Just an Observation, especially for Short Sale Buyers

Here’s what I have been noticing lately. First time buyers who are asking for the moon but have earthly money and expectations.

Yes there are a lot of other people losing their homes. Yes you may well be able to get those homes at a lower pricing than they had originally paid for the home. Yes, you may be able to finally move into a home of your own with all the responsibilities that do go with that move. And finally yes, you may be able to take advantage of the national IRS tax credit for moving now. You may though need to take 2 steps backward as far as optimum area from where or how you are currently living to be able to get your foothold on that homeownership dream. Just remember we want/need you in a home of your own.

First let me be one of the first to congratulate you on actually FINALLY making that move. Neighborhoods are stabilized by having more homeowners than renters living there. Homeowners actually have to care more about a neighborhood and its well being than a renter and the landlords because they are supposed to be living there longer; say 10-15 years; or at least 5-7. The time goes quickly when you are trying to make this new place a home and not just a house where you live and come to rest your head at the end of a long day’s work.

We will invest a lot of time in you and are banking on your integrity and honesty with us. Kind of have an idea or a feel to what the home of your dream is. We will try to find it for you, if it’s available, now that you are ready. You need to be patient. The right house will hit you. I really do mean literally. It will hit you and you will know that you have found it. Even if you are thinking of it as a move up house/home for you. It will reach out and touch you. Or at least the neighborhood will. You will be haunted in your sleep regarding this house and very disappointed if your offer is not accepted. And super elated when it is. As you should be.

Now give your Realtor® a little slack. We should be previewing and eliminating the homes before you see it so we know what we are taking you to. Sometimes, but rarely, we will ask you to see the house without us. The circumstances would probably be that you needed to see this one immediately and we had a prior appointment with another buyer. Please go to it and let us know immediately if it’s a go or no go. It’s probably a property we think is in very high demand. Not all the houses on the market that seem to meet your preordained requirements actually do. That is our job to really weed them out so you are not wasting your time. When we say this is a house you should jump on, if you trust us, you should jump on it. Reason being if we have the money and credit, we would for ourselves. No joke. Most of us do not have the extra disposable money or credit to carry another investment property, so we will find a buyer for this house we think you should have jumped at. Ask us why we think it is such a great home for you and we will tell you. Be honest with us back though. Our feelings are not hurt if you do not agree with our choices. This is a business. You are our customer. We are not working for ourselves when we are working for you, we are working for you. Let us know what we need to tweak for you.

Now, when we tell you that you need to speak to the banker and have that pre approval letter in hand when we first meet and you will need to make sure we have updated financials on you, please help us and do it or have them ready when we write the offer(s) for you. We, personally are not interested in your personal financial shape, just can you comfortably qualify for this home and get a loan that is comfortable for you unless you are a cash buyer. It does neither of us any good to put you in a place where you may default on it 3, 6 or even a year or two out. No good at all. You will to person blame us. Even though we are the least culpable in this. We can only go by the information you and your banker provide us. Your banker knew, you knew, you knew your future financial prospects or expectations, but we are more than likely to get the harshest brunt of the blame when things go wrong in your new home purchase. If we tell you it will take 4-6 months to get an approval for that short sale home, please believe us and add on 2 more months for just in case something goes wrong or there is another delay on the seller’s part. Please believe, we want to put you in the best place for your money. Unless of course you just insist on being in a neighborhood we see no future in. There may be extenuating circumstances for your choice. Let us know what they are. We can keep this in the back of our mind when we are culling through our lists.

There are some caveats to purchasing that first home. You need to take care of it or be able to hire service providers who can for you. Paint and new carpet or flooring or the yard or lacks there of, if there is space, are inexpensive if you love the house but don’t like these items. The current homeowner did them for their family as you will for yours. The important items are, does the house and its surrounding area suit you? Construction, such as moving a toilet, adding a room, changing a kitchen and its fixtures are or can be expensive. So can be homes with no permits for the additions or changes made by the previous owner. Please do not dismiss the non permitted items. They can bury you financially. If this is your first home, I would not advise you to start there. Stick with cosmetic fixable items only.

