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Disgruntled Short Sale Buyers Moving To “New” Homes

Written by David Fletcher

Recently, Tampa Bay Realtor Christine Hensley’s $153,000, 1800-square-foot ten-year old short sale canceled unexpectedly. The seller allegedly could not get comfortable with what he would really owe the lender after the closing.

One week later, Hensley’s buyer closed for cash on a brand new upgraded 2100 square- foot Centex home for $170,000 cash, or about $2 per square-foot less than the short sale.

Within two days of asking for interviews from Centex if they had any recent sales resulting from burnt-out, distressed sale shoppers in Central Florida we had three stories and had to withdraw our request.

“I purchased a new home because I will never ever go through a short sale nightmare again in my lifetime,” said buyer Lynn Buonviri. Her dream short-sale fell through when the seller canceled without telling anybody, refused to move out, and would not come to the door. The fact that she had just arrived after pulling a trailer 1,000 miles for the scheduled final inspection, did not help.

“My broker negotiated with the bank and owner for 5.5 months. The stress on both of us was incredible, but the idea of going through this again was unbearable.”

Fortunately, everything worked out for both buyer and broker.

“I couldn’t be happier with my new home, its 10-year warranty and the fact that Christine earned a commission in the face of what could have been a real nightmare for both of us,” Buonviri said. (Disclosure: This happened to be a Centex property, but the same principles apply to all production builders. The author has a professional relationship with Pulte Homes.)

If you didn’t know better, you would think Hensley is a recovering short-sale specialist, with a new-found passion for selling new homes. That’s an understatement. The chances of a homebuilder canceling a sale is about as likely as the United States Supreme Court overturning the law of gravity.

Others think that a short sale or a foreclosure is the best price and therefore, the best value on the market, when this clearly may not be the case. Short sale versus new home pricing is proof that ‘price’ does not equal ‘value’.

Could the ‘new home alternative’ be trending as an option to a short sale purchase?

According to Sean Strickler, Vice President of Sales for the Pulte Group, of which Centex is one of its brands, he thinks so.

The broker community is starting to move in the new homes direction for different reasons than just price, according to Strickler.

Hensley thinks builders should take advantage of the lack of affordable, closeable inventory and should build to compete specifically with short sales in their markets. In her Valrico market, she believes the price point is “around $175,000.”

Strickler said that the Pulte-branded communities maintain an inventory home program specific to each community, “While we don’t want to overbuild in a particular community, our goal is to always have a quick move -in or two for those buyers who don’t want to wait for their home to be constructed.”

No doubt, this is a market-specific challenge, but there is plenty both builders and agents can do to improve sales, starting with confirming what the short sale/new homes story is in your market.

The recommended action plan for real estate brokers:

1. Do not assume you understand the new homes market.

2. Understand the square foot price differences between resales and new homes.

3. Visit sales centers for yourself. Ask questions.

4. Email this column to a builder and ask him to give you his comments.

5. Ask for case studies of short sales buyers who eventually purchased a new home. How long did the new home take to close?

6. Call at least three new homes sales offices. Ask them if they are seeing an increase in short sales buyers who are shopping and buying new homes in your market.

7. Put your findings in writing, so you can show the results to a short sale buyer who may not be aware of the differences in short sale and new home prices.

8. If you confirm a new home alternative, establish a new homes niche to strengthen your short sale program.

Recommended “critical few” action plan for builders:

1. Conduct an informal focus group with productive short sale agents. They have the buyers.

2. Compare recent short sales square foot prices with yours.

3. Educate the broker community.

Are new homes sales trending as a short sale alternative? It’s too early to tell.

If so, home builders and Realtors are finding a most unexpected sales solution – each other.

Rural Housing Incentives

Written by Carla Hill

The landscape of American has changed over the years. As population levels grew, so changed rural and urban demographics. Cities have stretched their boundaries to include former farmlands, absorbing formerly rural populations. And young rural dwellers have made the leap to city life, as small American farms and a largely agrarian society has been replaced by industrialized farming and a service-focused job market.

According to the Census Bureau, a gradual shift has been taking place over the last 100 years.

