Jason's Blog

Existing home sales edge up 0.4% in November

Jason Thoele (Watson Touchstone Real Estate Group) — Sat, 05 Jan 2008 02:42:23 -0600

By Jeannine Aversa, AP Economics Writer
WASHINGTON - Sales of previously owned homes inched up in November but that didn't change the overall bleak picture for an ailing housing industry that has been suffering through a painful slump.
The National Association of Realtors reported Monday that sales of existing single-family homes, condominiums and townhouses rose 0.4% in November from October, to a seasonally adjusted annual rate of 5 million units. Over the last 12 months, however, existing home sales have plunged 20%, underscoring the troubles in the housing sector.

Economists were calling for sales to either move up slightly or hold steady for November.

Home prices continued to sink.

The median price of a home sold last month was $210,200. That marked a 3.3% drop from a year ago. It was the fifth biggest annual decline on record. The median price is where half sell for more and half sell for less.

Existing home sales jumped 10.3% in November from October in the West. They were flat in the Midwest. However, they fell 2% in the South and 3.3% in the Northeast.

The inventory of unsold homes in November fell 3.6% to 4.27 million homes. At the current sales pace it would take 10.3 months to exhaust that overhang.

"Inventory is still high and further reduction in prices may be required in some areas to induce buyers back into the market," said the association's chief economist, Lawrence Yun.

A dip in 30-year mortgage rates in November probably helped give nationwide existing home sales the small boost last month, the association suggested. Yun thought the small increase could be taken as a sign that the market might be stabilizing. That said, previous signs of stabilization earlier in the year have been dashed. A credit crunch that took a turn for the worse in the summer has aggravated housing problems.

The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.

Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.

Problems in housing are expected to persist well into 2008 - a major election year.

The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. And, the situation has given Democrats and Republicans- including those who want to be the next president - plenty of opportunities to spread blame around.

The economy's growth is expected to have slowed sharply to an annual pace of just 1.5% or less in the final three months of this year. Former Federal Reserve chairman Alan Greenspan recently warned that the economy is "getting close to stall speed." The big worry is that housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.

The Realtors group urged the Fed to slash interest rates by as much as three-quarters of a percentage point in January as a way to embolden home buyers. Most economists expect a quarter-point cut at the central bank's meeting on Jan. 29-30.

"The Federal Reserve could greatly help the housing market by making a one-time, large interest rate cut" instead of a series of smaller reductions, Yun said. "Knowing the Fed may cut rates, people are waiting and waiting to enter the market."

To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year. Its latest rate cut, on Dec. 11, dropped the Fed's key rate to 4.25%, a two-year low.

On Friday the government reported that new-home sales plunged 9% in November to a pace of 647,000, the lowest in more than 12 years.

The new-home numbers are thought to give a more current account of the health of the housing market because they are recorded when a contract is signed. The existing home figures lag because they are based on contract closings, many of which reflect deals negotiated months earlier.

"You want to take the two reports together, which demonstrated ongoing weakness in housing demand. This data today still doesn't indicate we're at a bottom," said Michael Darda, chief economist at MKM Partners.

Don’t let what’s going on in other parts of the Bakersfield real estate market fool you into thinking that you can’t make money in this area.

Jason Thoele (Watson Touchstone Real Estate Group) — Mon, 24 Dec 2007 22:56:41 -0600

Bakersfield, California is located in between two of the biggest cities in the state - Los Angeles and Fresno. The city has experience economic and social growth over the past ten years and has become comparable to other large American cities.

The real estate market in Bakersfield is currently a buyers market. The number of buyers exceeds the number of sellers in the area. Additionally, there are a large number of houses on the market right now. This gives the buyers a number of choices when they are choosing a home. Prices have been falling during recent years, which also works in favor of buyers.

In Bakersfield real estate, houses have been staying on the market longer. This is due in part to the fact that there buyers have so many different choices of houses in the area. They do not feel pressure to sign a contract or close a deal because there is a great chance that they will find something better in another part of down. Sellers find themselves forced to bring prices down.

In recent years, there is been a sizeable amount of appreciation on Bakersfield real estate. Because of this, sellers are still able to make profits even when they have to reduce the price of their offerings.

Even though buyers have such a tight control over the market, there investors still have an opportunity to make a profit on Bakersfield real estate. Investors that are looking for get-rich-quick deals won't find much success in this area. On the other hand, the investor that is willing to put a little extra time and effort into Bakersfield real estate can receive sizable profits.

Both investors and home sellers alike can sell Bakersfield real estate by making sure that it is priced right. Since buyers have so many choices for real estate, they will be quickly turned away by prices that are too high. Sellers will be forced to drop prices leaving potential buyers wondering why the priced has been dropped. Even when you drop the price of the property, buyers will shy away from homes that have stayed on the market for too long.

Whenever a piece of real estate stays on the market for too long it becomes stagnant. This makes the property difficult to sell. The right pricing is vital for selling Bakersfield real estate.

