Metro Atlanta North Real Estate

Many people today are looking to rent their current house out, and buy somewhere else.  It may be to get lower payments, or to relocate.  But some have done this, then stopped paying on their original mortgage on the rented house.  They used the opportunity to get out from under a loan, and never actually rented the house out.

Because of this, the FHA is now planning not to consider rental income on a previous “primary residence” in the income calculations on qualifying for the loan on the new house.  You have to be able to show that you can pay both loans without the rental income in order to get the new loan.

This is a temporary measure the FHA is making in order to prevent further defaults, or what is now being called “Buy and Bail” loans.  This is because the inevitable foreclosure, while it cannot be on an FHA property, can affect other FHA properties in the neighborhood.

Maybe now you need to sell your house because you are relocating and cannot afford two mortgages, or you now need to consider a short sale to get out from under a house you cannot afford.  Let me help you as I have helped many others.

Tell me what you think of this proposal.  Leave us a comment here, and share your thoughts with my readers.

For all those buyers out there waiting for the bottom, it would appear we hit one - two months ago.  Existing home sales nationwide increased 5.5% in September.  The price drops have leveled out.  Even with the hurricane aftermath and credit tightening.  If you are waiting for the bottom, you missed it, but you still have time.

This Article explains how things have turned.  While prices are down 9% from a year ago, they seem to have stabilized.

“This is the first time since November 2005 that home sales have been above year-ago levels,” Gaylord (President of the National Association of Realtors) says. “Credit tightened at the end of September, but the improvement demonstrates that buyers who’ve been on the sidelines want to get into the market to make a long-term investment in their future.”

Short Sales and Foreclosures are still over 35% of the total transactions, keeping prices down, 80% of the sales are to homeowners, not investors.  This is a great sign.

Contact me if you are looking for to make a move.  There are fantastic bargains out there, and great incentives for first-time buyers.  Leave a comment and tell us what you think!

The reason we were given for the Bailout Bill was because the banks were not lending - even among themselves.  They said we would not be able to get mortgages, car loans, student loans.  The news these days is that the banks are beginning to open up the flow again, slowly, but are not using most of the money to make loans.  Instead, they are using it for acquiring other banks and other investment purposes.  But does this mean you can’t get your loan?  No.

What has happened is that the lenders have increased their “underwriting requirements”.  In order to tighten up how much they are lending, and improve the chances that they will be paid back, they are requiring more from the borrower.  Those with no savings and lower credit ratings are having a hard time getting loans.  But those with decent credit and some money in the bank are getting loans, because the banks have a stronger belief that they will get their money back. 

As always, those with 20% to put down on a house, and a credit score of 720 or more, have no problem getting whatever loan they need.  The 100% mortgage is virtually gone.  But what if you don’t have 20%?  Underwriting guidelines at most lenders are now requiring 3.5% as a minimum (5% for Federal loans).  If you borrow that much, you won’t get the same rate as the person who puts down 20%, but you can still get your loan.  As for the credit score, a new ‘floor’ seems to have appeared around a score of 600 (in the past, low 500’s had been acceptable).  Again, you won’t get the favorable rates of the 720 score borrower, but you can get your loan.

In terms of the economy, these are all good moves.  It makes defaults less likely, and stabilizes the market.  If you can’t meet the requirements of a 600 score and 3.5% down, you may need to wait a while and work on increasing your score and saving money (which will help that score too).  But you’ll get a better loan when you get ready.  Give me a call if you are in this situation, and I can put you in touch with non-profit organizations that can help you make this happen.

Please leave a comment here to tell us how you feel about these moves, and how they will affect you.  I look forward to hearing from you.

With the economic downturn and the high cost of energy, everyone’s thinking about how to save some money.  Here are a few tips on how to cut the costs of running your home and staying comfortable.

1. Plug air leaks with caulking, sealing, or weather stripping & Save 10 percent ($190 per year) or more on energy bills.

2. Properly maintain the heating system to save approximately $950 per year.

3. Install a programmable thermostat ($90 per year).

4. Seal and insulate heating ducts instead of wasting $570 in warmed air per year.

5. Insulate, insulate, insulate ($630 per year).

6. Close fireplace dampers when not in use.

7. Let the sun shine in. Open curtains on south facing windows during the day to allow sunlight to naturally heat the home.

