Michael Creed's Blog

The recently instituted HVCC continues to devastate home values across the US and those of us in the industry fear that, with higher Fannie and Freddie loan limits, it will soon carry through to the "jumbo" markets as well; leading the country even further into recession. Because of past actions by many in our country, Representatives Childers (D-MS) and Miller (R-CA) introduced legislation (H.R. 3044) requesting an 18 month moratorium on the Home Valuation Code of Conduct (HVCC). H.R. 3044 now has 22 co-sponsors and now is the time to forward a petition (sponsored by ThinkBigWorkSmall) to every person you know and every representative in the country. Be sure to read some of the comments in the petition and you will soon understand the harmful nature of this horribly misguided code. NOTE: The comments may take a while to load due to the sheer number of them.

ThinkBigWorkSmall applauds the introduction of H.R. 3044 and would like to thank Representative Childers (D-MS) and Representative Miller (R-CA) for their continued efforts and leadership on this issue but it is not enough. Tens of thousands of consumers have already been robbed of their opportunity to enjoy historically low rates by Attorney General Andrew Cuomo's rule. HVCC needs to be permanently reversed in order to restore lower costs to the consumer and to protect the thousands of real estate transactions stalled by this horribly misguided code.

Please sign and forward the following petition and forward to everyone you know and ask them to forward to their representatives:

http://www.hvccpetition.com/ 

What is HVCC? Be sure to watch the video clip - it does a great job of explaining HVCC and its problems. 

First-Time Homebuyers - It's time to get ready!

As you may have heard on the news recently, home sales, construction of new homes and the sales prices have all jumped in June; are you ready to take advantage of these events?

Here are a few things that you need to keep in mind:

First, beat the looming deadline…

One of the biggest incentives that have ever been offered to first-time buyers is the federal government’s $8,000 income tax credit.  If you are ready to buy a new home and you qualify for this incentive, you must complete the purchase of your new home before December 1, 2009.

Secondly, be sure to not only look at a home’s price…

Many people are trying to time the market’s bottom and all I can say is “Good Luck!” Being around this business for years, I can tell you that timing the real estate market, just like most other markets, is just about impossible because of all the variables that go into it. Some good words from cnnmoney.com on this topic are as follows:

“…if you want to estimate the market's ability to recover, consider the following factors: the local jobs climate. Where there is unemployment, you'll find more foreclosures and lower home prices. Scan local newspapers for large layoffs in companies that are based in the area.

Consider too where your area is in the market cycle. Have prices stabilized? Are they still going down? How much inventory is on the market? A good realtor can help you weigh these issues.

If the inventory is growing at a slower rate, or shrinking, then the market in that area is stabilizing says housing expert Brad Inman.

Next, walk through the town and look at the condition of the neighborhood. How many homes are abandoned? Are people taking care of their yard? Talk to the neighbors. That is a valuable source of information.”

Lastly, be sure to use your leverage to get what you want…

Clearly, you must know what you can afford and I can help you figure out what that is; just give me a call.  Simply because homes are selling for much less than they used to, doesn’t mean it’s a bargain for you, personally.  In some markets, required down payments can be as much as 20% of the purchase price.

As a buyer, you need to know that you have leverage over many of the sellers that are out there; particularly those that are desperate. Ask for seller concessions, use the Rural Housing program or other government or non-profit organizations in your area.

To find out what you qualify for, please contact me for a personal, free analysis of your options.

Here is one that I had to share with you...

Rent-to-own your home: Pro and con

It's tough for buyers to find financing and hard for sellers to find buyers. A solution that can work well for both is renting with an option to buy.

By Les Christie, CNNMoney.com staff writer, full rights retained

Last Updated: June 4, 2009: 4:51 PM ET

Original Article http://money.cnn.com/2009/06/02/real_estate/rent_to_own/index.htm?section=money_realestate

NEW YORK (CNNMoney.com) -- With buyers scarce and financing tight, some home sellers are offering rent-to-buy options to potential buyers. In fact, there's been enough of a spike in interest that ForSaleByOwner.com added it as a search option on the site, says spokesman Eric Mangan.

These deals, also called rent-to-own and lease-option, usually require buyers to pay extra rents each month plus up-front fees of about 5% of the purchase price. The regular rent then goes in owner's pocket (presumably to pay the mortgage), but the additional payments are used to buy down the price of the home.

"Lease option agreements, if properly drafted, by and large are an effective way of enabling people to buy who are having trouble arranging financing or coming up with down payments," said Lawrence Jacobson, a real estate attorney in Los Angeles.

