needed. As with most homes that have been lived in, that would be all of them. Walk through a new construction home to see what you're up against and then go and make yours look as best you can on your budget.

Landscaping. Thankfully, mulch and flowering plants don't really cost a lot of money for those who are just sprucing up. Before going out and paying for a designer-created landscaping job, start with the local garden center and get some free advice on how to spruce up on a budget. Fresh, flowering plants (even in fall and winter) can make the house look oh-so much better.

Even if you're selling as-is, the above four tips are a must. Next is where we spend a little more money.

Redecorating

Renewed color. Giving your house a makeover doesn't have to cost you a second mortgage. The first item to consider for rehab is your color selection. While the traditional advice is "go vanilla," professionally selected colors (not too bold) can make a "nice" house into a "wow" house.

Flooring is one of the best moderately priced upgrades a seller can install to make a huge difference. While I like the concept of "choose-your-own-carpet" offers in home listings, think about what else it's saying: "We're too cheap to fix up the house now, so we'll let you walk through our tattered, stained carpeting and let you get it installed the weekend after we leave." Like I said, make your house a "wow" by making that first great impression with new carpet.

Replacing dated items. Sometimes replacing certain items in the house is really more like maintaining your home instead of upgrading it. Items like windows, doors, light fixtures, faucets, door hardware, etc., need upgrading and replacing periodically. A walk down the light aisle at your favorite hardware store reveals this could be done on a budget. Nevertheless, there's nothing more gross looking than a brass light fixture that's chipping and rusting.

Keeping up with the Joneses

At some point you have to look at what the neighbors are doing and keep up or you'll lose out. If everyone in the neighborhood is ripping out the old and installing the new (kitchen, bath, carpet, doors, etc.) then you may be forced to do the same thing long before you're thinking of putting your home on the market. My wife and I are facing that right now with the kitchen. It's starting to show its age, which means before we put the house on the market in a few years, if I want the best buyer (or any buyer for that matter) the kitchen cabinets need an upgrade.

Redo, Remodel, Relax

As you look around the house, making your list of things to change before putting the house on the market, remember to create some time to enjoy your new digs before selling the place. If a sale is on your horizon and you must redo the landscaping before putting the house on the market -- do it early so you can drive home to the professionally designed flowerbeds and floral creations a few months or years before selling it to someone else.

While you want to repair, paint, remodel and add on to your house because it adds value to your home, every homeowner should especially do it because they want to enjoy the changes as well.

Published: October 20, 2006

Media Too Negative

2006-10-16T07:17:00.000-07:00

Economists Beginning to Challenge Media's Negative Drumbeat on Housing
by Kenneth R. Harney
Realty Times
October 16, 2006

Is it a housing bust or a media-driven panic? Mike Moran, chief economist for Wall Street's Daiwa Securities America, Inc., says he's surprised that virtually nobody has challenged the constant drumbeat of negative headlines and TV news warnings of imminent crashes and home price meltdowns.

"It's really been way out of line with reality," says Moran, whose firm specializes in the bond market. When a 1.7 percent decline in the median home price nationwide sparks headlines about the "housing bust," that is "just pure sensationalism about what is going on here," he said in an interview.

The housing market "is going through a correction that's badly needed" after five years of record sales and price appreciation. "The key issue is whether it is orderly or disorderly" -- and it's clearly the former. Yet the financial press and TV news programs are "portraying it as a catastrophe."

Moran got indirect support for that view from other economists, including the Mortgage Bankers Association of America's chief economist, Doug Duncan, who said "the rhetoric is just way overwrought" -- the sky is not falling in the real estate and mortgage sectors.

To the contrary, even the Federal Reserve's vice chairman believes the current correction will not be dramatic or even that long-lived, and that the housing slowdown will not have dire side effects on other parts of the economy.

In a speech that went virtually unreported by major media, vice chairman Donald L. Kohn told New York analysts that the "rebalancing" of prices to better fit current demand that is underway in many metropolitan markets is a normal, cyclical event -- not an incipient disaster. In fact, it may even be a healthy and necessary part of the cycle: "The reported declines in new home prices in a number of areas should help facilitate the rebalancing of supply and demand" -- ie, lower prices should help gradually expand the number of serious buyers looking for houses.

Thanks to strong underlying demographic factors -- new household formations and population growth -- the current down phase may be relatively short-lived, Kohn suggested. New housing "starts may be closer to their (low point) than to their peak." If one takes mid-summer 2005 as the peak of the multi-year housing boom, Kohn appeared to suggest that the low point of the cycle -- and the beginning of the eventual turnaround -- could be just over the horizon.

The latest pending home sale index from the National Association of Realtors, which showed a surprising 4.3 percent jump in the number of sales in the contract stage, but not yet closed, supports that conclusion.

Kohn also noted that other economic conditions today do not point to a deep housing price recession or bust. For example, long-term mortgage interest rates are about a point above their historic lows, the Fed itself has stopped raising short-term rates, gas prices are falling, and the unemployment rate just dropped to 4.6 percent.

The current "situation stands in sharp contrast to some past downturns in the housing market" -- in the early 1980s especially -- "that followed actions b the Federal Reserve to tighten credit conditions significantly."

"Continuing growth in real incomes should underpin the demand for housing," said Kohn, "and as home prices stop rising, help to erode affordability constraints."

How come you're reading about the Fed vice chairman's moderately upbeat speech in Realty Times rather than watching it on the evening news or reading about it in your newspaper?

Good question.

Published: October 16, 2006

The Price is Right

2006-10-10T07:08:00.000-07:00

How To Get The Best Price In A Slowing Market
by Peter G. Miller
Realty Times
October 10, 2006

Reports across the country suggest that real estate in most areas of the country is no longer appreciating at the rates seen in the past few years. In fact, the National Association of Realtors reports that nationwide August existing home prices were actually down 1.7 percent from a year earlier.

None of this is terrible or awful unless you bought last year and must now sell. Those who have owned for a few years are well ahead in most communities.

Consider that in 2000, according to the National Association of Realtors, the typical existing home sold for $111,800 versus $225,000 in August.

So, what's the best approach to selling in today's market? Consider these five core points.

1. Buyers are scarce relative to home supply.
While sellers have called the shots for the past few years, that's no longer the case in most markets. No problem -- adjust. Make your home the most attractive, best priced property in the neighborhood.

While pre-market prep could have been ignored in the recent past, today you have to paint, clean-up and repair before offering a home for sale. An MLS photo that shows a home with a lousy roof is evidence of a property that likely will not sell quickly or at full price.

2. Remember that cash is still an issue.
While home prices may have slipped a touch, real estate continues to be hugely expensive for most buyers, especially first-timers who lack equity from a prior sale. Rather than reducing prices, offer to pay for buyer closing costs, thus lowering out-of-pocket purchaser cash requirements.

3. Choose the right broker.
When comparing local brokers, look for such markers as recent success in your neighborhood, a high level of local activity and professional education.

In a slow market picking the right listing broker becomes especially important. Why? Because a broker with a strong local history is known and respected: If he or she offers a property at a given price that value is likely to be accepted as at least within the realm of reason.

As an example, last year we sold a property that was unlike virtually all nearby properties in terms of size (smaller house), lot (much bigger) and age (older than most). In other words, not an easy house to sell because there were no practical comparables. The broker -- who had sold properties worth some $200 million in neighborhood real estate over the years -- suggested a sale price which turned out to be exactly on target.

Alternatively, let's say we used a less experienced broker, someone who was not an authority figure. The property might have sold for less because another broker might have been less credible. In effect, one of the values of using an experienced listing broker is to readily establish believable prices and terms, an important matter in a buyer's market.

4. Numbers Count.
Real estate sales are a by-product of exposure. If the odds of selling a home are 100 to one, if it takes 100 inquiries and visits to sell a property, then the quicker you get those inquires the better. No less important, if you can get more than 100 inquiries the odds of getting a top price and terms improve.

This means that when considering a listing broker you need to review the marketing plan with care. What, exactly is the broker going to do in terms of advertising, open houses, MLS placements, online marketing, broker relations, etc?

Remember that the marketing plan which works for one property may not work for another. Plans need to be specific to local markets, to particular homes and for current market conditions. The thinking that seemed so good last year may be inappropriate this year.

5. It's a business deal.
With some frequency I see homes priced for reasons that won't work:

The property must sell for this price because I need $400,000 for the next home. The truth: Prices are established by the marketplace, not seller needs.

Similar homes in a different neighborhood command a particular price, therefore my house should sell at the same price. The truth: What happens elsewhere is irrelevant. What happens in the immediate neighborhood is what counts.

The Flombacks got $800,00 for their home so I should be getting at least that much. The truth: This is not about the Flombacks and should not be about seller ego. The real issue is about bricks and mortar. The Flombacks may have an objectively better house.

The buyer's offer requires that we leave the washer and dryer -- it's an insult. The truth: Homes reflect our psychological identity, who we are, our social status, etc. But the marketplace reflects supply and demand. Leaving a washer and dryer may be a lot cheaper than not getting a sale for months on end.

This home would have sold for $500,000 last August and we will not accept a lower price. The truth: It's not last August. It's now and the marketplace reflects current supply and demand.
Sellers can be successful in any market so go forth and market -- but do it right.

Published: October 10, 2006

Buydowns

2006-10-09T06:43:00.000-07:00

Mortgage Rate "Buydowns" Can Sell Houses in Slow Markets
by Kenneth R. Harney
Realty Times
October 9, 2006

To help move at least some of the unsold houses glutting local markets, lenders are beginning to look "back to the future" for financing techniques that worked in the tough times of the 1980s.

One creative technique is known as a mortgage rate "buydown." Rather than lower the asking price on a house by thousands of dollars, a seller can offer a discounted rate package that lowers' purchasers' effective interest costs and monthly payments during the early years of their loans.

The most popular form of buydown in the 1980s was a "3-2-1" on a fixed rate 30 year mortgage. During year one of the new purchaser's mortgage, the seller agrees to pay 3 percentage points of the interest rate on the mortgage note. During the second year, the sellers pays 2 percent, and in year three the seller pays 1 percent. After that, the purchasers pay the full note rate.

To see how this works in practice, and why it can be a triple win -- for the seller, buyer and the realty agent -- consider this example. Say a seller has had her house on the market for months at $210,000 with no serious offers. She could cut the asking price, say to $200,000, to stimulate some bids. Or, more creatively, she could advertise a "3-2-1" buydown -- essentially subsidizing any qualified purchaser's mortgage payments during the first three years.

Here's how it would work, according to an active proponent, Joseph Lipes, president of Connecticut-based Family Choice Mortgage Corp., who ran the numbers for Realty Times. The sale would be for $210,000, not $200,000. Assume the going 30-year fixed mortgage rate is 6.5 percent. The purchaser applies for a 95 percent ($200,000) mortgage.

In year one, the purchaser's 6.5 percent rate would be subsidized down to 3.5 percent by the seller, creating a monthly payment of $898.09 for the purchaser, instead of the full $1,264.14 principal and interest. The seller's outlay for the subsidy would come to $366.05 a month, or $4,392.56 for the full year.

In year two, the purchaser would be paying at a 4.5 percent rate or $1,013.37 a month. The seller's contribution would be $250.77 per month or $3,009.20 over 12 months.

In the third year, the purchaser would be paying at a 5.5 percent rate, or $1,135.58. The seller would contribute $128.14 a month for a total of $1,542 for the year.

During the course of the three years, the home seller would pay a total of $8,999.44 in rate subsidies, according to Lipes. "So rather than have the sellers lower their sales price from $210,000 to $200,00" -- which might not strike potential purchasers as all that interesting -- "the sellers keep their price at $210,000 and pay $8,944.44 for the three year buydown," a savings of more than $1,000.

"As long as the house appraises for $210,000, it's a win" for the seller, the buyer, and even the realty agent who's commission will be slightly higher because of the higher sale price. Even more important for the Realtor: the house gets sold, in part because the buydown concept can be very attractive to certain purchasers, especially those with tight budgets that will be stretched in the first several years paying for new furniture, appliances and the like.

Lipes points out that Fannie Mae guidelines permit purchasers to qualify for the mortgage at the "bought-down" rate -- 3.5 percent in this case -- provided it's a primary residence and the purchaser has a 660 FICO score minimum (680 for self-employed individuals.) On sales of second homes or investment properties, the rule requires qualification at the full note rate.

Lipes says, "Buydowns have no hidden pitfalls such as negative amortization loans, payment-shock ARMs or others." It's all straightforward, easy to understand, and most important of all in sluggish markets: It's a novel approach in the eyes of many potential buyers today, and it really works.

Published: October 9, 2006

Investing

2006-09-28T05:56:00.000-07:00

Getting into Real Estate for the Long Haul
by Al Heavens
Realty Times
Published: September 28, 2006

They represent the future of real estate in this time of uncertainty -- 17 bright-eyed and eager students, median age 40, sitting for three hours in a classroom while I click slowly through a 50-slide Power Point presentation with embedded video and audio.

These are small investors, a mixed group of young and old, Realtors and nonRealtors, and all ethnicities -- a true mix of the modern-day urban market.

They want to know what I can tell them about renovating one-to-four unit properties cost-effectively, whether or not to hire an architect, what to look for in a contractor, what will put their rentals a cut above the others without breaking their budgets.

These are not flippers. These folks are in for the long haul, agreeing with some expert who told me this week that this isn't the time to experiment with real estate but to get serious about it.

One of the experts whose video was embedded in the Power Point was Carl Dranoff, a developer who was one of the pioneers of the warehouse to loft conversion boom on the late '70s to mid-'80s in many of our older cities.

When interest rates were hovering at 18 percent and creative financing was in its infancy, Dranoff turned his attention to the rental market, and that what these former factories and warehouses became. He attracted the same kinds of renters who are buying urban condos these days -- young single or recently married professionals and a few brave empty nesters willing to live on the then-mean streets of the city.

Although he focused on big projects, a lot of what Dranoff recommends can be tailored to smaller projects. On the top of his is location: Look at emerging neighborhoods that are not yet at the forefront of development. Look at smaller projects in areas where large ones are changing the equation.

Don't expect to find bargains at the intersection of major city streets.

Look for buildings with good bones: High ceilings, big windows, wide-spaced columns. For residential use, the shape of a building is important, since light can only penetrate a space up to 20 feet.

The larger the windows, the bigger the ceiling height, the more opportunity for being "sun-splashed."

Look for character-defining features, such as brick walls that can be restored.

Columns are another character-defining feature. Columns were used in lieu of beams, with the load carried by the flair-out at the top of the column.

The problem with columns is that they are often in the wrong place, so you have to adjust the spatial layout to accommodate them.

Remember: Because you are trying to accommodate architectural features with living space, "you can't make every apartment perfect," Dranoff said.

Lay out each room of an apartment with furniture; otherwise, you end up without door-swing clearance or with a piece of furniture without enough walk-by clearance.

Expect to install brand new systems: Plumbing, heating, ventilation and air conditioning. Even technology has to be introduced -- high-speed Internet access or fiber-optic cable -- especially for those investors whose buildings will house a younger market -- especially grad students and dot.com professionals.

Dranoff is a proponent of the "gut rehab," or starting a renovation with a blank slate. That means, removing the interior down to the frame and starting over.

That way it's easy to start installing heating, cooling, ventilation, and plumbing systems.

You need to pay attention to ductwork, since it is often difficult to penetrate obstacles such as concrete walls with a duct.

That's why you need a mechanical engineer to design the system, and have that person handle obtaining the permits and the equipment suppliers needed for the work.

To the neophyte investors, Dranoff recommends starting small.

Buy a small building. Surround yourself with good people: a lawyer, architect, plumber, electrician, and more who can be depended upon for advice and to show up when needed.

Know your market: Who is the end user? If you renovate to sell, make sure you have a good real estate firm. If you renovate to rent, have a good leasing agent.

Always allow more time for your project. If you believe it will take four months, make it six, because you never know what you'll find behind the walls.

And, for the same reason, add 10 percent to your budget.

Finally, be very wary of buildings with problems. Environmental issues can make a renovation project less than cost-effective, he said.

Sell Your House

2006-09-26T18:42:00.000-07:00

How to Sell Your Home...In One Week!
Barbara Corcoran Takes on a Challenge to Sell a House in a Week - Real estate expert says you need to clean up the clutter and let the light in to sell your house
Sept. 26, 2006

The Freunds live in a typical bilevel home in Tom's River, N.J.

They moved into the house in 1978, paying $52,000.

"We moved to Tom's River 28 years ago when we had two small children, and now the neighborhood's changing again, and it's turning back into a young family neighborhood again," Ginnie Freund said.

The couple are moving to Florida for retirement, but their home has been on the market for six months.

"We made a decision to sell our home a year ago. … But our son was still in school," Cliff Freund said. "And so we delayed actually putting the house up on the market until April, and now we find ourselves in basically a down market with a challenge to sell our home."

Sell This House in a Week?

"Good Morning America" real estate contributor Barbara Corcoran is taking on the Freunds' challenge; she will try to sell their home in just one week.

What makes a house hard to sell?

Here are a few things Corcoran noticed first about the Freunds' house.

The outside is the first impression a buyer will get. The Freunds have a great front yard, with mature trees and a well-tended garden.

There are a few things she would change, though.

"I would take the plantings out underneath that pear tree just because it foreshortens the yard and makes the whole thing look smaller," Corcoran said.

"Secondly, this driveway, which is a status symbol, beautiful driveway, has a lot of stains. I would steam clean this as well. A cheap thing to do but an important change," she said.

Corcoran also noticed the owner's name on the house — and that's a no-no.

"You want to get rid of anything that's personal in the house because you want the buyer to walk in and feel like it's theirs. So you want to get rid of anything personal," she said.

Inside the house, Corcoran immediately noticed some problems.

Get rid of the clutter. "There are three things wrong with this house, and it's true of every single room here," she said. "The clutter. There's clutter everywhere, and people can't see past clutter."

Let the light in. "Secondly, there's not enough light in this house, and yet it's a sunny house and that's because the curtain treatments are really heavy and they keep the light out. People love light."

Send your pets on vacation. "And last the house has an odor, and that's because they're living with two very loved cats, but on the day of the open house the cats have to take a little vacation so we won't know they're around."

Clean out the closets. "Every seller should know that buyers will open your closet, and they'll use it to judge how good your plumbing and electrical is. It makes no sense, but if they see a messy closet, they'll assume the inside of that house is not in good working order."

Every room needs a purpose. "The purpose of a room should be perfectly clear when a buyer walks in. This [spare] room, I'm not sure what the purpose of this room is, it's got an ironing board, a small sofa here. It should either be a den or a bedroom, and because it's not it's going to cost the seller a lot of money."

Tax Right Offs

2006-09-20T09:23:00.000-07:00

Second Homes Can Be Taxing
by Lew Sichelman
Realty Times
Published: September 20, 2006

As every home owner will attest, owning the roof over your head is an extremely tax-advantaged proposition. But how use decide to use your vacation property is the key to how owning a second home can impact your bottom line.

What follows is intended solely as general guidelines and should not be construed as legal advice. Be sure to consult professional tax counsel before making any decision to purchase a second residence based either solely or in part on the tax aspects of home ownership.

Obviously, if your new home becomes your primary residence -- that is, you inhabit the place for more than 180 days a year -- you are entitled to all the benefits ownership entails. You can write off interest on your mortgage and property taxes, and you can add the cost of any improvements you make to your property to your basis, or cost. And when you sell, you can exclude up to $500,000 ($250,000 for single taxpayers) from the capital gains tax.

If your second home is going to be used purely as a vacation property for you, your family and other guests, it is considered your second home. You also can claim your mortgage interest and property taxes, and add the cost of improvements to your basis. But not the capital gains exclusion, which is limited to your personal residence, or main home. Only if you occupy a place full-time for two of the previous five years can you claim that exclusion.

It also is worth noting that you can claim only one vacation home. If you own more than that, you can deduct property taxes only on the second and subsequent vacation properties. So, if besides a place, say, in Florida, you own a ski chalet in Aspen and a hunting cabin in the Wisconsin woods, you can claim your full vacation home deductions on just one. Which one is your choice. But for the other two, only the property taxes are deductible.

If you plan to rent your vacation property, the tax rules governing rental real estate apply. However, if you plan to use the place yourself and also rent it to others, the rules are somewhat more complicated.

First, if the place is a pure rental, you are required to count as income all rents. A security deposit is not considered income if you plan to return it when the lease expires. But if you keep all or part of the deposit because the tenant leaves early or there is damage to your place, the amount withheld must be reported as income in that year.

However, if you collect the first and the last month's rent as well as a security deposit, the extra month's rent is considered advance rent and must be reported as income in the year it was received as opposed to the year it is due.

As an owner, you can deduct the cost of improvements to your principal residence but not the cost of repairs. As an owner of rental property, though, just the opposite is true. Landlords recover the cost of improvements by taking depreciation and by deducting repair costs from ordinary income. As the IRS views it, improvements add to the value of your property, prolong its useful life or adapt it to new uses. Repairs, on the other hand, is work done to your property to keep it in good operating condition but does not materially add to its value.

Other expenses that are deductible from rental income include advertising, cleaning, utilities, insurance, commissions, tax return preparation fees, travel expenses and local transportation expenses. However, the expenses incurred to obtain financing -- commissions paid to the mortgage brokers, for example, or recording fees -- must be amortized over the life of the loan.

If yours is a condominium or cooperative, special rules apply. Moreover, each form of ownership is treated differently.

With condos, you can deduct depreciation, repairs, upkeep, dues, interest and taxes -- as well as assessments for the care of the common areas that owned jointly by you and the other owners. But you cannot claim special assessments paid to a management company for improvements. You share of the cost of improvements is recoverable by taking depreciation.

With a co-op, you usually can deduct all the maintenance fees paid to the cooperative housing corporation. But you cannot claim a payment earmarked for a capital asset or improvement such as a parking lot or new roof. Those payments must be added to the cost basis of your stock in the corporation.

It also is worth noting that if you don't earn a profit from your rental, you can claim your expenses only up to the amount of your rental income. Moreover, you cannot carry forward to the next year the rental expenses that exceeded your income in the previous year.

If you occupy your home for part of the year and rent it to others for all or even a portion of the rest of the year, you must divide your expenses between personal and rental use based on the number of days used for each purpose.

A day of personal use is considered any day the property is occupied by you, another person who has an interest in the property, a member of your family or anyone with whom you have an arrangement that permits you to use another dwelling. Any day the property is used for personal purposes and rented -- in other words, the day you leave and your tenant arrives, or vice versa -- counts as a rental day. But days in which the property is available for rent but not actually rented do not count as days of rental use.

If you use the property and rent it for less than 15 days during the year, you are not required to report your rental income. In other words, your rental income is tax free. But you can't claim any rental expenses, either.

If you use the house more than 14 days or more than 10 percent of the days it is rented, your place is considered as "a vacation home used as a residence." In this case, if you have a net loss -- your expenses exceed your income -- you cannot use the excess expense to offset income from other sources. Instead, you must carry forward your loss to the next year to be treated as rental expenses for the same property. Realize, though, that unless you turn a profit in subsequent years, you may never get to claim the excess expense.

If you use your home for less than 15 days or no more than 10 percent of the number of days it is rented, the property is considered a "vacation home used as a rental property." Here, too, you must report and pay taxes on the income less your rental expenses. But if you have a loss, more complicated passive and hobby loss rules apply and you should seek professional counsel.

If you are new to the rental business, Uncle Sam allows you to write-off your start-up expenses. Among other things, these include the cost to investigate potential real estate markets, fees paid for various professional services (other than those paid to actually purchase a property) and even attending classes or real estate seminars.

These would be normal operating costs for an ongoing business, but they are considered start-up expenses when they are incurred before the business begins. But you can deduct no more than $5,000 in your first year of business. Anything over that amount must be claimed in equal amounts over the next 15 years.

You are allowed to deduct legitimate expenses -- travel, entertainment and other "fun" expenses don't count -- as start-up expenses up to the day you put the place in service; that is, the day you offer it for rent as opposed to the first day on which it is actually rented.

If you already own rental property, these are considered as costs incurred to expand your business and must be claimed as business operating expenses, not start-up expenses. And if you should change your mind and decide not to rent your new Florida digs, all bets are off. These costs become personal costs and are not deductible.

Bring Outdoors In

2006-09-18T06:38:00.000-07:00

Outdoor Oasis, Always in Style
by Phoebe Chongchua
Realty Times
September 18, 2006

Creating an outdoor oasis is touted as the second most popular home remodel behind a kitchen makeover.