1900: 39% urban dwellers
1920: 51% urban dwellers
1960: 63% urban dwellers
1980: 73% urban dwellers
2000: 79% urban dwellers

This rapid growth has changed the dynamics of our country. It has put further pressure on our environment and increased strains on local governments to provide education, health care, sanitation, security, and transportation.

The University of Michigan reports that “because governments have less revenue to spend on the basic upkeep of cities and the provision of services, cities have become areas of massive sprawl, serious environmental problems, and widespread poverty.”

For those, however, who choose to live rural lives, numerous programs and incentives are in place that can make the process easier.

For example, if you are looking to connect to rural water sources, and you live in certain regions of Arizona, California, New Mexico, and Texas, you may be eligible for a grant that will pay for connecting service lines to a residence. It can also be used to pay utility hook-up fees, install plumbing and related fixtures, i.e. a bathroom sink, bathtub or shower, commode, kitchen sink, water heater, outside spigot, or bathroom, if lacking.

Looking to go green with a small business? The Rural Energy For America Program Grants/Renewable Energy Systems/Energy Efficiency Improvement Program provides grants for energy audits and renewable energy development assistance. It also provides funds to agricultural producers and rural small businesses to purchase and install renewable energy systems and make energy efficiency improvements.

Worried about qualifying for a home loan? The government has programs for that as well, whether you are an individual or builder. Considered “Guaranteed Housing,” you can find such help as zero downpayment requirements and no maximum purchase price limit.

For more information on what grants, loans, and programs could be of help to you, contact your local rural housing office.

Editor’s note: Believe it or not, rural financing programs are available in portions of the Coachella Valley and Morongo Basin. Contact us for more information.

Most Homebuyers Have No Regrets

Written by Broderick Perkins

An overwhelming 90 percent of homeowners say they don’t regret buying their current home, according to a new study by Bankrate, Inc.

That’s even in the face of stagnant – or sliding – home prices they’ve suffered and rock-bottom mortgage rates they may have missed out on.

Only 9 percent of respondents expressed second thoughts about taking the plunge. Why? Most often because they couldn’t sell their home and move on, or because they were unable to afford the monthly mortgage payment.

“It’s surprising and reassuring to hear 90 percent of homeowners say they don’t regret the purchase of their current homes,” says Greg McBride, CFA, senior financial analyst for Bankrate.com.

“And all the nasty headlines in the past two years have really moved the needle in terms of mortgage awareness, with a significant drop in the percentage of borrowers who don’t know what type of mortgage they have,” McBride said.

Only 8 percent of Americans don’t know what type of mortgage loan they have. That’s a lot lower than the 26 percent of respondents in a Bankrate study done two years ago who said they were in the dark about their mortgage type.

Being bullish on homeownership isn’t necessarily new. A recent Fannie Mae report revealed 70 percent of consumers see a home as one of the safest investments to make and 64 percent think now is a good time to buy.

“The key to any real estate survey conducted in today’s market would be to factor in the state where the survey’s respondents reside. In many parts of the country, particularly in the Central states, they did not experience a real estate boom like the West and East coasts and therefore are not faced with the fall out of a dramatic real estate bust today,” said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.

She added, “Feelings about home ownership should have changed very little in those states where home prices and equity have remained relatively stable.”

Other results in the Bankrate poll of 1,001 randomly selected adults, conducted last month by Princeton Survey Research Associates International, include:

Fixed-rate mortgages are gaining in popularity. Seventy-nine percent of respondents said they had this type of mortgage on their home.
Wealthier Americans — those making more than $75,000 — overwhelmingly preferred fixed-rate mortgages. Almost 90 percent of those who were asked, said they used a fixed-rate mortgage.

Priced to Sell

Written by Carla Hill

It has long been a motto of real estate, and the saying goes, “location, location, location.” It’s what sells a property, they say. But recent times have brought to light that the real deciding factor on how fast, or even if, your home sells all comes down to price.

It’s not that buyers are attracted by shiny, new things, but in a sense they are. When a home is newly listed it gathers a lot of interest. The listing agent may send out emails, webcasts, and virtual tours. They launch their entire marketing program. Even the MLS indicates the home as “newly listed.” After a few weeks, however, if no momentum has been built, the home will then face a must steeper challenge on the road to selling.

