Real Estate & Market Updates by Helen Oliveri

Banning HOA Rentals

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Fri, 27 Nov 2009 09:51:17 -0600

In some homeowner associations, the number of owners who rent their units is extraordinarily high, sometimes even outnumbering resident owners. With absentee owners and just a few irresponsible renters, there may be a move by the board to limit or eliminate rentals altogether. What things should be considered?

When it comes to sorting out rental restrictions, there is a hierarchy of "legal authority."

1. The highest legal authority is the state’s corporation, condominium and homeowner association statutes. Statutes vary from state to state.

2. The second highest legal authority is the association Declaration which is recorded in the county where the association is located. This document "declares" that there is a homeowner association and outlines the framework and a legal description of the property. The Declaration defines the three components of HOA property ownership: common elements (property owned and used by all owners), limited common elements (property owned by all but used by one owner) and individual homes (owned and used by one owner).

3. The third legal authority is the association Bylaws. The bylaws spell out the operating guidelines of the association.

4. Resolutions are the fourth level of authority. Resolutions generally deal with multifaceted issues like parking and architectural control that require clear definition and enforcement provisions.

5. Rules and Regulations are the fifth legal authority. They may be written in the Bylaws or enacted by the board. They are more of the "thou shalt not ..." directives and may or may not elaborate on what that means or what the consequences for violating it are.

The board cannot enact a Resolution, Rule or Regulation that conflicts with one of the higher legal authorities. If the Bylaws permit rentals, the board cannot reduce or eliminate them. The change requires an amendment to the bylaws by whatever vote indicated in the governing documents which may be a "super majority" vote of the owners (67 to 100%).

The mortgage loan market may impose restrictions on the number of rental units in a homeowner association. If rentals exceed those limits, purchasers or owners who want to refinance their units may find it difficult to get financing at normal rates, if at all. Fannie Mae, Freddie Mac, FHA and VA all have restrictions on the percent of units which can be rented.

Homeowner associations may try to balance the right to rent versus restrictions imposed by lenders. The three most common ways are:

Prohibition on Renting. To ensure that such a bylaw amendment would pass, existing landlords would insist on their units being "grandfathered" (exempted from the prohibition). Such a concession would be unfair to some owners since these owners will have greater rights than other owners. The amendment should allow renting in hardship cases like job transfer or job loss.

Limit Number of Rentals. Adopting this kind of rental control requires that the board to actively monitor the number of renters and establish a "waiting list" so that all owners have access to the rental right.

Sunseting Rentals. This is a variation of the "prohibition with grandfather" provision. By setting a deadline of, say, one year away, current landlords can continue to rent for a reasonable time and have time to market the property to an owner occupant. At the end of a year, all homes are expected to be owner occupied which levels the rental restriction playing field.

When owners purchase into a homeowner association, they are bound by the existing governing documents and all validly enacted amendments. However, the board should keep in mind when amending and resolving that judges often side with property owners and their rights. If challenged, the HOA must defend a "greater good" theory such as: If the level of rentals is too great, mortgage loan options will be limited and negatively impact market values. If all owners buy into it, your job is easy. If not, you’ll need to convince the judge.

R. Thompson

Real Estate Outlook: Fed Chair Discusses Housing

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Wed, 25 Nov 2009 10:51:37 -0600

Federal Reserve chairman Ben Bernanke put out a forecast last week that included some important observations on housing, but it got nowhere near the attention it deserves.

Speaking to the Economic Club of New York, Bernanke described some of the well-known problems standing in the way of economic growth -- especially double digit unemployment and consumer confidence that's shaky week by week at best.

But buried away in his speech he said: Housing in the coming year is going to be a relative bright spot - a helpful driver of national economic growth, rather than the wet blanket it's been for the past couple of years.

Think about that: Home sales and new home construction, at least according to the Fed, are likely to stimulate the economy in 2010 -- enough to generate jobs and help avoid a double-dip recession.

That forecast just happens to track nicely with another that came out last week: Fannie Mae issued its projections for the coming year -- and predicted that housing sales will jump by 11 percent -- even in the face of a slow recovery for the economy as a whole.

Meanwhile, scattered reports from hard-hit local real estate markets suggest that there may be some reasons for guarded optimism.

For example, research firm MDA DataQuick's latest report on sales and prices in southern California, including the counties of Los Angeles, Riverside, San Diego, Ventura, San Bernadino and Orange, found that October sales were up nearly three percent over September, and that prices are rebounding as well.

October sales in San Bernadino were 11 percent higher than September. In Ventura they were up nearly 10 percent. Median prices for the six counties were up almost two percent for the month, but were still 6.7 percent below where they had been in October of 2008.

Now, as is almost always the case, not all the news is on the up side. New home starts dropped by a surprisingly large, seasonally-adjusted 10.6 percent, according to the U.S. Commerce Department.

A lot of the decline came in multifamily housing apartment starts -- a volatile month by month index -- which plummeted by 35 percent. But there's no sugar coating here: starts of single family homes dropped by 6.8 percent - which was enough of a negative to spook Wall Street .

Finally into the mix this week, mortgage rates continue to be the magic potion for home buyers, dropping again further into the upper four percent range. According to the Mortgage Bankers Association, fixed rate 30-year loans averaged just 4.8 percent, and 15 year loans are going for just 4.3 percent on average.

K. Harney

Short Sale Sellers Need To Guard Against "Double Whammy" By Bank and I.R.S.

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 24 Nov 2009 08:54:56 -0600

Short-sale sellers and their agents have plenty to think about, and it is understandable if they are annoyed by the reams of paperwork that may come their way. Nonetheless, it really is important not only to pay attention to what is in the paperwork but also to be sure to retain it for possible future use. This is because of bad consequences that the seller may experience sometime after the sale has taken place.

Bad enough that a short sale involves the loss of one’s home with no equity to show for it, and a credit negative that may last for years; it also has the potential to produce two very bad after-effects. One is that the lender, or the lender’s assignee, may continue to pursue the beleaguered seller for the remainder of the debt. The other is that the I.R.S. may come knocking on the seller’s door, seeking tax on the amount of debt that was unpaid.

The first possibility is often contained in the paperwork that goes along with the seller’s ok of the short sale. The borrower may be required to sign a promissory note for the difference between the debt owed and the short sale proceeds received by the lender. Or, a lender may require the borrower to sign a paper acknowledging that the lender reserves its right to pursue the borrower for this amount.

The second possibility resides in the fact that, if a debt is forgiven, the borrower may be taxed on the amount he didn’t have to pay back. (see I.R.S. publication 4681). To be sure, there may be short sales where the debt that is unpaid is not taxable. For those exemptions, see a tax accountant.

The point here is that the short-sale seller may suffer one of those unpleasant consequences; but he ought not to suffer both.

The point is raised because here is what can happen: In allowing the short sale, the bank requires the borrower to sign a note for the difference, or to acknowledge that the bank has the right to take action to collect that amount. Also, probably sometime later, the bank sends out a 1099-C, informing the I.R.S. that a certain amount of debt had been cancelled.

NO ONE who has dealt with a short sale would raise the question: “How could this happen? The two actions contradict each other!” That is because anyone who has been through the process knows that it is common for the right hand of the bank not to know what the left hand is doing. Indeed, it is not uncommon for the right hand not to know what the right hand is doing.

This is why it is important for the seller to be sure to keep his paperwork. If he signed a document to the effect that the bank was going to pursue its unpaid interest, he should hang on to that. Then, if he receives a 1099-C saying that the debt was forgiven (and, therefore, taxable), he will have support for the claim that the 1099-C is incorrect.