"We're bringing the inside out because island barbecues come with refrigerators, storage drawers, side burners. Our islands are [designed] so you can put CD stereos in them, televisions, mood lighting," says Frank Camarena, Cal Spas.

But with summer winding down and the seasons turning colder, is it too late to put this remodel in the works? Not if you plan to make your outdoor oasis useable 365 days a year by creating a sunroom.

While it may not matter much in sunny Southern California where an outdoor oasis consisting of a spa, pool and a barbecue island are rarely affected by the weather, in other areas of the country those amenities aren't much use during inclement weather.

"Being able to sit in your hot tub with one of our glass roof rooms [surrounding the area] watching the snow come down," is what Larry Chavez, Jr. says makes your outdoor oasis a real treasure year round.

A sunroom is an enclosed area that gives the feeling and look of bringing the outdoors inside by having a panoramic view through temperature and reflectivity-treated glass.

"We're fortunate to be a franchise for Four Seasons Sunrooms and they've got a patented exclusive glass technology called Conservaglass that makes it useable 365 days a year," says Chavez.

Sunrooms have evolved drastically over the decades. "They've evolved from being greenrooms for people to extended-living space," says Chavez.

Today, many homeowners are turning sunrooms into home offices, second bedrooms, and extra sitting rooms. Inside sunrooms homeowners are building pools, spas and other relaxing amenities. A sunroom is different from a standard room addition "because of the panoramic view that you can achieve with a sunroom, you get the real feeling of having an outdoor feeling but being protected from the [weather] elements, the temperature, the bugs," explains Chavez.

Whether you're considering an outdoor oasis or a sunroom, the most important things to consider are the size of space you want to dedicate to the addition, the glass technology that you'll use (if you're building a sunroom), and, as with any remodel, do your homework to find a reputable, trustworthy contractor to do the work.

The home improvement industry "has been plagued by the fly-by-night contractors -- here-today, gone-tomorrow, that promises a low bid, takes deposits and leaves town," says Chavez.

Creating a sunroom can "run the price of buying a brand new car. So it's a significant investment, so you want to have a product that is going to perform and be able to use it when you want to -- not when Mother Nature says it's okay to use it in terms of being too hot or too cold," says Chavez.

"Of course there are certain climates like Phoenix that any glass is not going to hold out that kind of heat, but with the energy efficiency of the Conservaglass you can effectively and efficiently heat or cool the room if you need to," says Chavez.

A final consideration, whether your outdoor oasis is enclosed as with a sunroom or left open, be sure that you devote enough space to the project.

"We've never had a customer come back and say we should've made it smaller but too often customers come back and say we should've made it bigger," says Chavez.

Published: September 18, 2006

Foreclosures

2006-09-15T06:37:00.000-07:00

Prevent Foreclosure From Cashing You Out Of Home Ownership
by Broderick Perkins
Realty Times
Published: September 15, 2006

While a growing number of consumers are looking to cash in on the changing real estate market, another group is trying to figure out how to keep from cashing out.

The 115,292 homes nationwide entering some stage of foreclosure in August remains historically low, but the rate of increase in the number is becoming alarming. August foreclosures represented a 24 percent increase from July -- the second highest this year -- foreclosures are up 38 percent for the year so far and 53 percent compared to where they were this time last year.

Blame it on those nasty mortgage IEDs (Improvised Equity Devices) -- high leverage, high risk loans that are easy to come by, but financially explosive as time goes by.

Mortgage IEDs are typically ARMs, in a host of varieties, that typically start off with low rates, but, in this market, continually adjust upward. Along with the higher interest rate, so goes your monthly mortgage payment.

When the loans come with interest-only payment terms, if you only pay the interest and your home value shrinks, your mortgage could become larger than your home's value giving you no room to bail out without coming up with the cash to cover the difference.

"With home price appreciation continuing to decelerate and billions of dollars in adjustable rate mortgages projected to reset in the next few months, this month's increase could be the beginning of an upward shift in the foreclosures market," said James J. Saccacio, chief executive officer of RealtyTrac.

In August, states with both greater statistically significant numbers of homes entering foreclosure and high rates of increases in those numbers, included Colorado, Nevada and Florida.

Colorado foreclosure activity spiked nearly 60 percent in August from the previous month and the state documented the nation's highest state foreclosure rate for the sixth month in a row, with one new foreclosure filing for every 301 households. The state reported 6,079 properties entering some stage of foreclosure during the month, more than twice the number reported in August 2005 and the seventh highest number reported by any state.

With one new foreclosure filing for every 430 households, Nevada posted the nation's second highest state foreclosure rate for the third straight month, due largely to bad bets on housing made in and around Las Vegas. The state reported 2,016 properties entering some stage of foreclosure, a 24 percent increase from the previous month and more than three times the number reported in August 2005.

Once crawling with speculators who are now abandoning the Sunshine State, Florida saw foreclosure activity jump to its highest level of the year so far, with 16,533 properties entering some stage of foreclosure in August -- the most of any state and an increase of more than 50 percent from the previous month. The state's foreclosure rate of one new foreclosure filing for every 442 households ranked as the nation's third highest state foreclosure rate.

Five states, Florida, Texas, California, Ohio and Illinois accounted for 50 percent of the nation's foreclosure activity in August.

What should you do if you face the possibility of a late mortgage payment for the first time and want to avoid foreclosure?

Swallow your pride.

A head-in-the-sand approach will leave what's likely your No. 1 asset exposed to foreclosure. Contact the lender and discuss what you can do. Your goal should be to stop any lender action that could damage your credit and ultimately cost you your home and prevent you from owning another one in the immediate future.

A Freddie Mac/Roper survey found that 75 percent of delinquent borrowers recall being contacted by their mortgage servicer -- the company (the lender or the lender's agent) that collects mortgage payments, but 68 percent of them never call back.

Given most lenders take months before moving to foreclose, you have ample time to seek some kind of work out.

Once you make contact with your lender or servicer in a return call or a call you initiated, stay in touch with that contact until you are current. Document your contacts in writing so you and the lender have a documented record of your efforts.

If possible, consider restructuring or refinancing your loan -- but not to borrow more money. If you are saddled with two mortgages, do the math to determine if consolidating them will help. Likewise consolidate non-mortgage debts. Also consider extending a 15 year mortgage to 30 years or a 30 year mortgage to 40 years or longer. Examine how any restructured debt will play out if your situation worsens or improves. In each case, determine if restructuring is your best move, preferably before you miss a payment and damage your chances of landing a new loan.

Watch out for scams. When you are down on your dollars you are most vulnerable to debt-removal come-ons. You likely didn't get in over your head over night. Don't expect a quick fix.

Get financial counseling. Certified (by state and federal agencies and recognized trade groups) consumer credit counseling services are often free or offered for only a nominal fee. They will teach you your rights and work with you and your creditors, say, to temporarily reduce payments or otherwise work out a payment plan that will keep you housed and your credit relatively intact.

Know your rights. If you are in the military, you have special relief under the Soldiers and Sailors Civil Relief Act to stop the foreclosure and you may be eligible for a reduction in the interest rate. Similar relief is available to those affected by hurricanes, earthquakes and other natural disasters.

Procedural errors in the lender's foreclosure effort or lender errors when you acquired the loan could permit you to file a lawsuit to enjoin or stop the procedure.

If all else fails, bankruptcy is an option that can stop foreclosure, at least temporarily, and give you some leverage to resolve the foreclosure. Today's bankruptcy law also forces you into counseling. That's a good thing.

Selling the property is another end-game option. Consider selling the property out right as quickly as possible or deeding it to the lender in exchange for ending the foreclosure and minimizing the negative comments on your credit report.

Buying a Condo

2006-09-15T06:35:00.000-07:00

Questions to Ask Before Buying a Condo
by Stuart Lieberman
Realty Times
Published: September 14, 2006

Condominium ownership is becoming quite popular throughout the United States. Especially, but not only, in our big cities.

It seems as if condominium developments might be a win-win for everybody. For homeowners, they can be a very efficient and sometimes luxurious way of enjoying a nice lifestyle.

For builders, they can represent a strong return on investment -- at least they did before prices started dropping a few months back. And in the case of high rise condominium construction, less property has to be purchased so the profit margin can be even greater.

Condominiums come in all shapes and flavors. As I indicated, it seems that the newest breed are found in the urban areas. This is partly due to the trend towards urban renewal and redevelopment that is found in many portions of this country.

Of course, many condominiums are also located in suburban areas. Often upscale, these units may be gated and every bit as exclusive and luxurious as their urban counterparts.

When I talk about condominiums, I don't literally mean just those developments that follow a condominium form of ownership. I'm also talking about similar kinds of legal entities such as homeowners associations.

The types of developments have different names in different states. However, the concept is often similar. Unit owners are responsible for and own the interior of the living spaces, often to the finished walls.

The association is responsible for the areas beyond the finished walls, typically the structures themselves, the plumbing, the common sewer lines, etc.

In addition, there are common elements that are controlled by the association. Typically, this might include pathways, recreation facilities, swimming pools, tennis courts, and anything else that is for the benefit of the association.

Associations may have common areas and limited common areas. A common area might be something like what was described above: a park, an internal street, a pool.

A limited common area might be a part of the lawn that's fenced off for the use of a particular unit owner.

These are general observations. Before you purchase you must read the master deed, the bylaws and every other governing document to find out what you will own and what you will not own.

It can make a big difference. As an example, some coastal condominiums have docks for the unit owners. A unit owner needs to understand who will own the dock he or she will be using. This issue is important for resale purposes, maintenance issues (which can be very costly in this example) and riparian ownership concerns.

Condominium projects, with little exception, look wonderful when first built. After they are occupied by property owners, control shifts from the builder to the individual unit owners. At that time, the unit owners run the condominium association and begin full control and responsibility for the common elements.

The success of the condominium association is directly related to the caliber of the association. If the association board of directors is functioning properly and has good legal counsel and other professionals, then the entire community may be an exciting, desirable place to call home.

On the other hand, if the association is falling apart, if nobody wants to volunteer, if it's not governed by capable, caring people, if it doesn't retain quality professionals, or it isn't properly collecting the monthly assessments from the unit owners, then the community probably won't be a desirable place to live. And people are probably not going to continue to live there.

Another concern is the extent to which the condominium is owner occupied. If most owners rent the units out, they may be collectively less concerned about day to day issues than if it is largely or entirely owner occupied.

All of this means that when you purchase a condo, you can’t just look at the quality of the construction, or whether the heater works. You cannot just do the kinds of things that you would do if you are purchasing a private, single-family home.

Above and beyond the normal kinds of things that you need to do, you absolutely must look at the condominium records and documents. Take a look at the minutes. Is this a properly run, stable organization? Are there constant resignations; does it appear that little ever gets accomplished?

In reviewing the association documents, find out if they permit special assessments if there are one time large expenditures. The association should be able to special assess if problems arise. Watch for association documents that unreasonably restrict the right to special assess. While this restriction might seem desirable, in reality an inability to special assess can ruin a condominium development.

Things that must get done might never get done properly.

Ask whether the association has a functioning covenants committee? These are the internal volunteers who enforce the rules and regulations. Are they fair and reasonable people? Do they go out on a regular basis to ensure that the rules and regulations are being followed? Or is this the condominium version of the wild west where unit owners do as they please and are never asked to follow the rules.

Rules are necessary in these communities and they must be fairly, even handedly enforced on a regular basis.

In addition to a thorough document review, talk to people who own units. What do they have to say. Look around the development. Does it appear to be well maintained? Are their annoying signs posted everywhere suggesting dysfunction?

There is no getting around the fact that due diligence in the case of a condominium purchase requires an examination of the Association records and legal documents. Examine them and ask questions before purchasing. I suggest having an attorney help you understand the association and its workings. This is an inexpensive service, and may prove down the road to be a very worth while investment.

Today's Real Estate Market

2006-09-15T06:34:00.000-07:00

Don't Like the Market? Look Again
by Al Heavens
Realty Times
Published: September 14, 2006

It's never easy to be the messenger of not-so-good news, but it apparently has fallen upon "the media" to bear the bad tidings of the slowing market and all that it entails.

A business writer I know produced an exceptionally even-handed piece on the most recent Office of Federal Housing Enterprise Oversight report showing home prices increasing in the second quarter at a 4.7 percent annual rate, "the slowest since the fourth quarter of 1999."

The next day, a Realtor accused the writer of filling the newspaper with negativity and threatened to pull advertising -- an idle threat, since brokerages and builders tend to increase advertising in markets in which houses aren't selling themselves.

Advertising, in fact, is one of the methods sellers use to gauge whether the listing agent is doing his or her job. But that is a topic for another time.

Considering that most of this bad news is based on statistics compiled by the National Association of Realtors, Commerce Department, National Association of Home Builders, Fannie and Freddie and a host of governmental numbers-crunchers, maybe brokers and builders should complain directly to them.

A builder I know recently suggested that the more often economists and government analysts went on TV to announce that it was now a "buyers' market," the faster it would become a seller's market again.

Look. Because it is a buyer's market, the Realtor's other mantra, "Now is the time to buy," doesn't sound as much like hyperbole.

Now is the time to buy, because there's a lot on the market, fixed interest rates Sept. 7 were 6.47 percent and one-year Treasury-indexed ARMs just 5.63 percent, and when you consider that fixed rates when I bought my first house were at 18 percent, you'd be foolish not to.

In addition, there are a lot of mortgage products that will provide the first-time buyer with even lower rates and costs, if they shop around. Even in the 18 percent days, I was able to find a 13.5 percent fixed rate. With more houses on the market and less competition, buyers can take a little more time.

The media focusing attention on higher rates and slower sales surely frightens those easily spooked by a few negative numbers, but most aren't complaining about the media's attention.

I take my show on the road on occasion, and at a seminar in Orlando a few weeks ago, I asked the audience of builders if they had any complaints about the media.

One builder's hand shot up.

"A reporter from my local newspaper called and asked how new-home sales were, and I told her that they were slower than last year, but still brisk," he said. "The headline and the article the next day made it sound as if I was headed into bankruptcy."

Again, not everyone involved the production of that real estate article knows the intricacies of the business so there is margin for error. You should try explaining annualized rates or why we compare year to year rather than month to month sales and price statistics to the uninitiated.

I don't know how long what is euphemistically referred to as the "normal" market will last. Personal and professional experience tell me that it will change eventually; I remember the late 1980s and the mid-1990s and the surprise bump-up in interest rates in 1999 because of the Thai bat and the post-9/11 fears that never materialized -- so we just need to hang in and not panic.

What you should expect from the media is a blend of statistically based news and information on how to deal with the market those numbers are reflecting.

For example, if it is a buyer's market, tell buyers how to take advantage of it -- negotiate, take your time, get an inspection, shop around for the best mortgage rate.

Then let sellers in on the information they need to cope -- get a pre-inspection to anticipate problems, look at your neighbors' houses and try to make yours better, or offer reasonable incentives or allowances to attract interest.

If you want to invest in real estate, forgo flipping and consider the long-term, such as REITs that are consistent income producers (some did better than stocks at the height of the market).

If you want property, buy a condo that is lingering on the market and rent it until median prices return to their dizzying climb. The focus on condo construction and conversions have reduced inventory of rental property in many urban markets, and that's the situation you want to take advantage of until circumstances change.

They always do.

Foreclosures

2006-09-15T06:32:00.000-07:00

Vacation Homes

2006-09-12T17:34:00.000-07:00

Will Domestic Travel Slump Impact Vacation Home Rentals?
by Broderick Perkins
Realty Times
September 12, 2006

After three years of upward growth, domestic tourism hit a slump this year and while scattered reports indicate the vacation home rental sector may be faring much better, the sector is rolling out winter marketing strategies early, indicating all is not as well as it could be.

Along with the slower growth in domestic tourism, there is also a greater than ever number of vacation home rentals to fill and that means gravy may be harder to ladle this fall and winter, if only in select areas, experts say.

Also, with the general downturn in housing, owners unable to sell condos in saturated buyers' markets may look to renting as a way to cover their carrying costs until selling is more viable.

"Competition is heating up as millions more second homes and investment properties appear on the vacation rental market. In 2005, according to the National Association of Realtors, second home sales accounted for a whopping 40 percent of all transactions, for a total of 3.34 million second home sales. More telling, 16 percent of those sales (2.32 million) were to investors, most of whom count on rental income to pay their expenses while their properties appreciate. This was on top of 2 million investment home sales in 2004," said Yardley, PA-based Alfred Glossbrenner, who along with his wife, Emily, self-published "How To Make Your Vacation Property Work For You", a guide book and CD-ROM for vacation home landlords.

"That much 'product' on the market impacts property owners in at least two ways. It makes it difficult to raise rental rates. And it makes it more important than ever to do everything you can to stand out from the crowd to get your place rented," Alfred said.

Total domestic travel expenditures by U.S. tourists is expected to rise at a rate of only 4.1 percent this year, compared to nearly twice that much, 7.5 percent last year, according to the Travel Industry Association of America..

TIA reported expenditures for domestic tourism by U.S. travelers dropped by 1.1 percent in 2002, the year after the day of infamy when terrorists turned commercial jetliners into missiles used in three U.S. cities.

In 2003, 2004 and 2005, those same expenditures rose, 3.7 percent, 6.8 percent and 7.5 percent, respectively with 2005 revealing the highest growth rate since 911.

TIA forecasts expenditure growth will dwindle further in 2007 growing by 3.7 percent and in 2008, growing only 2.7 percent.

While fear of traveling abroad and by air in general put a crimp on travel it also helped give rise to the a trend in vacation home accommodations. However, higher in-the-tank fuel costs and related fuel costs are putting a damper on all travel expenditures, TIA said.

In December of 2005, the TIA's Traveler Sentiment Index hit an all time low and by it's summer 2006 forecast the industry said "historically high fuel prices are expected to have a negative impact on summer travel and (fuel prices) are accompanied by broader economic concerns for many Americans."

The industry forecast summer travel would grow this year only by 1 percent over last year and the Glossbrenners say vacation home rentals aren't immune to economic conditions.

"Gas prices and travel costs are likely to cause vacationers to think twice from now on. You've got to give them a compelling reason not only to come to your location but also to rent your particular property. You've got to set it apart from the cookie-cutter look of the competition," said Emily Glossbrenner.

William May, director of the Seattle, WA-based Vacation Rental Owners Association agrees the fundamentals apply -- marketing is always key -- but says vacation homes may be more immune to market conditions than more traditional tourist accommodations.

Under the name of Sunspots, May owns or manages more than a dozen properties from single-family homes and condos to inns and resort properties primarily in the Pacific Northwest, but also Hawaii.

"The inns, resorts and vacation rentals we own and or manage have stronger occupancy than last year, but we always advertise heavily and harangue our repeat visitors with reminders to renew," he said.

"As to the VROA.org we do get reports from members all over. These have to be highly parsed. Looks to me like aggressive marketing and sales focused individuals and managers always do well. Unsophisticated, naive and untrained owners have been pleading for bookings for the three years VROA's been around. I take their reports with a grain of salt. We haven't done a member survey, but it too would be anecdotal," he said.

There's no official, audited, central vacation home rental business registry so it's difficult to tell, beyond anecdotal evidence and in-house surveys, what's really happening to the vacation home rental market.

It is generally accepted, however, that when the general travel industry hit the wall after 911, the vacation home buying sector (as well as the overall second home market) flourished, based on NAR's numbers after 911. Growth was particularly noticeable in investment properties including vacation home rentals.

As travelers left the skies abroad and hit the roads at home, they more and more often sought the security -- perceived or real -- of individual properties and in smaller developments. Resorts, hotels and other areas where tourists traditionally congregated were deemed more likely targets for terrorists.

As domestic travel growth has dwindled in recent years, it appears growth in demand for vacation home rentals has continued, according to one source, HomeAway.com, a network of vacation rental listing websites.

"The research shows HomeAway network owners did not see a decrease in occupancy rates since last year, even though vacation rentals inventories increased across the industry," said Eileen Buesing, public relations manager at HomeAway.com.

In September, HomeAway.com reported a 25 percent growth in year-over-year growth in traffic on the online network and a 30.3 percent increase in year-over-year growth in inquiries per property, based on an owners survey.

"The owners surveyed have not experienced any decrease in occupancy rates in year-over-year," Buesing said.

However, HomeAway.com in September also released a statement to help vacation rental owners in off-season areas boost rental income, indicating owners could benefit from market conditions squeezing the rest of the market.

"Given the increasing cost of travel and the explosion of the online vacation rental industry second home owners have more ways than ever to appeal to winter renters," said Christine Karpinski, HomeAway.com's director of Owner Community.

Published: September 12, 2006

Buyer's Market

2006-09-11T14:20:00.000-07:00

Tips For Buyers In Emerging Buyers' Markets
by Broderick Perkins
September 11, 2006

Buyers don't quite yet hold all the cards, but they aren't smirking behind the hand they hold without reason.

Economic conditions are poised to give buyers more homes at lower prices this fall and winter, and as luck would have it, it's that time in the annual buying and selling cycle when more motivated sellers are more open to negotiations.

Housing's current plight and its role as an economic cornerstone was evident the week ending September 8, when stocks fell for at least two consecutive days after Beazer Homes USA, Hovnanian Enterprises and KB Home warned of growing cancellations and spikes in the supply.

That same week, a mortgage rate breather with six consecutive weeks of rate declines appeared over as Bankrate.Com first and then Fannie Mae reported rates were up albeit slightly.

But you really needn't look any further for what's ahead than the recent flurry of forecasts from the usually conservative National Association of Realtors.

NAR's latest existing home sales report on Aug. 23 said July home sales dropped 4.1 percent from a year ago, as the median price of single-family homes rose only 1.5 percent and the condo median fell 1 percent.

On Sept. 1, the trade group's Pending Home Sales Index, based on pending sales of existing homes was down even more, 16 percent lower than July 2005.

NAR dropped somewhat of a bombshell days later on Sept. 7 in a monthly forecast revising down earlier predictions on home sales, due to rising inventories and high home prices. Existing-home sales are now forecast to fall 7.6 percent by year's end, still the third best year after the last boom years 2004 and 2005. New-home sales should to drop further, 16.1 percent and make 2006 the fourth highest on record. NAR projected housing starts to fall 9.6 percent this year.
"A year ago we had record home sales and tight supply with buyers bidding over the asking price. This year sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory," said David Lereah, NAR’s chief economist.

"This is a normal pattern during a market correction ...," he added.

For buyers "normal" means they don't hold all the cards, but the deck is stacked in their favor.

Here's how to get a winning hand without bluffing.

Learn the game. Obtaining general knowledge about the home-buying process and the real estate market is a relatively easy task, but buyers who feel a competitive edge tend to leap before they look. A glut of information available on the Internet, from free real estate industry-sponsored seminars and workshops and through a vast library of real estate guide books can give you an edge.

Check the table. Real estate markets are local, at that means so is a buyers' market. It can be designated by a small community, larger region or greater geographic area. A buyers' market is typically spotty occurring in some neighborhoods and not others or first in one area and then spreading to others. In any event, a buyers' market tends to include high inventories, slow appreciation, flat or falling prices and more sellers than buyers. The area might also suffer from general economic distress. Part of your homework should include learning the boundaries of your buyers' market. The larger the area, the greater your bargaining power.

Don't deal from the bottom of the deck. In a buyers' market, buyers who don't educate themselves about prices and markets tend to low-ball sellers and ask for too many concessions. Even in a buyers' market, that will only alienate the seller, especially those less motivated with top-value homes. The seller will simply look elsewhere for a more reasonable buyer.

Don't give away your hand. Paying sellers' market prices in a buyers' market is a common mistake buyers make, especially at the onset of a buyers' market. The mistake could leave you with a home that immediately loses value. Home buyers should make the same price checks a seller makes to price it right -- get comparables, track sale prices in your shopping area, use the local newspaper, online listing and for sale sites and other sources, to keep tabs on asking prices. Also visit open houses. Use a real estate agent schooled in the history of market trends and statistics.

Play smart. Buy the least expensive house on the best block. Buy into the least expensive neighborhood in the best community. Buy into the least expensive city in the best region. The cheapest home in a neighborhood, community or region in transition will give you the greatest return on your investment, especially when the market rebounds.

Play with a full deck. Don't let a false sense of power overcome you. Even motivated sellers aren't going to wait around for your money to show up. Get your credit report checked an in order. Get your loan preapproved. Lock in your mortgage rate. Don't shop for a home without them.

