This morning as I was reading a recent article from the NY Times "For Athletes in Motion, Real Estate Can Be a Burden", it re-emphized in my mind the importance of always advising all clients of the financial implications of investing in real estate.  Having been around various aspects of real estate for many years including corporate consturction of plants and labs as well as sale of residential homes I have become acutely aware of our resposibility to advise clients of the full realm of possibilities, including what might happen in worst case scenarios such as at the end of a variable rate mortgage, or buying that dream home that will stretch their budget. It is too easy to get caught up in wanting to close the deal. While real estate can be a good investment, even in this market, it requires us to really help our clients analyze their long term needs. 

I learned a hard lesson personally in a ReLo move from Ohio to California.  Several years ago I moved from Ohio selling a home in a depressed housing market losing about $30,000 selling that Ohio home with a 16.5% mortgage.  (Note my interest rate and we had excellent credit!)  Coming out of that sale cash poor we bought a low end condo $150,000 in California as it was all we could afford since mortgage rates had risen to the 18% level by that time.  Now that was before the chemical company who employed my husband began to guarantee transferees a break even that most of them give today.  To get that low end starter condo, we got an ajustable rate mortgage fixed for 1 year.   The first month our mortgage passed that starter rate our payments jumped nearly a thousand dollars with 6 month adjustment periods where they could continue to go up.  Luckily we were in a boom California market so that condo went from $150,000 to 250,000 in that 12 months.  We sold that property and bought another single family with a 30 yr fixed mortgage.  Two more years and my husband was transferred again, but this time in a down market just before Orange County went bankrupt.  By that time the company purchased the home and we moved to Texas with a break even. If our company had not matched our purchase price we would have been in position many of today's homeowners find themselves of being unable to sell a home in a transfer.

Here are some questions I try to ask my Relocating Buyers before I show them any homes:

1.  How long do you think you will stay here?  If the time is less than 2 years they need to be very careful where they buy and what they buy.  For some it may be better to lease if their qualification only puts them in older fringe areas that are the most vulnerable in economic downturns.

2.  What monthly house payment is comfortable for you?  For most people that's less than they qualify for.

3.  If the unexpected happens, how long can you survive financially? This makes people think of that reality

4.  If you can't sell your home and break even are you willing to use some of your own money to sell & how much of your own money are you willing to lose?  Are you able to keep it as a lease property?  (The type of mortgage they choose may be influenced by this answer)

I tell my clients, "When you come back to me in 3-5 years and ask me to sell your home, I want to guide you so that we'll have the best possible chance to do that." 

This fall I visited a corn maize for the first time.  The Baton Rouge area corn maize is north of Denham Springs on Hwy.16.  The maize is a journey thru the field with clues for your family to solve at each turn to help you not get lost.  It engages every member of your family, even the younger ones.  For example one of the clues involves singing the song "Twinkle, Twinkle Little Star" and deciding the direction from that song.  Threre are many other twists and turns; so don't go too close to dark unless you bring a flashlight!  For the more adventursome there is a haunted trail after dark on some evenings.  Call to be sure before you go.

In addiiton my family loved the puppets that sang songs in the barn area where everyone gathers to catch a "cow Train"  There are 2 types of rides:  one a fast train and the other a bucking cow train.  This was a highlight of our trip.

Additionally, there are duck rases where plastic ducks compete on water flowing from old fashioned hand pumps. (It will use up lots of your family's extra energy pumping that water!) 

This morning I came across a novel idea I wanted to share.  If you are looking to redo a room in staging your home for sale or just want to have a simple winter project to give a little color and light to a drab area, consider this tip from Southern Living Magazine's Anne Turner Carroll.  Create Do-It-Yourself artwork by framing a colorful piece of wallpaper that you like.  It's such an inexpensive and great tip that you can change up your color frequently!  I am an avid reader of the magazine and highly recommend it.  In the Nov.2009 issue (go get a copy for holdiay recipe ideas too) you'll find this tip plus many others for ways to "Wake Up a Tired Bedroom".