Conversely, suppose that there was no specific release of the debt and that the paperwork contained no reference to it. Then, if the seller receives a 1099-C, saying the debt was cancelled, he should keep that, just in case the bank, or its assignee, comes calling a year or so later, trying to collect the debt.

None of what has been said here should be construed as tax or legal advice. I am not certified to do that sort of thing. But I hope this little piece will encourage short-sale sellers to consult with their appropriate advisors about these matters.

B. Hunt

Mortgage Refinancings: Tax Rules Are Tricky

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Wed, 18 Nov 2009 09:20:15 -0600

The recent drop in interest rates has prompted millions of households to refinance their mortgages. Borrowers who refinance need to familiarize themselves with tricky tax rules on what is or is not deductible for interest payments. Here are some reminders on how the rules work.

Question: I own a personal residence. It is worth more than the remaining principal balance on the mortgage. My lender is willing to allow me to refinance for more than the balance of the existing mortgage. I know that the tax rules allow me to deduct interest payments on a refinancing loan as long as it is for the same amount as the existing balance. But am I also entitled to deduct interest payments for the part of the refinancing that exceeds the existing balance? And does it matter that I plan to use most of the excess refinancing proceeds to pay off credit card debts?

Answer: Whether borrowers are entitled to deduct interest on the excess amount depends upon how they use the proceeds from the refinancing and the amount of the proceeds. When borrowers use the amount in excess of the existing mortgage to buy, build or substantially improve principal residences, meaning year-round dwellings, or second homes such as vacation retreats their interest payments come under the rules for home acquisition loans. Those rules allow them to deduct the entire interest as long as the excess plus all other home acquisition loans do not exceed $1,000,000, dropping to $500,000 for married couples filing separate returns.

When borrowers use the excess for any other purposes, another set of rules prohibits deductions for payments of interest on “consumer loans.” This wide-ranging category includes credit card bills, auto loans, medical expenses and other personal debts such as overdue federal and state income taxes. There is, though, a limited exception for interest on student loans, one of those “above-the-line” subtractions to arrive at adjusted gross income, the amount on the last line of the first page of the 1040 form.

But most borrowers are able to sidestep these restrictions on deductions for consumer interest, thanks to the rules for home equity loans. Those rules allow them to deduct the entire interest as long as the amount in excess of the existing mortgage plus all other home equity loans do not exceed $100,000, dropping to $50,000 for married couples filing separate returns. It makes no difference how borrowers use the proceeds.

When their refinanced loans are partly home acquisition loans and partly home equity loans, there is an overall limit of $1,100,000 to $1,000,000 home acquisition debt and $100,000 home equity debt, dropping to $550,000 for married couples filing separately.

When the loans exceed the ceiling of $1,000,000 for home acquisition loans and $100,000 for home equity loans, the excess generally is categorized as nondeductible personal interest. The general disallowance is subject to exceptions for loan proceeds used for business or investment purposes.

Yet another restriction applies to the steadily growing number of borrowers burdened by the AMT (alternative minimum tax). The AMT allows deductions for interest payments on home acquisition loans of up to $1,000,000. But AMT rules deny any deductions for interest on home equity loans for first or second homes, unless the loan proceeds are used to buy, build, or substantially improve the dwellings — one reason why advertisements for home equity loans frequently finesse the troublesome question of tax deductibility.

J. Block

Investor Report: Commercial Investing 2010

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 17 Nov 2009 08:55:10 -0600

If you're a commercial property investor looking toward 2010, where are the most promising real estate markets in the U.S.?

The Urban Land Institute teamed with consulting firm Pricewaterhouse Coopers and asked more than 900 investors, developers and lenders that question recently, and came up with some intriguing answers.

The top market for heads-up investors among literally hundreds around the country turns out to be Washington D.C.

The nation's capital, where you send your tax money and where your federal government continues to grow, turns out to be the only truly "recession proof" market in the U.S., according to the real estate experts polled in the study.

Why? Because Washington thrives when the economy falls apart, thrives when the country is at war, and does really well when the political party in power believes in big government, more agencies and more federal spending.

And that's precisely where we are right now.

"While hard pressed lenders pull back in most cities," according to the Urban Land Institute's summary of the study, in Washington "major insurers and banks have taken a long term view and are actively providing financing for new (commercial real estate) deals. "

No shortage of equity or debt for the right project -- if it's in D.C.

And it's not just the city itself that's prospering. The Virginia and Maryland suburbs are adding high tech, defense and scientific jobs by the thousands.

According to the study, "Bethesda (Maryland), home to the National Institutes of Health, should benefit from increased biomedical (federal) spending," and the close-in Virginia suburbs are expected to grow defense-related jobs and new construction as well.

Ranking number two after Washington for commercial property investment in 2010 is San Francisco, with especially good prospects for apartments, warehouses, offices and hotels. Metropolitan San Francisco not only is a tourist and convention magnet, but combines strong center-city employment with the high-tech industry in suburban Silicon Valley.

The third rated top investment prospect in the survey might be a surprise to some: Austin, Texas, with lots of technology businesses growing and needing more space. The survey ranked it near the top because of the city's pro-business political climate and low taxes, both of which should, it said, "contribute to future growth and continuing corporate relocations. Austin fits the "brainpower" model that attracts investment even when the national economy is soft.

Rounding out the top ten hot spots for commercial and income-property investors for the coming year, by rank: Boston, New York, Houston, Seattle, Raleigh/Durham North Carolina, Denver and San Jose, California.

K. Harney

Long-Term Rates Fall to Lowest Level in Five Weeks

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Mon, 16 Nov 2009 10:04:50 -0600

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.91 percent with an average 0.7 point for the week ending November 12, 2009, down from last week when it averaged 4.98 percent. Last year at this time, the 30-year FRM averaged 6.14 percent.

The 15-year FRM this week averaged 4.36 percent with an average 0.6 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 5.81 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.29 percent this week, with an average 0.6 point, down from last week when it averaged 4.35 percent. A year ago, the 5-year ARM averaged 5.98 percent.

The one-year Treasury-indexed ARM averaged 4.46 percent this week with an average 0.6 point, down from last week when it averaged 4.47 percent. At this time last year, the 1-year ARM averaged 5.33 percent.

"Mortgage rates eased further over the week, helping to promote an affordable home-purchase market and stimulate refinance," said Frank Nothaft, Freddie Mac vice president and chief economist. "This comes at a time when house price declines are moderating and consumer demand for prime mortgages at commercial banks has picked up."

"The National Association of Realtors® reported that national median sales price of existing homes fell 11.2 percent in the third quarter relative to the same period last year. Moreover, almost 20 percent of the top metropolitan areas experienced positive annual growth, compared to only about 12 percent in the first quarter of this year."

Fire Sprinklers Set to Become Standard in New Homes; Group Warns of Inferior Cabling

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Fri, 13 Nov 2009 10:05:07 -0600

Members of the International Code Council's Residential Building Code Committee (RBCC) have made it clear that fire sprinklers are destined to become a standard feature in all new homes. The fire sprinkler requirement was added to the International Residential Code (IRC) last year, and it is scheduled to become effective January 1, 2011, in states that adopt the latest version of this code. Currently, 48 states use the IRC as a basis of regulating residential construction, although some states lag behind in adopting updates.

At a hearing held earlier this week, the National Association of Home Builders (NAHB) had petitioned the International Code Council (ICC), which publishes the IRC, to repeal the fire sprinkler requirement, but the RBCC rejected that request by a vote of 7 to 4.