Play for keeps. Buy because you need a home, not because it's a buyers' market. Speculators and short-term investors are bailing out for good reason. It's also a keepers' market.

Play another game. Renting now and waiting out the market is a gambit, but so is buying a home right now if you don't think you can stay put long enough to weather the change. Renting could pay off, over time, in a buyers' market that hasn't bottomed.

Published: September 11, 2006

Tips and Tricks

2006-09-11T14:16:00.000-07:00

101 pretty good ideas from Home & Garden Television

Home & Garden Television
11-SEP-06
A continuing compendium of tips and tricks from Home & Garden Television: Selling in a cooling market:

_ In a cooling real estate market, there are many tricks-of-the-trade that will make your home more attractive to buyers. You can immediately impress buyers with a beautiful entrance. Trim bushes, plant seasonal blooming flowers and put a fresh coat of paint on the front door and shutters.

_ Inside the home, continue wowing buyers with an elegant and well-lit entry. If you don't have a designated foyer, create one _ a console table or demilune chest of drawers, a pair of small lamps and a hung mirror or artwork will create a welcoming vignette.

_ A bright, well-lit home is cheerful and seems larger. Consider adding recessed canisters or strategically placed sconces to your home's existing lighting. Also, replace any dated light fixtures with newer decorative ones.

_ Realtors agree that most buyers are hunting for hardwood floors. Replacing carpets with a synthetic wood-laminate floor, like Pergo, is a good option for those who can't afford hardwood. However, a laminate floor won't fool everyone _ it has a hollow thud when you walk on it and it doesn't have the same warm, high-end look as genuine hardwoods.

(For thousands of other ideas visit www.hgtv.com. Distributed by Scripps Howard News Service.)

Housing Decline......

2006-09-08T11:37:00.000-07:00

The Economy | Housing decline: How 'temporary'?

By Andrew Cassel
Inquirer Columnist
Posted on Fri, Sep. 08, 2006

You know the boom is over when even the brokers start predicting lower prices. That was true of the stock-market bubble in 2001, and it's true now, as the air comes out of housing.

Yesterday, the National Association of Realtors issued its sales forecast for the rest of this year, saying an "inventory and price imbalance" will likely cause home prices to fall below the levels of a year ago.

Of course, the drop will be only temporary, the brokers' group says, just until "the market works through a buildup in housing inventory."

Anyone who didn't buy a house last year in hopes of "flipping" it for a quick profit should be fine, they assure us. And perhaps they're right.

But as long as "temporary" lasts, we could be in for a bumpy ride.

Other forecasters are less sanguine than the Realtors. Global Insight, the economics firm with offices in Eddystone, found prices falling even in parts of the country where housing has been relatively tame.

In Michigan, Ohio and Indiana - some of the flattest real estate markets in the country - "modest gains have given way to losses as mortgage rates rise and economic conditions soften," the Global Insight team reported.

Closer to home, they found house prices in the Atlantic City area rose only 2.6 percent during the first six months of 2006. A year earlier, the same market saw prices rise nearly 8 percent.

When a gain isn't a gain

But isn't a 2.6 percent increase still an increase? Not necessarily. Houses don't behave like stocks; when the market cools, publicly reported prices are the last thing to change.

First, sales volume slows down. Then sellers start offering "incentives" - discounted add-ons, flexible payment terms or subsidized mortgage deals. The real price can be falling for months before it shows up in anyone's statistics.

That means it could be a while before we know the size of this "correction." And the extent of the fallout - political as well as economic - is anyone's guess.

Some of it may already be starting. In Philadelphia, for example, some developers are shelving or bailing out of projects for fear that the market is becoming saturated with upscale condos and townhouses.

And builders are lashing out on the political front as well. This week, a group of them issued an 82-page tome in defense of the city's 10-year tax abatement for residential construction, which some city politicos want to cut back or abolish.

The builders (or rather their consultants, local firm Econsult) say the tax break has been worth about $4 billion to the city's chronically bedraggled economy, stimulating thousands of jobs and boosting investment and property values all over town.

It's an arguable claim, though you'd need a tweezer to tease out the effect of the tax break from other trends that have boosted urban housing the last few years.

Home builders clean up

But the abatements have brought one undeniable benefit: bigger profits for home builders in the city.

This is not a secret to anyone in the real estate business: Taxes and other ownership costs are "capitalized" - rolled into the sales price of a house. Buyers paid more for properties with tax abatements than they would have paid without them.

How much more? That's the really interesting part. The authors of the builders' report estimate that each year without real estate taxes adds 2.5 percent to the price of a home or condo. A home with a 10-year tax abatement has been selling for roughly 25 percent more than a comparable home without one.

So have builders simply been getting the money that homeowners would otherwise have paid the city in taxes? Yes - and that's not all.

The consultants calculate the real cost of Philadelphia real estate taxes at about 15 percent of a property's sales price. Thus buyers - for reasons the consultants say they cannot identify - have apparently been paying builders $25 in order to get $15 worth of tax relief.

Alan Greenspan once referred to that kind of behavior as "irrational exuberance." The question now is, what happens when it stops?

Soft Market

2006-08-29T11:03:00.000-07:00

Condo developer stops work, citing suddenly softer market
By Henry J. Holcomb
Inquirer Staff Writer

Latest stories on the housing market

A major condominium developer put plans for his 30-story Marina View Towers on hold yesterday, complaining that a softening market has made it hard to hold prices high enough to cover rising construction costs.

"It has suddenly become a buyers' market," said developer Louis A. Cicalese.

Site preparation had started for the $119 million building next to the Benjamin Franklin Bridge overlooking the Delaware River.

The decision is the strongest sign yet that the Center City residential condominium market, red-hot for two years, has cooled.

While two major developers are pressing ahead, others are becoming cautious and complaining that media coverage of whether the condo market is in a boom or a bubble is causing the problem.

The demographic groups - young professionals and empty nesters - who are looking for shorter commutes and an urban lifestyle are destined to be strong for years, brokers and developers say.

"We're not discouraged. We still plan to build it, and we think it is going to be the best building in the city," Cicalese said.

Cicalese is a Philadelphia native who made a lot of money in California real estate before moving to Ottsville, Bucks County. He and his partners own three prime condo sites on the waterfront. He said yesterday that they still planned to build on all three.

Marina View, pictured on billboards along traffic-clogged expressways into the city, had attracted reservations for 60 of its 197 units. All deposits will be refunded, Cicalese said. Prices for the condos ranged from $300,000 for the smallest one-bedroom unit, about 800 square feet, to $2 million for the larger units.

His other sites are Pier 34 in South Philadelphia, where the Marina View sales office is located, and Pier 40, just north of Waterfront Square, a five-building gated community under construction near the foot of Spring Garden Street.

Other developers acknowledged that the market was softening, but said they were pressing ahead.

Hal Wheeler, developer of the 33-story Ten Rittenhouse Square, at 18th and Walnut Streets, said 25 truckloads of steel would arrive at his site Sept. 12. Tom Scannapieco has opened a sales office next to his 31-story ultra-upscale tower at 1701 Rittenhouse Square St., between Locust and Spruce Streets. He said construction would start next spring.

But Tim Mahoney said yesterday he was looking for ways to "take some of the risks out" of a 57-story condo skyscraper that he and partner Brook J. Lenfest have planned at 15th and Chestnut Streets.

Mahoney and Lenfest put the project, which has cleared all government hurdles, up for sale in June, when the market was hot and brokers were predicting it would fetch $60 million.

Yesterday, Mahoney said he was exploring new ways to build the tower himself, adding that it is still on the market, but that "I don't think we're going to get a number that appeals to us."

The DePaul Group of Blue Bell, meanwhile, said in a recent interview it would wait until January to decide when to build a second luxury condominium tower next to its "Residences at Dockside" just south of Penn's Landing at 717 S. Columbus Blvd.

Mahoney grumbled that media coverage pondering whether the boom would soon cool has, at least for now, produced a "self-fulfilling prophecy."

Joanne Davidow, manager of the Rittenhouse Square office of the Prudential Fox & Roach real estate firm, said "the demand is still there" but the market has quickly changed.

"One minute we're amazingly busy, then there were a lot of articles asking, 'Is this a boom or bubble?' I'm not surprised some are taking a step back... to see if prices will go down," Davidow said.

Davidow and others predicted that the pause would be brief. "Nothing else has happened. I don't see interest rates going up significantly. My thought is if you are an older baby boomer and you want to do something, how long are you going to wait?" Davidow said. "There is an awful lot of demand out there."

But for now, Marina View developer Cicalese said, demand has gone down while "concrete and drywall costs are going up dramatically, and copper has gone through the roof." At times like these, he said, "the fact is you need to be careful."

Contact staff writer Henry J. Holcomb at 215-854-2614 or hholcomb@phillynews.com

Rent until Sold

2006-08-21T06:42:00.000-07:00

Renting Condos That Don't Sell
Realty Times
August 21, 2006
by Broderick Perkins

Can't sell that condo? List it as a rental.

It's not a slam-dunk proposition, certain conditions are required to make for a good rental property, but the option could be an alternative in today's changing market -- if only temporarily.

Speculators are bailing out of the once super hot condo markets and some potential first and second-home buyers, thwarted by higher energy costs, are opting for the rental market instead.

As a result, condo inventories are rising and the sector is turning around faster than the single-family detached home market.

In June, single-family home sales were down 8.2 percent from June 2005 as the median price came in at $231,500, up 1.1 percent from a year ago, according to the National Association of Realtors.

Meanwhile, during the same period, condo and cooperative housing sales fell harder, by 14.6 percent and the median price was down by 2.1 percent to $226,900, the association reported in its latest monthly tally.

In metropolitan areas, where rentals may be more viable, market conditions reversed a pricing anomaly that had the median condo price higher than single-family price for more than two years.

NAR's second quarter "Metropolitan Area Existing-Home Prices and State Existing-Home Sales" revealed a $227,500, median price for single-family homes in 151 metro areas, up from $219,400 a year earlier. Condo prices in 57 markets, on the other hand, were at a median of $225,800, less than the single-family median for the first time since the first quarter of 2004 and down 0.3 percent from a year earlier as 14 markets revealed price declines.

The national condo price had been higher than the median single-family home price, NAR said, because of a high concentration of condos in the most expensive metropolitan areas included in the report. Generally, within a given broader area, the typical single-family home costs more than the median condo price.

The metro core condo concentration has been caused by reduced land availability; the need for more practical, affordable, and high-density housing as well as high-end condos; the anti-sprawl movement; and the cool factor -- young professionals want to be where the action is.

NAR spokesman Walter Molony says price-boosting demand for condos can also be traced to capital gains tax relief beginning in 1998 and empty-nest baby boomers moving down or buying a second home, but seeking appealing amenities. Also, during the last housing boom, condos were selling like hot cakes to speculators and investors.

Some of the same market conditions that are reducing buying demand for condos can be used to turn a failed sale into a condo rental for the long term or shorter term vacation rental.

"Renting out your house by the night or by the week while it's on the market can help cover your expenses until the house/condo sells. It's easy, inexpensive and effective way to market your home," says Christine Karpinski, real estate investor, author and director of Owner Advocacy for HomeAway.com, a network of vacation rental listing websites.

Given the high cost of housing in many regions some potential buyers are turning to rentals and generating a greater demand in the apartment and home rental market, but that's not true of all markets faced with a supply glut.

"New condo owners who are counting on renting their properties to vacationers should be prepared to work harder than might have been necessary even a year ago," said Emily Glossbrenner a partner with Yardley, PA-based FullyBookedRentals.com, a website for resort and vacation rental owners.

"Property owners who used to fill their available weeks by advertising on three or four of the leading vacation-rental sites are finding that they have to expand their advertising programs and pay a lot more attention to their ads in order to stand out from the competition," Glossbrenner said.

Obviously, location is key. If your home is along the railroad tracks it will appeal to only a few hard core renters who like edgy locations. Beach front, hillside, ski resort and lake front homes will appeal to more renters, especially those looking for a vacation getaway. Urban living and rural seclusion will also attract a cross section of renters.

In all cases, safety and security must also be included in the appeal.

"It also needs to be safe -- from man-made or natural disasters. Trying to create an attractive rental from the property you buy that is sitting on an eroding cliff overlooking the ocean just won't fly, no matter how beautiful the view. Ditto if the potential for flooding from high tides or rivers is present," said Amanda Sturges, director of operations at Escape Homes, a San Francisco Bay Area online clearinghouse for vacation rentals, real estate agent specialists in vacation markets and other industry services.

Karpinski, also author of "How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment" (Kinney Pollack Press, $26), is a proponent of do-it-yourself property management to save on a major carrying cost found in prime rental markets. Property management companies can charge as much as half the rent for services in some markets.

But where property management costs aren't prohibitive and renting is viable or where the potential rental is just too far away and simply too time-intensive to manage yourself, a property manager can be a lot like a stock broker.

In addition to thoroughly screening tenants, property managers have at their beck and call vendors and working relationships with other professionals to help them quickly perform a host of maintenance, repair and upkeep chores.

"You can also use the analogy of stock investing. Many investors use a full service broker because the experts are better at managing the investments than are the investors. And in the long run, the investor makes more money even though the have to pay the fees," said Terry Feinberg, vice president of the Arizona Multihousing Association in Phoenix, AZ.

Finally, know your demographics. The home itself should have a certain level of attractive features and amenities and be in the kind of condition that will quickly attract renters.

For example, kid- family- and pet-friendly rentals get contracted sooner if they have swimming pools, spas, hot tubs; roomy, modern kitchens and family rooms and ample outdoor spaces.

Likewise, couples may want a rental with a cozy nook. Universal design elements and special amenities like free cable, computer hookups and cable outlets appeal to a broader cross section of renters.

Published: August 21, 2006

Buyers vs Sellers

2006-08-17T04:05:00.000-07:00

Buyers Rebound, Begin Full Court Press
Realty Times
August 17, 2006
by Broderick Perkins

The housing market is playing out a lot like a come back game for the underdogs.

Home sales were down in 26 metropolitan areas during the second quarter this year, compared to only 16 metros losing ground in prices during the first quarter, according to the National Association of Realtors.

The second quarter median condo price, measured in 57 metropolitan markets, was down 0.3 percent from a year earlier as 14 markets revealed price declines. Only five condo markets came in with price declines in the first quarter.

Speculators are rolling up their tents in once super-hot markets, investors are moving money to emerging markets and some potential first-time buyers, thwarted by higher energy costs, are opting for the rental market.

For the first in more than two years, the median condo price in metropolitan statistical areas (MSAs) is less than the median single-family price in metro areas.

That's a quantum shift in previous pricing anomaly that was caused by a concentration of condos in metro areas.

In a growing number of housing markets, selling a home is no longer a slam-dunk proposition. If you want to hear the net go 'swish' on your home sale, you'd better have some new moves.

Otherwise buyers will shut down your game.

"After half a decade of unprecedented growth in the housing market, it looks like home buyers are finally holding the cards as we move into a buyer's market," said Holly Slaughter, consumer experience expert at RealEstate.com.

Slaughter contacted us with a new game plan for sellers and we brought in some real estate agents from around the nation to help her coach.

If sellers want to stay in the game, here's what they'll have to do.

Don't foul out. Price it right. Truly competitive prices that reflect market conditions are game winners. Slaughter suggests getting an appraisal to help set the asking price.
"The most important thing is pricing your property correctly. This can be done by contacting your real estate agent and having them perform a Comparative Market Analysis (CMA) for homes in your area that have sold or those that are on the market that are similar to the home that you are selling. A home that is priced too high for an area will not see a strong flow of interested buyers. Pricing your home too low may make buyers wonder if there are problems with the property," said, Brandon Green, owner and president of 40 Acres Realty Investments in Houston.

Respect your opponent.Treat every consumer and every agent as if they were the person willing to pay the highest price for the property
"Realize that in a declining market, a low offer today is likely to be a high offer in 60 days so give careful consideration to any offer even if less than you expected," said Richard Calhoun, San Jose-based Creekside Realty's broker.

Give up some free throws. Negotiate with concessions and incentives
"From a paint and carpet allowance to a new plasma TV. Creative extras may cost you a little up front, but are a great way to sweeten the deal," said Slaughter.

The market may be slowing, but home prices aren't cheap and buyers are cash-strapped.

"Pricing in New England is running about the same or just under it was a year ago, and settlement is coming in between 2 percent to 5 percent below asking. Sellers are offering to pay the property taxes for a year as an inducement to a buyer. Or giving free gasoline for a year. We have seen one developer offer a new BMW in the garage of any new house sold during a particular period. Some sellers are offering to pay the mortgage for the first year or two," said Dane Hahn, owner of EXIT 11 Real Estate, in Stratham, NH.

Razzle, dazzle them with some new moves. Curb appeal enhances first impressions. Removing clutter sends impressions into overtime. Likewise, staging the game can put points on the board
"Sellers in a changing market should consider the power of having a professional stage their home. If they are wary of being charged for these services, even just having a savvy real estate agent walk through and around the home and give suggestions on how the home could look better to potential buyers is huge," said Marcie Hahn, a real estate agent and Dane Hahn's daughter, at Williams Realty, in Salt Lake City.

"Many times the sellers don't see their home as others do because it's just that ... their home ... fresh eyes can be very powerful," she added.

Shoot! Because so many consumers browse for housing, post plenty of high-quality photos of your home's interior and exterior online

"Print out a nice report of your home. Add plenty of pictures, a detailed list of the home's amenities, a list of local amenities, third party information on schools, etc. Leave a couple of bottles of water for them to take (from the open house) as well," said Slaughter.

Bring in an assistant coach. Hire an inspector
"A large number of home sales fall apart after the inspection. Hire a professional to inspect your house from roof to basement before you put it on the market, giving you plenty of time to make repairs or price accordingly," said Slaughter.

Know your way around the court. Know your neighborhood
"Part of my listing presentation focuses on current market conditions. I educate them on the importance of competitive price, the average days-on-market in their area, and I make suggestions on the presentation of their home for potential buyers," said Shawneequa Badger, a real estate agent with Century 21-Alpha in San Jose.

Sit on the bench
Most buyers want to feel comfortable when they're considering buying your home. Hanging around during the open house may run off potential buyers.

Bring in some trick plays
"I also suggest holding open house throughout the week instead of just the weekends. There is nothing better that will capture buyer's attention when you are the only open house in the area," said Badger.

Published: August 17, 2006

Vacation Homes

2006-08-15T20:31:00.000-07:00

Vacation homes come with tax benefits
08/15/2006

Tax breaks can make owning a vacation home more affordable. If you're looking to claim the most tax breaks possible, you need to carefully track the amount of time you and your family spend at your vacation home. There are three basic scenarios of vacation home use and a different tax treatment applies to each.

Personal versus rental use

The tax treatment of your vacation home depends on the number of days you rent it at fair market value and the number of personal use days. In addition to the days you use the home, you must count as personal use any part of a day that the residence is used for personal purposes by a relative and by any individual who rents the residence for less than fair market rent.

In addition, any day that your vacation home is used by your parents or grandparents, children or grandchildren or siblings is counted as personal use - even if the family members paid fair market rent.

On the other hand, days you spend working on your vacation home are not counted as personal use days if they are primarily spent making repairs or getting the property ready for tenants. Bear in mind that for tax purposes, a second home can be a boat or even recreational vehicle as long as it has permanent sleeping, cooking and toilet facilities.

**Scenario 1: Use often, rent seldom

If you rent your home for less than 15 days during the year, any rental income you collect is tax-free. You don't even have to report the income on your tax return. You can still deduct property taxes and mortgage interest whether or not the property is used to produce income. However, you cannot deduct any rental-related expenses.

**Scenario 2: Use seldom, rent often

If your personal use of your vacation home doesn't exceed 14 days a tax year or 10 percent of the total number of days it is rented out at fair market value, whichever is greater, your vacation home qualifies as a rental property. As the owner of a rental property, you must report the entire rental income you receive. However, you may qualify to deduct expenses related to renting, such as depreciation, utilities, repairs and property management fees.

If you end the year with a net profit from the rental income, you may deduct all your rental expenses.

However, if you had a net loss, your deduction will be limited by the passive activity rules. A passive activity involves the conduct, trade or business in which you are not materially participating. An exception applies if you actively participate in managing rental activities. In such cases, you can deduct up to $25,000 in rental losses against other non-passive income, such as wages.

This deduction begins to phase out when your adjusted gross income (AGI) exceeds $100,000 and disappears completely when your AGI reaches $150,000. The passive activity loss not used can be carried forward to future years.

**Scenario 3: Use some and rent some

If you and your family personally use the place more than 14 days a year or, if greater than 10 percent of the number of days it is rented to others at fair market value, your vacation home is treated as a residence. You must report all rental income on your tax return and you may be able to deduct your rental expenses, but only up to the total amount of rental income.

You cannot use the excess rental expenses to offset income from other sources. You can, however, carry the excess expenses forward to the next year and treat them as rental expenses for the same property up to the amount of rental income for the year.

With proper planning and professional advice, you can maximize tax benefits and your personal enjoyment of your vacation home. A CPA can help you determine the best strategy.

Mary Leigh McDaniel, CPA/PFS is a partner in a local firm specializing in tax, consulting and financial planning. This article was written in conjunction with the Virginia Society of CPAs.

©Times Community Newspapers 2006

New Jersey Real Estate

2006-07-28T21:19:00.000-07:00

N.J. housing gap hurts residents

By CARL GOLDBERG
For the Courier-Post
July 28, 2006

It seems New Jersey is perpetually debating the appropriate balance between home building and open space preservation -- with both sides claiming the moral high ground on just what quality of life means.

Home builders rightly want to provide enough quality homes for residents of all incomes. Environmentalists rightly want to protect the quality of New Jersey's natural resources.

Unfortunately, both goals have suffered under a complex regulatory structure.

A recent study by The Brookings Institution found that the state is losing its economic competitive edge and the threat is coming from "multiple forces, including rising housing costs, persistent race, class and place disparities and unbalanced development patterns." In fact, New Jersey has the fifth least affordable housing in the United States, according to the Brookings report.

Unaffordable

Simply put, New Jersey has a housing gap which makes it more difficult to live here. And, as housing grows ever more expensive, it squeezes those who can least afford quality housing and also has a harmful impact on the middle class. Without quality housing to continue to attract residential buyers and renters, communities suffer tax base loss that diminishes our ability to deliver quality education and other important government services.

This is no longer a hypothetical situation. Numerous studies have cited a slowing of New Jersey's economy, a flattening of wages and the loss of quality jobs.

Regulation

Wedged between New York and Philadelphia, New Jersey is always going to be an expensive location to live. However, too much regulation is what has escalated the cost of housing here to its dubious national ranking.

Indeed, according to the Brookings study, New Jersey is the only state in the country where the regulatory requirements for building are rated as "very high" statewide -- making housing here expensive. This restrictive environment drives the cost of housing to unaffordable levels for many potential residents or those who are looking to move up in the housing market -- in other words, there's a housing gap.

The unfortunate result of these regulations is the right type of housing is usually not built in the right places, and the state's economy suffers as a result.

In real estate, we've all heard the experts say the most important factor is location. But it is also price. Companies are not going to come to New Jersey if a diverse workforce is unable to find quality, affordable housing.

This leaves the housing and environmental advocates fighting while the state suffers.

Diverse housing options are the lifeblood of a successful economy and the inability to provide these residential opportunities puts New Jersey at a serious competitive disadvantage with other states.

New Jersey must consider a total evaluation of its planning policies. Many states throughout the nation have developed programs to correct their housing gaps, according to the Brookings study.

It's time for New Jersey to call a summit of home builders, environmentalists and planners to resolve the state's housing gap and help New Jersey rebuild a strong, diverse economy.

The writer is a principal with Roseland Property Company in Short Hills, Essex County.

Buyer's Market

2006-07-26T15:11:00.000-07:00

Officially a ‘Buyers Market’?

NAR reports existing-home sales flattening, prices cooling and sellers need to be more competitive

RISMEDIA, July 26, 2006—Existing-home sales were down modestly in June, and home prices were up slightly from a year ago, according to the National Association of Realtors®.

Total existing-home sales including single-family, townhomes, condominiums and co-ops – declined 1.3 percent to a seasonally adjusted annual rate1 of 6.62 million units in June from an upwardly revised level of 6.71 million May. Last month’s sales were 8.9 percent below the 7.27 million-unit pace in June 2005.