First, homes that have been on the market a considerable time lose their competitive advantage. A buyer may see a home hasn’t moved, and may come in with a low offer price. Depending on how desperate the seller is, they may feel obligated to take this offer.

Second, no one wants their home to sit on the market. It can interrupt plans to move and to buy. One of the best game plans is to price your home to sell.

This means taking a good, hard look at the area comparables. How much have homes been selling for in your area? How does your home compare in terms of amenities? Your real estate agent can be invaluable when it comes to correctly pricing your home. Sellers judgement can be easily prejudiced by emotional attachment to the home and hopes for certain profits.

If your area is experiencing a strong buyers market, that means you need to be even more competitive. You may need to price your home a little lower than you had hoped for. If you are in a sellers market, you can generally ask for a bit more in the asking price.

One tried a true method a realtor will use to snowball interest in a home is to actually underprice it. If your home is in a desirable location and you undercut the competition, you may find yourself fielding multiple offers. How does that work?

A group of buyers are all looking for a home in your lovely neighborhood. Comparable homes to your are priced around $250,000. So, you price your home at $220,000. Buyers jump at the chance to get such a bargain deal …. buyers being the operative word. This can create a bidding war between buyers who have fallen in love with your property. In many cases, the final sale price ends up being more than you would have gotten had you listed at a higher initial price.

Have your upgrades priced you out of the competition? Renovating your home with upgraded fixtures and granite counters can be very appealing. But if homes in your neighborhood are basic models with Formica counters and fewer fancy upgrades, you may have a hard time finding a buyer who will shell out more. This is one way location is very important. You must make sure you’re aren’t overpriced for your location. Depending on your area, you may have to eat the costs of some of your previous upgrades in order to get a sale.

And finally, are you being greedy? Sometimes people have a magic number in their head of the profit they’d like to make by selling their house. They already have that money spent on the upgrades and toys they’ll buy for their next home. But selling is a time to be realistic.

Rely on your real estate agent to guide you in pricing your home. And good luck selling!

Interest Rate Watch

30 yr fixed: 4.36%
15 yr fixed: 3.86%
1 yr adj: 3.52%

(U.S. Daily Averages)

How to Improve the Odds of an Offer

Written by Realty Times Staff

Price it right. Set a price at the lower end of your property’s realistic price range.
Prepare for visitors. Get your house market ready at least two weeks before you begin showing it.
Be flexible about showings. It’s often disruptive to have a house ready to show at the spur of the moment. But the more amenable you can be about letting people see your home, the sooner you’ll find a buyer.
Anticipate the offers. Decide in advance what price and terms you’ll find acceptable.
Don’t refuse to drop the price. If your home has been on the market for more than 30 days without an offer, you should be prepared to at least consider lowering your asking price.

How to Recognize a Sellers Market

Written by Carla Hill

As a homeowner, and a prospective seller, you may be wondering if now is a good time to put your home on the market. But how can you tell if the market is in your favor at this time? Will you lose money or make money? Is it a “sellers market”?

These are all very important questions. And the answer is in the market statistics.

As a seller, one of the first things you must evaluate is the desirability of your location. Market conditions are extremely localized statistics. While the national economy and housing market tie every area of the country together to a certain degree, markets and their conditions range widely from state to state, community to community, and even neighborhood to neighborhood within a community.

You must ask yourself, and your real estate agent, “Is my neighborhood up and coming or has it already come and gone?” If you live in a neighborhood that is highly desired due to its school system, local amenities, or even status and prestige, then you may find yourself in a continual sellers market, where you will always be in the advantage.

A great place to start your research is the National Association of Realtors’s website, realtor.org. They offer monthly quarterly and monthly studies by region, that include such things as existing and pending home sales.

For a more local view, look at the most recent sales in your surrounding area. How much are homes selling for? And how does your home compare in both size, location, upgrades, and condition?

Unfortunately, an issue completely out of your control can have a direct effect on your ability to sell your home, and for a good profit. Foreclosures in your neighborhood affect your home’s value. This isn’t fair, but it is how the market works. Buyers look for the best home for their dollar. If they are able to buy a home on your street for a foreclosure price, then suddenly your asking price must decrease in order to compete. Be sure to ask your agent for tips on how to make your home stand out again to buyers, despite this issue.