8. Reduce water heating costs by lowering the water heater’s thermostat setting (save 3-5% per 10ºF reduction.

9. Storm windows reduce heat loss by 25 to 50 percent.

10. The Energy Star Label can save you $600 per year.

For further details, you can read the whole article.  Please let us know your ideas for saving energy by leaving a comment here.

Hi Everyone:

I’d like to invite all my clients and friends to the Fall Festival this Saturday, 10/18/08 (11am to 3pm).  Come share a nice day with all of us, maybe paint a pumkin, or a face.  There will be kids activities and all kinds of fun.

The Festival will be held at Bulloch Hall - 180 Bulloch Ave, Roswell, GA  30075.  I look forward to seeing you there!  Please RSVP and let me know if you want to take home a pumpkin.

While you (and I), like many Americans, may not like the bailout bill much, it is pretty clear we were facing financial turmoil if something had not been done.  The argument is that while this bails out Wall Street, what does it do for Main Street (me)?  It is a confusing bill and a confusing time.  But one of the things I always try to do is to help you Understand the Language of Real Estate, and this will affect the Real Estate market pretty directly.

The root of the whole problem was that banks could no longer borrow from each other, and therefore could not lend to the public.  This was because there are limits on the amount of money that can be loaned, based on the amount of cash you have on hand.  Banks had already loaned that limit, and sometimes more.  The amount that they can borrow against is also based on the value of their “portfolio” which is directly tied to the price of your house.  With the market in decline, almost all houses are worth less than they were a while ago, reducing the amount that the banks had in assets.  If the banks can’t get money, they can’t loan it to you - or to the person who wants to buy your house.

The basic principle of the program is that the government will buy some mortgages from the companies holding them.  This gives those mortgage companies more money.  This changes an asset that they can’t borrow on, the mortgage with a undervalued house, with one they can - cash.  This frees up the pipeline and allows the buyer to get the mortgage to buy your house.  And it extends beyond the Real Estate market, so that people can continue to buy cars, fund their business operations, get student loans, etc.

There are those that argue there were other answers, and no doubt there probably were.  However, this is what got passed, and whatever else it means, it opens up the possibility to buy houses again.  This supports the entire market by keeping house prices from dropping further.  It is like my Short Sale process.  When I make a deal that allows the buyer to get a great deal on a house, the seller to get out of financial trouble, and the lender to get back most of their principle without the cost of a foreclosure, it is a drop in the bucket that helps the overall economy.  This bill works in a similar way for the whole market.

Will it work?  That remains to be seen.  But the general sentiment is that it is better than doing nothing.  Tell me what you think?  Who wins in this deal?  Do you benefit?  Will it work in the long run?  What will it mean to average people?  Give us your opinion, by leaving a comment here.

It’s big, it’s messy, and it’s complicated.  But what does it mean to YOU?

Yes, it had to be done.  The failure of these two companies would have had unimaginable consequences to the whole economy, both here in the US and around the world.  There was no other real option.  Now it has been in the news for a couple of weeks, and is seen as the signal event of all the other bailouts that have happened since and are being talked about now.

What happened?  Put overly-simply, these two ran out of money.  They buy mortgages from direct lenders so that the direct lenders have more money to loan to you.  When they can’t do that anymore, the direct lender can’t lend you money, and you can’t buy your house (or sell it because the buyer can’t get his loan).  That is also at the root of this week’s bail-out bill. So the government stepped in.  But they did not just “throw money” into these two companies, they “took them over.” 

This means that they now own 80% of these companies.  In essence, they traded several billions of your money for stock in these companies.  This has two positive impacts - the companies can now buy those loans again, and the government can (if it works) realize a profit by reselling those shares on the open market when the crisis ends.  If all goes well, the taxpayer is not only not “on the hook” for the bailout funds, but makes a profit by means of a reduced national debt.  But that part is off in the future.

For now, Fannie and Freddy can loan money again.  If this had not happened, many deals set to close in the last two weeks and the next months would have frozen.