David Lereah, NAR’s chief economist, said the housing market is flattening-out. “Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing,” he said. “At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories. Home prices are only a little higher than a year ago.”

The national median existing-home price2 for all housing types was $231,000 in June, up 0.9 percent from June 2005 when the median was $229,000. The median is a typical market price where half of the homes sold for more and half sold for less.

“The change in price performance is directly tied to housing inventories – a year ago we had a lean supply of homes and a sellers’ market, with monthly home sales at an all-time record high,” Lereah said.

Total housing inventory levels rose 3.8 percent at the end of June to 3.73 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.

NAR President Thomas M. Stevens from Vienna, Va., said opportunities have opened for home buyers. “People who were discouraged by the bidding wars that were so common over the last few years are finding more choices now,” said Stevens, senior vice president of NRT Inc. “Relative to the five-year housing boom, this year is a buyer’s market in much of the country with plentiful supply, along with interest rates which remain historically favorable, so it’s a good time to buy a home.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.68 percent in June, up from 6.60 percent in May; the rate was 5.58 percent in June 2005.

Single-family home sales eased 0.9 percent to a seasonally adjusted annual rate of 5.81 million in June from an upwardly revised 5.86 million in May, and were 8.2 percent below the 6.33 million-unit pace in June 2005. The median existing single-family home price was $231,500 in June, up 1.1 percent from a year ago.

Existing condominium and cooperative housing sales fell 5.5 percent to a seasonally adjusted annual rate of 805,000 units in June from a pace of 852,000 in May, and were 14.6 percent below the 943,000-unit level in June 2005. The median existing condo price3 was $226,900 in June, down 2.1 percent from a year earlier.

Regionally, existing-home sales in the Midwest were unchanged in June, holding at a level of 1.52 million, and were 6.2 percent lower than a year ago. The median price in the Midwest was $175,000, which is 1.7 percent below June 2005.

Existing-home sales in the West also were unchanged, at an annual pace of 1.41 million in June, and were 17.1 percent lower than June 2005. The median price in the West was $342,000, the same as a year ago.

Existing-home sales in the South eased 2.3 percent to a pace of 2.57 million in June, and were 5.5 percent below June 2005. The median existing-home price in the South was $191,000, down 0.5 percent from a year earlier.

Existing-home sales in the Northeast declined 3.5 percent to an annual sales rate of 1.11 million units in June, and were 9.8 percent below a year ago.

The median price in the Northeast was $298,000, up 7.2 percent from June 2005.

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

Second Homes

2006-07-18T20:23:00.000-07:00

HouseValues Survey Reveals Interesting Trends Among Second Home Buyers
Realty Times
by Blanche Evans

It's great news for the airlines. A large percentage of second home buyers would as soon fly as drive to reach their vacation homes, says a new survey by HomePages.com, a division of HouseValues that allows consumers to see aerial views and neighborhood-centric information of homes.

While most second home buyers would like their second home to be an hour's drive or less (43 percent), 29 percent said they didn't mind catching a flight.

With plenty of disposable income to spare, 21 percent of 1,300 consumers surveyed said they are considering purchasing a second home within a year, while another 42 percent say they're considering buying within the next two to six years.

It appears the economy and housing are hardly going down the tubes.

In fact, "vacation and investment homes remain a strong and prominent part of the real estate market, both as a means of providing an escape and providing supplemental short-term and long-term income," says Ian Morris, chief executive officer of HouseValues.

A quarter of respondents said they are considering a second home for investment purposes, while 22 percent said they wanted one for "enjoyment," such as weekend getaways, vacations and family use.

Forty percent of respondents said features such as water or mountains would not be a factor because they intended to buy for investment purposes. Among those who do consider geography an important factor in where they buy, 36 percent listed proximity to water as key, followed by mountains (17 percent), golf courses (5 percent) and the desert (2 percent).

Yet, even disposable income runs out when it hits hurdles. Asked what factor would most likely cause them not to buy a second home, 32 percent of respondents listed rising home prices, followed by rising mortgage rates (18 percent) and job insecurity (12 percent). Thirty-eight percent listed a variety of other factors.

Sixty-five percent of respondents were women, 35 percent were men.

According to the preface of the 2006 National Association of Realtors Profile of Second-Home Owners, second-home owners are defined as those who "own one or more residential properties, in addition to a primary residence, and who use these properties either for vacation or investment purposes. Although both types of properties share several attributes, vacation homes are properties owned primarily for recreational use by the owner or their family, while investment properties are owned primarily to rent to others."

Ownership of more than one home is increasingly common, notes NAR, due to peak earnings of the baby boomer segment of the population, less-than-stellar returns in other financial assets other than real estate, and popular tax incentives (including capital gains exclusions) and loan programs that favor buying property over other investment instruments. For example, between 2000 and 2005, the value of homes nationwide rose over 50 percent, while the Standard & Poor's 500 Index returned just over 2 percent for the same period, says NAR.

Older baby boomers dominate the second-home market as vacation-home owners (age 59) and investors (age 55) and most own multiple properties. About six in ten survey respondents own two or more homes in addition to their primary residence.

Published: July 18, 2006

Investment Advice

2006-07-18T20:19:00.000-07:00

Make Your Real Estate Investment More Successful
Realty Times
by Clifford A. Hockley

For years we have been hearing the real estate mantra of "location, location, location," but is that really what drives the success of an investment?

I agree with the pundits that you can charge more rent at a better location and potentially have more return. Perhaps your vacancies will turn faster because you have that better location. But those areas or opportunities are not the norm.

So what is it in addition to location that makes a real estate investment successful?

In my opinion there are many variables.

Personality

This means it pays to keep it modern and cutting edge. Update your sconces, install flags, redo your landscaping. Give the property personality and color, something other than battleship grey with white trim. Ask a decorator and a landscape architect to help you. That $2,000 investment will be a payoff when you receive higher rents and longer term tenants. Consider investing in one major project a year. Hallway carpeting, an updated conference room, phased exterior painting projects. The options are endless and so is the payoff.

Emotions

Tenants (both residential and commercial) are emotionally driven in their decision making. Commercial tenants want their businesses to be placed in central locations, because retailers want visibility. Residential tenants want to be located close to friends, family or work. And all tenants want to be proud of their surroundings. They want their friends and business associates to visit them and be impressed.

The owner of the property has a responsibility to help fill that emotional need by keeping a property in first class condition: Wash the windows, clean the common area lights, paint the hallways, stripe the parking lot and remove the weeds in the landscaping.

Customer Service

In addition to the physical attributes of a property, make it easy to solve problems. Customer service is a huge added value. Think of it this way, the better a tenant feels about a property the happier they are going to be. Have a yearly holiday party. Give the tenants an opportunity to feel like they belong to the community. Of course not everyone wants to belong, so do not be pushy, just create options. Bring in pizza once a year to all tenants so they know they are appreciated.

Property Condition

As you make the property look great, do not forget the fundamentals. Don't let the roof leak, don't let lights burn out, don't allow potholes in the parking lot and make sure the common area restrooms are clean, in great condition and nicely decorated. In addition, you want to insure there are enough parking spaces. I will pass on buying a property if there are not enough parking spaces. (There might be an exception to the rule in a downtown environment where tenants use public transportation to get to work or around.)

Tenant Mix

Another component to the happiness of landlords and tenants is considering your tenant mix. Many years ago I had the opportunity to prepare a 10-year lease for a friend of mine in a business park. He owns a telephone distribution company (with a ratio of 70 percent office and 30 percent warehouse), and had over 80 employees. We found a cost-efficient location for him, and the space next door was vacant which we considered as possible room for him to expand into. About a year after he moved in, a new tenant moved in next door. They were a metal bending company. Their machines went "bang, kaching, kapow," all day long! And the floor now vibrated. All of the employees along the shared wall (over 100 feet long) had to move. They could not work and use the telephone while the neighbor was working bending steel.

The same is true in a retail environment where putting a church next to a tattoo parlor does not work very well.

In a residential environments, we prescreen all of the tenants. We screen on affordability, and they must pass credit and criminal checks, because we want a good tenant mix.

Understanding the finances

Part of planning your successful investment is understanding your income and expenses.

Compare your income to that of properties that are similar in your general area. Do the same with expenses. BOMA (Building Owners and Managers Association) and IREM (Institute for Real Estate Management) publish annual books that summarize income and expenses in all categories of investment -- from warehouses to office buildings, apartments and condominium associations -- in all areas of the United States. Use these resources and your own natural curiosity to compare/contrast and keep your property in the front row of available properties.

It is all about motivating a tenant to choose your property. The fewer vacant days you have, the more income your property will generate. The happier your tenants are, the longer they will stay. When the economy turns down, they will be motivated to stay -- even as other building owners attempt come to woo them away.

A Successful Property

A final example might help you understand. We took over a 50 unit apartment property from another management company. The property was in an excellent location, but was losing money. We convinced the owner to invest $75,000 (he had to borrow on a 2nd on his home) and proceeded to paint the property, redo the landscape, train the onsite manager and make the property look appealing. We then increased the rents by $100 per unit. Today we are making payments on the first and the second. The owner gets a nice monthly check (which he had not been receiving with the other company) and we have a waiting list of tenants wanting to move in.

Final Thought

A successful property will provide higher rents and a higher net operating income and therefore a higher sales price. That is why you need to take the steps that will make and keep your property successful.

Published: July 18, 2006

Housing Market

2006-07-17T20:48:00.000-07:00

Coping With Real Estate Market Change
Realty Times
by Broderick Perkins

Like calling a nuclear-tipped missile the Peacemaker, real estate market buzz words "stabilizing market," "returning to normal" and "market softening" may send the wrong signal to consumers.

The housing market isn't likely to implode in a mushroom cloud, but words like "normal," "stable" and "soft" are more likely to produce complacent acquiescence when it's time for a more proactive approach to changes in the market.

Experts who have lived and worked through past market shifts take a decidedly more robust "cover your assets" approach to today's real estate market rather than trying to pigeon hole it as typical.

One of those experts is Lisa A. Vander, real estate investment advisor and founder of Pacific Blue Investments in Solana Beach, CA.

Also author of "The Real Guide to Making Millions Through Real Estate" (Entrepreneur Press, $24.95) Vander is doing for real estate what Suze Orman did for the stock market and personal investments -- leveling the playing field for the first-time and small investor.

It's not easy.

Real estate investors, including home buyers, are just as unrealistic about and unfamiliar with the real estate market as novice stock market investors were about the technology sector during the dot com era of sudden wealth and sudden losses.

"They are unfamiliar with the real estate market, especially when it decreases in value and does not appreciate at the tremendous rates that have been seen recently in some parts of the country. It can not be emphasized enough how this is not standard and is not how long-term investors should be calculating their numbers," Vander says.

The fundamentals apply -- realistic, conservative and well-diversified investments over the long haul virtually always yield greater returns than jumping on the wagons just as they are about to circle.

"Real estate gains will be experienced for a period of time and then immediately followed by times of losses up to 20 to 30 percent. These gains have historically outperformed the losses, but investors who keep and sustain their properties during these cycles are those who win in the long run," she says.

Vander offers additional pieces of advice designed to help investors hold on when the ride gets bumpy.

"There are several key action steps investors can make to help sustain their investment real estate during all real estate market adjustments and conditions," she says.

Squirrel away equity. An equity line on your primary residence helps augment mortgage payments should you have to decrease rental income in declining markets. Get the equity line when the market is healthy and lenders can verify your employment and good credit. Don't wait until you lose your job or interest rates skyrocket.

Don't squirrel away too much. Retain, unencumbered, at least 20 percent to 25 percent of your property equity should you have to sell to get access to cash. Over leverage property in a declining market and you could be holding the bag with an upside down mortgage -- where the balance is larger than the property's value. That could make a needed sale difficult, if not impossible.

Know your mortgage. Examine the terms of your mortgage. Know the maximum the loan can adjust during each adjustment period and how that will affect your payment.

Build loan bridges. Refinance with loans designed to get you through the market tightening. Loans tied to stable indexes that don't adjust too frequently are best.Property in high-value markets are better able to handle the risk of interest-only loans that don't pay down the principle or even add to the principle. Such loans keep payments reasonable while rents and values decrease during down times. Again, be careful when using such loans not to over leverage your property.

Reduce rents slowly. Right now, rents in many regions are rising in your favor in response to the demand of a growing number of consumers who can't afford home prices. Nevertheless, check with your property manager or others in the area to learn historical trends for the past 10 years. Follow the market and follow suit if local rents drop. Be prepared to sustain your properties with a rental rate decrease as large as 10 to 15 percent. Do it slowly so you don't over shoot the need to squeeze. Work hard to please and keep your current tenants so you don't have to lower rates to attract new tenants. Offer improvements, amenities and other incentives to keep your current renter renting from you.
Published: July 17, 2006

Win, Win Win Situation

2006-07-17T20:42:00.000-07:00

Casinos win again
Gaming halls bounce back after costly state shutdown
By DONALD WITTKOWSKI Staff Writer, (609) 272-7258
Press of Atlantic City
Published: Monday, July 17, 2006
Updated: Monday, July 17, 2006

ATLANTIC CITY — Despite millions of dollars in lost revenue and tons of negative publicity caused by their unprecedented shutdown, the casinos showed once again that, ultimately, the house usually wins.

Casinos rebounded quickly after the three-day closing ended July 8, and Wall Street laughed off predictions of a meltdown in Atlantic City's sizzling gambling market. The gaming industry also benefited from the expiration of a tax on casino net profits in the new state budget.

“Much ado about nothing,” Jane Pedreira, gaming analyst for Lehman Brothers, scoffed of the shutdown. “I find it hard to believe that anything that happens over three days, midweek, will be crippling. I think people were dramatizing it because they were eager to get open again. They wanted to put pressure on the politicians.”

Casinos already are capitalizing on public disgust with the state Legislature by pushing a bill that would shield them from future government shutdowns. Gambling was brought to a halt because New Jersey's budget crisis forced state gaming inspectors off the job. New legislation making the rounds at the Statehouse would allow gaming inspectors to continue to work during any other budget-induced shutdowns.

“Clearly, the law needs to be changed. That's the first thing,” said John Payne, regional president of Atlantic City operations for Harrah's Entertainment Inc., owner of four New Jersey casinos. “From the governor to the Assembly to the Senate to the casino industry, we must get this out of the way. A shutdown can never happen again.”

Although the shutdown began July 5, the impending crisis overshadowed the Fourth of July weekend, one of the most lucrative holidays for the casinos. Gaming executives argue that future budget battles can never, ever threaten the holiday again.

“Absent this (new) legislation, every future budget session, which of course leads up to our critical Fourth of July weekend, may cause our customers to think twice about making plans to visit our casinos, given the uncertainty created by this year's closure,” said Joseph A. Corbo Jr., president of the Casino Association of New Jersey, a trade group representing the city's 12 gaming halls.

While gaming officials say it is premature to predict any long-term effects of the shutdown, the immediate damage is clear. The casinos lost an estimated $54 million in revenue and the state forfeited $1.3 million a day in casino taxes.

“It is lost forever. I can't think of any way to reclaim this money,” Atlantic City gaming attorney Nicholas Casiello Jr. said.

Casiello thought of the possibility of legal action against state government to help the casinos recover their lost revenue, but soon realized the litigation would fail. States have been protected for many years from lawsuits by “sovereign immunity,” so it would have been pointless to sue New Jersey for gaming losses, he noted.

Pedreira, however, argued that the casinos shouldn't worry about the loss of $54 million in revenue, a relatively minuscule amount for the $5 billion-per-year gaming industry.

“There's nobody there that is at death's door. No one has liquidity problems that will push them over the brink,” she said of the deep-pocketed casinos.

Pedreira also downplayed any negative impacts in the investment world. Wall Street simply will dismiss the shutdown as an aberration and will continue to pour money into Atlantic City, she maintained

“There are a lot of other states that are worse,” she said. “I think Atlantic City still has a pretty stable operating environment.”

Unlike Pedreira, Casiello isn't so sure that the shutdown didn't harm Atlantic City in the investment community. He said underwriters are likely to view the city as a riskier investment, making it more expensive for casinos and other developers to borrow money to finance their projects.

“No one in the investment community was expecting the casinos to be shut down for three days,” Casiello said. “Now, it will make them a little bit leery about investing in Atlantic City. They will wonder what will happen next year.”

Billions of dollars are at stake. Harrah's, Borgata Hotel Casino & Spa and Trump Taj Mahal Casino Resort are already building new hotel towers and other amenities costing $1.1 billion. Caesars, Bally's and Showboat Casino Hotel are expected to announce major expansion projects in coming months. In addition, two separate investment groups are planning to build new casinos at the northern and southern tips of the Boardwalk.

Corbo said casinos are attracted to states that have a stable tax base, political environment and regulatory structure. New Jersey was considered a model of political and financial stability until the budget crisis shook the gaming industry and caused investors to look at Atlantic City more cautiously, he said.

“Obviously ... the casino shutdown was an episode of significant instability that will be factored into future investment considerations,” Corbo said.

Three years ago, New Jersey's investment climate was also called into question when then-Gov. James E. McGreevey unsuccessfully tried to raise the state tax rate on casino gross revenue from 8 percent to 10 percent. In a compromise with the casinos, the 8 percent rate was left untouched, but a series of other fees and taxes were imposed on the industry for a three-year period.

One of those taxes, a 7.5 percent levy on adjusted annual net income, has cost the casinos millions of dollars since 2003. But in a move little noticed by the public, the tax on net income expired in the new state budget. Legislation was considered to extend the tax, but it died, giving the casinos another win.

Price It Right

2006-06-16T05:05:00.000-07:00

"Losing" on Real Estate Price a Matter of Perspective
by M. Anthony Carr
Realty Times

When it comes to pricing your house when you’re ready to sell it, keep in mind you must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago, or what properties are listed for now. All that matters is this -- whatever the last sale price in your neighborhood of your model -- that’s probably your sale price now.

When you’re looking at what you’ll gain on the sale of your house, let’s keep it in perspective. If house prices increased year after year at 4 percent per year and then suddenly people were selling their houses for 1 percent less than last year’s asking price, would that be reasonable? If so, then when property is moving up at 20 percent per year for several years and then suddenly you have to sell it for 5 percent less than the prices last year, would that be reasonable? The challenge is when we move from percentages to dollar amounts. If 5 percent represented $5,000, most people wouldn’t blink. It’s when 5 percent represents $25,000 that sellers start to freak.

In the DC area, we were experiencing astounding rates of appreciation as a region, 20 percent from 2004 to 2005 prices. Many homeowners have experienced a doubling in property values over the last five years. The average home price is now about $540,000, according to the local multiple listing system. Now, price appreciation has subsided and is sitting at a mere 5 to 8 percent region wide (depending on where you’re standing). Sounds pretty healthy, still, right? You would think.

However, there are stories from the field on how sellers are defending their prices as if their lives depended on it. While sellers are sitting on hundreds of thousands of dollars of equity, they can’t stand the idea of dropping their price by $25,000 or $50,000 to sell it today. The house that was $260,000 in 1999, is now selling for $569,000 today. But some sellers now want that same type appreciation and can’t imagine selling it for less than $589,000. Bringing it down the $20,000 or $40,000 to sell the property seems, well, just not fair.

What’s even scarier are the agents who are defending their prices in a correcting market. I have to keep in mind that nearly half the agents in the country (as well as here in the Capital region) were not in business five years ago. They’ve just now entered a market where prices have to be corrected, dropped -- improved, as it were.

However, as I talk with agents around the region about their listings, they’ll be the first to let you know, "It won’t sell for what the seller’s asking," but they’re too afraid to tell the seller the sobering news.

The market is like playing Russian roulette. Sometimes you don’t know what you have until you pull the trigger. Somebody needs to blink. Sellers seem to be saying to buyers, "I’ll drop my price, just make an offer." While buyers are blankly replying, "I’ll make an offer, just lower your price."

It’s this stalemate that has played a part in creating an abundant supply of houses on the market in the DC area. We’re talking upwards to 200 percent more homes on the market in any given year-to-year comparison. And, folks, after a dearth of homes in this area, it’s a good thing. Is it affecting prices? Sure thing. Will prices come down? Absolutely. Are sellers going to lose money? Well – in some cases.

For sellers staying in the same area, keep in mind, if you have to drop your price by 5 percent, then the seller of the house you’re buying (usually a lot more expensive) is probably doing to drop the sales price by about the same percentage point. It means that while you may "lose" money on the sale of your home, you’ll more than likely "gain" it on the purchase up.

Keep in mind, the market is the market. When it’s time to buy, buy. When it’s time to move, then sell. Work with the market you’re in, not in the market you wish it would be.

Published: June 16, 2006

Housing Industry

2006-06-13T09:53:00.000-07:00

IBISWorld: Outlook for U.S. Housing Industry
RisMedia

Business information analysts point to a two-year housing market slowdown followed by a gradual rebound

RISMEDIA, June 13, 2006—The U.S. housing industry—developers, builders, Realtors and others—may understandably view National Homeownership Month (June) with mixed feelings. Yes, the housing market has enjoyed a sustained period of high demand and high prices in many parts of the country, but now the tide is turning.

Indeed, new indicators, including the increasing inventory of unsold homes languishing on the market, point to a rapid cooling of the U.S. housing market in many once-hot areas.

Detailed market analysis recently published by business information analysts IBISWorld (www.ibisworld.com) underscores the trend and points to a two-year housing market slowdown followed by a gradual rebound.

Snapshots of the nationwide outlook for various components of the U.S. housing industry:

SINGLE FAMILY HOUSING CONSTRUCTION: The value of single-family housing construction is forecast by IBISWorld to decline by -4.9 percent in 2006, and -5.6 percent to a cyclical trough at around $380.3 billion in calendar year 2007 (in constant 2005 prices). The number of single-family housing starts is also projected to decline over the short term to a cyclical trough at 1,520,000 units in 2007 (-11.4 percent over two years). Industry revenue is forecast to decline roughly in line with the value of new housing construction, falling by -2.7 percent in 2006, and -4.2 percent to a cyclical trough of around $340 billion in calendar year 2007 (in constant 2005 prices).

MULTI-FAMILY HOUSING CONSTRUCTION: The outlook for the multi-family housing construction industry is for subdued cyclical growth in revenue averaging 1.5 percent per annum to December 2010, lagging well behind the projected pace of US GDP growth of 3.0 percent per annum, but corresponding with the projected weak average growth in the value of new multi-family housing construction, and the volume of multi-family housing starts.

LAND DEVELOPMENT: The land subdivision and land development industry is forecast to record subdued revenue growth averaging 1.5 percent per year to December 2010. The weak growth profile stems mainly from the projected downturn in the housing construction market and a more subdued pace of growth in residential property values.

RENTALS: IBISWorld forecasts slow real growth in gross rents received by lessors of residential buildings and dwellings. Investment returns from rental housing will be adversely affected by several factors, including: slow or negative real growth in capital values over the outlook period (following a period when capital values grew at a rapid rate); relatively high rental vacancy rates; and a rise in interest rates.

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

Questions and Answers

2006-06-13T09:49:00.000-07:00

Ask George & Chuck: Questions from Consumers
Realty Times
by George Stephens & Chuck Jacobus

Question: I had mentioned to my neighbor (she is also my friend) that my house will be on the market by the end of the year. She has expressed an interest in buying it for her elderly mother. My friend would continue to live in her house while her mother would live next door.

Are there any special precautions that I need to take before this transaction actually comes to fruition? Since I wouldn't necessarily need to contact a Realtor, how would the appropriate paperwork be drawn up as well as other necessary requirements whatever they might be?

Answer: Unless you have a great deal of experience in buying and selling real estate, we suggest that you hire a Maryland real estate licensee that has a verifiable reputation in the marketing and successful sales of homes in your area. You could also hire a real estate attorney but the attorney will most likely be more useful in telling you which forms need to be used and what disclosures you need to make whereas a real estate licensee -- as we've described in the previous paragraph, should be able to provide you with the forms and disclosure information as well as important marketing advice and reports such as the best price to ask for your home in the current market, for only one example.

You appear to have a good and justifiable plan for the sale of your home to your friend. And that is exactly why you should have an objective representative who is bound by law to represent your best interests, such as a real estate licensee. Your home is a valuable asset. It is the most valuable asset most people own. However, when two friends get involved in a real estate transaction, it is our recommendation that both be represented by real estate licensees.

Friends tend to trust each other too much and let too many things be overlooked. It isn't a bad thing, just sloppy business procedures that can dissolve friendships quickly.