Now back to the purchase of this your new home. Let me also just tell you now, that finding that perfect for now house for you is only 1/3 of our job. We also need to meet all the inspector, appraisers, workpeople that need access to your property, do some background research if necessary, make sure you are given in a timely manner your forms and publications, regulations information, and lastly make sure you understand ALL that you are signing. And getting your keys when they said you would.

Here’s how you can help us. Make sure and interview us. If your gut does not feel comfortable working with us; DON’T. All in all it all boils down to a gut feeling not a logical reason as to why we do what we do. You will be asked to sign a buyer agreement and you should. It holds both of us accountable to each other for the duration of our working relationship. Work with one realtor at a time. If a reputable realtor finds out that you are cheating on them or trying to undercut them, we will drop you. That said, if you do not wish to work with us anymore let use know and why. Let us know your work schedule as much in advance as possible so we can schedule showings at your convenience, unless we say we have a hot one for you to see. Sometimes we may have to write an offer sight unseen, we can always get out of an accepted contract if you do not like it once you have seen the interior. There are some things beyond our control.

Most of all though, we just want you to ENJOY YOUR NEW HOME

Herm.

Home Sizes Fall as Builders, Buyers Embrace Economic Reality

By Steve Kerch

RISMEDIA, January 28, 2010—(MCT)—New-home buyers responded to the tough times in 2009 by opting for smaller houses, driving down the average size of a house built in the United States for the first time in 27 years.

Data recently released by the National Association of Home Builders (NAHB) found the average size of a new home that was completed in 2009 fell to 2,480 square feet from 2,520 square feet in 2008. The last time the average completed-home size fell by a statistically significant amount was 1982.

“You’ve heard the mantra ‘downsize me’ and ’small is the new big?’ Well, last year was definitely a downer,” said Carol Lavender, president of Lavender Design Group, a residential design firm in San Antonio, Texas.

Homeowners surveyed by Better Homes and Gardens magazine said downsizing was becoming a bigger priority: 36% said in November 2009 that they expected their next home to be “somewhat smaller” or “much smaller” than their current home versus 32% who said that in 2008. “Not surprisingly, we see a ‘cents and sensibility’ approach when it comes to buying or improving a home, with practicality and price being the top priorities,” said Eliot Nusbaum, the magazine’s executive editor of home design
.
While the small-house movement in the United States has been gaining steam for a number of years, the recession has accelerated it and home builders have responded.

“The era of easy money is over. You really have to think before you go out and decide you need that five-bedroom, five-bath home,” said Rose Quint, the NAHB’s assistant vice president for survey research. “Couple that with the energy cost concerns of consumers today and I think we will continue this trend. Houses will not shrink drastically, but they will shrink.”

Although actual square footage of homes didn’t fall until 2009, the percent of homes with four or more bedrooms in them has been falling since 2007, NAHB data show. And in 2009, the number of homes with three or more bathrooms fell for the first time since 1992.
Two other trends in home construction are contributing to the declining square footages: The prominence of first-time buyers in the housing market and the increasing number of households with members 55 and older who are buying homes.

First-time buyers, driven into the market in good part by the availability of an $8,000 tax credit, are more likely to compromise on home size in exchange for a lower price. And the 55-plus crowd tends to purchase single-story homes, which generally are smaller because of the land costs that favor the more-efficient two-story plans.

“Barely over half of new homes today are built with two stories or more,” Quint said. Two-story homes peaked at about 55% of the market in 2006. For 2010, home builders say they will focus on lower-priced models and smaller homes. More than 95% of builders surveyed by NAHB in January said that was the way they saw their business evolving this year.

The penchant for smaller homes will necessitate some design changes. Builders, attempting to respond to those consumer demands as well as hold the line on prices, told the NAHB surveyors that they were most likely to include these features as standard in their houses this year:

-Walk-in closets in the master bedroom.
-Laundry rooms.
-Insulated front doors.
-Great rooms.
-Energy-efficient windows.
-Linen closets.
-Programmable thermostats.
-Energy-efficient appliances and lighting.
-Separate shower and tub in master bathrooms.
-Nine-foot ceilings on the first floor.

Among the things that builders said they were least likely to add to houses in 2010:

-Outdoor kitchens.
-Outdoor fireplaces.
-Sunrooms.
-Butler’s pantries.
-Media rooms.
-Desks in kitchens.
-Two-story foyers.
-Eight foot ceilings on the first floor.
-Multiple shower heads in the master bath.
-Smaller kitchens.