"This vote is significant in two ways," said Chief Ronny J. Coleman, president of the IRC Fire Sprinkler Coalition and former fire marshal for the state of California. "Not only did the RBCC reject the homebuilders' request to repeal the sprinkler requirement, but if you look at the vote, every member of the committee, other than the four who are appointed by NAHB, voted to uphold the fire sprinkler requirement." Following the committee vote, NAHB attempted to use a new procedure in the ICC process that allows members assembled at the hearing to overrule the committee decision, but the members made it clear that they were standing firm on protecting American families from fire. More than 1,000 ICC members in attendance voted overwhelmingly to affirm the RBCC's decision.

"ICC's message on this matter is pretty clear," said Jeffrey Shapiro, P.E., executive director of the IRC Fire Sprinkler Coalition. "Their membership has now supported the home fire sprinkler requirement at both the 2008 and 2009 annual hearings, and each of those votes passed by more than a two-thirds margin." Those decisions have now been further affirmed by the RBCC, which is a balanced, consensus committee that includes homebuilders, building and fire safety officials, architects and engineers.

"People who buy new homes that comply with the IRC fire sprinkler and smoke alarm requirements can sleep peacefully knowing that their families and their homes are protected from fire," said Meri-K Appy, president of the non-profit Home Safety Council.

While fire sprinklers provide a level of comfort, further prevention is sometimes necessary. Take for example the recent announcement from the Communications Cable and Connectivity Association, Inc. (CCCA) that warns of an increased risk of fire from offshore-manufactured communications cable products which fail to meet National Fire Protection Association (NFPA) minimum requirements for fire safety. It's a problem, the CCCA says, that continues to plague the industry and marketplace.

"As we witnessed last year, the failing products were made with inferior materials and designs to save on production costs and they predictably failed the minimum fire safety requirements," said CCCA Executive Director, Frank Peri, whose organization's test results showed that six of the eight samples failed to meet the minimum NFPA code requirements for low flame spread and/or smoke generation for installation in commercial buildings, schools and multi-tenant residences. "All of the failing samples exhibited catastrophic results, indicating an unacceptable public safety hazard still exists."

Cables selected for the tests were all procured from North American distributor's inventory between March and May 2009 and were comprised of riser and plenum rated Category 5e and Category 6 cables, which are the predominant cable types used for wired local area networks (LAN). Category 5e cables also are typically used for telephone interconnection within a building. These cables are commonly installed behind walls and in ceiling cavities, and are connected to wall outlets that have phone or Ethernet ports.

"The CCCA has taken the position that this serious problem will not go away until quality assurance procedures include testing of samples of finished cable procured directly from the marketplace. Our association is cooperating with the major independent telecommunications industry testing agencies to establish a stronger approach to assure compliance to safety standards," Peri added. "We are very encouraged that a major independent testing agency has informed our association that it plans to put in place new quality assurance measures which include testing of finished product procured directly from the marketplace."

P. Mosca

Washington Report: Expansion of Tax Credit

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Thu, 12 Nov 2009 10:10:47 -0600

Congress's extension and expansion of the $8,000 tax credit through next June 30 should take the pressure off first time home buyers who've been rushing to close deals before the November 30 deadline.

That deadline is now gone. Everybody's got until next June 30 to settle on their purchases.

But here's something in the expanded program that hasn't gotten much attention: The new $6,500 federal tax credit for so-called "move up" buyers took effect immediately upon enactment.

That means that potentially hundreds of thousands of Americans who fit the key ownership and income criteria for the new credit are eligible for it … right now.

What are those tests?

Number one: You have to have owned and used your current home as your principal residence for five consecutive years out the past eight;

Number two: Your adjusted household annual income cannot exceed $125,000 if you file taxes as a single, or $225,000 if you are married filing jointly.

To qualify, you've got to sign a contract to purchase a replacement residence before next April 30, and go to closing on it by June 30, 2010.

That's potentially huge for all sorts of people who never thought of themselves as qualifying for a tax credit under any circumstances, because they've owned a home for years.

Here are some other useful facts about the revised credit program:

* Although the $6,500 feature has been labeled the "move up” credit, there is nothing in the law forcing anybody to buy a bigger or costlier house. You can downsize or upsize and still get the credit.

For example, one Treasury investigation found 500 claims for the credit were submitted by kids under four years of age!

Other audits have documented violations of rules against purchases of homes from relatives, and the requirement that purchasers must not have owned a principal residence any time during the preceding three years.

In other cases, investigators found that no purchase had taken place! The whole thing was a fraud.

This time around, the IRS plans to evaluate credit claims much closely, up front.

K. Harney

30-Year Fixed Rate Falls Below 5 Percent

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 10 Nov 2009 08:48:00 -0600

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.98 percent with an average 0.7 point for the week ending November 5, 2009, down from last week when it averaged 5.03 percent. Last year at this time, the 30-year FRM averaged 6.20 percent.

The 15-year FRM this week averaged 4.40 percent with an average 0.6 point, down from last week when it averaged 4.46 percent. A year ago at this time, the 15-year FRM averaged 5.88 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.35 percent this week, with an average 0.6 point, down from last week when it averaged 4.42 percent. A year ago, the 5-year ARM averaged 6.19 percent.

The one-year Treasury-indexed ARM averaged 4.47 percent this week with an average 0.5 point, down from last week when it averaged 4.57 percent. At this time last year, the 1-year ARM averaged 5.25 percent.

"Mortgage rates fell back this week pulling interest rates on 30-year fixed mortgages under 5 percent," said Frank Nothaft, Freddie Mac vice president and chief economist. "Lower mortgage rates should help homeowners lower their monthly payments and feed the ongoing recovery in the housing market." For instance, the Federal Housing Finance Agency reported that Freddie Mac and Fannie Mae have financed more than 3.5 million refinance loans during the first nine months of 2009. Freddie Mac estimates that borrowers who refinanced their conventional loan during the third quarter reduced their interest rate by a median of 1.1 percentage points, which will save these borrowers an aggregate of $3 billion in mortgage payments over the next 12 months.

"Further, pending sales for existing homes rose for the eighth straight month in September to the strongest pace since December 2006, while spending on private residential construction jumped 3.9 percent and represented the largest gain since July 2003. In the third quarter of this year, residential fixed investment added almost a full percentage point to economic growth."

Non-Judicial States Let Mortgage Lenders Off The Hook

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Mon, 09 Nov 2009 11:27:20 -0600

There is a lot of talk about foreclosures in the news today. One aspect of foreclosures that has received little attention is difference between a judicial state and a non-judicial state. A judicial state requires that a lender file a foreclosure action in the court system and get an order from a judge before the property goes to a foreclosure sale. This provides the opportunity for the homeowner to assert any claims against the lender he or she may have and allow a judge to make a determination before the homeowner loses the home.

Homeowners that do fight the foreclosure in the court system obtain a better result and have a much higher rate of success in obtaining loan modifications or other favorable outcomes. In the states that follow this protocol, lender abuse, misrepresentation, neglect and lack of oversight has been exposed. Florida is in the top four of the highest foreclosure rate in the country and is a judicial foreclosure state. The amount of lender wrong doing that been exposed in the clients we represent has been enormous. This abuse would have never been exposed if we did not have the ability to fight these cases in the court system.

However, not every state follows the judicial foreclosure model. In fact, the majority of the states does not require a judicial process at all, but instead follow what is termed a non-judicial foreclosure. In a non-judicial foreclosure state, the lender only has to put the borrower on notice as to the default in payments and schedule the sale in as little as 30 days in some states. This process does not give the homeowner the opportunity to assert claims against the lender before the property is taken. Unfortunately, for the thousands of homeowners that do have legitimate claims to assert against their lenders they are prevented from doing so before their property is taken. More importantly, lenders that have engaged in misconduct get off the hook without their bad behavior being exposed.