Along with an extension of the existing 1st time homebuyers tax credit with a few minor changes, Obama is expected to sign into effect today, Friday Nov.6th a tax credit for existing homeowners.  This credit will be $6500,, purchase contract to be dated before April 30, 2010 and after date President signs bill, must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years, actual closing to occur before July 1, 2010.  Complete summary of 2 bills by Nar 

For a summary of the Basics of the Extended Home Buyer Tax Credit, visit this article The Basics: Extended Home buyer TAx Credit 2009/2010

This afternoon the bill extending the first time homebuyer credit passes the House with a 403-12 v0te.  The President is expected to quickly sign it into effect.

The $24 billion package also contains extension of the unemployment benefits. The IRS says some 1.4 million people applied for the homebuyers credit through August, according the the Business Report. The legislation would extend the program through June of next year, as long as the buyer signs a contract by the end of Apr.il. It also offers a $6,500 tax credit to those who have lived in their current residence at least 5 years.

The American Dream:  A Home for Every Family

Having been involved with real estate for several years, each time period offers a unique set of challenges.  It seems now we are facing mortgage challenges as one of the biggest hurdles in our present business, whether it's avoiding foreclosure by helping financially strapped sellers sell before it happens, or counseling them about options available to them, or getting willing buyers approved for a home they wish to purchase.  Our ability to close real estate deals today is challenged by the mortgage process itself in today's market (my opinion). 

This past week I have been involved with 4 purchase contracts, and will be lucky if half of those make it to the closing table.

Previously, I felt comfortable to sit down and do a prequalifying discussion on an FHA or conventional or VA or rural development loan with the understanding that anything I did was simply a very rough estimate to be confirmed by a lender.  Today I won't even attempt to do that but often make my first client meeting at the lender's office.  The rates and rules seem to be changing daily so it's unrealistic for real estate agents to keep up; and may not be the best use of our time either.  I try to stay in touch with trends in communities like Active Rain and Twitter, but leave the details to the mortgage professionals.

Last week I attended a training session on "Navigating the Waters of Short Sales and Foreclosures" funded by National Association of Realtors to educate those of us in the trenches as to what's happening nationwide and how to counsel our clients to cope.  Louisiana foreclosure rate is 34th out of 50 (Good). I came away feeling blessed to live in Baton Rouge, Louisiana where we are untouched compared to places like California and Florida where property foreclosures are high, job loss is severe, and values are dropping below mortgage payoffs.  The high number of foreclosed properties has brought out a different type of buyer, the investor, who hopes for a deal that will appreciate in value in the future.

When we look at the present 30y fixed interest rates ranging from 5.0% to 6% which are at historic all time lows and stimulus bills like a $8000 first time homebuyer tax credit which is an unprecedented move to encourage homebuying,and state programs like Louisiana's bond offering an advance of $5000 of that credit to use a closing, why are we not seeing a better recovery rate?  I think from what I see it is an ever increasing tightness of mortgage lending that keeps getting more and more difficult.  For example, here in Louisiana this summer our state bond program allowed credit scores of 580 and above at higher interest rate with documentable income and a history of job stability for the buyer.  In September that minimum score jumped to 620 leaving even some preapproved buyers stuck without a loan that could close.  Now rumblings in the mortgage market talk about raising that score to 650 and above and some institutions have implemented it already.  That's a minimum credit score jump of 70 points in less than 6 months.  And we have gone back to many self-employed again being unable to secure mortgage financing even with high credit scores.  Some of this is adjustment from 2002 thru 2005 where everyone was able to obtain a loan. Whether they could pay it back unfortunately wasn't examined in many cases.  Are banks suddenly unwilling to take any risk in a scramble to make up for all the bad loans, thereby penalizing the average American citizen?  And at what cost to the American economy?  Has the pendulum swung too far to the conservative side?  And I hope someone can correct me, but has commercial lending almost disappeared altogether??

And with the FED announcing that beginning Jan.1st they will stop buying mortgage backed securities, the interest rates will go up.  In 1980 the average national intrest rate was 16.63% so we can slide upward a long way, folks.