“You can see that builders are concentrating heavily on energy-saving features,” Quint said. “But a lot of the luxury items are on the chopping block or on hold as builders try to lower costs.”

(c) 2010, MarketWatch.com Inc.
Distributed by McClatchy-Tribune Information Services.

Happy New Year for 2010

Here's to everyone starting their New Year off with a Big Bang. Herm.

Home Security and Fire Safety

For a safe home, we want to keep burglars out by locking up the doors and windows. But in a fire, a door or window with security bars or locks can keep you from getting to safety in time to save your family.
Protect Against Break-ins and Fire

• Replace deadbolt locks that need a key to open from inside. Keys can easily be misplaced when the deadbolt is locked, making it impossible to escape.

• Choose locks that use keys only outside the door or have a turning or “throwing bolt” or latch inside.

• If your home entry doors have two-keyed deadbolt locks, protect your family in the meantime by keeping the key to your deadbolt on a hook near the door, but away from any windows. Make sure all responsible family members know exactly where to find the key and how to use it quickly in an emergency.

Window Security/Burglar Bars
Security bars on doors and windows can provide a strong defense against burglars. However, that same protection can prove deadly in a fire emergency.
A home fire can grow so fast and spread so quickly that people may have three minutes or less to get outside to safety. Bars welded over an escape route not only trap people inside; they also prevent firefighters from being able to get them out. The Home Safety Council urges families to make sure security measures do not slow down a quick escape:

• If you put bars on windows and doors, choose a kind you can open from inside your home. These have a “quick-release mechanism” that lets you open them fast.

• These bars are designed so no one could reach the opener from outside and come in.

• Contact an iron contractor to have quick-release devices installed on security bars in your home.

Electrical Safety - Safety Saturday Project Starter

Cooper Wiring Devices is a proud supporter of Home Safety Council's electrical safety education.


Our homes are filled with things that run on electricity. Electricity makes our lives easier, but it can also be dangerous if you’re not careful. Electricity is especially dangerous to curious children and if it comes in contact with water.

A special outlet called a ground fault circuit interrupter, or GFCI, can prevent you and your family from being hurt by electricity. A GFCI outlet will quickly stop the flow of electricity if an electrical appliance comes in contact with water or if a ground fault occurs.

GFCI’s should be installed in outlets near any source of water in your home. If young children live in or visit your home, you may want a “tamper resistant” GFCI. These have a built-in shutter that prevents children from putting things into the outlet and getting an electrical shock.

Set aside one Saturday this month as a “Safety Saturday” and work with your family to look at all of the different ways you use electricity in each room of your home. Use the Home Safety Council’s room-by-room guide to find and fix potential hazards before a shock or other injury occurs.

Laundry Room: In most homes, a lot more than doing laundry takes place in the laundry room. With your washer, dryer and utility sink all likely in close quarters, it’s especially important to have a GFCI in the laundry room. All electrical outlets near water should be protected by GFCIs. If the outlets in your laundry room aren’t already protected, an electrician can install a GFCI for you. Also make sure all appliances in the laundry room are kept dry and away from water at all times.

Kitchen: With so many kitchen gadgets available, many families struggle to find enough outlets for their appliances. Take a look at the outlets in your kitchen and make sure you don’t have too many appliances plugged in at once. Unplug your toaster oven, coffee maker and other small kitchen appliances after using them. If you don’t have GFCI’s in your kitchen, call an electrician and ask to have them installed.

Bathroom: The combination of water and electrical appliances in the bathroom make this an important area of the home for your electrical safety makeover. Make sure the electrical outlets near your tub and sink are protected with GFCI’s or call an electrician to install a GFCI for you. Store hair dryers, curling irons and razors away from water and always unplug appliances after using them.

Nursery: Electricity can especially be dangerous to curious children. Inspect the outlets and appliances in your nursery and take steps to make sure the nursery offers a safe place where your baby can learn and grow. Install special child safety receptacles to keep children from putting things into outlets. Tamper-resistant receptacles have a built-in safety shutter that opens when a plug is plugged in, but will not open for a single object such as a key, hair-pin or paper clip. Tamper-resistant receptacles are safer than small outlet covers that can be taken in and out. Small outlet covers also present a choking danger for young children.