Most of the lender abuses occurred in states that are now the hardest hit in the country with foreclosures. The three other hardest hit states in the country for foreclosures are California, Nevada and Arizona. All three of these states are non-judicial and mortgage lenders have continued to avoid taking responsibility for their actions in these hard hit states. Therefore, homeowners that have been taken advantage of or lied to in these states currently have no way to assert their claims to a third party who can make an impartial ruling on those issues before their property is taken. That is a travesty and is my humble opinion un-American.

Another unfortunate aspect of the non-judicial process is a lack of oversight as to the implementation of the HAMP (Home Affordable Modification Program) passed by the Obama administration earlier this year. This program provides that if a lender is participating in the program and a homeowner qualifies the lender MUST approve the loan modification. Unfortunately, some of the criteria listed in order to qualify is a matter of opinion and can be debated. In a non-judicial state, if the lender tells the homeowner he or she does not qualify for it that is the end of it. There is no impartial third party that can make a determination as to whether the homeowner really qualifies. In a judicial state, the homeowner can assert this claim in the court system and the judge hearing the case can make this determination.

As a result of this injustice, Kaufman, Englett and Lynd, LLC (KEL Attorneys) is going to start taking cases in the State of California this month. We will be representing homeowners facing a foreclosure and filing a lawsuit as the Plaintiff against the lender in order to assert any claims the homeowner may have against the lender. We will immediately move for injunctive relief so the lender is prevented from proceeding with the foreclosure until the homeowners claims are heard by a judge. We will be filing in state court and federal court if necessary. In the next couple of months, KEL Attorneys will also be going into Nevada and Arizona as well. Lenders should not be able to steam roll homeowners in foreclosures actions without the opportunity to be heard by a fair and impartial third party. We at KEL Attorneys will do everything in our power to make sure this most fundamental right is not denied.

M. Englett

Tax break for buying a home

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Fri, 06 Nov 2009 08:39:41 -0600

The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.

The Senate's bill also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.

The Senate bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

"It's gonna put people back to work, the home builders, put people in the real estate business," said Sen. Chris Dodd, D-Conn. "The kind of jobs that can make a difference."

The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.

Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.

By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.

"The data on the present home buyer tax credit show that the credit has had its intended impact -- sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably," said Ron Phipps, the association's first vice president, in Senate testimony last month.

The credit, however, has also posed many problems. Critics say it's a waste of money because most of those claiming the credit would have bought homes anyway.

It's also been the target of fraud. Some 74,000 people claimed more than $500 million in credits even though they may not be first-time homeowners, according to Treasury officials. And more than 580 children, including some as young as 4-years-old, have claimed the credit.

"Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the Credit and receiving an erroneous refund of up to $8,000," said J. Russell George, Treasury inspector general for tax administration, before a House subcommittee last month.

CNN Radio Capitol Hill correspondent Lisa Desjardins contributed to this report.

Real Estate Outlook: Case-Shiller Index

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Wed, 04 Nov 2009 10:16:06 -0600

If you look at the latest Case-Shiller home price index numbers, which showed prices up in seventeen of the twenty markets it tracks and the fourth straight month of gains, you'd have to say: wow, how things have changed!

Even the gloomiest of the major indexes is now documenting month after month that housing not only bottomed out earlier this year, but is steadily racking up price gains.

But hold on, this week's numbers get better than that: According to the National Association of Realtors, resales of existing homes jumped sharply last month, up a very robust 9.4 percent during September.

Sales around the country were 9.2 percent higher than they were during September of 2008 -- pushed this year by first-time home purchasers looking to nail down contracts to qualify for the $8,000 tax credit that's scheduled to end in less than four weeks.

Still more good news: Inventories of unsold homes fell just about everywhere, averaging about an eight month supply in September, down from a 9 month supply in August. A six to seven month supply is considered a balanced market … so we're almost there.

Add in mortgage rates averaging 5 percent for a 30 year fixed mortgage and four and a half percent for a 15 year loan, and you can see why applications for new loans to purchase houses were up by nearly five percent last week, according to the Mortgage Bankers Association's national survey.

And as icing on the cake -- GDP or gross domestic product -- the barometer measuring the nation's overall economic health -- grew by three and a half percent in the third quarter, thereby officially ending the "great recession" we've been suffering through for the past two years.

So absolutely, there's a lot of positive news out there this week.

But not all the news has been good. As we've said here at Realty Times before, the marketplace is complex -- and the arrows usually don't ALL point in one direction.

And that is certainly true this week: New home sales dropped unexpectedly by more than three and a half percent in September. And consumer confidence dropped for the second straight month, according to the Conference Board, mainly because of fears about continuing job losses.

Both of those are troubling developments, no question, and the unemployment situation is obviously a major drag on the economy and housing.

But, as the reports on prices, mortgage rates, GDP and existing home sales show -- there's plenty of action out there, and the housing recovery is well underway -- even if it sputters here and there.

K. Harney

Washington Report: Extending the Credit

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 03 Nov 2009 09:13:44 -0600

Don't bet all your money on it quite yet, but it looks more and more likely that Congress will extend the housing tax credit beyond its scheduled termination date - and maybe even open it up to people who already own homes.

Late last week a bipartisan plan emerged in the Senate that would continue the $8,000 credit for first time purchasers beyond November 30, but would create a new, smaller credit of $6,500 for people who've owned and lived in their houses for five consecutive years and now want to buy another as their principal residence.

Under one version of the Senate plan, which reportedly has the support of top Democrats including Majority Leader Senator Harry Reid, the current $8,000 credit for first-timers would effectively be extended through next June 30.

However, buyers would need to have their contracts signed by April 30 and closed by July 1.

The credit program would also be opened up to a restricted segment of current home owners, those with at least five years in their current residences, but with the maximum tax credit amount capped at $6,500.

That would still be enough, sponsors of the plan believe, to encourage people now on the sidelines to get into the market for new and existing homes in early 2010 -- and thereby help stimulate the economy and create jobs.

The Senate plan would also raise household incomes limits for the credit to $125,000 for single buyers and $250,000 for married couples - far more generous than the current $75,000 and $150,000 maximums.

Extending the $8,000 credit, as it is now, has heavy bipartisan support on the House side as well. But key Democratic leaders there -- and at the Obama White House -- are concerned about the costs.

The current $8,000 credit costs the Treasury about a billion dollars a month in lost tax revenues, according to Congressional budget estimates. Opening up the program to existing home owners - even in a restricted way -- would add to that cost.

On the other hand, limiting any extension to six months would be less expensive than a full-year extension, as advocated by major housing lobbies, including the National Association of Realtors and the National Association of Home Builders.

So the issue on Capitol Hill appears to boil down to this: It's not so much a question of whether to extend the credit. Absent a political train wreck, the credit should survive beyond November 30

But for how long, and for whom, are the questions still not nailed down?

We'll keep you up to date.

K. Harney

Washington Report: Extending the Credit

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 03 Nov 2009 09:12:14 -0600

K. Harney

Media Dropping Ball on Housing-Market Trends

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Mon, 02 Nov 2009 13:39:01 -0600

I clicked a link to the Wall Street Journal's market data chart, called the Hagerty's Quarterly Housing Report and was really taken aback by what they are reporting in the Washington, D.C. area (my home base).

Again, they have labeled our market as a "buyers" market and reported that more foreclosures are on the way. The problem I have with both those statements is that

* they are created out of data provided by the real estate industry; and

* they are accurate, but not truly reflective.

The real estate industry is its worst enemy when it comes to reporting sales data to the media and, ergo, the public. The reporters call, asking for the latest sales information and that's exactly what we hand them, latest solds, the houses that actually settled in the last month.