But it also means that the “Heyday” is over.  We can expect that there will be no more “no-documentation” loans, or the really worrisome “Ninja” loans - No Income, No Assets, No verification loans.  Downpayment requirements will go up, getting 100% financing will become very hard.  On the other hand, general mortgage interest rates should come down - possibly by as much as 1%.  Right now, because of the liquidity problem and the fear it generates, the average mortage is 1% (or 100 “basis points”) over its normal benchmark.  If this, and the other bailouts, work, we can expect lower rates.

Over time, this should stabilize housing prices.  Unfortunately, this is not the only band-aid going on at the moment, and we are all waiting to see what will happen with the 800 pound gorilla - the 700 Billion bailout that is being debated as I write this article.  As soon as we see what form it will take, and can get an idea of what it will mean you YOU (not just Wall Street), I will be posting an article on it.

In the mean time, chime in!  Tell us what you think.  Are we going down the right or the wrong path?  What would you suggest?  Leave us a comment and share your thoughts.

Two months ago, someone called me interested in a Foreclosure.  He wanted to make an offer NOW with an FHA loan and the least downpayment possible, as he did not have much cash on hand.  This was the only property in which the caller was interested.  After speaking with him for 10 minutes, I said that the best way to structure the offer in the current market would be to be pre-approved for the loan from the beginning and being sure that the lender of his choice could truly offer the type of loan product he wanted.  The customer told me that he would call me back.  He did not want me to recommend any loan officers, telling me that he would call me when he had everything in place.

After two months of these calls, and talking with various Loan Officers, there was nothing concrete.  The house was still on the market.  I should also mention that I had shown this same property to two investors who buy with Cash Deals, and because of the large amount of necessary repairs (foundation problems, mold, erosion on the land, etc.), they did not want to make an offer.

Last week, this same customer called me and gave me the good news that he had been pre-approved.  We made an appointment and went to go see the house.  Again, because of the large amount of repairs and being sold As-Is because it was a Foreclosure, there was no way that this person would qualify for FHA.  So he had the excellent idea to apply for a 203K loan through FHA.

Again, he wanted to make the offer NOW.  I called his Loan Officer, and he told me that his company had cancelled the 203K program, and that he had informed my client.  After a while, the client called me and told me that his Loan Officer had told him that maybe the program would be available again in a month and a half, and if it wasn’t, he would go to another company that could do it.

Bottom Line: Agents, would you help a buyer, in this market, make an offer on a Foreclosure where the Earnest Money is going to be held by the Listing Broker and write a stipulation stating that the Lender was promising the buyer that MAYBE in 6 weeks he can get the type of loan for which he is applying in order to buy the house?  A Foreclosure that needed such major repairs?

Oh, I forgot to mention, after asking these questions of the Loan Officer, and the customer, in order to make the offer, another Agent called me.  He told me that the client did not want to work with me anymore, that he was going to represent him.

I would like to take a small survey of all of you.  Who believes that this transaction will actually close at the end of the day, and who doesn’t?  We will know the answer to this in a month and a half.  For those buyers who are looking for clear and honest representation: Look for an agent who represents YOUR best interests, not their commission.  The good news is that there are fewer of this type of agent today than there were.  They were the ones who helped create this Real Estate crisis, and are now out of business because of it.

So vote here by leaving a comment.  Will the transaction succeed in the end or not?  Also tell us your stories of unrealistic buyers and unscrupulous realtors who did not protect their buyers.  I look forward to a spirited discussion, and I’ll let you know how it went in 6 weeks.

It’s a tough market out there.  You hear it everywhere you go - TV, Radio, Newspapers.  Homes are just not selling, and the “backlog” of unsold homes means it could take a very long time for the “Inventory” of homes on the market drops back to normal levels.  That means your home must really Stand Out in this market to get the attention needed to sell.  There are two ways of making your home Stand Out: lower the price, or increase the “Value” that the buyer sees in it. 

My website has several common suggestions for increasing the Value appearance of your property (See my Seller’s Articles page), I wanted to post a few here that might catch your (and the buyer’s) attention and help “seal the deal”.