Visit the Safety Guide for a complete list of electrical safety tips.
To learn more about electrical safety, visit MySafeHome. Be sure to tour the laundry room, kitchen, bathroom and nursery for tips you can use to protect your family from electrical problems.

The Next Wave of Bad Loans - Option Arms

A friend of mine in Huntington Beach confided in me that they are in serious trouble with their mortgage. My friends earn good money - and their combined income is a lot higher than the medium level for Orange County; which is high to start with. I'll call my friends Lisa and Jim. They are usually investing successfully in various other commodities, but this time I think they put their home in the position of being an investment vehicle. This time, I think they are in trouble.

Lisa and Jim are in thier late 50’s and early 60’s professionals looking toward retirement in a few years; who refinanced their modest home for $750,000, at the peak of the market with an Option Adjustable Rate Mortgage (Option ARM). This loan program allowed Lisa and Jim to decide monthly which of four optional mortgage plans they would pay, each month. Since getting the loan, Lisa and Jim always chose the lowest payment - which was actually less than the interest they accrued.The plan Lisa and Jim had been to sell their home when he reached 65 and retired relocating to the Palm Springs area or Arizona. This seemed like a well thought out plan which showed they knew what they were doing at the time.

Well, the $2800 monthly mortgage jumped to $3200 with another jump to over $4600 looming in the not too distant future.The problem is that despite what appears to be a path of recovery for the housing industry there are still more than a half million option ARMs that are scheduled to reset in the next four years!

Since many of the Sub Prime mortgages have already failed more and more of the Option ARMs are failing and since February, the Option ARMS have exceeded the default rate on the Sub Prime mortgages.

The sad news for Lisa and Jim is that the home is now only worth approximately $550,000, or less, and the balance of their mortgage has risen to over $800,000; since they only made the minimum payments their principal balance went up every month.Between 2004 and 2007 over $750 Billion in Option ARMs were made and remain at risk. The real kicker is that despite the perfect payment history of many borrowers they still cannot refinance their way out of this mess, as their homes are worth so much less today than when they borrowed the money. About one third of all Option ARMs are currently in default, according to industry analysts.
In comparison to the Sub Prime Mortgages, the borrower of an Option ARM typically had much higher credit scores, better jobs and more to lose than the masses of Sub Prime borrowers who literally walked away from their homes and neighborhoods, in droves. The Option ARMs tend to have higher balances and when they reset have been known to double the initial monthly payment.

The industry is expecting to see 600,000 or more Option ARMs reset in the next 4 years. The four payment plans that Lisa and Jim and other borrowers were offered included the interest only, less than the interest (where the difference would be added onto the principal - OK, when you are accumulating equity every month - but really bites in a declining market), fully amortized over both a 15 year and a 30 year fixed-rate-mortgage.

Over 75% of all borrowers never paid more than the minimal payment - less than the current interest rate plan. This plan was set to reset at either 5 years or when the new principal balance reached a pre-determined level somewhere between 110% and 125% of the original loan. Then once the ‘cap' is reached, borrowers have to pay down a higher balance at a higher interest rate in a shorter time period.

Like so many other exotic loans, they were great products if used properly. What most homeowners in this situation need to do is once every 6 months make at least the regular payment. In most cases this will help the balance on the loan not double and helps to reset the minimum payment due. Consult with your lender to make sure this is what will happen in your case. Unfortunately industry experts expect 81% of the Option ARMs that originated in 2007 to default with many of them ending in foreclosure.

The problem is that the loans were not only offered to those for whom they were designed but to just about everyone with a decent credit score. People were not taking on these loans because they believed their income would grow over time - they were used by homeowners who believed the equity in their house would increase and that they could refinance out of the teaser rates.
The losses from Option ARMs promises to be staggering. Another industry expert is projecting at least $112 Billion will be lost by the banks as a result of Option ARMs written between 2005 and 2007.The good news, if there is any, is that interest rates remain low - so loans are taking longer to reach their cap and will not rest at the higher interest rate until they do reach the cap.