Then the media take that report and extrapolate a trend (in their minds) of what's going to happen in the local markets. The problem is they are usually wrong. The Journal's report is a good example. While they are reporting that the Washington, D.C. market has a 6.4 months supply (considered a normal to buyer market) any agent working the Washington suburbs will tell you that is far from the truth. We are sitting on hardly any inventory and in many of our pocket markets, we have just a few days' supply, much less weeks.

Split it up by price range, and some communities have less than 7 days' supply. The houses come on and sell in a day at or above listing price. The challenge for the media (or something they refuse to really look at) is that when they go to these "local" MLS organizations that serve a particular metropolitan area, they just lump it all in the same bowl and come out with one large biscuit and label it Chicago; or Washington, DC; or Big City Name here.

If you know the geography of Washington DC, then you'll probably be a little confused when you find out what's included in our MLS: Parts of Pennsylvania, Delaware and West Virginia. If those areas are included, then, yes, the DC market has a 6.4 months' supply.

In Pennsylvania there's an absorption rate of 13.5 months currently. In W.Va., it's a 10.8 months' supply and in Delaware, those good people have a 12.7 months' supply.

Right around the Beltway, however, which is DC-proper, the absorption rate is at 2.8 months. (That would be only Active properties, divided by pending sales written in the last 30 days). A buyer can see all the homes in their price range in about 15 minutes because there just aren't enough houses on the market.

So when the consumers around Washington (or Miami, Chicago, New York, etc.) read about the months' supply on Hagerty's Quarterly Housing Report in the Wall Street Journal – what's an agent to do? Who's the buyer going to believe – the Wall Street Journal, or the agent driving them around trying to sell them a house and earn a commission.

I mean, hey, what would the agent know? They just look at me as a big fat commission check, right? The market is turning in many metropolitan areas around the country – DC is at the head of the curve and many will follow. (In fact, at this writing, foreclosures make up only 18 percent of Fairfax County – one of the larges suburban markets in the DC area – 82% are regular sales.) But before you swallow the charts from the Big Media about absorption rates, talk with the agent who's actually working the area.

M. Anthony Carr

Ask the HOA Expert

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Thu, 29 Oct 2009 09:06:44 -0500

Question: Our homeowner association has 30 single family detached homes. Our governing documents were basically written for townhomes. One of the bothersome issues is that the governing documents state that the HOA is responsible for replacing roofs, painting, gutters and other things that are commonly done with condominiums. Many owners object to building up a reserve fund to pay for repairs that may be as much as 20 years or more down the road.

The covenants also state that the board cannot special assess for anything other than common area improvements. So that leaves us with pretty much the options of building up the reserve fund or changing the governing documents. Can you provide us some sample wording for a single family home HOA that would allow homeowners to pay for major repairs themselves but would allow the board architectural control of those repairs?

Answer: While it's unusual for a single family HOAs to do exterior maintenance, repairs and replacements, it's not unheard of. I doubt that the developer made a mistake on this since it's a huge issue. And it's doubtful that you can muster the votes to change this which may take 100% of the owners to approve it including their mortgagees. You need to consult with a knowledgeable attorney to determine the requirements. If it is possible, the attorney can assist the board with the proper wording of the amendment.

So barring you pulling off a major governing documents amendment, yes, you need a reserve plan that includes a funding plan to collect money systematically from each owner every year. The 20-year-down-the-road thinking is flawed. While a reserve event like a roof may take place 20 years down the road, the reserve plan will only charge each owner a share of the future cost directly proportional to the benefit received. For example, if a particular owner owns for five years and sells, he would only pay 5/20ths of the future roof cost. He only pays for the benefit received and not a penny more. It's like refilling the tank of a rental car. This is the fairest way to fund future costs.

Question: Our board is being badgered by a delinquent owner because his account was turned over to collection. In hard economic times, should the board back off of collections?

Answer: As long as the board is enforcing collections uniformly, consistently and fairly, it is the board's responsibility to enforce the Collection Policy regardless of circumstance or economic climate. There is no government bail-out for HOAs.

Question: Is there an average that HOA management companies charge for managing a homeowner association? How do they base their fees ... by size, number of units, expectations, etc.? Do they usually charge a flat fee or percentage? How do they charge for maintenance, as a flat fee, by the job, etc.?

Answer: Percentages are not used to determine HOA management fees. Commonly, the management fee is expressed as the cost "per door." But behind the per door concept is an analysis of how much time it takes the management company to execute the routine duties described in the Management Agreement. This can vary a lot from HOA to HOA. And within the fee structure, there is usually several levels and costs of service included in the routine duties like management, accounting and general office services (mailing, making copies, etc.).

Maintenance and repairs are charged over and above the basic duties on an hourly or bid basis. So, for a management company to make a profit, an annual estimate of all the levels of service multiplied by their hourly charges multiplied by the number of hours for each plus a profit margin equals the annual cost of management. Keep in mind, however, that most Management Agreements provide for extra charges for non-routine tasks like assisting in insurance claims, arranging contractor bids and performing special tasks or investigations requested by the board.

R. Thompson

Real Estate Outlook: Just Right Housing

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Wed, 28 Oct 2009 09:56:32 -0500

You probably remember the line about porridge from Goldilocks: It wasn't too hot, it wasn't too cold, it was ... just right.

Well, you could make that point about some of the latest housing and real estate numbers.

Last week's new housing starts were reported by the media as further evidence of the deep hole the home building industry is in: Starts were up by barely half a percent nationwide, and permits for future construction were down.

But is that "cold," or maybe something else? If you dig below the anemic sounding half a percent gain, you discover something very different: New starts by builders on single family homes were actually up by nearly four percent for the month nationwide.

It was multifamily apartment starts, which are notoriously volatile and jump around every month, that were down bigtime -- by nearly 16 percent.

Now a 4 percent gain, combined with lower permits, are hardly dramatic enough to say new home building is heating up. Then again, they're definitely not stone cold.

Home builders are building, just at a modest pace.

So maybe the starts and permits numbers are somewhere in "just right" territory. Lawrence Yun, chief economist for the National Association of Realtors, suggests that modest gains in production might be the best way to go at the moment.

If builders start new units too fast, they'll most likely add to their inventories of unsold houses. But if they stop all starts, they'll go out of business and tens of thousands of jobs in building components, appliances and construction will be lost.

Far better to keep it "just right."

Now, on a more sobering and unexpected note, hopes for an early signal from the Obama administration that it supports an extension of the $8,000 home buyer tax credit encountered a setback last week. HUD Secretary Shaun Donovan told a Senate committee hearing that the White House is not yet on board.

Though builders and Realtors have presented strong statistical evidence that the credit has been a major contributor to economic growth this year, Donovan said the program is costly to the federal Treasury, a key negative at a time of soaring federal deficits.

Donovan added that it would not be "catastrophic" if the credit were allowed to die as scheduled November 30.

Meanwhile, the mortgage market continues to be attractive to anyone buying a home: Rates last week on 30 year fixed loans averaged just above five percent, according to the Mortgage Bankers Association, while 15 year rates averaged four and a half percent.

K. Harney

Time is Running Out for First-Time Home Buyer Tax Credit

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 27 Oct 2009 10:20:19 -0500

The clock is ticking. Time is running out. To be exact, time runs out midnight, November 30, 2009. Many readers will know what I am referring to. Under the American Recovery and Reinvestment Act of 2009, November 30 is the last day for a home purchased by a first-time home buyer to qualify for the $8,000 tax credit. The purchase must be closed and title transferred by that date. It will not be sufficient simply to be under contract or in escrow.