Question: Do you answer questions regarding issues outside of Texas?

Answer: Yes. If you read the Houston Chronicle, or TexasRealEstate.com, or some other website in which we appear, check out RealtyTimes.com. It contains article written by us but that are completely different and original content.

Once there, select "About Realty Times" then select "Our Columnists" from the drop-down menu. Ask George & Chuck is the first grouping in the left-hand column. When you select it, you can open a list of the articles we've published. They are usually scheduled for publication on Realty Times the second and fourth Tuesday of each month.

Question: I am currently being charged for hazard insurance through my escrow that is rolled into my mortgage payment. I also have a comprehensive homeowner's policy that I pay separately. I do not live in an area that would require extra insurance (flood). Do I need both? I was not aware I should not have both until I found out from a friend that just bought a house. Thanks for your help!

Answer: Some of what you stated in your email to us does not make sense, unless you have two different insurance companies and one of the policies is being paid out of your escrow account and the other you are paying directly. If that is the case, you need to communicate with the agent or agents representing the insurance companies and inform the insurance company because you are being charged for double coverage. However, before you do that (since we believe you are not being charged double), please read on.

We need to make sure you understand and are using the correct terminology to describe the different types of "insurance" policies, as follows:

Title Insurance: Owner's (or mortgagor's) Policy -- Usually a one-time fee paid by either a buyer or the seller (and in many cases by the seller) to make sure there is an unbroken chain of title to the property you purchased which enables the Title Company to issue a Title Insurance Policy to the purchaser (you) guaranteeing good and marketable title;

Title Insurance: Mortgagee's (or lender's) Policy -- Usually a one-time fee paid by the buyer that guarantees the lender that there is an unbroken chain of title on the property against which the lender is loaning the buyer purchase money;

Mortgage Insurance (also referred to as PMI, MI, or Up Front MI depending upon the type of loan) -- This is an insurance policy that a lender may require when a down payment is less than 20 percent of the purchase price, that guarantees the lender against a default by the purchaser (you);

Homeowner Insurance -- Covers various hazards such as fire, wind, hail, theft, etc. It is sometimes called a "Comprehensive Policy;"

Flood Insurance -- This is a policy that provides coverage against rising water only and the premium is based upon the official flood zone map.
In most cases, if you are paying a Comprehensive Homeowner's Insurance Policy yourself, then the insurance the lender collects through your escrow account is Mortgage Insurance. Flood Insurance can be required by your lender if you are in a flood-prone zone according to the official flood zone map, or you can choose to have this insurance, which is a good idea. Either way, you can pay it through your escrow account or you can pay it yourself. Your closing or settlement statement (identified as a HUD-1) will list all the charges to your side of the statement (the left side) that were paid by you when you purchased to property.

We therefore recommend that you communicate with the insurance agent who represents the company you are paying on your own to check what insurance policies you have in place and whether or not you are paying Flood Insurance.

Question: I apologize in advance if you have already answered a question of this nature. My husband and I recently purchased some land 1/2 mile up the road from where we live now. The school district was essential as we didn't want to change where our kids were already going and we are both graduates of the district.

Now, we are almost finished with the building of our new home and find out the listing was incorrect and we are in a different school district. After contacting the listing Realtor, he apologized for the error, and explained that he knew the correct school district and didn't know why he listed it wrong. He offered for us to finish building and then he would discount his commission and sell it for us.

It just doesn't seem adequate as we've worked very hard towards this dream and designed the house ourselves. I know you don't give legal advice but can you just tell me if this is a common occurrence? And how it is usually dealt with? I have contacted a few attorneys who don't seem to have experience with this. Our kids are middle-school aged and active and settled with their current district and friends.

We never would have bought this property had it been listed correctly and feel there must be something in place to protect us from this kind of thing.

Answer: There are at least two schools of thought on how best to deal with this situation:

That is the type of error an Errors & Omissions insurance company usually handles. The Listing Realtor from whom you bought the land should have E & O coverage, but if he does not there is a chance that his business insurance policy may have applicable coverage. Either way, you need to contact a Missouri Attorney who is experienced in litigating real estate matters. If you do not have an attorney, check out the Missouri State Bar Association's website at mobar.org.

One of the problems you are most likely going to encounter is the proximity to your existing home and the land that you purchased from the Realtor being only 1/2 mile up the road. Said another way, if it was so important that your children remained in the same school district, why did you not check out the location of the unimproved land with the school district before you purchased it?

We believe that the listing agent clearly misrepresented the school district issue according to your allegations, so you really did not need to question beyond that. However, the listing agent also offered a compromise that was not unreasonable. You could very well suffer no economic loss other than the time in selling this property and buying another. A settlement is almost always better than the expense of protracted litigation. However, make sure you get this listing agent to commit to his agreement with you in writing. Make sure you take into consideration all of your expenses in connection with the listing agent's error.

The advice that goes with both recommendations is to: 1. hire an attorney; 2. remain in your existing home if you can (or rent a temporary home in the correct school district if you cannot); and, 3. have your attorney speak with the listing Realtor who sold you the land, to work out the details of any compromise agreement that might be available to you. However, you should probably inform the attorney that you are not seeking protracted litigation.

Published: June 13, 2006

Baby Boomers

2006-06-10T16:10:00.000-07:00

Baby boomers investing in real estate
Prosperous age group sees additional property as a good investment.
By Julie B. Hairston

THE ATLANTA JOURNAL-CONSTITUTION
Saturday, June 10, 2006

ATLANTA — Like many empty nesters, Dennis and Julie Doll have inaugurated their post-child-rearing, pre-retirement years by buying a house more suited to their current and future needs.

Thinking ahead to the next stage in their life, empty nesters Julie and Dennis Doll bought a house in Georgia surrounded by 1 acre of wooded land. Others like them are buying condominiums.

"My wife's mother has knee problems and couldn't come visit us in our last home," Dennis Doll said.

Now making up 42 percent of all U.S. homeowners, baby boomers such as the Dolls have become the focus of the 21st century housing market. In a recent Harris Interactive survey, the National Association of Realtors has been measuring the desires, habits and plans of these homeowners between the ages of 41 and 60.

The generation that sang rock anthems about getting back to the land has done it in a way most did not initially envision.

The rural communes of their youth have evolved into sleek, amenity-packed urban condominium communities. Beach and mountain homes now satisfy their taste for back-to-nature security.

Awash in a lifetime of earnings, equity and inheritance, millions of baby boomers are investing their futures in real estate.

The 77 million U.S. baby boomers are now in their peak earning years, with the survey showing they account for 55 percent of American households with more than $100,000 in annual income.

In addition, many anticipate becoming the recipients of significant inheritances from their thrifty Depression-era parents during the next 10 to 15 years.

The Realtors' survey shows that as many as a quarter of America's baby boomers now own more than one piece of real estate. That's almost 20 million buyers for second homes and investment properties.

Ten percent of the boomers surveyed said they expect to buy or sell real estate in the coming year. If that sample holds true throughout the age range, it would generate almost 8 million sales over the next 12 months.

Robert and Joan Tufts, both 56, are among those second-home owners expecting to complete the transition from their current location to their favorite vacation locale — permanently and in the not-too-distant future.

Although their primary residence is in an Atlanta suburb — a home they downsized into after their last child moved away — they now split their time between there and a beachfront condo near Sarasota, Fla. The Tuftses also have bought a single-family home in the Sarasota area, where they plan to live full time after Robert retires.

"We found something we liked in November and used our equity out of the condo to put a down payment into the house," Joan Tufts said. "A lot of people we know here are doing that."

The movement of baby boomers such as the Tuftses and Dolls to new homes for their current stage of life — and the purchase of possible retirement homes that often begin as vacation retreats — is a significant driving factor in today's real estate market, said Paul Bishop, the National Association of Realtors' research manager.

"Because there are so many baby boomers in the leading edge (of the age demographic), buying vacation homes is going to be a pretty strong part of the market," Bishop said.

The survey also shows that boomers, who have ridden the recent real estate price surge into prosperity, see such purchases as part of a sound financial strategy.

All but a paltry 4 percent of the survey respondents see homeownership as a good investment.

Real Estate Questions and Answers

2006-06-09T06:20:00.000-07:00

Ask Realty Times
Realty Times
by Peter G. Miller

Question: I own a business and currently have it on the market. My broker had an offer on the place which I agreed to. The expiration date on the buy and sell agreement came and went and I learned it was my broker that was the buyer. He formed his own LLC corporation and put it down as the buyer. He never placed the money into the escrow account. My property was tied up for months. I call his office and visited his office and he is never available. What can I do?

Answer: If what you say is true, if what you say can be verified, you should immediately contact real estate regulators. Be sure to hold onto all written offers and other documents. Regulator contact information can be found at ARELLO.com.

In most jurisdictions, if not all, a broker has an obligation to disclose any personal interest in the purchase or sale of a property. This disclosure requirement routinely extends beyond the broker directly.

As an example, Maryland real estate regulators say that a "licensee may not acquire an interest in, or purchase, personally, for any member of the licensee's immediate family, for the licensee's firm, for any member of the firm, or for any entity in which the licensee has any ownership interest, property listed with the licensee or the licensee's firm without making the licensee's true position known to the listing owner. In selling or leasing property in which the licensee, the licensee's firm, or any member of the licensee's immediate family or the licensee's firm has an ownership interest, the licensee shall reveal that interest in writing to all parties to the transaction."

In the case of a home that a broker has listed and then wants to buy, the broker may have inside information obtained in his role as a listing agent that would not be available to an arms-length buyer.

Moreover, the broker helped set the price and terms of the sale. The potential for conflict is enormous.

As to deposits and such, the purpose of a deposit with a buyer offer is to protect seller interests. Most jurisdictions have strict rules regarding escrow funds.

Lastly, when a broker lists your property he is your agent. If he is also buying the property he plainly has an adversarial position.

Brokers should be allowed to buy properties, including in certain circumstances properties they originally listed. However, in such instances it is necessary to assure that a seller has separate and independent representation as well as full and proper disclosures.

Question: How do I find what area in my city is the most attractive to home buyers?

Answer: You might check two numbers with local brokers: First, how long do homes remain on the market in various neighborhoods. Second, what percentage of asking prices are actually received by sellers.

Question: I have a problem with a title company that I used to close a house. After three written letters to the company they're unwilling to resolve an issue that they should correct.

Answer: Did you send your letters by certified mail with a return receipt? That may help.

There are two steps you can take. First, you can have an attorney review the matter and then send a "demand" letter if appropriate. Second, you can file a complaint with your state insurance commissioner.

Question: I placed my home on the market about 60 days ago at $539,000 with a broker. At the time I spoke with a reputable appraiser who indicated that this was appropriate. We dropped our price twice and it's now at $515,000. We have only had a few walk-throughs in the last 60 days. Good feedback on look and price -- just not the right house for each.

My broker has indicated that this price range in this area is a very tough one right now. How do I know if this is true or not?

Answer: If the broker was wrong the house would have sold.

Your situation reflects a reality in many markets: Homes are taking longer to sell and as they remain on the market longer, prices are moderating. In the context of your sale, the asking price has fallen less than 4 percent and that's hardly unreasonable.

Your feedback has been good, so what you really need is more traffic. Speak with your broker about the next steps which need to be taken that would be most effective in your marketplace.

Question: What should I do if a seller refuses to move out? Escrow closed in April. We let her stay in the home as part as escrow agreement for 30 days after escrow closed. We extended that till the end of May. She still will not leave. What is our next step?

Answer: It's your property. Charge rent on a daily basis -- and have the rent increase 10 percent each day. Then take the seller to small claims court to collect. However, if you're in a community with rent control charging "rent" may set off certain requirements that you want to avoid. Speak with a local attorney for details.

Question: I'm planning to build four duplex units. As interest rates are rising, I'm trying to get an accurate picture of the local rental market and what a realistic rent expectation should be. This is needed as I want to compare the information to my financial costs, construction, taxes, insurance, fees etc.

How do I conduct an analysis?

Answer: You're best investment option is not building four duplex units anytime soon. You lack the most basic information needed for investment decisions. If you were to start such construction at this time the probability of success would be just about zero. Put another way, you would be chum for marketplace sharks.

If real estate investing is of interest, then you need to learn the game. The easiest way to start is to get a real estate sales license so you can get the basics. Local real estate brokers can tell you more.

Question: My vacation home is part of a large number of homes 'For Sale' in my community. It's a buyer's market. I'm hoping to take advantage of the summer market to make a sale. My home is listed with a broker, but is there is anything that I can do on my own to display my property on as many other venues as possible, for instance the Internet?

Answer: When you retained a broker to sell your home that individual must have presented a marketing plan which would be appropriate for your community and your specific property. In this era, brokers routinely post homes online with MLS systems, their web sites, their broker's website, perhaps their franchise and in other ways. Also, when homes are advertised in local newspapers and real estate guides, such ads also appear online.

Most probably the best thing you can do is to review the marketing plan with your broker to assure that all promised promotions are underway and to keep the house clean and neat in case would-be buyers drop by with little notice.

Question: We recently signed a contract to purchase an existing home for $236,000. The appraisal came in at $226,000. We have already paid the $100 offer fee, the $300 appraisal fee, the $75 pest inspection fee, the $200 home inspection fee. If we now back out of the contract because of the low appraisal what are our liabilities? Will the seller have the right to sue or demand damages?

Answer: You need to read your sale agreement. Does it require that the appraisal must equal or exceed the sale price? If yes, what you have is a contingent agreement -- and the appraisal was not satisfactory.

If you did not have an appraisal contingency does the agreement say that you will obtain a certain level of financing and only put so much down? If the property does not appraise for the sale value then you may not be able to get the financing required by the agreement. In effect, the financing requirement may offer another contingency.

All of this is conjecture, however, You need to have an attorney look at the sale agreement to determine exactly what it says -- and does not say.

Question: I bought an expensive house ($1.3 million) with the typical disclosure statement from the owner (all items checked "no"). I also had a home inspection. After closing and moving into the house, we discovered it had significant rot on dormers and chimneys and that the asphalt shingle roof was at the end of it's life expectancy after only 14 years old. A missing chimney cap was replaced but there was no mention of rot on the chimney facing. The owner was older and probably was never on the roof. The inspector was older and didn't go on the roof, but looked at it with binoculars! The estimate on repairs including new shingles is over $25,000. Any suggestions?

Answer: Seller disclosure forms are useless because owners in good faith often do not know the answers to various questions. The use of a home inspector was a good idea. The age of either the seller or the inspector is irrelevant, the important measure is capacity.

The question to be asked is whether the inspector's use of binoculars is a standard and reasonable practice in your jurisdiction. Was it the inspector who recommended replacement of the chimney cap?

How was the rest of the damage detected? Did the inspector recommend a physical inspection by a roofer?

Before going further, it seems unusual that a 14-year-old roof would need replacement. At the very least, have another roofer take a look and give you an estimate. You may get a different result -- and you may discover that your inspector was right.

Question: My loan was sold but I was never notified. Nothing. What can I do?

Answer: The fact that your loan was sold is not an issue -- lenders have a right to sell loans. However, they also have an obligation to make sure that you know where to send your payments and that accounts are properly kept. As well, the loan terms cannot be changed by the new lender.

Under RESPA -- the Real Estate Settlement and Procedures Act -- if you send a full and timely payment to the old lender then the new lender cannot charge a late fee or other penalty for 60 days. Since there are penalties for lenders who violate RESPA standards, most lenders will do what they can to assure that you're able to make payments to the proper address.

If you have questions or concerns, contact the new lender by certified mail with a return receipt requested. If that does not work, contact the consumer affairs office of your state attorney general.

Seller Information

2006-06-09T06:15:00.000-07:00

Pricing Right Sellers' Job No. 1
Realty Times
by M. Anthony Carr

It seems during a slowing market, the last person to get the message that the house needs a lower price is the seller. After all, the seller has the most to lose by "improving" the price and it's a tough decision to let go of a dream of cashing out.

A sellers market builds over time. If new jobs enter a particular area and housing doesn't keep pace, home shortages create a sellers market where prices increase and bidding wars begin. Then, one of two events happen to make a market cool down: the economy stops growing or prices become too expensive (combined with an ample supply of rentals). A normalized/buyers market is born and sellers need to get on board or hit the showers.

In the Washington, D.C. area, jobs are continuing to enter the market at a projected rate of 65,000 in 2006 (which is on top of more than 70,000 new jobs in 2005). According to the Center of Regional Analysis at George Mason University, the area has a deficit of housing by about 160,000 units. With plenty of rentals available this past year and skittish buyers, the area has just come off one of its hottest markets ever. It's cooled, slowed, normalized.

When people ask if it's crashing, I just point out that if you were driving at 120 mph and slowed to 75 mph, how would it feel? The lower speed limit may seem a lot slower, but it's still faster than the speed limit. We're running at that fast, but slower pace, now.

Nevertheless, as inventories grow and days on market increase, those in the business know what will sell a house more than anything else -- a price correction. Call it "reduced," "price cut," "realignment," "price improvement," "repositioning," or whatever you want -- the price needs to come down to where the buyers are biting.

I've collected quite a few excuses that sellers and some agents hold onto, instead of biting the bullet and bringing down the price.

"My house is worth it." Well, according to who? Usually, this statement is followed by a shopping list of items that have been added to the house: hardwood floors, 9-foot ceilings, new appliances, upgraded bath/kitchen, you name it. Yeah, your house is unique, just like everybody else's. The reality is while your house may have all those neat amenities, so do the other dozens, scores or hundreds of homes in your market area that are also on the market.

"It's a great looking house." It better look great if it's going to beat out the competition. Location, price and condition will always be a factor in any market. It may look great, but looks have nothing to do with real value. When you start thinking that your house pales all the competition it means one thing you probably haven't seen other houses like yours on the market.

"I have to get this much or I can't sell." Oh, I really like this one. What a seller needs doesn't matter to the buyer. The buyer is looking for as much value in a community of high-priced houses. In the DC area, the average price lingers around $550,000. For that price, many buyers want the house to look good, have plenty of amenities and be connected with a realistic seller who is motivated.

"If I can't get my price, then I'll take it off the market." My question to that statement is: "Then why are you on the market to begin with?" Look at what it's going to take to sell your home and realize your true goal -- getting that next property. Looking at only what your house will draw is too short sighted. The real question is, "What kind of deal can I get on the next house?"

The reality of most sellers, when they are dropping the asking price, is that they are still walking away with a boatload of money, just not as much as they wanted. They really haven't "lost" anything. They've doubled their gain. When pricing your house, look at these hard-core realities: what were the last few "solds" in my type of home; what is my true goal -- to get a certain amount of gain, or to get to the next house; and, finally, am I really in the game or am I playing around? Get serious. Price right. Get the next home of your dreams.

Published: June 9, 2006

Home Sweet Home

2006-05-10T05:30:00.000-07:00

Simple Ways Your Home Can Make You Money
by Diane Kennedy - Realty Times

Is your house an asset or a liability? Does it put money in your pocket or does it take money out? If you're like most homeowners, you might view your home as your biggest asset. Yet, it doesn't create cash. It takes cash. As time goes on, the value (hopefully) increases and you pay down the mortgage loan, so that your equity increases. That's how your house acts as an asset.

There's more that your home can do for you. In fact, there are three great ways to have your home start paying you, instead of the other way around. We call these "home loopholes;" the tax loopholes that the government wants you to use. A tax loophole is actually a government incentive to promote public policy. Follow the rules, and you'll put more money in your pocket and still be able to sleep at night.

Home Loophole #1: Home office deduction

The home office deduction is one of the most misunderstood tax loopholes. There are three rules to get this deduction:

You must have a business.

You must have a space in your home that is used exclusively for the business.

You must regularly do some kind of business activity in that space.
That's it. You don't need to have a separate entrance or see clients in your home office, but you need to do some sort of regular business activity (phone calls, emails, filing) in the space. You can have another office and still take the deduction for your home office. This space can be a spare room or even the corner of a dining area. Now, let's go through these three requirements in a little more detail.

If you receive a Form 1099 as an independent contractor, you have a business. If you have a part-time activity in which you make money (or in which you plan to someday make money), you have a business. Face it, if you're spending your time working, even if it's part-time, as a real estate agent, you have a business.

The home office deduction is calculated as a percentage of the business square footage of your home applied to the total square footage. In other words, if your home office is 200 square feet and your home is 2000 square feet in total, then 10 percent (200 divided by 2000) of your home expenses are deductible against your business income.

Home Loophole #2: Move

If you live in your home for two of the previous five years, you can take a capital gain exclusion of up to $500,000 if you're married, filing jointly and $250,000 if you're single. Chances are you've heard that strategy before, but had you ever thought about making it your career?

One of my clients will buy a fixer-upper property, fix it up, live in it for two years and then sell it for a gain. Kurt made $110,000 after all expenses on his first home like that, after living in it for 2 years. Remember that's tax free. Now, how hard would you have to work in order to put $110,000 after tax in your pocket after two years? Well, Kurt makes that much simply by moving.

Home Loophole #3:

Combine #1 & #2 for best of all worlds! Maybe you've heard one of the tax myths that states that having a home office is bad because you pay tax when you sell your house. That's completely untrue! In fact, you can have a home office and take a deduction for it every year you own your home. Then, when you sell the home, you can still take advantage of the tax free gain exclusion.

You have a choice with your home -- you can pay for it or it can pay you. Home loopholes make all the difference.

Published: May 10, 2006

No Cost Mortgages

2006-05-10T05:28:00.000-07:00

No-Cost Mortgages Are Coming
by Lew Sichelman - Realty Times

At least one major lender has a totally no-cost loan on its radar screen.

"We talk about it quite a bit," Bank of America's Floyd Robinson told a gathering of the country's real estate writers meeting in Charlotte over the weekend. "I know it's a revolutionary change, but I truly believe that's where the market's going."

Robinson, who is president of consumer real estate and insurance services at Bank of America, said the myriad of closing costs and fees now attached to home loans only serve to confuse borrowers, and promised that the bank's no-fee loans would have the same annual percentage rates at those with fees so borrowers could readily see there would be no hidden charges.

He also said the big Charlotte-based bank is considering offering to refinance its customers' mortgages without charge. "All they'll have to do is call the servicing department and it's done," he said at the National Association of Real Estate Editor's annual conference.

Bank of America, which began to waive lender fees on most mortgages a year ago, thinks it has enough economies of scale and clout with service providers to offer no-cost loans, an executive with bank said. But even if the bank has to take a loss to originate such a mortgage, he explained, it will be worth it to get customers in the door so it can start building banking relationships with them.

Last May, the bank introduced its Mortgage Rewards program, which re-engineered the lending process and promised to knock about $2,000 off the cost to close a $200,000 loan. The savings is higher or lower, depending on the amount of the mortgage, the location of the property and other borrower choices.

With Mortgage Rewards, Bank of America waives the origination, application, lender closing, appraisal, flood determination, tax service, credit report and courier fees. Borrowers also receive a $200 credit on their closing statements, and a one-year insurance policy that "cancels" up to six principal and interest payments if the borrower loses his or her job involuntarily and wipes out the balance altogether if the event of accidental death.

The program is available on most conventional and jumbo products offered by the bank, covering the purchase of both primary and vacation homes.

"There are no gimmicks," the bank's Eric Telljohann said at the time. "We encourage customers to shop around and compare (our) APRs (annual percentage rates) with that of other lenders."

Earlier this month in Charlotte, Robinson said national banks like Bank of America are the "most driven" of all lenders to give borrowers the best products. "We're not in the mortgage business to collect an origination fee, or only to generate repeat business," he explained. "We want to serve all of our customers' financial needs."

The executive said that by the end of next year, banks will be offering free refinancing, bundling their products to save borrowers time and money and making "truly no-fee mortgages."

"These will be revolutionary changes," he told the journalists. "The needs of American home buyers are driving us to make these changes. They'll be the winners, just as they should be."

Published: May 10, 2006

First Time Home Buyers

2006-05-03T19:05:00.000-07:00

Tips for First-Time Home Buyers

By Salvatore Caputo
Bankrate.com

Buying a home for the first time can be scary, but as with anything else in life, the right preparation brings about good results. Remember, the right home for you is one you want and can afford.

Step 1: Ask yourself if you're ready.

You need to decide whether you're financially ready to buy a home, says Connie Barbosa, vice president and branch manager of Slade's Ferry Bank in Somerset, Mass. She suggests first-time buyers ask themselves some simple questions:

Do you have a steady job and income?
Do you plan on remaining in the same area for a few years?
Do you have enough money set aside for your down payment and closing costs?
Do you have an emergency fund?
Do you live within your means, avoiding credit card debt?
Another consideration is whether you're mentally prepared for the responsibility, says Charles Glass, a real estate agent who sells in the Washington, D.C.-Maryland market.