The Advantages

Because the contract is typically written to close in 12 to 36 months, it gives buyers the chance to experience homes and neighborhoods without having to make major commitments.

But the biggest reasons buyers opt for rent-to-buy deals are to build up down payments and to improve their credit profiles so obtaining a mortgage is easier.

For example, if they buy a $200,000 home, paying $5,000 up-front and a rent premium of $400 a month on top of their $1,000 market rent, they'll have $9,800 saved after one year and $19,400 after three.

In New York City, condo conversions are increasingly offering the option after having units sit empty. For example, the developers of a former commercial building on Wall Street are offering to apply 100% of "buyers" rents toward the purchase prices. And there are no up-front fees.

It's a luxury building with prices starting at $630,000 for a studio to $8.4 million for a four-bed penthouse. Sales were slow because buyers were having difficulties arranging financing, according to sales director Larry Kruysman.

"What we were finding from customers was that banks were making it more difficult to purchase," he said. The lenders were asking borrowers to put up 30% of the purchase price to obtain a mortgage rather than the traditional 20%.

But most rent-to-buy offers are from individual sellers, often people who have purchased new homes, can't sell their old ones and need to offset some of their mortgage costs.

Renee Haworth, a Louisiana homemaker, tried to sell a house in Mandeville, La., for many months without success.

"We had two or three buyers ask us if we would do a lease option," she said. "We hadn't thought about it before that."

She consulted an attorney and made a deal this past March. It calls for a sale price of $217,000 for the four-bedroom two-and-a-half bath house. The buyer put $3,000 down and pays $1,400 a month, $400 of which accumulates toward the sale price.

The renters agreed to exercise their option after 12 months. Under terms on their contract, if they decide to walk away, they lose both the $3,000 deposit and the $400 per month they pay over normal market rents.

The Drawbacks

But there are drawbacks to these deals. You need a good contract and a healthy sense of "buyer besmeared."

Losing your investment: For one, there's little protection for buyers who fall behind in payments. If you fall behind and are evicted, you lose any up-front fees and rent premiums you paid.

Can't get a loan: If you still can't arrange financing at the end of the rental period, you may have to forfeit all the extra cash you've invested. The terms for that scenario would need to be spelled out in the contract. In buyers' markets, you may have the leverage to get a contingency clause specifying any up-front fees and extra rent be returned if you don't qualify for a loan.

Falling home prices: Buyers may be hesitant to lock into a set price a year in advance considering how much home values are plunging. If the comparables are significantly more attractive when it's time for your deal to close, you can sometimes renegotiate, but that's at the seller's discretion. If renegotiating is impossible, then you have to decide whether it's cheaper to walk away or go through with the deal.

Foreclosure scams: Some renters have been burned by doing lease-option deals with owners who are going through foreclosures. After months of taking the inflated rent payments even though they are in foreclosure, the owners finally have the home repossessed by the bank and the renters are served with eviction notices and are out their investments.

There have also been instances of foreclosure-prevention scams in which fraudsters take title to homes and do lease-option deals with unsuspecting renters. Instead of applying the initial deposit and the extra rent money to the down payments, the scam artists simply pocket everything and disappear. Because the renters don't get a title to the property until they close the bank loan, they are again out their investments.

Walk aways: Pitfalls exist for sellers as well. Renters may decide to not exercise their options if prices fall. That can leave sellers with large paper losses by the end of the lease compared with if they had sold the home when they originally planned. They are also stuck carrying the costs of the home until they find other buyers or tenants.

Affordability

Most importantly, however, buyers must be cautious about entering into a deal that's unaffordable. The payment can seem manageable when you're just looking at the monthly "rent" payment. But there are more expenses than that.

First, the mortgage payment on a $200,000 home after paying $20,000 down, comes to more than $1,000 a month at the current very low interest rates, which are only available to borrowers with the best credit.

Over the past few weeks, rates have been creeping up again, so there's no guarantee they will be as low when the purchase is completed. Plus, credit-damaged buyers can expect to pay one or two percentage points higher at a minimum. That could add another $250 or more to the monthly bill.

Then add in private mortgage insurance, property taxes, all the utility and routine maintenance costs, and it could push the monthly payment past $2,000 - and affordability. 

First Published: June 4, 2009: 2:43 PM ET

Original Article http://money.cnn.com/2009/06/02/real_estate/rent_to_own/index.htm?section=money_realestate