And the U.S. congress is struggling with what to do.  So far band-aids like the $8000 tax credit have given some help to a few, but is it short term relief while the "sticker still festers?"  Claudette Millette of Active Rain alerted us to the New Housing Bill to Force Loan Modifications.  Now in the foreclosure class we learned that the success rate on loan modifications is low...only 25%, meaning 75% still go on into foreclosure at some future time.  But at least 25% did get to stay in their homes and banks avoided costly foreclosure on those!  These actions garner mixed reviews, but if the banking industry doesn't act on it's own to help with this problem, it seems certain that the government will step in and do something...Anything!

So what have we learned in the past 2064 years?

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest  Rome  become bankrupt. People must again learn to work, instead of living on public assistance."
                                           -    Cicero  - 55 BC 

(Source of statistics: Grant Simon, GRI, Instructor "Navigating the Waters of Short Sales & Foreclosures" and RealtyTrac)

While FHA policy was revised to allow the new tax credit (up to $8000) to be taken at the closing instead of waiting after closing and rrequiring a tax revision filing to collect the $8000, there was not a lender offering the second mortgage to do this.  With the new bond issue at the end of August, Louisiana has now set up a mechanism.  The following is the detail from their website:

Low Rate - Homebuyer Tax Credit Program Loans:
Low Rate - Homebuyer Tax Credit Program will bear an interest rate at 5.60%.  This program will advance up to $5,000 per loan for down payment, closing costs, and prepaid items.  The borrower must qualify for the $8,000 First-Time Homebuyer Tax Credit.  There will be a second mortgage executed with this program and must close on or before 11/30/09.  After the initial deferral period through 6/30/10, the loan will fully amortize over ten years, starting with payments 8/1/10, with an interest rate of 7.60% unless the Agency is repaid in full with the borrowers federal tax refund.  The second morgage loan payment must be included in the Debt to Income Ratio.  This program will require a $100 Application Fee in addition to the $75 Compliance Fee.  A Homebuyer Tax Credit Program Disclosure is required detailing the information on the terms of the loan, the tax credit, and the option to repay LHFA through the federal tax credit. 

Now that East Baton Rouge area parents and students have adjusted to the first weeks of school, it's time to take a look at some of the progress.  PEP, the Public Education Project, cordially invites all parents to an open house and School tour.  

The Dufrocq School- Open House and School Tour
Thursday, August 27th
4:30-6:30 pm
330 South 19th Street (At Government Street)

Come see your tax dollars at work! Originally built in the 1920s, The new Dufrocq School has just opened after a 2 year, $20 million renovation and expansion. The school's students are in grades K-5, and the expansion of course offerings includes Montessori and academic magnet programs.

For more information, contact Chris Trahan at (225) 922-5620 or ctrahan@ebrschools.org

Brooklyn Heights in New York City with its quaint streets and brownstones is filled with history.  One of the residences 182 Clinton Street, has recently been remodeled and listed for sale for $2.995 million by the Corcoran Group.  What many may not realize about this luxury property, is that it is steeped with history as it was where the first Alcoholics Anonymous meeting was held in 1935.  The home was owned by Clark Burnham, a gynecologist and surgeon, who had a daughter Lois who later married Bill W. the founder of Alcoholics Anonymous.  Bill and Lois' love story and their family struggles with the disease of alcoholism laid the foundations of the AA and Alanon programs they started which have helped many families cope with this disease.

This is one weekend I look forward to all year long:  when the Pennington hot air balloon championships come to Baton Rouge Louisiana. 

This year there will be other special features:  The Black Daggers parachute Team, the official U.S. Army Special Op Command Parachute Demonstration Team will perform live aerial demonstrations.  After their demonstration, the skies will glow with spectacular fireworks on Friday and Saturday night following the balloon glow.

There will be many other events such as the Balloon Glow in the evenings after sunset where the balloons look  like huge lighted ornaments. 

And returning again this year the BREC's Children's Village will be fun for the entire family.

And one of Baton Rouge's own appraisers, Harry Moran will be taking to the skies as usual in his colorful balloon "Zephyrus".  Now Harry flies early every morning in the top competition, so you may miss him if you wait around to find him in the evenings for "balloon glow". 

Come on out this year.  Don't miss the fun!