"A first-time home buyer is probably used to renting," Glass says. "They've got to get used to budgeting a little differently in terms of having a reserve when things go wrong. And whether it's a new home or an old one, things will go wrong. Experienced homeowners know this. First-time buyers don't."

Step 2: Find out what you can afford.

When you're sure you have the right mind set to be a homeowner, it's time to determine how much house you can afford. Probably the best way to do that is to get pre-qualified for a loan. In fact, some real estate agents won't work with someone who is not pre-qualified.

There are three options for pre-qualifying: go to a lender with whom you have already established rapport, find a real estate agent you trust and follow the agent's recommendations for a lender, or research lenders online.

Glass says the first option is the best because "if you've built a relationship with a lender, they will go to extra lengths to make sure they qualify you for the loan."

Your total monthly mortgage payment -- principal, interest, taxes and insurance (or PITI) -- should not exceed 32 percent of your monthly gross income, Barbosa says. The U.S. Department of Housing and Urban Development (HUD) suggests that figure should be 29 percent. So this is not an exact science. You can calculate a ballpark figure from this information, but then talk to your lender to get a better feel for how much flexibility you might have with different lending arrangements.

According to Bank of America's Consumer Real Estate Group, you should find a lender that offers "first-time buyer options and financing ideas that take into consideration your personal situation. For example, many first-time buyer mortgage programs require only a low down payment or even no money down. If a down payment is required, you may be allowed to use 'gift' money from family members and other sources. Some first-time home buyer programs feature no closing costs. There may also be down-payment assistance programs available in your community."

Remember, the bigger the down payment, the less you're borrowing, and the less expensive your mortgage will be in the long run.

HUD offers programs to help first-time buyers, too.

Step 3: Find out what's available

Now it's time to decide where you want to live and research what types of housing are available -- one-story single family, condos, town homes, etc. You can get an idea by looking at ads and driving around the community before you ever call a real estate agent, Glass says. In fact, he prefers clients who have done some research.

In searching for an agent, find one who makes you feel comfortable and, more importantly, one who listens to you, Glass says.

HUD points out that it's traditional for the real estate agent to represent the seller's interests, although most state licensing laws require them to treat the buyer fairly. Laws regarding the relationships between real estate agents and clients vary from state to state and buyers should be aware who your agent is working for.

Step 4: Choose a neighborhood.

Once you know the housing stock, you can look at specific neighborhoods. Cruise by at night time to see whether you get a "vibe" that it's a safe neighborhood. If you have children, you'll want to check out the quality of the schools. You may want to check out what types of large-scale facilities (airports, highways, chemical plants, etc.) are nearby, and whether you're convenient to shopping, work and schools. You can do much of this independently, but you can also ask your agent to help you find sources of information about such things.

Step 5: Define your house and find it.

Now, you can narrow down the features you want in a house. Do you want an energy-efficient model? Do you want two stories, a basement, a bathroom downstairs or a large back yard? You may not find a unit with every feature that you want, but this will help you to define what's most important for you, Glass says.

When you've found a house that has your most important features, is in the right neighborhood and is affordable, you're ready to buy.

Step 6: Do a home inspection.
HUD recommends that an offer should be contingent on a home inspection. As the buyer, you cover the cost of the inspection. If you're unsatisfied with the results, you may ask the seller to pay for certain repairs or to lower the price, or you may decide to walk away from the deal.

Reggie Marston, a home inspector who can be seen regularly on HGTV's "House Detective" program, says home buyers should have an inspection done regardless of the age of the home and should interview several inspectors before hiring one.

"A home inspection should uncover defects that could become very costly to repair after (buyers) assume ownership," he says. "It will also uncover safety issues, water infiltration issues, roof problems, structural issues, etc.

"A first-time home buyer should start interviewing home inspectors before or at the same time they're interviewing real estate agents and mortgage lenders. Normally, real estate contracts only allow three to 10 days for a home inspection after acceptance of the contract and that doesn't allow the purchaser adequate time to find a qualified home inspector."

Step 7: Shop around for homeowners insurance.

Your lender will require you to carry homeowners insurance. Such insurance comes in many flavors, so it's a good idea to search for a policy that meets your needs for protection while being easy on your pocketbook. Access insurance information that is appropriate for your state. Many states provide data on typical rates charged by insurers, as well as information on the frequency of consumer complaints against a company.

Step 8: Negotiate.

Once you've found the house you want, you should make an offer that's lower than the seller's asking price. The seller expects this and will likely make a counter-offer. You have to decide before you start negotiating what your make or break point is, and stick to it. Just be reasonable. Don't expect the seller to give you a 50 percent discount on a good property.

Step 9: Closing.

In a number of states, it is customary for each party to have an attorney review the closing papers and to be present at closing. Whether that's the custom in your state or not, it's a good idea to hire your own attorney to review the documents to be sure that your best interests are represented in the paperwork. You'll foot the bill for your own attorney.

Step 10: Move in.

You've done all the homework and bought a great home. Enjoy it.

Designed to Sell

2006-04-16T06:34:00.000-07:00

Designed to sell
Details count when putting home on market
Daily News Journal
By NANCY DE GENNARO
degennaro@dnj.com

If you're in the market to sell your home, it's going to take more than putting a sign up in the yard. You're going to have to be committed to selling it.

"Before you put it on the market, you want a clean carpet, furniture and curtains. You want it to look nice," said Alfreda Smithson, a realtor with Re/Max Elite in Murfreesboro.

With a little time and lots of elbow grease, you can clean the grime and clear away years of dirt and dust. So roll up your sleeves and get to work.

Deep clean

First you have to start with an initial cleaning, then maintain the appearance as long as your home is on the market. Of course, don't forget the basics: clean carpet, curtains and furniture (upholstery).

"It has to sparkle from top to bottom," said Debbie Bailey, a Realtor with Snow and Wall in Murfreesboro.

From the cobwebs in the corners to the fuzzbunnies on the ceiling fan, clean everything you can possibly think of, said Bailey.

"They're looking at the house, but they are (also) looking at how the people live," said Smithson. If someone sees you keep everything clean, they know you've taken care of things around the house.

"Make sure the stove and microwave are clean," warned Smithson, who added, "and don't throw your dirty stuff in the stove, because they will open it."

People will open just about any drawer and door in your home, so be prepared by cleaning everything as well as possible. You also want to make sure all those doors and drawers work properly. If not, you may need to replace them, noted Smithson.

Day-to-day clean

Bailey offered tips to keep in mind each day: Keep the litter box changed and pet food bowls neat; make your bed, put away clothes and wipe down counters; clear out the kitchen sink and put dirty dishes in the dishwasher; be sure all electric appliances are put away, especially in the kitchen (blenders) and bathroom (hair dryer).

Walls

A fresh coat of paint goes a long way, although Smithson said "you need to go with a neutral paint all over because everything goes with neutral."

Don't overcrowd your walls. You'll have to patch up those nail holes at some point anyway, so the less holes you have to deal with, the better. The pictures you do have, keep them hung at eye level, noted Smithson.

Some Realtors also suggest taking down family photographs all together so the potential buyers can associate the house itself as being a home — their home, not yours.

Declutter

You don't have to take down all your knickknacks, but you definitely want to "keep it simple," said Smithson.

You'll also need to clear out those stacks of magazines, piles of newspapers and mounds of junk mail.

Decluttering may also mean clearing out bulky furniture pieces or shifting items to other rooms.

"If you don't have good walkways and paths (through the home), that makes (the potential buyer) immediately think the house is too small for them," said Bailey. "What you want to do is open up the house and make it look bigger, so less is better."

Clean out your closets, too. Pick out old clothes you haven't worn in years and either give the items to charity or pack away. Have a yard sale and get rid of those items you haven't used in years.

Outside

Curb appeal is key because you want the first impression to be good. Oftentimes people know before they even walk inside a home whether they will be interested.

"So keep your yard mowed, your walkway clear, your bushes trimmed," said Bailey.

Paint the exterior trim, such as the wooden railings on the porch, and be sure to look closely in case there is rotted wood you need to replace.

Pressure-wash the exterior to get rid of mold and mildew stains, and pressure-wash your sidewalks.

If you have a bit of rust on some of the exterior fixtures, sand away the bad part and touch up with gold metallic paint, suggested Smithson.

Don't forget to clear out clutter and trash underneath your deck, too, said Bailey.

Keep landscape simple. If weather permits, you might want to plant a few colorful flowers.

It's show time

When you know your home is going to be shown, leave. You also should turn on all the lights and open up the blinds to make the house seem "lighter, brighter and cheery," said Bailey.

Especially for an open house, keep fresh flowers can add a nice touch on tables and countertops.

Keep some sort of aromatic plug-in going on, but nothing floral, warned Smithson, who explained that many people might be allergic. Generic scents such as vanilla work best and give the house a homey feeling. For an open house, try boiling some potpourri or baking cookies.

"You can tell people who prepare to sell their house," said Smithson. "If the house looks good, it will sell."

Vacation Properties

2006-04-14T06:09:00.000-07:00

Vacation Properties Come With Extra Expenses
by M. Anthony Carr

There's nothing like a short jaunt to the beach (or mountains) to release your stress, get your first seasonal sunburn and start thinking about buying a piece of vacation rental property.

Come on, we've all done it. Just when the sand is about completely shaken out of all the towels and swimsuits, you start drooling over the prospects of owning your own home on or near the water.

How difficult could it be? If it's a rather affordable area, then it's going to take care of itself as far as monthly payments are concerned, right? Twelve prime rental weeks from Memorial Day to Labor Day is just the right amount of time and income to cover the 12 months of the year, right? Keep in mind that a vacation rental property has some unique expenses that you'll not face in your primary residence.

Furnishings
Your cost of housing isn't just the purchase of the land and lot, but also everything that's in it. If you want repeat renters, then it's got to be nice -- every time. At least check out auctions/sales from used hotel furniture before heading to the new furnishings store. Some investment sales include all the furnishings so you don't have to go shopping. But remember that you're renting out a property as a place for people to relax and think about nothing -- especially about the frayed couch coverings, bad springs in the master bedroom and leaky faucet in the bath or kitchen. Your house has to compete with the likes of at least a nicely furnished and operated local hotel.

Cleaning services
In between each rental, you're going to have to have the dwelling cleaned out. Through the summer, unless you've had 12 groups of very conscientious vacationers, you're going to have to have the place shoveled out at least a dozen times. The cleaning is more than just what you would do to prepare for dinner guests. These guests are paying you $150 to $300 per day for a week of vacationing – it better be as clean as a brand new home. This means a gleaming kitchen and bath, fuzz-free carpeting, crystal clear windows and a fresh smell throughout.

Wear and tear repair
After these folks have paid you to live on a weekly basis in your home, then you've got to come in and repair what they have broken. What you're used to seeing at your home now, may not cut it in your vacation property. They expect to see near-new carpeting or flooring, meaning that if it's getting worn, it's time to replace it. Peeling paint? Repaint it. Mildew in the bath? Re-caulk it. Sun-burned or algae-covered decking? Blast and stain it. These are not necessarily inexpensive repairs, but this property is now a commodity. A commodity that you want your customers to be banging on the door each year to rent.

Utilities and Management fees
Just like your house at home, you are going to have to keep up the property. Hopefully, you've charged enough weekly rent to carry, not only your mortgage payment, but also the costs of carrying association dues, water, trash, electric and other utility costs (through the whole year, not just for the prime rental season). You'll need to keep up the exterior as well, so you may need funds for a landscaping crew.
Many of these services may be included with the contract you'll have with your property management company. And if you're thinking of managing the property yourself -- then think again. Managing vacation rental property is a totally different ball game than residential rentals. In a residential rental, the tenant joins you, the landlord, in keeping up the property. Remember, the vacationing renter is there to be treated as royalty -- or at least close to it.

Giving up prime rental periods
Another aspect of owning vacation property is to actually to be able to enjoy the property yourself a couple weeks a year. The challenge is letting go of the prime renting season to assure that you have enough weeks rented out during prime time to alleviate or completely pay for the challenges of paying mortgage payments through the rest of the year. So, kiss bye-bye to the Independence Day Getaway -- that's one of the highest-rent, most-desirable rent weeks of the year.

Personal time to open and close the property
Finally, remember that week you wanted to take to enjoy your vacation rental property? Well, this is probably going to be the same week that you're either getting the property ready to rent out the first week (de-winterizing the property) or getting it ready for the cooler months (winterizing).
Vacation properties can be a great way to buy a house now for the future (retirement or actual vacationing) at today's prices. But the smart investor will remember that with income and wealth building, come expenses and upkeep.

Published: April 14, 2006

Housing Market

2006-04-13T20:43:00.000-07:00

Housing Market to Stay on High Plateau

RISMEDIA, April 12, 2006—Home sales should generally level-out and remain at historically high levels, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said mortgage interest rates are trending up but will remain favorable. “Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect,” Lereah said. “Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record.” He expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year.

Growth in the U.S. gross domestic product is forecast at 3.7 percent in 2006, while the unemployment rate should average 4.8 percent.

Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005. New-home sales are likely fall 10.9 percent to 1.14 million from the record 1.28 million last year – both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2.00 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year.

NAR President Thomas M. Stevens from Vienna, Va., said home prices are expected to cool, but not as much as in earlier projections. “Although housing inventories have been improving, the balance is still a bit more favorable for sellers and annual appreciation remains in double-digit territory,” said Stevens, senior vice president of NRT Inc. “Even so, the market is in a process of normalization – appreciation will return to normal single-digit patterns, providing solid investment returns into the future.”

The national median existing-home price for all housing types is likely to increase 6.4 percent this year to $221,700, while the median new-home price is expected to rise 2.3 percent to $242,700.

Inflation as measured by the Consumer Price Index is seen at 3.4 percent in 2006. Inflation-adjusted disposable personal income should grow 3.8 percent this year.

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

Q and A

2006-04-11T05:37:00.000-07:00

Rules for landlocked properties
How to legally obtain a permanent easement
Tuesday, April 11, 2006

By Robert J. Bruss
Inman News

DEAR BOB: Quite by accident, my wife and I stumbled on a beautiful 3.5-acre hilltop parcel for sale near a small town where we have vacationed many times. The asking price is quite reasonable, but it has been for sale over 12 months. There is a very good reason: It is landlocked with no permanent access to a public road. It has a dirt road over a neighbor's land. The real estate agent introduced us. The neighbor is a "good old country boy." He says we can use the dirt road over his acreage "if we don't cause trouble." When we explained we would like to build a retirement home if we buy the 3.5 acres, he said, "That might be all right if you don't cause no trouble." However, we would want to pave the dirt road because in rainy weather it could become dangerous. Is there any way we can force the neighbor to sell us a permanent easement? --Dean W.

DEAR DEAN: Possibly. You certainly don't want to risk buying that landlocked land without a permanent recorded road access easement.

Purchase Bob Bruss reports online.

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Quiet title lawsuit can clear title of missing owner

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Speculator investors make condo purchases risky

>>More
The general rule on landlocked parcels, depending on state law, is the owner of the landlocked property has a right of access to a public road. However, to acquire such access you must be able to prove at one time in the past both the landlocked parcel and an adjoining parcel with road access had common ownership.

The legal theory is that when the property was subdivided, the owner forgot to provide road access to the landlocked parcel.

This is not a do-it-yourself project. You need to consult an experienced real estate attorney, and a title researcher, to determine if you meet the requirements for an easement by necessity. If not, your best alternative is to buy a permanent easement over the neighbor's land. Cash usually talks.

CAN A QUITCLAIM DEED SIGNED BY MISTAKE BE UNDONE?

DEAR BOB: I refinanced my home to lower my interest rate and the payments. At that time, I thought my grandson should co-sign because he was making part of the payments. By mistake, I signed a quitclaim deed giving him right of survivorship. How can I get my property back? My daughter (my grandson's mother) will inherit the home in my will. --Alice McC.

DEAR ALICE: For your grandson to co-sign on the mortgage obligation, the lender probably required him to be on the title. That is probably why you were presented with the quitclaim deed conveying an interest in the property to your grandson.

If you had not signed that quitclaim deed, you probably wouldn't have received the new mortgage.

Although a title mistake can be "undone," you might not want to do that. You and your grandson should consult a local real estate attorney to discuss the consequences. He might stop paying part of your mortgage payment if he can't claim the tax deduction because he is no longer a co-owner.

HOW TO ESTABLISH A PAST STEPPED-UP BASIS

DEAR BOB: My wife died in 2003. We lived in our house for 35 years and I continue living in it today. Having read your articles about stepped-up basis, I realize if I decide to sell, this will be very important to have my basis stepped-up as of the date she died. How do I prove the market value on that date? --Morton G.

DEAR MORTON: An easy way is to check with the local tax assessor's office to see what value they showed for your home as of that date. If that valuation is acceptable to you, ask for a copy and file it away in your important records file.

That's what I did when I inherited some property in 1991. In the local jurisdiction, each property is reassessed annually and I felt the assessor's market value estimate was reasonable. That became my adjusted-cost basis for the inherited property.

However, not all local tax jurisdictions reassess each year. Some assessments are far lower than market value. If that is your situation, I suggest you hire an experienced licensed appraiser to determine the 2003 market value of your home. The appraiser can do this by checking comparable 2003 sales prices of homes like yours.

(For more information on Bob Bruss publications, visit his
Real Estate Center).

Tax Breaks

2006-04-10T07:33:00.001-07:00

Property Sales Tax Breaks
Realty Times
by Phoebe Chongchua

Real estate prices are being driven up by the purchase of second homes, which account for as much as 40 percent of the market.

"There's so much equity that's been built up throughout the last five years or more. People don't want to pay capital gains taxes which can be as high as 30 percent of the gain," says attorney David Greenberger who is president of 1031 Exchange Advantage, Inc.

He says investors can pay no sales tax on their investments regardless of whether or not they lived in them previously by using IRS Sections 121 and 1031.

Many people are familiar with IRS Section 121 -- the homeowners' exclusion. This law applies to your principal residence and allows a gain exclusion of $250,000 for single people and $500,000 for married people filing jointly. The gain exclusion funds do not have to be reinvested. There are requirements, such as the property must have been your residence for at least two years out of the past five-year period.

"[The 1031 exchange] can even be used on a personal residence that's converted into an exchange property, and the way you do it is you move out of your residence and a year later it can be an exchange property," he says.

A 1031 exchange is basically an unlimited tax break -- as long as you roll the money from the investment, non-owner-occupied property into another real estate purchase within six months, you will not incur property sales tax.

Combining Sections 121 and 1031 can create an even greater tax shelter for your real estate transaction. If a couple lives in a multi-family unit building, Section 1031 can be used to exchange the portion of the property that they do not live in and no taxes on the transaction are incurred when they purchase another real estate investment property. Section 121 can be applied to the unit the couple lives in.

"In this way, the unit they reside in is sheltered up to $500,000 in gain, and the remainder of the building is valued and exchanged as investment property under section 1031," Greenberger says.

Dividing the value between your residence and your investment property can be determined by the calculation of square footage or an appraisal of the unit that you are living in.

"You don't ever have to pay capital gains taxes if you plan it, but what is required is that your next move always be a trade into something else …" he says.

Using the 1031 exchange, you can buy an investment property and, after just one year you can live in it. Greenberger also says that you can sell one investment property and exchange it for more than one property.

He says, "The clear victory comes when the taxpayer who resides in a mixed-use property takes advantage of Sections 121 and 1031 to remove all taxes on gains and diversify into other properties." Greenberger adds "Clearly, living in a property that appreciates and does not present you with a tax bill when you leave makes for a very welcomed stay."

For more information on 1031 exchanges visit 1031exchangeadvantage.com.

Published: April 10, 2006

Tax

2006-04-10T07:33:00.000-07:00

Questions and Answers about Real Estate

2006-04-07T05:55:00.000-07:00

Ask Realty Times
by Peter G. Miller

Question: I've been an investor for a little over a year. I own three single family homes, one in which I live and the others are for rent. I got into investing being very ignorant and ended up with some deals that are not performing. These properties are hurting me more than anything.

I've tried to sell but many people told me that the properties are overpriced and I was taken advantage of. Is there anything I can do besides sue? Is there anything I can do to get rid of these properties? If so, how can I find someone to help? I have learned a big lesson and now I am ready to make the best of what I have. I am struggling every month to make these payments. Is there a company that can help?

Answer: Forget about "companies" that can "help" -- people will only pay as much as the properties are worth -- and less if possible.

Who would you sue? The marketplace can and does change. As an alternative, why not consider some options: For instance, would any tenants want to buy? Can you rent rooms in your home to boarders? Can the properties be converted to other uses with higher values? If you sold at a loss, would that be better than your current situation? Would it make any sense to sell the residence and then move into one of the investment units? By any chance, is the residence financed with a purchase money mortgage in a state where you cannot be sued for a shortfall from selling the property at a loss?

Speak with an attorney for details.

Question: I "see" a woman aged about 25 to 30. She says she is from Texas and she wants my help. She says her husband drowned her. She just won't leave me alone. There was also a local boy named Josh. I capitalize his name out of respect. He has left. There was a woman named Karen, I am not sure where she went. Linda will not leave.

There are others that I don't talk to. One of the strangest things I ever saw was as I was washing dishes and a little girl, obviously from the early 1900s or late 1800s was there. When I turned around she asked me for a glass of water. I had been through other strange things, so I didn't think much of it. But when I turned back around she wasn't there. It was really scary. Now I am used to that kind of thing. In retrospect, that was nothing compared to what I see now. Seeing dead people is not much fun. The people I see now are okay, but they don't know where to go. They know they are dead but they don't know what to do. They come to me for help. What do I do?

Answer: I'm not sure this is a real estate question, but to the extent that it is there are what as known as "stigmatized" properties, homes which may have been the scene of a murder, suicide or where ghosts have been seen. The definition of a "stigmatized" property varies by state and many states have no rules regarding the issue.

Thus, if you're asking whether a home with ghosts can be sold without disclosure the answer is that you need to look at state rules. If you're asking how to address those you see and hear regardless of where you are, those are questions beyond the scope of this column. Speak with a counselor or cleric for further advice.

Question: In a multiple bid situation, could I put an offer in for say $125,000, or $1,000 over the highest bid, not to exceed say, $130,000?

Answer: Yes. What you're proposing is to make an offer with an automatic escalator clause -- and a bidding cap.

Escalator clauses are used in situations where a home has multiple offers. However, buyers need to use care. A cap is absolutely essential. Also, we wary: If there are two bids with automatic escalators they can just bounce off one another until the highest cap, or no cap, is reached. Before going further, ask you broker if he or she is sure that there are, in fact, other competitive bids.

Question: At this time I'm behind one month on my house payment. I would like some help on what I can do to prevent foreclosure. The reason for this is because I bit off more than I can chew. If you can give me any advice or someone that I can call please let me know.

Answer: First, you must immediately communicate with the lender, either directly or through an attorney. They may have programs in place to assist you. Second, consider listing the home for sale if this is something other than a temporary problem -- this may also encourage a lender to give you time to sell. Third, you may be able to hold off a foreclosure by declaring bankruptcy, but this is an awful alternative. An attorney can provide bankruptcy advice.

Question: I currently own a two-bedroom co-op apartment that's valued approximately $300,000. My credit is average and I have $15,000 cash to work with.

Right now I would love a purchase a three-family investment property for $595,000. How can I generate the cash to purchase this property but still keep my co-op since this is my primary resident? My income is $72,000 annually but I also live pay check to pay check since I am a single mom of two. I really want this property as an investment to help pay for my kid's college tuition.

Answer: Would it make any sense to sell the co-op and then live in one unit of the triplex? This way you could get owner-occupant financing plus two rental units to off-set your costs.

Does the rental property produce a positive cashflow? If not, how will you cover the bills? What about closing costs? Before going further, have a qualified real estate broker go through the entire transaction with you. You have the right idea, you need to see if this is the right property in terms of financing, economics, location, condition, etc.

Question: My ex-husband bought a house and the inspection revealed there was a leak in the above-ground oil tank which is in a basement.