By way of a brief refresher:

   1. The tax credit is for first-time home buyers only. For the program, the IRS defines a first-time home buyer as someone who has not owned a principal residence for the past three years.

   2. The credit does not have to be repaid.

   3. The tax credit is equal to 10% of the home’s purchase price, up to a maximum of $8,000.

   4. The credit is available for homes purchased (closed) on or after January 1, 2009 and before December 1, 2009.

   5. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

   6. The credit can be taken for either 2008 or 2009 taxes. In the former case, an amended return can be filed.

By all accounts the program has been extremely popular – which is to say, successful. The National Association of Realtors® (NAR) estimated that, by September, about 1.1 million first time home buyers had used the program; and another 700,000 are expected to do so. Already, the Treasury Department has reported nearly 315,000 people have claimed the tax credit after filing an amended 2008 return.

As enacted, the program is set to expire at the end of November. A number of bills have been introduced to extend and/or expand it. Representative Eddie Johnson (D-Texas) introduced a bill to extend the program through 2010. Another would also expand it to all home buyers. In the Senate, a bill co-sponsored by Johnny Isakson (R-Georgia) and Chris Dodd (D-Conn.) would expand the tax credit to $15,000 and make it available to any buyer regardless of income.

One would think that at least the modest proposal for an extension would be a no-brainer. It is a government program that is working, for goodness sakes. But even that legislation is in doubt. Two obstacles are cited. One is the cost. Extending this program would result in reduced future revenues. The second problem is that such a bill will have a hard time receiving any attention while the Congress is – for the next foreseeable months – focused on considerably higher profile items such as health-care and Afghanistan.

The first so-called problem seems just crazy. Suppose an extension generated an extra 1 million sales. That would result in $8 billion in unrealized tax revenues. Now that is a lot of money; but it is chump change compared to the amounts that have been lavished on financial firms and auto makers, with yet to be determined beneficial effects. The tax credit program only costs money if it works. Its cost is proportional to its success. If it didn’t work at all, it wouldn’t cost a dime. Imagine that for a government program.

The second problem is realistic. There’s a lot of heavy-duty stuff going on. But, it would seem a simple extension of the program could be achieved with very little ado and virtually no distractions from the “big issues.”

Meanwhile, what should interested parties do?

   1. If you are a first-time home buyer, you had better get off the dime. There’s certainly no guarantee the program will be extended.

   2. If you are a real estate agent, pass #1 along to every potential first-time buyer that you know.

   3. Whether you are a Realtor® or not, if you believe in extending the program, let your representatives know.

   4. If you are a member of the Realtor® organization, respond to NAR’s call for action, supporting its lobbying efforts.

B. Hunt

Investor Report: Investment Buying Tips

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Mon, 26 Oct 2009 09:15:05 -0500

Foreclosures and bank REOs are pulling a new wave of novice investors into the market, some of whom "are just plain clueless, to put it bluntly," says Robert Cain, a long-time rental market and real estate management specialist based near Tucson, Arizona.

"They see the price and they way, wow! I can buy that house and turn it into a rental," says Cain, who lectures around the country and online about investing intelligently.

"But they don't understand the local market, they don't understand landlording, and don't even necessarily visit the property," Cain said in an interview last week with Realty Times.

For example, a property manager in Tennessee called Cain for advice recently. The manager had a simple question: "Should I fire my client?" who lives in California and purchased rental real estate 3,000 miles away in Tennessee -- sight unseen because the low price made it sound like a steal.

But the property had a long list of defects requiring costly repairs, and it was slow to rent - causing the absentee owner-investor to blame the property manager for the cash drain.

"We see it constantly," said Cain. "New investors think it's easy. They buy on emotion, on low pricing, rather than buying with a disciplined plan.

What are some of the key rules for freshman class investors? Here are a few of Cains' that have served him well since the early 1980s:

Number one: Due diligence is never optional. You've got to understand the local market - and that includes not just where prices are headed, but specific market demand for rental real estate in this price segment, and even the local government's plans for the area where you're thinking of buying.

Number two: Buy with a written plan - that's right, just like the large professional investors use, with an entry strategy and an exit strategy. How long are you going to hold onto the property, how much will it earn you during your period of holding?

And what's the endgame - a sale to another investor? Conversion to condos? Tear it down and build something that's closer to the underlying real estate's highest and best use?

"Write it all down," says Cain. That way you can analyze it better.

Number three: Calculate the actual costs of the property in advance - not just the bargain basement price, but how much you'll need to fix it and feed it - the management costs, rental commissions, vacancy costs, taxes, to name just a few.

"If you don't know these things up front," says Cain, "you are flying blind. And there are no good surprises in real estate."

K. Harney

Is Your Home Wired Properly?

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Fri, 23 Oct 2009 09:19:33 -0500

We all know that as things age, they often need replacing but sometimes homeowners neglect to take care of their home's electrical wiring and that can set them up for potential danger. Electrical consumption since the middle of the last century has increased in most homes on average about 400 percent.

If you're tripping your main safety circuit box that could be a sign that you're overloading the electrical outlets and an indication that an electrical contractor should examine your wiring. Oftentimes, homes are renovated several times without any electrical wiring updated. Yet, this is a part of the house that can cause huge problems if it isn't kept up-to-date.

Outdated circuit boxes. When a home hits the 40-year mark the biggest area of electrical concern is the circuit breaker box. Zack Israel, owner of Mike Electric, says that when the circuit box becomes outdated, "it doesn't do what it's supposed to do." He says that as the house ages, the brand of the circuit box becomes obsolete "and today, a new generation of improved boxes is being installed." Israel cautions homeowners about the danger of not replacing an old and outdated circuit box. "If the breaker doesn't trip then the wire might melt and cause a fire," says Israel.

Kitchen wiring upgrades. An area of an older home that typically needs upgraded wiring is the kitchen. "The kitchen is an area that always needs to be upgraded after 40 years. Several decades ago we didn't have microwaves and all the appliances that we have today," says Israel. He says that what can happen if the kitchen wiring isn't upgraded is that when appliances are used, the circuit breaker trips or, even worse, it doesn't trip at all. "So the kitchen is an area that you want to upgrade and bring more power to it," he says.

The electrical code requires two circuits of 20-amps, 120 volts for GFCI (Ground Fault Circuit Interrupter) receptacles for the kitchen/eating area. However, more might be necessary depending on appliances being used.

Heavy-duty appliances need dedicated outlet. A common problem for homeowners occurs when there isn't proper distribution of the electrical circuits. Israel says homeowners often don't understand this. "Let's say for example that [depending on the weather] a homeowner tries to use a portable air conditioning system or heater and plugs it into just any plug—and boom! there's no power—it trips the circuit. This is common. People don't know that they need a dedicated circuit for that kind of appliance," says Israel.

Wire insulation cracks. Another big problem for older homes is that electrical wiring insulation cracks. "Especially in the ceiling lights, the heat from the light rises into the box and causes the wiring insulation to crack," says Israel. When homeowners consider tackling the task of rewiring their home they're often overwhelmed by it—feeling like it will be too expensive and too much trouble. While it is true rewiring can be a major renovation that, in some cases, even means the homeowner must leave the home for a period of time—due to electricity needing to be turned off or just the inconvenience of living with workers in your home -- the end result of peace of mind from knowing your electrical system is working properly and no longer at risk of causing a fire–(a major concern of home insurers)—is well worth the expense and any temporary hassles.

P. Chongchua

Sell Short, Get $1,500 in Closing Costs

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Thu, 22 Oct 2009 09:13:00 -0500

The U.S. Treasury is poised to announce a finalized plan to expand mortgage relief efforts to include short sales.

