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Jun 15

Lending Insiders: “We will NOT MAKE BORROWING EASY”

By Carole Ellis | News

Nine out of 10 senior loan executives say that their companies will not be making it easier to get a home loan in 2016. According to Fannie Mae’s Mortgage Lender Sentiment Survey, despite the fact that a year ago many of these same executives said that they planned to make homeownership more accessible this year, now they are backing off of those plans. In fact, they are less likely than ever to ease lending standards, the report showed.

“The trend toward easing of credit standards appears to be tapering off,” said Doug Duncan, chief economist at Fannie Mae, pointing out that things probably would have looked even bleaker if the survey had been conducted after the release of a weak May jobs report. Despite a clear disinterest in making home loans easier to access, however, lenders do seem cautiously optimistic about the market in general. Mortgage loan demand is about the same as last year, while refinance and profit margins are slightly higher, although most lenders expect the demand for refinancing to fall in the latter half of 2016.

Lesson Learned:

It’s not going to be getting easier to get a traditional home loan, so if you can offer buyers another option you will be able to tap into an underserved portion of the market.

Point to Ponder:

Should lenders loosen their standards?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 14

BLOCKBUSTER EQUITY NEWS you can’t miss

By Carole Ellis | News

Only about eight in every 100 homes are still underwater, and that’s great news for American homeowners. More homeowners now have equity than they have since the housing crash, with about 46.7 million residential properties with a mortgage registering at least some equity at the end of the first quarter of 2016. That equated to a home equity leap of about $762 billion year-over-year, reported CoreLogic.

According to the real estate data giant, 268,000 homeowners regained equity between January 1, 2016 and March 31, 2016. That number boosted the percentage to 92 percent of all mortgaged properties having equity. “In just the last four years, equity for homeowners with a mortgage has nearly doubled,” observed CoreLogic chief economist Frank Nothaft. He added, “The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers, and increased principal payments.” He also predicted that the increase in equity would help the overall economy and that the number of underwater borrowers would continue to fall over the remainder of 2016.

Interestingly, five states account for nearly a third of all negative equity in the United States. Nevada, Florida, Illinois, Rhode Island, and Maryland all have more than 12 percent homes still underwater in their states.

Lesson Learned:

The housing recovery is still regional. Investors must remember to evaluate state and local trends before sinking money into any market.

Point to Ponder:

Nothaft said if equity rises a “uniform five percent across the U.S.” then the number of underwater borrowers will fall by another 1 million. Do you think that this is likely?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 14

DEALING WITH DOGS NEXT DOOR – wise move or keep moving?

By Carole Ellis | News

More and more Americans are factoring their pets into their home decisions in bigger and bigger ways, including opting out of home purchases if their dogs don’t like the neighbors. According to Keller Williams, “fence fighting,” when dogs run along a fence separating two properties and bark at each other, is becoming a more common deal-breaker when buyers are considering buying a house. Interestingly, Keller Williams suggested that there can actually be a solution to this problem that does not always involve just finding a house with different (or no) canine neighbors.

The training post suggested that installing “netting” along the fence could obstruct the dogs’ view of each other, effectively eliminating the problem. Also, the author said that immediately bringing your dog inside when he starts barking can help train them out of hating the neighboring animal or, at least, out of barking at it. Finally, the author suggested “working out a plan with the neighbor, like a rotation schedule of when the dogs are outside” so that they do not see each other in the yard.

Lesson Learned

Buyers will factor in their pets, so you must too. If you have an investment property with a problem animal living next door (or any outside animal that might be considered a “problem” by a potential buyer) factor that issue in before you buy and attempt to resolve it before you show the home.

Point to Ponder

While these options are probably fairly sound ones if you’ve already purchased the home, they seem a bit far-fetched if the home is not yet under contract or sold. Would you buy a home if your dog hated the neighboring animal and barked at it constantly, or would you keep looking?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 13

The “MAGIC NUMBER” that is BLOCKING YOUR BUYERS

By Carole Ellis | News

A certain “magic number” is making it increasingly hard for homebuyers to purchase properties these days, and if something doesn’t change, builders say that they simply will not be able to build any more homes for this tier of homeowners. The issue, according to the National Association of Home Builders (NAHB) is that median sales price of a new single-family home in 2015 was just under $300,000, and most first-time homebuyers need to purchase homes in the far more affordable sub-$150,000 range. The result: fewer than six percent of new homes on the market are priced below $150,000 and even fewer are priced under $100,000, despite the fact that nearly one in three potential buyers says that the only way that they can buy is if they pay less than $150,000.

Of course, that does not factor in the existing-home market, which one might think would have more affordable properties. In some areas of the country, this is the case. However, in high-demand areas where affordable, existing housing is simply largely nonexistent, this huge new-home stumbling block has effectively removed a large portion of the buying population from the equation.

Interestingly, the NAHB blames the government in large part for the affordability crunch. Nearly a quarter of the cost of a new home (average $84,000) can be accounted for by virtue of government fees and regulations. “Cost factors like these leave little mystery about why the lower 30 percent of the home-buying public is often restricted,” the NAHB noted in a recent press release.