Subsequently, he was told that it was fixed, and he bought the house. The first time he tried to buy oil for heat, he found out it wasn't "fixed" and the law states leaking oil tanks are not allowed to be fixed, and therefore real estate is not supposed to be sold with this problem and there could be a $25,000 fine

The company he signed a contract with to buy oil would not give him oil because of this problem -- the entire winter. It's freezing in our state, not to mention there being a threat of water pipes freezing.

The sellers had agreed to pay for a new tank and have canceled twice, saying they were looking for a better price. They told him not to put any oil in the tank as they were going to remove it. He didn't put any oil in the tank, and they did not show up as promised, now his furnace will not work -- still -- in the middle of winter. They called him today and now state they are NOT going to replace the tank, but have offered him $400 as compensation. It costs about $2,000 to replace.

Who is responsible? What is our recourse?

Answer: Did someone say the tank had been repaired? Is there a receipt for such work? Did you get an independent inspection?

The state or local environmental protection office may be able to provide specific information regarding what is or is not required in such situations. They may also be able to provide an inspection.

Question: I have home that I'd like to purchase, but the seller doesn't want to sell for two years because he has a prepayment penalty, so he giving us the option to lease for two years and than purchase. If we pay $1,200 a month and $600 goes toward the down payment, can the seller just spend that money and at end of two years give us a credit?

Answer: A lease purchase agreement is a complex arrangement and you should not go any further with this until you have paperwork prepared by an attorney of your choice. However, before you get to that point, speak with lenders. They may not give credit for money which is below a market-rate rental or money to buy which is not retained in an escrow account by the current owner. Ask how lease purchase credits are to be handled and show the owner, or have the lender show the owner, what's required.

How much is the prepayment penalty? In a market which is slowing in many areas, would not the owner be better off selling now? As to you, why lock-in a price now when it could be lower in the future? If the owner does not want to sell at this time you may be best off buying elsewhere or renting at a lower cost and saving your money.

Second Home Market

2006-04-07T05:44:00.000-07:00

Second homes 40% of market
Updated 4/5/2006 3:10 AM
By Doug Miller

Americans snapping up second homes — as investments or vacation properties — accounted for four out of every 10 sales of existing homes last year, a record that helped drive the real estate market to new highs, according to a report being released today by the National Association of Realtors.
Nearly 28% of homes bought last year were for investment purposes, and an additional 12% were vacation homes, the figures show. Most of the buyers were baby boomers in their top earning years, looking toward retirement and hoping to build wealth or find a more desirable place to live.

"Baby boomers are such a powerful economic force," said Dave Jenks, co-author of The Millionaire Real Estate Investor. "They're using their wealth to go buy second homes."

The typical investment buyer last year was 49 years old with annual income of $81,400. He or she paid $183,500 for the median-priced investment home, up 24% from 2004.

"Real estate, over the past five years, has outperformed virtually every other investment vehicle," said Ron Peltier, president and chief executive of HomeServices of America, the country's second-largest residential brokerage firm. "A lot of people have just speculated in real estate."

The trend really started after 1997, when Congress changed the tax code, allowing most homeowners to duck capital gains taxes when they sold their homes. The exemption is $500,000 for married couples, $250,000 for singles, if it was their primary residence for two of the past five years.

Under the old system, the only way to avoid the tax was to "roll" the gains into another home of equal or greater value. Americans bought bigger and costlier homes. But now, they can downsize and use the equity built up in their homes to buy second homes.

"That's what spurred all this on in the beginning," says David Lereah, the NAR's chief economist. "It's like all the stars are aligned. The tax situations helped, but at the same time, baby boomers were entering their peak earning years. That's why we just boomed in second homes."

He thinks the trend crested in 2005. With rising interest rates, tighter lending standards and slower price appreciation, Lereah expects second-home sales to drop this year to 30% of all existing-home sales, and maybe into the 20% range.

"What's going to be leaving the market right now are the speculative investors who came into the market and were trying to flip homes," he said. "They were buying one, two, three or four properties at a time, and that was distorting the numbers."

Sales of vacation homes, though, are expected to stay strong for years, because the youngest baby boomers are only 42 this year.

The typical vacation home buyer last year was 52 years old, earning $82,800 a year, and purchased a property that was about 200 miles from the primary residence. The median price was $204,100, up 7.4%.

More than three-fourths of the buyers had no interest in renting their property. About 20% said it would one day be their retirement home.

Joe Klein and his wife bought their first vacation home last year on Lake Wabedo in Minnesota, three hours from their primary residence. He says he might like to retire there but might have to persuade his wife.

"It's something that we could hand down to the kids," says Klein, 42, a program manager for a medical company. "But secondly, I see it as an investment. If we had to, we could sell it to help pay for their college."

BUYING SECOND HOMES

As Baby Boomers hit their peak earning years, they are buying up second homes for investments or vacation properties. Last year, second-home purchases accounted for almost 40% of all home sales (in millions):

Vacation

2003 0.8

2004 0.9

2005 1.0

Investment

2003 1.6

2004 2.0

2005 2.3

Source: National Association of Realtors

Nothing Down

2006-04-07T05:28:00.000-07:00

How to buy your next home for nothing down
'Hard part is making the payments'
Friday, April 07, 2006
By Robert J. Bruss
Inman News

Are you old enough to remember Robert G. Allen's bestseller real estate book "Nothing Down" from the early 1980s?

I'm showing my age, but I vividly remember that book because a) it explained dozens of creative real estate finance methods, and b) I actually used several of those techniques to buy profitable property for nothing down.

Purchase Bob Bruss reports online.

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Most of those methods are still viable. But for the majority of today's home purchases, there is no longer a need to use creative seller financing and other innovative methods.

Today's mortgage lenders have become very savvy about the profitability of making low- and no-down-payment home loans, even to borrowers with poor credit. Last year, according to the National Association of Realtors, over 30 percent of home sales involved 100 percent financing in one form or another.

THE DEFINITION OF "NOTHING DOWN."

In real estate "nothing down" means zero cash from the buyer's pocket. However, it doesn't mean the seller won't receive 100 percent cash for the home. Personally, I bought several zero-down-payment houses where the sellers walked away with all-cash.

Nothing down really means the buyer is borrowing the entire purchase price.

To illustrate, when you read in the newspaper that a commercial property sold for $50 million, do you think the buyer paid $50 million cash from his savings account? Of course not. Using a combination of a first mortgage, perhaps a second mortgage, plus a bank credit line, the investor-buyer probably didn't even pay the closing costs from his pocket. The same procedures apply to home purchases.

BUYING A HOME FOR NOTHING DOWN IS EASY.

If you are in the market to buy your personal residence, but you are a little "cash-challenged," don't let that stop you from purchasing for zero cash from your pocket, just like the real estate tycoons.

Although not every mortgage lender offers zero-down-payment mortgages, a savvy mortgage broker can arrange your no-cash home purchase. Especially if you are a first-time home buyer (defined as not owning a house or condo within the last two years), most mortgage lenders offer extra-easy home finance plans.

But there's a catch. You will need 1) a reliable source of income, and 2) a good credit score. Many lenders now offer "stated income" mortgages where, with good credit, you don't even have to prove your income, such as with W-2s or tax returns.

If you qualify, and many home buyers can, lenders will gladly finance 100 percent, sometimes even up to 125 percent, of your purchase price. But you will probably pay an above-market interest rate, often including PMI (private mortgage insurance) premiums. In other words, "nothing down" isn't cheap.

HOW TO DETERMINE IF YOU ARE A "WELL-QUALIFIED BUYER."

If you pay attention to those "no cash required" radio and newspaper ads for some new houses and condos, in the disclaimer you will usually spot the words "well-qualified buyer." That means you must have good income and good credit.

To check your credit reports from all three national credit bureaus, and determine your FICO (Fair Isaac Corporation) score which most lenders use to rate you as a "well-qualified buyer," just go to www.myfico.com.

For $44.85 total, you will receive your three credit reports, and your FICO credit score. Each credit report will be different, so take time to compare them and follow the instructions to correct any errors.

Or, at no cost, you can obtain all three of your credit reports at 1-877-322-8228 or www.annualcreditreport.com. However, you will not receive your very important FICO score at this free source.

After checking your credit reports and FICO score, the next step is to get written pre-approval for a no-down-payment mortgage. Most major mortgage lenders offer this service, or a mortgage broker can obtain a lender's pre-approval written mortgage commitment at a low or zero up-front cost. To obtain a zero-down-payment mortgage, most lenders require a FICO score of at least 680.

Armed with your lender's written pre-approval mortgage promise (subject to reasonable conditions, such as appraisal of the home you decide to buy), then you can shop with confidence knowing the maximum mortgage you can obtain.

But don't settle for a lender's worthless "pre-qualification" letter, which just means, "We think you can qualify for a mortgage but we really haven't checked you out yet."

HOW TO BUY A HOME WITH 100 PERCENT FINANCING.

However, if you can't qualify for a no-down-payment mortgage, don't give up. There are many alternatives. For example, many buyers' real estate agents recommend 80-20, 80-10-10, or 80-15-5 mortgage choices. The 80 means the lender makes an 80 percent first mortgage, and a 20, 10, or 15 percent second mortgage, often in the form of a home equity loan.

If you can make a 5 to 10 percent cash down payment, that makes obtaining financing even easier. A special advantage of keeping the first mortgage at 80 percent or less of the home purchase price is you will avoid the dreaded PMI (private mortgage insurance) premiums.

However, in the right circumstances, "seller financing" might be your best and least expensive choice.

Large real estate fortunes have been earned with this method. For example, real estate tycoon, John Schaub, reports in his recent bestseller book, "Building Wealth One House at a Time," he never obtains bank mortgages when buying.

Another example is small-town realty mogul, Jay DeCima, who explains in his best selling, "Start Small, Profit Big in Real Estate," book why he buys ugly run-down houses, which no mortgage lender, except the seller, will finance.

LEVERAGE ADVANTAGES OF NOTHING DOWN.

Another name for buying real estate with little or no cash is "high leverage." It simply means the borrower controls the entire property with a small amount of cash.

The big leverage benefit is usually a high percentage profit-per-dollar invested if the property goes up in market value due to capital improvements or sales price appreciation.

For example, suppose you buy a house or condo for $200,000 with nothing down. Because of your good income and good credit, the mortgage lender approves a $200,000 mortgage. Suppose that house appreciates in market value by 5 percent annually, or $10,000 in the next 12 months. What percentage return is that on your investment? The correct answer is "infinite," because your only out-of-pocket expense was probably for closing costs.

However, suppose instead you paid $200,000 cash for that same home and it appreciates the same 5 percent in market value ($10,000) during the next 12 months. Now your return on investment is a mere 5 percent. Of course, you avoided the tax-deductible mortgage payments, so those savings should be added to your return.

As the years go by, the advantages of high leverage on your home usually become greater each year. Of course, there is also risk, especially if you have to sell the home within the first five or 10 years when you don't have much equity.

SUMMARY: There are many advantages, and a few disadvantages, of buying a home for nothing down. But the pros usually outweigh the cons. However, as Allen often said in his "Nothing Down" lectures, "Buying real estate for nothing down is easy; the hard part is making the monthly payments."

(For more information on Bob Bruss publications, visit his
Real Estate Center)- www.inman.com/bruss

Second Home Sales

2006-04-05T19:53:00.000-07:00

Second-home sales at all-time high
Vacation homes and investment properties show double-digit growth in 2005.
By Les Christie, CNNMoney.com staff writer
April 5, 2006: 10:36 AM EDT

NEW YORK (CNNMoney.com) - Are home still a good buy? Americans seem to think so -- they bought second homes, both as vacation properties but especially for investment purposes, in record numbers last year.

There were 3.34 million second home sales in the United States last year, up 16 percent from 2005, according to a report released Wednesday by the National Association of Realtors (NAR).

Nearly 40 percent of all home sales were for second homes, up from 36 percent the year before -- 27.7 percent of all home purchases were for investment (compared with 23 percent in 2004) and 12.2 percent were bought as vacation homes (13 percent in 2004).

"The baby boom generation is driving second home sales -- they're at the peak of their earnings, interest rates remain historically low and boomers want to diversify investments," said David Lereah, NAR's chief economist.

Vacation homes more expensive and more distant
Vacation homes cost more than homes bought for investment. The median price paid for a vacation home was $204,100, up 7.4 percent from 2004, while investment homes cost a median of $183,500, up 24 percent.

The buying of investment properties continues a trend that started with changes in tax laws in 1997. Previously, when homeowners sold their primary residences, the only way to avoid capital gains taxes was to roll over gains into another, more expensive home. Now, couples can claim a $500,000 exemption on sales of primary residences, enabling them to downsize into less expensive houses and apply the difference to second home purchases.

According to Lereah, vacation homes once constituted the majority of second home purchases, but the soaring real estate market has attracted more Americans to real estate investing.

Technically, many of the homes bought for investment cannot be classified as "second" homes, since many investors have purchased multiple properties. About 4 percent of home owners own three or more properties.

Typical buyers
The NAR report said that the profile of typical vacation home buyers was that they were 52 years old with earned income of $82,800. Their getaways were usually either within 100 miles of their primary residences (47 percent) or more than 500 miles away (43 percent).

Investment home buyers were, on average, a little younger (49 years old) with slightly lower incomes ($81,400). The biggest contrast was that investment buyers usually shopped much closer to their primary residences; the median investment home purchase was just 15 miles away.

The biggest consideration for vacation home buyers was that the properties should lie near recreation facilities such as beaches, mountains or golf courses. Midwesterners purchased more vacation homes than residents of any other region; they accounted for 33 percent of al sales. Southerners bought 30 percent of all vacation properties, Westerners 20 percent and Northeasterners 17 percent.

Southerners bought more for investment (38 percent of all sales), with 24 percent each accounted for by Midwesterners and Westerners and just 15 percent by residents of the Northeast.

Lereah said, "Vacation-home sales will remain strong for the foreseeable future given the fact that baby boomers are favorably positioned in terms of affordability, as well as being at the stage in life when people are most interested in making that kind of a lifestyle purchase."

Investment homes purchases, however, may drop, according to Lereah, as stagnant prices and rising interest rates will discourage buyers.

Second Homes

2006-04-05T19:48:00.000-07:00

Americans buying record number of second homes-NAR
Wed Apr 5, 2006 1:30 PM ET
By Melissa Bland

WASHINGTON, April 5 (Reuters) - Americans bought a record number of second homes for vacation and investment last year, some 40 percent of 2005 total sales, a trade group said on Wednesday.

And with baby boomers at the peak of their earning potential, the push to snap up vacation homes is unlikely to reverse soon despite a broader housing slowdown, the National Association of Realtors said.

The group said vacation home sales rose 16.9 percent in 2005 to a record 1.02 million units from 872,000 in 2004. Purchases of homes for investment, chiefly rental income, rose 15.7 percent to a record 2.32 million units last year from 2 million in 2004.

NAR said Americans snapped up 3.34 million second homes in 2005 -- 27.7 percent for investment and 12.2 percent for vacation. That was up 16.0 percent from 2.88 million in 2004.

Second home purchases also made up a larger chunk of the total, rising to 39.9 percent of total residential real estate transactions from 36 percent the prior year.

"The baby boom generation is driving second home sales," NAR chief economist David Lereah said in a statement.

"They're at the optimum point in life when people become interested in second homes, they're at the peak of their earnings, interest rates remain historically low and boomers want to diversify investments," he added.

The buyer profiles for the two types of homes were similar, the group said.

According to the report, the average investment-home buyer in 2005 was 49 and earned $81,400 a year. For those seeking vacation retreats or housing for children in college, the typical age was 52 and income at $82,800.

Americans paid more for their second properties as well, driving the median price of a vacation home to $204,100 in 2005 from $190,000 in 2004, while the cost of a typical investment property climbed to $183,500 from $148,000 the prior year.

"Vacation-home sales will remain strong for the foreseeable future given the fact that baby boomers are favorably positioned in terms of affordability, as well as being at the stage in life when people are most interested in making that kind of a lifestyle purchase," Lereah said.

"On the other hand, investment home sales are likely to decline this year, in part because of higher interest rates," he added. Still, he said the long-term outlook for second homes sales was positive "because more people will be moving into the prime years for buying a second home."

NAR said 33 percent of 2005 vacation home purchases occurred in the Midwest, followed by 30 percent in the South, 20 percent in the West, and 17 percent in the Northeast.

In the category of investment homes, 38 percent were bought in the South, 24 percent in each of the Midwest and West, and 15 percent in the Northeast.

The NAR report was based on more than 11,000 responses to surveys to collect data on market share, buying activity, demographics and buyer preferences.

© Reuters 2006. All Rights Reserved.

Foreclosures

2006-04-03T11:51:00.000-07:00

Anxiety, Foreclosures Up as ARM Rates Rise

(April 3, 2006) -- As interest rates rise, thousands of Americans with adjustable rates mortgages are having trouble paying the mortgage.

Nearly 25 percent of mortgages – 10 million – carry adjustable interest rates, many of them with subpar credit ratings, according to the Mortgage Bankers Association.

Of the 7.7 million household that took out ARMS over the last two years to buy or refinance, up to 1 million could lose their homes through foreclosure over the next five years because they won’t be able to afford their mortgage payments and their homes will be worth less than they owe, according to First American Real Estate Solutions, a real estate data provider.

In West Virginia, Alabama, Michigan, Missouri and Tennessee, about one in five homeowners with high-interest, subprime ARMs was at least 30 days late at the end of last year, the Mortgage Bankers calculate.

Source: USA Today, Noelle Knox (04/03/2006)

Contingencies in Agreement

2006-04-02T06:54:00.000-07:00

Put every contingency in your offer to buy home

By CANDY McCAMPBELL
For The Tennessean
Sunday, 04/02/06

A house is one of the biggest investments you'll likely ever make, so your purchase offer needs to cover all the bases: the right price, any contingencies needed and date of possession.

Most real estate agents use a standard contract that includes all the basics, such as the price, property description, closing and occupancy dates, title insurance, termite inspection, home warranty, who pays which costs, a default provision and payment of commissions.

It also should include three important contingencies: one for obtaining financing, one for a successful home inspection and a third for selling your existing home. If not, you could find yourself committed to buying a house without a way to pay for it. Or buying a house with costly problems. Or buying a house while you still own your existing home.

"Unless you have all the cash in your pocket, you need to make sure you have a contingency of a loan you can afford," says real estate attorney Alan Mazer, partner in Saturn and Mazer Title Services.

"I even suggest making it contingent on getting a loan at such-and-such an interest rate," he says. That way, a spike in interest rates won't throw your budget out of whack.

The more details you can stipulate in the offer, the better, says Lindy Gaughan, co-owner of Re/Max Choice Properties in Hendersonville.

"It's safer for the buyer if something should change," she says.

You can also make the offer contingent on:

Appraisal. You want the house to appraise for the sales price or higher.

Home inspection. "Every buyer needs a home inspection to see what they're actually buying," says Jim Terrell, real estate agent with The Pilkerton Co. If problems show up, buyers could void the contract, have the owner fix the problems or get credit on the purchase price to make the repairs, he says.

Sale of your current home. If you have a contract on your home and your buyer is approved for a loan, attach that to the offer, Gaughan says. If you don't have a contract, you may reach agreement on everything else in your offer but the seller could continue to try to market the house, giving you first right of refusal if another offer comes in.

A walkthrough the day before closing. "You want to make sure the house is in the same condition it was in when you saw it," Terrell says.

Possession. It's best to take possession of the property (including an exchange of all keys) at closing, but it's not always possible, Terrell says. If the seller stays later or the buyer moves in early, sign a lease so you know who is responsible for things such as taxes, repairs and the condition of the house, he and Mazer say.

What is there stays there. "Don't presume that if something looks like part of the house, it's going to stay," Mazer says. "If your heart is set on some feature remaining, put it in the offer." This could include anything from the washer/dryer to a chandelier or ceiling fan.

A septic inspection. Houses in many suburban areas have septic tanks instead of sewers, Gaughan says.

TERRELL GAUGHAN MAZER - The Tennessean

Second Homes

2006-04-01T18:58:00.000-08:00

Tax code helps spark boom in 2nd homes
Nation's Housing
Originally published April 1, 2006

If you are thinking about buying a second home this spring - or you bought one in the last couple of years - you are part of a major transformation under way in the real estate market.

The annual number of second homes purchased in the United States doubled between 2000 and 2004, according to new research. The boom is being driven in part by demographics - mainly a flood tide of equity-laden baby boomers - and in part by a largely unexpected ricochet effect of tax law changes in the late 1990s.

The latter factor was explained by Keunwon Chung, a statistical economist at the National Association of Realtors, who recently studied a vast pool of federal data on hundreds of thousands of second-home mortgage closings.

When Congress amended the federal tax code in 1997 to permit up to $500,000 (for married couples) and $250,000 (for singles) of gain on the sale of a primary home to be spared from taxation, observed Chung, "homeowners did not have to buy expensive [replacement] homes anymore."

Under prior law, the only way to avoid capital gains taxes was to roll over sales gains to progressively larger and costlier homes.

The amended tax code, by contrast, allows primary home sellers to buy a smaller, less expensive primary (replacement) residence while using a portion of the $500,000 or $250,000 tax-sheltered gain to buy or make a down payment on a second home - for use either as a recreational property or as an investment vehicle.

For example, a married couple pocketing $500,000 tax-free from the sale of their longtime family home might use part of the proceeds to downsize into a condominium unit in the center city, and then use the remainder to purchase a vacation retreat an hour or two away.

Call it the downsize-and-add-a-second-home strategy - sort of a real estate billiards shot propelled by tax-free money. Whatever you call it, Chung's study suggests that the trend is hot, and likely to stay that way for years.

According to Chung, second homes represented just 8.6 percent of all residential mortgages - 405,000 individual purchases nationwide - that were closed in the year 2000. By 2004, the number of second-home purchasers had more than doubled to 881,000 and the market share had surged to 14.2 percent.

Who's selling and buying? Primarily baby boomers, according to Chung, and especially boomers with above-average incomes. Whereas the average household purchasing a primary home in 2004 had an annual income of about $61,000, the average second-home buyer had an income of about $102,000, nearly 70 percent higher.

Part of the motivation of second-home purchasers has been to diversify household financial assets.

Second homes, along with primary homes, saw an average 55 percent gain in price appreciation between 2000 and 2004, according to Chung, whereas the Standard and Poor's 500 index declined by 15 percent.

"As an investment choice, the housing market presented an attractive alternative" to a stock market that sagged sharply from its 2000 dot-com highs and has only recently begun to recover, Chung said.

Where are boomers and others investing their second-home dollars? Chung's study found that a dozen states have attracted exceptionally high rates of purchases and cumulative growth during the past four years, whether for recreational use or investment.

In Hawaii, nearly 1 of every 3 purchases made between 2000 and 2004 was for a second-home getaway or investment unit.

In Florida, the proportion was nearly 1 in 5. Arizona (18 percent) and Nevada (17 percent) also saw significant activity, as did other prime recreational getaway states such as Idaho (13 percent), New Mexico (12 percent) and Utah (10 percent).

The District of Columbia - where 1 of 10 home mortgage closings between 2000 and 2004 was for a second home, almost always in the form of rental condos or townhouse units - was a surprise contender on the national list. The number of such units financed in D.C. grew by a stunning 187 percent during the four-year period studied by Chung.

California and Washington, both with 9 percent shares of total loan closings, Maryland (8 percent) and Virginia (8 percent) were all high-growth states for second homes or investor units.

How long can the second-home boom continue? Chung says as long as "boomers are still in their peak earning years and they can afford some homes for vacation purposes or investment."

Copyright © 2006, The Baltimore Sun

Guidelines for real estate market

2006-04-01T18:52:00.000-08:00

Rules of real estate changing as market cools
Before you buy, sell or invest, check out these guidelines to get the best housing deal

By Ruth Simon
The Wall Street Journal
April 1, 2006

As the spring selling season moves into high gear, the cooling housing market is upending the conventional wisdom that guided buyers and sellers during the housing boom.

The changing dynamics have implications for a variety of players in the real-estate market.

The number of homes for sale has climbed about 30 percent over a 12-month period, reaching its highest level in nearly 10 years, according to the National Association of Realtors. The group recently predicted sales of existing homes would drop 5.7 percent this year versus a 4.4 percent gain in 2005.

Higher mortgage rates are making houses less affordable in many metro areas. Rates on 30-year fixed-rate mortgages now average 6.35 percent, according to Freddie Mac, with rates on adjustable-rate mortgages moving up even faster.