A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance.

It's a strategy to avoid foreclosure, but banks have been more likely to let a home go into foreclosure, rather than short sell it, even if it means holding the property during moratoriums set by some jurisdictions.

That's because short sale bids often come in well below the last appraisal, real estate agents don't want the extra work involved and buyers fear a four-to-five month transaction period that could end in a no-deal scenario.

To help move more distressed properties through the clogged pipeline, the Treasury, under the Making Home Affordable's Home Affordable Modification Program (HAMP) is expected to announce a $1,500 closing cost incentive for those who agree to short sales or deed-in-lieu deals (the deed is transferred to the lender, avoiding the more costly foreclosure proceeding).

The Treasury will also pay the lender $1,000 for accepting a short sale or deed-in-lieu deal.

Earlier this year when the plan was first announced, there was also a provision to pay second lien holders up to $1,000 to relinquish their claim in such transactions.

Thus far, Refinancing Fannie Mae or Freddie Mac mortgages under the Home Affordable Refinance Program (HARP) and HAMP mortgage modifications have been the "go-to" foreclosure options among federal mortgage relief programs.

Some 260,000 homeowners have refinanced under the HARP program since January, according to the Federal Housing Finance Agency.

FHFA also said during the second quarter this year there were 11,700 short sales and 202,200 trial loan modifications under government programs.

B. Perkins

Collecting HOA Delinquencies

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Wed, 21 Oct 2009 09:23:13 -0500

There are few things more basic to a homeowners association than the fees it takes to keep the place running. When one or more owners default in the payment of fees, the impact is felt by all. And the longer the delinquency, the deeper the cut. It is a situation that many boards dread because of having to deal with neighbors. Here are a number of ways to reduce the impact of, cure or avoid collection problems in your community:

Establish a collection policy with teeth. While this sounds simple enough, many HOAs have nothing more in place than the often inadequate provisions of the governing documents. The collection policy needs to be clear and concise. Some of the basic provisions should include:

1. Date the fee is due

2. Date it's late

3. Penalty for late payments

4. How late payments will be applied to outstanding balances

5. Legal procedures that may be invoked after a certain period or level of delinquency is reached

6. Who pays collection costs

7. Lien filing rights on an owner's property if payment is not received and,

8. Foreclosure provisions.

The goal of the well written collection policy is to move the HOA's bill to the top of the payment pile. As with any policy enacted by the board:

Apply the policy consistently. Once the policy is agreed upon, do not deviate from it. While there are great excuses still to be heard, the board has a fiduciary duty to protect the HOA's rights. If one owner doesn't pay, other owners have to ante up the difference or services will need to be curtailed. The board must absolutely avoid selective enforcement due to a friend's, family member's or a personal default.

Apply the policy in its entirety. The typical collection policy is made up of a series of sequential events that are triggered by time and/or dollar amount. Once put into motion, allow it to run its course. This typically ends in placing a lien on a member's property. Garnishing wages, seizing property and foreclosure are possible but usually not invoked unless the case is extreme.

Use an attorney well versed in legal collection procedures. While attorneys should not be the first line of defense, the procedure should include them once the size or age of the balance due reaches a certain proportions. Liens and foreclosures are an attorney's domain. The impact of an attorney letter alone may be sufficient to turn the collection tide.

Hire a property manager. Collections and rules enforcement are the main reasons folks don't want to serve on the board. A manager doesn't live there and for them, collections are business as usual. If your HOA is experiencing greater than normal collection problems, this may be the best step to getting collections back in line.

Let's face it, collections are an unpleasant but necessary part of homeowners association living. Rather than reacting or overreacting, prepare for them with a strong yet fair policy. If the members know the will of the board, most won't tempt the process.

R. Thompson

The Horror Story: Why Isn't Your Home Infested with Termites?

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Tue, 20 Oct 2009 10:37:27 -0500

The sad truth is that your home might be infested with termites and it may be years before visible signs of damage alert you.

Since these wood-eating social insects look like "white ants" to the untrained eye, termites have been confused with ants by those who do not understand the biology. Different species of termites have different habits, but they all relentlessly ingest more than their weight in wood—your wood—without leaving easily-detectable damage. (Here's a start on the biology: http://en.wikipedia.org/wiki/Termites)

Termites can cause significant structural damage to a property. Since Canadian homes are commonly wood-frame structures with brick or siding veneer, few properties are completely immune. Termites infestations are expensive:

* The cost of repairing structural damage caused by wood-devouring termites, coupled with the cost of "termite-proofing" the property by removing all wood-soil interfaces, wood piles and some types of landscaping, make termite attacks expensive, but the cost does not stop there.

* Current treatment for infestation requires chemical poisoning of the soil to dissuade termites from entering the home. This interior and exterior treatment of the soil under the house can involve thousands of dollars for the initial soil poisoning and may require follow-up treatments if spot attacks occur in the future.

* Property value may also be affected if proof of eradication and prevention are not provided to prospective buyers. In some cases, a stigma may remain.

The Location Factor The real estate value mantra of "location, location, location" also applies to termite invasions. The location of a property relative to its distance from existing infestations may be considered a value factor, particularly if the municipality involved does little or nothing to stop or at least slow the spread of these relentless wood-eating insects.

In a recent email, Dr. Timothy Myles, Canada's leading termite control research scientist and, currently, Termite Control Officer for the City of Guelph, Ontario, shared observations of termite management problems across the country, including:

* In Alberta, localized infestations were reported in Medicine Hat and as far north as Edmonton, but the details and status of spreading are unknown.

* In southern British Columbia, a native species is infesting Vancouver Island, the lower mainland and inland river valleys, including the Okanagan River basin. Improved control methods will help, but the existence of native populations place eradication out of reach.

* No conclusive reports from Manitoba, but a Winnipeg infestation detected in cursory sampling in 1991 has probably spread.

* In Ontario, the non-native subterranean species, which was first sighted 70 years ago on Point Pelee and in the City of Toronto, has "spread from these points of entry and continue to spread at an accelerated pace, now threatening almost all urban areas of southern Ontario."

With no natural predators and little or no municipal termite control activity, there is nothing to halt or slow the steady migration of subterranean termites. Although this species does not seem to create new colonies through a flying stage, termite migration is dramatically escalated by human intervention. What wood have you moved lately?

Decades ago, a wide-scale Ontario initiative launched by Toronto and involving many other cities and the provincial funding established termite control bylaws to slow the spread and to offer financial relief for affected property owners. This program ran for 20 years, until it fell victim to funding cuts a few years ago, leaving property owners to fend for themselves.

"We should go back in time to the point where [governments] realized that this is a huge problem—that this is probably equivalent to all the fire damage in all the municipalities across the province and it is just getting worse," said Myles, who is internationally recognized as a leading researcher on termite control and management. "It is preposterous that the government—both municipalities and the province, the [Ontario Ministry of the Environment]—got out of it. A lot more could be done for homeowners because, when they get [termites], they say, 'What do I do and what help is there?' The answer is, 'There is no help. Look in the phone book under exterminator.' That's it. There is absolutely nothing by the federal government, the province or cities any more."

Termite Truths

* These termites do not have recognizable nests or a central queen. This guerilla-like nature makes termites hard for individual property owners to control. Concerted efforts by municipalities can make a difference. In Guelph, termite infestations have been mapped to locate infected areas which are managed to achieve containment and reduction.

* When you first see a termite shelter tube, the insects have probably been in your house for at least a couple of years, if not longer. Regular investigation of basement areas and removal of clutter inside and out can reduce termite-friendly environments and aid early detection.