Lesson Learned:

If you want to sell to first-time buyers, figure out a way to get below that problematic $150,000 number!

Point to Ponder:

Do you think it is worth it to sell to first-time buyers when second- and third-time purchasers usually can spend more money?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 13

3 DIVORCE “DON’TS” for real estate professionals

By Carole Ellis | News

Divorce is never easy, but splitting up the real estate can make things downright nasty fast. Real estate professionals often find themselves in the middle of sticky divorce situations when couples decide to split and need to sell off their joint property. Here are three things that you should avoid doing if you are caught in the middle of a couple sorting out housing in a divorce:

First, don’t give divorce advice. You can tell your sellers anything you want about the home-selling process, including what they might get for their home and how quickly they can expect to sell. However, steer clear of anecdotes or personal advice no matter how tempting it may be. If you appear to be judging or taking sides, they’ll opt out of working with you fast.

Second, steer clear of buyouts. Some real estate professionals think they’re being brought in to sell a home, then find themselves tangled up in the legal process as one spouse buys out the other. This is something for the couple and their lawyers to work out, since buyouts are often quite subjective and generally do not result in a profit for the real estate professionals involved.

Third, don’t make the divorce a home feature. Real estate professionals who specialize in moving homes for divorcing couples actually stage the homes to appear as if a happy couple lives there, right down to stocking the empty side of the closet. One agent explained, “When buyers hear the word ‘divorce,’ they think ‘fire sale.’ You don’t want that for your sellers.’”

Lesson Learned:

Working with a divorcing couple to sell a home can be perilous, but it can also be worth it since a good result will often net you two new clients.

Point to Ponder:

What is your worst divorce-sale story?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 03

3 HIDDEN PROBLEMS that will show up on inspection

By Carole Ellis | News

Most sellers dread home inspections, and with good reason. No matter how well you have prepared, that inspector’s job is to find some problem, however, small, and find it he or she will. Otherwise, your buyers are actually unlikely to believe that there is not any issue with the home and may give the home inspector a bad review or opt not to buy! While many sellers deal with this by leaving some small item undone (I know one investor who actually leaves the cover plates off outlets in order to provide a quick, easy-to-spot and easy-to-fix issue for inspectors to point out to buyers), there are some inspection issues that can really rear their ugly heads at the worst time. Here are three common home problems usually uncovered at inspection, and what to do about them:

Home Problem #1: Water Damage
You’d think that this would be an easy one to spot and deal with in advance, but home inspectors say that slow leaks in unused places, such as an unfinished basement, often go undetected. Check out all areas of the home before the inspection so that you can deal with any water-related issues up front.

Home Problem #2: Overworked Electrical Systems
If the lights are on, then you may be tempted to believe that the electricity is basically fine. However, if you have made any adjustments to the wiring in the home (or a previous owner did) then you may have an overtaxed electrical system that represents a fire hazard.

Home Problem #3: Foundation Issues
These can be hard to spot if they have not yet begun to cause major inconvenience, but you may get a hint of an issue if there are cracks at the corners of windows and doors, or if windows and doors do not shut tightly. If you have concerns about the foundation, have the home inspected yourself before putting it on the market. These issues can be difficult to repair and will almost always kill a deal.

Lesson Learned:

Be prepared! Do everything you can to present a solid home with no major issues to your buyers’ inspector, even if it means having an inspection done first.

Point to Ponder:

What’s the worst problem you ever uncovered during a home inspection?

Thank you for reading the REI Today!

Your comments and questions are welcomed below.

Jun 03

LITERALLY BLINDING: new “computer vision syndrome”

By Carole Ellis | News

Once you’re done reading this article, you might want to take a minute to gaze out the window. If you’re like most real estate investors,  you spend a fair amount of time online tracking market trends, identifying leads, generating leads, and monitoring your business. Doing so is vital to your success, but you need to remember to give your eyes a break or you could end up permanently damaging your eyes. According to a recent report in Medical Practice and Reviews, nine out of every 10 people who use computers extensively (more than three or more hours a day) have “computer vision syndrome,” and it can seriously and permanently damage your vision.

Computer vision syndrome (CVS) stems mainly from something that you probably don’t even think about doing: blinking. Normal, healthy blinking happens about 17 times a minute, but because looking at a computer screen tends to create a scenario in which you are staring, you’re likely to only blink about a dozen times a minute when working in front of the computer. Also, because your eyes have to constantly refocus in order to read on a screen due to pixels being blurry, not sharp-edged like printed words, your eyes tend to become strained and fatigued over time.

CVS symptoms include tension headaches, double vision, dry eyes, red eyes, and other eye strain symptoms. Over time, CVS sufferers may develop chronic migraines or generally worsening vision. Researchers recommend keeping your eyes a minimum of 20 to 26 inches away from the screen and minimizing ambient light in order to avoid eye strain from the glare on the glass. Also, they suggest taking a 20-second break every 20 minutes to look at something at least 20 feet away.

Lesson Learned:

Your eyes can take a beating when you’re working, so be sure to care for them.