Another stat you should be aware of is “days on market.” This means how long it takes a home to sell from the time it hits the market. In general terms, anything less than 6 months is considered a sellers market. If the average time is longer than 6 months, then the market is in favor of buyers. This should be a consideration for when you look to buy your next home. Unless you are prepared to carry two mortgages, you will want to make sure your current home has sold before looking for the next.

How is the local job market faring in your city? If you live in a town that has a healthy economy, then chances are you live in a sellers market. People who have steady jobs are more inclined to look to buy. The bigger the unemployment figures, then fewer buyers on the market.

Another consideration is “appreciation.” In a healthy market, a home should increase in value each year. Many of the areas of the country, however, experienced a “bubble burst” after seeing years of record appreciation rates. Two major areas of uncontrolled appreciation were Florida and California. Homes bought during the bubble may very well be worth less now than their owner owes.

Be sure to discuss all of these issues with your local real estate agent. They will be able to help you determine whether now is a prudent time or not to put your home on the market.

Too Much To Store and Too Little Space

Written by Realty Times Staff

Do you have too much to store and too little space? If you’re like many homeowners, finding enough storage space can be a challenge. Thankfully, remodeling professionals can help you create new ways to tuck away your family’s treasures in a resourceful and sophisticated way, according to the National Association of the Remodeling Industry (NARI).

Finding storage solutions doesn’t always mean undertaking a major remodel. Sometimes it’s about using the square footage you already have. Remodelers can help you plan and reallocate storage to accommodate your family’s changing lifestyle. Getting creative with storage can improve daily living and boost the resale value of your home.

Look in Unusual Spaces

Veteran remodeler Don Van Cura, CR, CLC, CKBR, and owner of Chicago-based Don Van Cura Construction, recently won a regional CotY Award for a clever storage solution he designed for stashing canned goods under a kitchen staircase. “I’m a space freak and I don’t believe that any part of the house should be wasted,” he explains. “Almost every section of home has a void in it that can be made into storage — and the older the house, the more nooks and crannies you can find.”

For his stair solution, Van Cura created storage bins under the wooden treads of a staircase. He did this by attaching each tread of the staircase to the frame using hidden piano hinges, which allow each tread to open like a storage chest. The homeowner could then use the space under the tread to tuck away dry goods and cans. This storage strategy can be used in many areas of a home. In the foyer, for example, the hidden cubbies under stairs can stash shoes and outdoor gear. In the basement they store cleaning products or seasonal accessories. For a short run of stairs, remodelers can also install a set of custom drawers underneath the stairwell with access from the either the side or the back — another great use of space.

Any good stair installer or skilled remodeler should be able to do this project, but it demands a structurally sound staircase, fine cabinetry skills and careful preparation. “It’s easiest if you’re planning a new set of stairs, but it can also be done as a retrofit to existing stairs,” Van Cura notes.

Reconfigure Rooms As Needed

Perry Szpek, design sales associate for JDJ Builders in Milwaukee, Wis. recently created more storage for a family of six by reconfiguring two existing rooms and adding some square footage. The family’s mudroom was once a cramped hallway that led from the house to the garage. “Not having a place to put on and take off their shoes was their biggest pet peeve,” Szpek said. As a solution, he designed two furniture-style storage units that provide both seating and a place to store outdoor gear.

On one side of the room, a large boot-bench and locker cabinet gives the kids a place to sit down or hang up coats. The bench features storage beneath the seat and wicker baskets on a shelf above the hanging area. Drawer cabinets also flank each side of the bench, creating a personal spot for each child to stash hats, gloves and mittens.

Across the room Szpek planned a shorter boot bench for mom and dad that offered flip-top storage under the seat and hooks to hang coats behind them. Both storage pieces were accented with traditional beadboard backing, crown molding and a medium-brown distressed birch finish.

In the family’s 120-square-foot laundry room, Szpek created a beautiful and storage-smart workspace. Upper and lower cabinetry provides plenty of storage for detergents, brushes and sponges, and a long countertop gives mom ample space to fold clean laundry. Under one area of the counter, Szpek designed cubbies that accommodate six laundry baskets — one for each member of the family. “When mom’s done folding clothes, she can separate the loads into a separate bin for each member,” he says. “The abundance of storage space worked great for this family of six.”