What this new environment means for buyers and sellers varies from market to market. To be sure, sales are strengthening in some markets, including Albuquerque, N.M., and Indianapolis. But in many parts of the country, after several years of sellers calling the shots, 2006 is shaping up to be a market in which buyers are gaining bargaining power.

What follows is a look at what this means for different groups of buyers and sellers:
Sellers

Say goodbye to the days when sellers could simply look at what their neighbor's house sold for and then list theirs for 10 percent more.

Overpriced homes may never even catch the eye of their intended audience. That's because buyers and brokers increasingly rely on computers to screen listings based on price, size and other parameters when new properties come to market.

David D'Ausilio, a broker- associate with Re/Max Heritage in Westport, Conn., is counseling his clients to price their homes in the "bottom 25 percent" of comparable homes and cut their asking price by 3 percent to 5 percent if the listing doesn't generate several showings or written offers within three weeks.

Brokers also are telling sellers to fix problems that buyers might have overlooked in a more heated market.
First-time buyers

First-time buyers can be more thoughtful about their purchases and negotiate for a lower price, a more flexible move-in date or incentives such as seller-paid closing costs.

Some brokers are advising first-time buyers to leave a financial cushion instead of stretching as much as possible and counting on rising home prices to bail them out. They are also asking sellers to help with closing costs.
Move-up buyers

Move-up buyers face the delicate task of balancing a purchase with a sale. A growing number of buyers are making offers contingent on selling their current homes. But such offers often are frowned at because these deals are more likely to fall through.
Relocaters

Employers are looking for ways to ensure that homes don't languish on the market when an employee relocates. The number of company-ordered appraisals is growing as employers seek to get the price right before a house goes on the market, says H. Cris Collie, executive vice president of Worldwide ERC, an association of companies and professionals that relocate employees.

Collie expects employers to more aggressively enforce policies that require transferees to price their homes close to the appraised value. He also is seeing renewed interest in "loss on sale" programs, which compensate people who are relocating for losses if they sell below the purchase price.

Some relocation experts also advise transferees to shy away from buying a home in a new development because they will be competing with new construction when they sell.
Investors

Investors used to seeing quick profits in once-hot markets may be disappointed. In some new subdivisions, dozens of similar investor-owned homes are competing for buyers, says Craig Beggins, president of Century 21 Beggins Enterprises. "If you have any way not to sell right now, don't," Beggins tells investors. "If the neighborhood is brand-new and no one is living there, my advice is to rent it if they can."

But the decision to sell or rent can be tricky. Rental homes typically don't show well, says Bob Hamrick, broker-owner of Coldwell Banker Premier in Las Vegas, and often must be vacated and given fresh paint and carpet before going on the market.

LATEST STRATEGIES

As housing markets around the country cool, brokers are recommending new tactics:

• Some brokers are advising sellers to price their homes in the bottom 25 percent of comparable properties.

• First-time buyers shouldn't overly stretch their finances, expecting rising prices.

• Relocating employees should look for a home that will be easy to resell if they are transferred again soon.

Copyright 2006 IndyStar.com. All rights reserved

Sales Market

2006-03-28T16:35:00.000-08:00

As Sales Slow, Rules of Real Estate Evolve
REALTOR Magazine Online

(March 28, 2006) -- Rising mortgage rates, a surge in housing inventory, and slower home sales in some areas are changing the ways in which buyers and sellers approach the housing market.

Real estate practitioners are placing a great deal of emphasis on pricing, with buyers who use the Web to conduct home searches steering clear of properties that appear to be overpriced.

Westport, Conn.-based practitioner David D'Ausilio of RE/MAX Heritage is encouraging sellers to price their homes in the bottom 25 percent of comparable dwellings and shave 3-5 percent off the asking price after three weeks if interest is tepid.

Sellers also are urged to undertake repairs to attract buyers at a time when they have plenty of homes to choose from and plenty of time to make purchase decisions.

Meanwhile, first-time buyers are encouraged to stay within their budgets because slower home-price appreciation means that there will not be a great deal of equity to bail them out in the event of a financial crisis.

Move-up buyers, by the same token, are being told to avoid offers that are contingent on the sale of their current residence if they want to secure a better price; and investors who do not want to aggressively compete with other new units for sale are being advised to rent or turn to stagers to make their properties more attractive. The housing slowdown also is impacting relocaters, as a growing number of employers require that homes be priced close to the appraised value to achieve a quick sale. Additionally, many companies are instituting "loss on sale" programs to compensate workers who get less than their asking prices.

Source: Wall Street Journal, Ruth Simon (03/28/06)

© Copyright 2006 Information Inc.

Investing

2006-03-27T05:53:00.000-08:00

Housing Counsel: Investor Rules of "Pigs" and "Pals"
Realty Times
by Benny L. Kass

Question: I own a small rental building (4 units), and am trying to understand the tax rules so that I can prepare my tax return. I would prefer to use one of the tax services on the internet, rather than pay for an accountant. Can you provide me with the basics?

Answer: Yes, but I still recommend that you retain a professional CPA to assist you. While many of the internet services are adequate, there still is nothing better than having a real live person to talk to -- and to hold accountable should mistakes be made. And besides, the accountant's fee is tax deductible.

There are a lot of people in the Washington metropolitan area who own investment real estate, and this includes single family homes, condominium and cooperative apartments as well as large office complexes and shopping centers.

Many people are investors by choice; they believe that real estate is a good investment. Many people are investors by default; they could not sell their family home when leaving this area, and decided to become a landlord instead.

Before Congress dramatically changed the tax laws in 1986, real estate investment was usually considered a "profit making activity." You could purchase rental property, obtain favorable mortgage financing, and receive rental income. These would often generate large "paper losses" which translated into large tax shelters.

For example, if you bought a piece of property for $200,000.00, and the land value was assessed at $95,000.00, the depreciable basis for the building was $105,000.00. Land cannot be depreciated for tax purposes. The tax laws then on the books allowed you to take accelerated depreciation, and take a large paper loss each year.

Indeed, if you decided to elect straight line depreciation, depending on what year you were in, you might have the option to depreciate the property on a basis of 18 or 19 years. Assuming that you took an 18 year basis, you could take a paper loss of $5,833 each year from your tax return ($105,000.00 divided by 18).

In addition to deducting your actual out of pocket expenses -- such as mortgage interest payments, real estate taxes, leasing commissions, advertising and repairs -- from rental income, the law also allowed you to take a paper loss called depreciation.

Congress and the Reagan administration were concerned about the growth of the tax shelter industry. Often, promoters and speculators would buy property that would not necessarily be a good investment, but would generate a significant tax write-off each and every year. These write-offs were called "tax shelters."

When Congress enacted the Tax Reform Act of 1986, it created a new concept called "passive activities." Although the primary focus of passive activity was to curtail tax shelter abuse, the net result was a dramatic impact on the average real estate investor.

Passive activity regulations are complex. Here is a very brief summary of passive activities as they relate to real estate transactions. In August of 1993, Congress modified the law for professional real estate investors.

For all practical purposes, most investment real estate transactions fall into the category of "passive activity." Oversimplified, this means that real estate losses may only be used to offset income from other real estate activities.

Prior to the 1986 Tax Reform Act, you were able to deduct your real estate losses from other income sources, such as wages and stock dividends. However, beginning 1987, this situation -- and the law -- changed.

To simplify this complex law, let us pretend that you have two buckets. One bucket is labeled "passive income generators (PIGs)" and the other bucket is labeled "passive activity losses (PALs)."

If you are involved in a real estate investment activity, all of your losses are put in the PAL bucket, and all of your gains are put in the PIG bucket. One of the primary objectives of any real estate investor is to make a lot of profit while at the same time not having to pay tax on that income.

Under the Tax Reform Act of 1986, real estate gains in the PIG bucket can only be offset by real estate losses in the PAL bucket.

There are provisions, however, for carrying forward the losses. This is referred to as "net operating loss" (NOL). You can carry forward these losses indefinitely and can use them as deductions against passive income in later years. Unused losses are allowed in full when the taxpayer disposes of the entire interest in the real estate.

There are two major exclusions from these passive activity rules:

Under certain circumstances, a taxpayer may be able to deduct up to $25,000.00 of passive rental losses from other (non-passive) activities. This special rule is known as the "$25,000.00 exemption."
To qualify for this exemption, the taxpayer must "actively participate" in the rental activity. To be an active participant, this requires "bona fide" participation by the owner of the property, such as making management decisions, approving new tenants, approving repairs or writing checks.

However, the $25,000.00 exemption is applicable only to taxpayers whose adjusted gross income (AGI) in any taxable year is $100,000.00 or less. Where the taxpayer's AGI exceeds $100,000.00, the $25,000.00 maximum amount is phased out; the $25,000 is reduced by 50 percent of the amount by which the individual's adjusted gross income exceeds $100,000.00. In other words, if the taxpayer's AGI exceeds $150,000.00, passive losses cannot be used to offset other income.

For married taxpayers who file separate returns and live apart, up to $12,500.00 of passive losses may be used to offset income, again with the same phasing out rules.

In August of 1993, Congress reacted to the strong -- and vocal -- concerns from the real estate industry, and partially liberalized these rules in the Revenue Reconciliation Act of 1993. Now, if a taxpayer materially participates in real estate activities, he or she will be allowed to offset any losses incurred against non-passive (non-real estate) income, regardless of the AGI.
There are two important tests to determine whether the taxpayer is eligible for these liberalized rules. First, more than 50 percent of the taxpayer's personal services during the tax year must be performed in real property trades or business. This is referred to as the "material participation" test. Second, the taxpayer must spend more than 750 hours during the tax year actively working on these real estate businesses. And the IRS has made it clear that the taxpayer cannot combine rental and non-rental activities to satisfy the test of material participation.

However, most investors will probably still fall under the 1986 passive activity rules. You should obtain a copy of IRS Form 8582 entitled "Passive Activity Loss Limitations," which must be filed with your tax return if you claim a loss from real estate activities.

You should also obtain a copy of IRS Publication 527, entitled "Residential Rental Property." This is available on the web (irs.gov; click on "More Forms and Publications.") You can also order it from the IRS by calling (800) 829-3676.

The laws relating to investor real estate are complex; a proper understanding of these passive activity rules may provide the taxpayer some tax savings, but you are must discuss your individual situation with your own tax advisor.

Published: March 27, 2006

Home Sellers Information

2006-03-24T10:17:00.000-08:00

5 Tough Questions for Sellers
Realtor Magazine Online

(March 24, 2006) -- Selling a home is getting more difficult these days and sellers are going to be asked some difficult questions that buyers in tighter markets may not have had the time or inclination to ask.

Here are five questions a seller should think about and be able to answer — just in case they are asked.

1. Why are you selling this lovely home?
The buyer wants to know just how desperate the seller is. Desperation equals a lower offer, so answer carefully.

2. How much did the seller pay for this house?
The amount is a matter of public record and a real estate professional can find it easily. One answer a seller might consider is some variation of this: "I got a bargain purchase price when this was a run-down shack before I renovated it so my purchase price is irrelevant to today's market value."

3. What defects does the home have and have there been any recent professional home inspections?
It’s a good idea for the seller to have a home inspection before the home is put on the market, so any defects can be repaired or, at least, potential buyers can be told about them before they make an offer.

4. What problems have you had with this home?
In most states, court decisions and statutes do not require home sellers to reveal past problems that have been corrected.

5. What is the quality of the public schools?
Even buyers who don’t have children can be concerned about this and a seller should know the answer.

Source: Inman News, Robert Bruss (3/24/06)

Home Inspections

2006-03-23T10:15:00.000-08:00

Home Inspections: Varied Perceptions
by Al Heavens
Realty Times

In a slower market, buyers aren't willing to throw caution to the wind, and are less willing to buy houses with problems.

Buyers are less willing to fix problems after they buy

In most areas of the country, the winter hasn't been as bad as it was last year, which reduces the amount of cleaning up you'll need to do before the summer heat propels you poolside.

Whatever has fallen or peeled since the last warm day of autumn needs to be picked up or repaired before then, and certainly before the house goes on the market. That means sooner, not later, because with a slowing real estate market in many regions, the first house on the block for sale has a leg up on the competition.

Before I mix more metaphors, let's just say that when you do get a house ready for sale, you can miss many of the things that will capture the notice of buyer and especially the home inspector or other professional the buyer employs to make sure what he or she is buying is as sound as the dollars being spent.

Should you obtain a pre-inspection of your house before you put it on the market? What this entails is hiring a home inspector to come up with a list of things that the buyer's inspector might find after the house is on the market. Knowing ahead of time might give you a chance to correct all those problems in advance, thus making the transaction go much more smoothly and virtually ensuring that your asking price won't be whittled down by roof replacement or a new heating and cooling system, to mention two examples.

From what my readers, real estate agents and many home inspectors tell me, it doesn't work that way. Depending upon where they are coming from, two inspectors could look at your house completely differently, and their lists could have few similarities as a result.

Here's a reader's example: "I put my house on the market, and it attracted several interested buyers. The successful bidder hired an inspector, who found that we had mold behind a wall in the second-floor bathroom, and that the roof needed to be replaced. We were willing to negotiate, but the buyer was nervous about the mold and pulled out of the deal."

"Those were the only two problems that inspector found with the house," the reader continued. "The next prospective buyer hired a home inspector. We warned the buyer that the previous offer had been rescinded because of the mold and the roof, but that we were willing to negotiate, and would either take care of the problems ourselves or reduce the price of the house by the cost of the work."

Now, the reader's state doesn't require a disclosure statement, which is fairly rare these days, and the buyer didn't mention the roof or the mold to the next inspector. That inspector found the mold (the odor in the bathroom made it hard to miss), but thought that roof seemed in pretty good shape, and might need replacement a few years down the road.

The inspector did find a cracked heat exchanger in the furnace that definitely needed replacement. The other inspector had checked out the furnace and had not found the problem, but expertise only goes so far. Two different sets of eyes don't necessarily see the same thing.

Again, this is not a complaint against home inspectors. I hired my first in 1982 and have used them on every house I've purchased since. I tried to talk the successful bidders on my last house to employ one because there might have been a problem I'd missed in 14 years. They decided not to, so I spent the three months between agreement of sale and settlement finding things on my own and fixing them.

After five years, they still love the house, but it's not the way I wanted to spend a summer, working on a house I wouldn't be living in after Aug. 24.

Real estate agents are divided on pre-inspections. In disclosure states especially, agents say that the less the seller knows the better, since caveat emptor went out the window long ago, and it is easier to sue than not to sue these days.

Other agents like the idea, because it means sellers can get a jump on the problem and get the house quickly on what is becoming in many areas a buyer's market again.

It's the seller's choice. From what I've already seen, however, buyers are getting picky about houses and are taking more time to choose. Inventories are up, so there's more to look at, and with interest rates rising, buyers are beginning to hang on tightly to every dollar before they spend it.

It's something to think about.

Published: March 23, 2006

Sell Your Home

2006-03-22T08:26:00.000-08:00

10 Ways To Make Your Home More Salable
by Peter G. Miller
Press of Atlantic City

There's little doubt that the real estate marketplace is now in transition. Sale volume has begun to weaken and in many markets the days of quick sales and multiple offers are going or gone.

"The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they've seen in the last five years," says David Lereah, NAR's chief economist. "Annual price appreciation is still running at double-digit rates, but the cause of those sharp increases is going away. As the market readjusts, price appreciation should return to more normal rates of growth this year."

Translation: Homes are not selling as quickly as before -- that's good news for buyers. Sharp increases in value are moderating -- that's also good for buyers. Values are not falling -- that's great news for sellers.

Meanwhile, the National Association of Home Builders says that permits for new construction for February fell by 3 percent when compared with a year earlier.

Neither the existing nor new home unit declines should trouble anyone. These changes follow record year after record year, a pace that's not sustainable. The good news is that the changes are modest rather than manic.

The catch is that a softer marketplace means sellers will have to fight harder to get top prices and quick sales. Here are 10 ways to get more out of your local marketplace.

Go for the junk -- and get rid of it. A house with less stuff looks bigger and roomier. If what you want to throw out can have value to others, see if you can help by donating goods to local charities.

Price within reason. Trying to sell a home for $700,000 when like homes go for $525,000 is a non-starter. The days of "testing" the market with huge price increases is finished in many areas. Overprice and you won't be competitive.

Use the best local broker you can find. Experience, connections and reputation can be a real edge when marketing a property.

Require your broker to have a marketing plan that makes sense for you and your property. The technique that sells one property may not be appropriate for another, so find the approach that's right for you.

If the home doesn't sell within a reasonable time period, think about changing the deal rather than lowering the price. In other words, rather than cutting the price from $500,000 to $480,000, instead keep the $500,000 price and offer a 2 percent "seller contribution" to help a buyer pay for closing costs. This approach is cheaper ($10,000 in closing cost help rather than a $20,000 price reduction) plus it gets to the real need of many buyers, closing assistance.

Have a home equity line of credit in place -- even if you don't expect to sell for several years. This way you can have funds available if you want to buy a replacement home while the current property is being sold. Just be aware of the risk -- if your current home does not sell in a reasonable period you could face lots of mortgage payments.

Make sure everything works -- and nothing leaks. Expect buyers to ask for a home inspection and be prepared to make reasonable repairs if requested. Remember that it may be better to upgrade an electrical service box than to look for a new buyer.

Find out what buyers thought after a showing or open house. Don't take negative comments personally. Look for ideas that can help you make a better impression with the next prospect.

Beware of buyers who want you to take back financing. At a time when loans with little or nothing down are available from every lender, don't go into the banking business and take back a loan when there is less risk to you with an outright sale.

Don't get upset with small inconveniences. If a prospect wants to see a home with little notice or at an odd hour, don't worry about it. It's better to show the property than to have a home which is both undisturbed and unsold.
For more articles by Peter G. Miller, please press here.

Published: March 21, 2006

Investing in Real Estate

2006-03-20T08:52:00.000-08:00

Self-directed IRA and IRA LLC for Real Estate
by Phoebe Chongchua
Realty Times

Many people are concerned with building wealth so that they can retire comfortably. A decades-old form of investing and creating wealth is gaining in popularity as people search for creative ways to buy real estate.

Investing using your IRA is a complex strategy that I have written about before, but because it is often misunderstood and generates so much interest, it's well worth further exploration.

The self-directed IRA and IRA LLC (Limited Liability Company) are vehicles to invest in real estate. However, they are not often used because many people are erroneously told by their IRA trustees that you cannot use the account to invest in real estate.

Actually what you have to do is simply find a company that offers the option of using a self-directed IRA to invest in real estate. This can be an extremely beneficial investment tool because IRAs come in two forms: tax-deferred and tax free.

The traditional tax-deferred IRA allows yearly contributions to a tax-deferred account using your pretax dollars. You are not taxed when you deposit into your IRA; you are, of course, taxed when you withdraw the money upon retirement.

The tax-free, Roth IRA, allows yearly contributions of after-tax dollars. You're not getting a tax advantage in the year of the contribution, but growth of the entire retirement account is tax free as well as the income distributions when you retire.

Many types of IRAs can be converted to self-directed accounts including: Traditional IRAs, Sep IRAs, Roth IRAs, 401(k)s, 403(b)s, Coverdell Education Savings (ESA), Qualified Annuities, Profit Sharing Plans, Money Purchase Plans, Government Eligible Deferred Compensation Plans, and Keoghs.

The creation of a self-directed IRA or IRA LLC enables you to choose what you would like to invest your money in -- it can be raw land, single-family homes, condominiums, apartments -- to name a few.

"A lot of people want to identify retirement property or identify rental property and they're going to rent it out until they want to retire and [it's only] one or two IRAs -- then they can do the investment directly," says Attorney Debra Buchanan of Legal Strategies, P.C. who specializes in asset protection, estate planning and business planning.

Buchanan highly recommends an LLC because it is flexible and you can add and subtract investment partners easily.

"When I set you up as the manager then you have the checkbook [control]," says Buchanan. She adds, "Then every time you are going to invest in a new property you don't have to have the custodian approve [the transaction]."

"But if somebody is going to invest with one property for a long-term investment then you don't need to use the LLC strategy," says Buchanan.

A word of caution -- always make certain that the transaction is not prohibited. Setting up an LLC and using an attorney who gives you an opinion letter (stating whether the transaction is legal or prohibited) is valuable protection for you.

Navigating through the process of setting up a self-directed IRA or IRA LLC can seem overwhelming. Using qualified experts to guide you through the process will help keep you out of financial troubles that could cost you your entire investment. A good resource for more details can be found here.

Published: March 20, 2006

Buying Sight Unseen

2006-03-20T08:48:00.000-08:00

Net Offers Buying Sight Unseen, But Should You?
by Broderick Perkins
Realty Times

Browsing for housing is not just an ancillary tool in the quest to buy a home.

For one in three home buyers it could be the only way to go when buying a home.

Using the Internet, it turns out, also gives you a clandestine approach to being the proverbial nosy neighbor, not to mention all the "normal" online home shopping benefits -- obtaining a real estate agent and finding financing, mortgage, market, school and neighborhood information, among others.

Nearly a third of 300 San Francisco Bay Area home owners surveyed said it's likely home buyers will consider buying a home on the Internet -- sight unseen -- without an in-person tour, according to a survey commissioned by Prudential California Realty.

Given advances in the Internet's information technology, including high resolution imagery, speedy virtual tours, cross-platform file exchange, online neighborhood mapping, emailed communication convenience, and the wealth of school, neighborhood, mortgage and other educational home buying content, it's not surprising that some consumers believe buying sight-unseen with a Net assist will become more common.

After all, the vast majority of home buyers go online to browse for housing at some point in their home-buying effort.

The National Association of Realtors 2005 Profile of Home Buyers And Sellers found that 82 percent of first-time home buyers and 78 percent of repeat buyers used the Internet to search for homes.

NAR also found 24 percent of buyers actually found their home on the Internet. It's not clear if those buyers actually purchased their home sight unseen, but nearly one in four netted their home on the net.

Online shoppers surveyed said that's because what home shoppers saw online was often pretty much what they got -- on the surface anyway.

In Prudential's survey, 79 percent of those surveyed said the homes online met their expectations when they viewed them in person.

So why beat the bushes?

In the time it takes to physically tour 1 home, you can "visit" dozens or more homes in the virtual world.

Thirty-three percent of buyers searching online said they viewed 10 to 30 homes before they purchased their dream home and 22 percent looked at 100-200 homes online before they purchased. The buyers most frequently viewed between 10 and 20 homes in person, the survey said.

However, sight-unseen buyers should beware.

If you do attempt to purchase a home online or otherwise, without actually seeing it, you should not forego a full round of inspections (home, roof, termite, etc.) to learn the true condition of the property.

Also, photographs and virtual tours typically do not reveal termites, leaky roofs, appliances about to quit or an undermined foundation.

And then there are all the little things that don't show up in photos and virtual tours -- the next door neighbors; true color rendition of paint, decor and other finishing details; creaky floors; the property's north, east, south or west orientation and a host of other conditions lurking out of sight.

"A picture is worth a thousand words, but it's not the same thing as being there. Somewhere along the line, it's your duty to examine the property physically," said Frank Cannella, a branch and regional manager in Prudential's Northern California East Bay Division.

What you see simply isn't always what you get -- below the surface.

"How could you know what the neighborhood is like. How could you know what the smell of the house is like. They could have had [animals] in it," Cannella said.

Neighborhood virtual tours and an online experience that, well, smells is still on the drawing boards.

"I would be surprised if that (one-in-three sight unseen online buyers) ever happened. I don't see that happening," he added.

Prudential commissioned Caravan Opinion Research to conduct the telephone survey from January 17 to 19 this year with 300 adults living in private households in Northern California, who also purchased a home in the past three years and used the Internet to assist them in the search.

Photos attracting the most attention of buyers was the exterior of the home (41 percent) and then photos of the kitchen (37 percent).

While the online home shoppers were at it, many of them, toured online homes as virtual nosy neighbors, dropping in uninvited on homes near where they live.

Among those surveyed, 37 percent were "looky-loos" who wanted to see what was inside of their neighbor's home for sale. Nearly twice that many dropped in to check their neighbor's listing price.

Prudential said consumers not only use real estate listing websites to see homes' high quality photos and virtual tours, but also to view finance, community and school information, to find open houses and to assess the value of their homes.

And that's another sight unseen buyer beware.

Online home values typically aren't accurate if real comparables (recent sale and listing prices of homes comparable, by neighborhood, floor plan, age, style, etc., to their own) are not considered.

Apparently, virtual naiveté is alive and well.

Published: March 20, 2006