Point to Ponder:

Do you think you have CVS?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 02

REHABBER JAILED over purchase process

By Carole Ellis | News

If you have ever thought that all that matters to banks is getting their mortgage payments on time, think again. While most lenders won’t pursue fraud charges as long as the loan does not become delinquent, taking a gamble and lying about who is buying a home and for what purpose gets very, very costly if you lose, as a Baltimore rehabber is finding out in the wake of a recent guilty plea. Michael Camphor recently pled guilty to fraudulent loan documentation and straw purchases, and he now faces up to 30 years in prison as well as a $250,000 fine.

Camphor was a real estate investor who found buyers for rehabbed properties for another investor in the Baltimore area. He would work with these buyers to falsify employment, income, and place of residence so that the rehabber could purchase the properties, then assured the straw buyers that the mortgage payments would actually be made by putting a tenant in place in the property. In reality, when this did not work (and sometimes when it did) the investors ultimately opted not to make the mortgage payments and the properties would eventually fall into foreclosure. Total losses were more than $736,000.

The issue for Camphor and his co-conspirators, who are also facing fines and jail time, is that they lied about who would be living in the properties and also priced them far over market value. As a result, not only did the banks make loans in excess of the properties’ value, but they required low down payments because of the straw purchasers’ alleged income and because they claimed they would be living in the properties. Also, the co-conspirators received large payments from the proceeds of the loan.

Interestingly, the main investor in the scheme who was rehabbing and moving the properties faces only one charge, mail and wire fraud. However, he faces that charge on nine separate counts because of the many properties he moved during the scam. That investor provided the funds that were lent to the straw purchasers in order to make the down payments at closing.

Lesson Learned:

Don’t lie on your loan docs, no matter what you think of the banks!

Point to Ponder:

Is 30 years in jail a bit much for this type of crime?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

Jun 02

BIGGEST PROBLEM for buyers this spring

By Carole Ellis | News

Although most buyers say that their biggest concern about making a home purchase in 2016 is affordability, in reality, they should be more concerned about their competition in the market. According to real estate brokerage Redfin, which conducts a large number of surveys of buyers, sellers, and other real estate professionals on a regular basis, buyers’ fears about competition are growing – and they should be. Just over one every four buyers told Redfin that in 2016, they are most worried about affording their homes, but Nela Richardson, chief economist at the listing an data site, said that the bigger issue will soon be that there are not enough homes in the first-time-buyer inventory to go around.

According to Redfin, some buyers are starting to realize that they could have a competition problem on their hands. About one in five said that competition was their top worry in today’s market. This is potentially good news for real estate investors who can offer unique financing and other types of advantageous deal structuring to would-be buyers. Furthermore, as more buyers begin to worry about competition, you can actually build a list of ready and eager buyers that are ready to buy your deals as soon as you get them under contract.

Richardson noted that today’s would-be buyers are “enticed by high rents and low mortgage rates to begin a home search,” but soon find that there are a “number of obstacles in today’s competitive market.” She noted that starter homes are actually not only the highest-competition sector in many cities, but they’re also phasing out of the range of affordability as well due to limited supply. A real estate investor with a good connection to off-market starter homes will likely be well-situated for the evolution of the 2016 market.

Lesson Learned:

Watch the inventory in your market, then adjust your strategy so that you have access to the most in-demand options.

Point to Ponder:

Will affordability of starter homes be the downfall of this market cycle?

Thank you for reading REI Today!

Your comments and questions are welcomed below.

May 31

MAJOR CREDIT MISTAKES buyers are making right now

By Carole Ellis | News

All excited because you’ve found a buyer for your latest real estate deal? If they’re planning to use conventional financing in order to buy, you’d better keep a close eye on them. According to a recent study by Yahoo! Finance, certain poor credit behaviors among soon-to-be homebuyers are more rampant than ever, and these credit mistakes could cost your clients their house and you your payoff on the deal! Here are three major credit mistakes that your buyers may be making RIGHT NOW with their credit:

They could be putting off payments: Buying a house is a huge investment, and many buyers actually postpone making payments on other things while they’re getting ready to make that big down payment. However, that decision could kill their credit score fast (30-60 days late on a bill automatically gets reported even though it doesn’t usually shut the lights off) and cause a lender to withdraw a loan offer.

They might be paying the minimum: Mortgage companies like to see borrowers who pay more than the minimum each month, and even Fannie Mae is about to start factoring in how much you pay off when you pay your credit card balance each month. If your buyers are paying the minimum to save up for moving expenses, encourage them to pay at least a little bit over.

They could be “cleaning” their credit: Yes, a high credit score is good. No, a record of constantly disputing everything in order to keep your credit score “clean” for lenders is not good if they detect it. You should absolutely report false charges, but bear in mind that lenders view myriad disputes as an attempt to “game the system” (and sometimes it works, but sometimes it doesn’t). If you already have the loan and interest rate locked in, just hold tight until that home purchase is complete!

Lesson Learned:

Your buyers need to be informed about good and bad credit behaviors so that they do not accidentally cause themselves to lose their home loan.

Point to Ponder:

What’s the worst credit mistake you’ve ever encountered?

Thank you for reading REI Today!

Your comments and questions are welcomed below.