* Wood-soil contact outside and foundation cracks are two entry opportunities for termites, but termite-contaminated wood and furniture can also give termites access to your home.

* In the United States, there are a number of chemical treatments, but in Canada only one neurotoxin is available.

* Chemical treatment does poison the soil around the house and under the foundation, but it does not poison termites or disadvantage neighbours, according to Myles: "Isolate the ones in the house, which will then dry out, and the ones in the yard will just go away. When you say 'go away,' a lot of people say, 'Oh, you're chasing them to the neighbour's house, but that whole concept of chasing them to the neighbour's house I don't agree with. [Termites] are already at the neighbour's house and in extensive soil tunnelling throughout the entire block. You are not chasing them you're just saying, 'Instead of feeding on this house today, go back to the rest of the extensive tunnel system you've got on the whole block.' It is never going to be an isolated thing; it is going to be whole contiguous parts of neighbourhoods that have them."

Myles divides termite areas into two types based on treatment approaches:

1. Infested areas too large for area-wide management programs like British Columbia, Ontario's Essex County and Toronto where better control products will provide licensed pest control experts with improved tools.

2. Infested areas where area-wide management programs can contain, suppress and eradicate termites. These areas include Alberta, Winnipeg, GTA suburbs and southern Ontario towns including Guelph, Innisfil, Oshawa, Oakville and Mississauga. Guelph alone provides assistance and coordinates the needs of individual property owners with the community goal of eradication.

How can the human spread of termites be stopped?

* Have you moved firewood, a dog house or other wooden objects to or from your property? What garage sale goodies also transported termites to your home—it only takes a few in an infected piece of wood.

* Garden clubs and community groups can take special care that plants like rose bushes do not contain termites and educate homeowners in the process.

* Ratepayer groups can use the need for community-wide termite control as a local rallying cry to raise support and bring property owners together to fight a common enemy.

* New home construction includes some precautions against termite invasion, but above-code remedies like metal and sand barriers are required for extra protection.

* Rouse local politicians to champion this cause which threatens our homes and affordability.

Myles insists: "It is just insane not to do area-wide management because this [infestation] will just spread and engulf the city if we don't nip it in the bud. There are 20 municipalities that are in the position of nipping it in the bud...it makes more sense to be where we could actually eradicate them."

Myles continues to research control alternatives. Currently, his trap-treat-release program shows promise if he can find funding to continue the 20-year search for practical control alternatives to the current chemical solution.

"This is huge—this is people's homes and everybody is paying property taxes and what are they getting for that?" said Myles. "Well, 20% of all your property taxes are going to fire departments…and there should be just as many little termite labs…If you are a buyer, the main thing is you must be aware that this is a big problem that can impact the value of your property."

The take-home message is simple, according to Myles:

* Don't feed the termites, and

* Don't move the termites, and

* Don't sell a termite-infested house.

PJ Wade

Home Foreclosures: When the Right Price is Not Correct

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Mon, 19 Oct 2009 10:02:14 -0500

The San Diego housing market is once again hot! Selling quickly and at above listed prices are the bank-owned foreclosure properties, both detached homes and condominiums. Alan Greenspan's term "irrational exuberance" is once again characteristic of the San Diego home buyer's behavior. Any property description using "bank-owned," "lender repossession," "foreclosure sale," etc., is drawing a crowd to see the property. If the property is in decent condition, there will be offers and multiple offers, at that.

Sounds like déjà-vu? Not quite. Adding my observation to the above facts, a number of lenders have hit on a marketing ploy to create a buying frenzy which guarantees an almost instant sale. In the majority of cases the offer(s) exceed what may have been realistically expected if the property was marketed the traditional way.

Here are some actual examples of this technique for San Diego home sales.

Example 1: On 4-8-09, a bank owned home in east Carlsbad was listed at $499,900. Based on the location, age and size of the home, I estimated the current value at $575,000 to just over $600,000. Within one day of the listing, the listing agent had multiple offers. According to the agent, the lender required it to be on the market one week before they would look at any offers. The agent speculated that based on the number of inquires, she would have 40 to 50 offers in the one week period. This home sold for $597,000. The sales price was almost 20% over the listed price. Doesn't a sale of $97,100 over the listed price suggest that it was listed way under the market?

Example 2: A bank-owned Little Italy one bedroom condominium was listed in March for $234,900. The estimated fair current value for this condo was approximately $275,000 to $280,000. The listing agent stated that within 3 hours of the MLS listing being submitted, he had an offer. Again, the lender would not look at any offer until the condo was on the market one week. This San Diego property generated 21 offers within the 1st. week, of these, 11 were at or above the $234,900, listed price. This Little Italy condo sold at $295,600, or $60,700, approximately 26% above the listed price! I was told the accepted price was $15,000 above the next highest offer.

Example 3: A San Carlos planned-unit-development, bank-owned 4 bedroom was listed at $344,900. The estimated fair value for this condo was approximately $410,000 to $425,000. Inside of one week, this San Carlos property had an accepted offer at $410,000. This was approximately 19%, or $65,100, above the listed price! Banks are purposely under listing property with the strategy of creating a buying frenzy to result not only in a very quick sale, but, a sale at or above the fair market value. Is this practice fair or even legal? It is on both counts. If the bank does not list it properly, they could end up with a sale way below the current fair market value.

On the other hand, it isn't fair to neophyte buyers/agents. Buyers and/or their agent who do not recognize the ploy, may be wasting quite a bit of time writing offers that in some cases, will not even be considered or countered. Also, what about shattered expectations? A number of buyers/agents may honestly believe that their full price offer has a chance of being accepted. In reality, they not only have zero chance of getting their offer accepted, but in the majority of cases, they will not even get a counter-offer.

This is not the time for buyers to be represented by neophyte agents. Bargains are available and buyers can position themselves to be one of the lucky ones by selecting an experienced agent familiar with the areas in which they are interested. A good agent will have reasonable advice about structuring offers and which properties are worth the work and wait. Follow that advice!

B Schwartz

30-Year Fixed Rate Still Below 5 Percent for Third Consecutive Week

Helen Oliveri (The Helen Oliveri Team of Keller Williams Realty Partners) — Fri, 16 Oct 2009 09:00:56 -0500

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.92 percent with an average 0.7 point for the week ending October 15, 2009, up from last week when it averaged 4.87 percent. Last year at this time, the 30-year FRM averaged 6.46 percent.

The 15-year FRM this week averaged 4.37 percent with an average 0.7 point, up from last week when it averaged 4.33 percent. A year ago at this time, the 15-year FRM averaged 6.14 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.38 percent this week, with an average 0.6 point, up from last week when it averaged 4.35 percent. A year ago, the 5-year ARM averaged 6.14 percent.

The one-year Treasury-indexed ARM averaged 4.60 percent this week with an average 0.5 point, up from last week when it averaged 4.53 percent. At this time last year, the 1-year ARM averaged 5.16 percent.

"Mortgage rates rose slightly over the week, but rates on 30-year fixed mortgages remained below 5 percent for the third consecutive week," said Frank Nothaft, Freddie Mac vice president and chief economist. "Homeowners are taking advantage of these low rates to refinance their current balances. Over the past five weeks ending October 9, more than three out of five mortgage applications were for refinancing, according the Mortgage Bankers Association."

"The outlook on economic growth in the second half of this year has improved over the past few months. At it's September 22-23 monetary policy meetings, the Federal Reserve increased its forecast for real GDP growth from the last meeting in mid-August. They noted that data from the housing sector indicated that a gradual recovery in activity was under way. The modest strengthening came about, in part, to improvements in housing affordability stemming from low interest rates for conforming loans and a lower level of house prices."