Where to Start

While some homeowners may think that a bigger home will solve their storage dilemma, this is not always the case. Often, having better storage is about making better layout choices and putting things within easy reach. Before talking to a remodeler, homeowners should take a thorough assessment of the square footage they have and how much stuff they need to store. In addition, it’s important to think about day-to-day schedules. Some areas of the home, like foyers, mudrooms and laundry rooms, could use additional cabinetry or places to drop cell phones, keys and wallets. Sometimes the project is more about reworking traffic flow or designating specific spots for tasks like folding laundry, putting on outerwear and storing cleaning products.

Five Keys To Successful Negotiations

Written by Peter G. Miller

Whether you’re a buyer or a seller you want to succeed in the realty marketplace. That’s natural and reasonable, but what are the steps you need to triumph?

Negotiations are a complex matter and all transactions are unique. Both sides — buyer and seller — want to feel that the outcome favors them, or at least represents a fair balance of interests. In the usual case there is a bit of bluff, some give-and-take, and neither party gets everything they want.

So how do you develop a strong bargaining position, one which will help you get the most from a transaction? Experience shows there are five basic keys which will determine who wins at the negotiating table.

1. What Does The Market Say?

At various times we’re in a “buyer’s” market, a “seller’s” market, or a market where supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.

Because all properties are unique — it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or, if you’re a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.

2. Who Has Leverage?

If you’re on the front page of the local paper because your business went bust — and the buyer knows it — you have less clout in the bargaining process. Alternatively, if you’re among six buyers clamoring for that one special property, forget about dictating an agreement — the owner can sit back and pick the offer which represents the highest price and best terms.

3. What Are The Details?

A lot of attention in real estate is paid to transaction prices. This surely makes sense, but the key to a good deal may be more complex.

Consider two identical properties that each sell on the same day for $275,000. The houses are the same, the sale prices are the same, but are the deals the same? Maybe not. For instance, one owner may have agreed to paint the property, replace the roof, purchase a new kitchen refrigerator, and pay the first $5,000 of the buyer’s closing costs. The second owner made no concessions.

In this example, the first house was actually sold at discount — the $275,000 purchase price less the value of the roof repairs, closing credit, and other items. If you’re a buyer, this is the deal you want. If you’re a seller, you would prefer to be the second owner and give up nothing.

4. What About Financing?

Real estate transactions involve a trade — houses for money. We know the house is there, but what about financing? There are several factors that impact the money issue:

Has the buyer been pre-qualified or pre-approved by a lender? Meeting with a lender before looking at homes does not usually guarantee that financing is absolutely, unquestionably available — a loan application can be declined because of appraisal problems, title issues, survey findings, and other reasons.

However, buyers who are “pre-qualified” or “pre-approved” (these terms do not have a standard meaning around the country) at least have some idea of their ability to finance a home and know that they are likely to qualify for certain loan programs.

The result is that pre-qualified buyers represent less risk to owners than a purchaser who has never met with a lender. If the seller accepts an offer from a buyer with unknown financial strength, it’s possible that the transaction could fail because the buyer can’t get a loan. Meanwhile, the owner may have lost the opportunity to sell to a qualified buyer.

The lower the interest rate, the larger the pool of potential buyers. More buyers equal more potential demand, good news for sellers.

Alternatively, high rates or even rising rates may drive buyers from the marketplace — and that’s not good for anyone.

It used to be that down payments were a major financing hurdle — but not anymore. For those with good credit, loans with 5 percent down or less are now widely available. In fact, 100 percent financing, mortgages with nothing down, are now being made by conventional lenders. Reduced down payment requirements are good for both buyers and sellers.

5. Who Has Expertise?

Imagine you’re in a fight. The other guy has black belts in 12 martial arts — and you don’t. Who’s going to win?

Brokers have long represented sellers, and now buyer brokerage is entirely common. In a transaction where one side has representation and the other does not, who has the advantage at the bargaining table?

Interest Rate Watch

30 yr fixed: 4.49%
15 yr fixed: 3.95%
1 yr adj: 3.55%

(U.S. Daily Averages)