• Instead of just holding an open house, hold a “Bash”.  Serve catered food and wine, have door prizes, create a “party” atmosphere.  Make sure the announcement of your Open House Bash gets spread as wide as possible with neighborhood door-hangers, Post Card announcements, and listings on those websites that announce open houses.  Email an “evite” to your entire address book or the agent’s mailing list.
• Take the “Staging” of your house to the next level.  Bring in a Feng Shui expert to improve your home’s Chi.  As an interior designer for a dozen years, I know Feng Shui and the effect it can have on buyers.
• Offer a test-sleep.  Like a test drive for a car, let your prospective buyers ’sleep on it’ for a night in the home so they can get a feel for what it would be like to live there.  This is most effective in higher-end homes.
• Most homebuyers are going to ask (especially in this market) for closing cost assistance, points to bring down interest rates, etc.  You can pre-empt this and take it a step further by offering right up front to pay a certain amount toward closing costs or points. 
• You can also offer a Customization allowance - money the buyer can use to make changes to the house right away, as soon as they move in.  This could be to repaint areas where the buyer may not like the color, replace carpeting with carpeting that matches their style, etc.
• A rebate to pay some months of their first years mortgage would also make your home stand out.  This would be a rebate to the buyer that is equal to some number of months (3-12) of their mortgage payment.

While the last three clearly reduce your net, they are also creative ways of making your house stand out.  If you need to reduce your house price $5000 in the hopes of selling it in this market, using these techniques you can leave the house price where it is and offer that same $5000 in incentives.  You get the same amount of money.  But the psychological difference for the buyer could mean that your house sells 3 months or more faster than its market competition.  This saves you mortgage payments and lets you “move on” faster.

Let me know your creative thoughts for making your home stand out - I’m always looking for new ones.  Post a comment here and let us all know.

In a very recent article, the cheif economist for the National Association of Realtors (NAR) has analyzed the recent trends in the homebuying market, and the impact of the new Stimulus bill.  He analyzed two key features: the tax credit and the overall impact of the bill on the housing market.

The bill provides for a 7500 tax credit for buying a home.  It decreases for higher-income individuals, and must be “Paid Back” over a 15 year period.  That’s a little confusing, so let me break it down for you.  If you buy a 150,000 house and make less than the cutoff income amount, you get the full $7,500 tax credit when you do your next year’s taxes.  This is a credit, not a deduction.  If you owe 1000 in taxes, and can claim this credit, then instead of paying the government $1,000, they will pay you $6,500.  That’s year 1.  Starting with the Tax Return of 2010, you will owe $500 more in taxes to begin “paying it back”.  This will continue for a total of 15 years until you have “paid back” that same 7,500.  BUT: you will have paid back that money with deflated “future” money.

This will have a great impact on the housing market and the economy as a whole.  It means that buyers can now afford better houses, and are incentivised to buy sooner rather than later.  This takes more houses off the market and frees up the sellers to buy “trade-down” or “trade-up” houses, and stabilizes prices which are already beginning to stablilize (as more foreclosures are taken off the market and less added).  Statistics suggest that the hardest-hit areas (Florida, California, Nevada, Arizona) have already bottomed and are slowly climbing back.  The declines in the other areas are slowing.

A note on our local market: while other markets like those mentioned above have declined as much as 20-30%, the South has only declined 2.4%.  So far, I have been unable to find statistics specific to the Metro Atlanta market.  As Atlanta has routinely been #1 or #2 in foreclosures nationally, it is to be expected that our price drop (due to pressure from low priced foreclosure homes) was higher than the regional 2.4%.  It is likely that as we were slower to decline, we will be slower to recover as well, but the NAR study suggests that we are very close to the bottom - that either it will come in the next quarter or we are already beyond it in the last quarter.

This suggests hope for sellers that the market will stop the slide in prices and homes will begin to sell at a faster rate than they are now.  It also suggests to buyers that they should not continue their waiting game.  They may have already seen their best prices, and in waiting could miss out on the incentives.

Tell us what you think of the impact of the stimulus bill on the market and the economy?  Will it cause buyers to start moving?  Is it too-little-too-late?  Does it change your plans (either as buyer or seller)?  Leave a comment here and let us know.  And call me if you think now is the time for you to either begin to market your house or to start looking for one to buy.  For buyers, make sure you read the articles about the Downpayment Assistance Programs ending too - just look a few days back on this blog.