The best way to price Bakersfield real estate is by comparing to other homes that have sold in the area. Many investors and sellers are inclined to price Bakersfield real estate based on the price of homes currently on the market. However, this isn't the best way to determine the price of your property. Since buyers have control of the Bakersfield real estate market, you must make sure that you price homes according to what the buyers want.

Don't let what's going on in other parts of the Bakersfield real estate market fool you into thinking that you can't make money in this area. The appreciation of homes counters the control that buyers have on the market.

Real Estate Guide-Buying Real Estate

Jason Thoele (Watson Touchstone Real Estate Group) — Sat, 08 Dec 2007 10:39:54 -0600

Real Estate Guide-Buying Real Estate

How Much House Can You Afford?
There are several ways to gauge how much you can afford to spend on a house. But, before you go house-hunting, get pre-qualified for a mortgage so you'll know in what price range you can shop. It is not unusual for first-time buyers to be somewhat baffled about how to estimate what mortgage payment they will be able to handle each month, plus how much money they'll need for a down payment and closing costs.
That's why it is a good idea to get pre-qualified through a lender before you even start to look for a home. Pre-qualification lets a buyer know exactly how much a lender is willing to loan them. With pre-qualification in hand, the buyer can save a lot of time-and frustration. Pre-qualification does not obligate buyers to take a loan from the lender, nor should it involve any fees (until later, when they actually apply for the loan). At the same time, you must understand that pre-qualification is not pre-approval for a loan either which is a much more involved formalized process that results in an actual letter of credit from a lending institution for a specific loan. Depending on your unique circumstances, you may wish to consider pre-approval as an option, but it is not necessary-consult with your real estate professional to decide what's right for you. The less formal process of pre-qualifying on the other hand is a tremendous tool for buyers to have when making an offer. Usually, pre-qualified buyers have an edge when making a purchase offer because the seller knows that the buyer is pre-qualified, and that there is at least one lender ready to make it happen. In addition, it allows you the flexibility to choose the mortgage that is best for you at the time of actual purchase-which is sometimes months down the road. That can be important given the volatility of interest rates. When a lender pre-qualifies, they are more concerned about the buyer's paying ability than the price of the property. For this reason, lenders are interested in more than just a buyer's income. They also want to know how much existing debt a buyer has, what their on-going financial obligations happen to be, and what the buyer's monthly budget looks like.
Lenders use an established debt-to-income ratio, usually between .28 to 1 and .38 to 1, to calculate the amount of the loan they are willing to give to a buyer. For instance, a lender who uses a .3 to 1 debt-to-income ratio has determined that payments toward debt reduction-including existing debt plus new debt associated with buying a home-cannot be more than 30% of they buyer's gross monthly income. An important factor that may influence a lender to authorize a loan with a higher debt-to-income ratio - (where debt payments take a higher percentage of a buyer's income) - is a larger down payment. Buyers who put a larger percentage of the purchase price down (5%, 10%, 15%, 20%, etc.) are considered better "risks," because the theory is that the more a person has actually invested in the purchase, the less likely they are to default on the loan. Buyers usually discover that the pre-qualification process will produce a home purchase price that is roughly 2 1/2 to 3 times their gross annual income. The 2 1/2 -to-3 guideline is only a general rule of thumb, however, and it doesn't take a buyer's full financial situation into consideration. Since the lender's calculations will also consider a buyer's actual debts and ongoing expenses, the loan pre-qualification amount may be higher or lower. Regardless of the price bracket a buyer targets, they should keep pre-qualification in mind.

How much should you budget to own your own home?
Aside from the down payment, the three largest expenditures involved with the purchase of a home are usually your monthly mortgage payment, insurance and taxes. Obviously, the amount of your mortgage payment depends upon your down payment, rate of interest and the price of the property. Take, for example, a home that has a $200,000 mortgage. An 7% fixed mortgage for 30 years, will run approximately $1330 per month. What about taxes? The rate will often times vary from city-to-city, but generally you might expect your yearly tax bill to total around 1.25% of the purchase price.That means, for a home with a market value of $250,000, yearly taxes might run around $3125. A local real estate agent can help prospective homeowners refine these figures.
In addition, it is important to keep in mind that there are many additional expenses incurred with home ownership, some of the most obvious are utilities and trash collection. Smart homeowners should also budget for one other item, maintenance and upkeep of the home. If possible, a small amount should be set aside each month to pay for those "rainy day" repairs such as painting, plumbing (hot water heaters, garbage disposals), adding storm windows (to improve energy usage), insulation (in attics), etc. But home ownership is not just a one way street-that is, aside from spending money on repairs and maintenance, homeowners can profit from their property. The most significant benefit is the tax deduction. It is no secret that among the last real income tax deductions available to consumers today are the interest paid on the home loan, and the property taxes. This can amount to thousands of dollars in deductions each year. And, of course, the primary benefit of home ownership is appreciation-equity that builds every month. A home, aside from being a place that provides shelter, can be a profitable investment, and the rising value of the property oftentimes provides another "savings" account. So, when it comes to buying a new home, remember one thing ... the purchase of a property requires budgeting and planning.

How do you go about finding a mortgage?
The commotion of house hunting is finally over. You found just the right house, and your offer has been accepted. It was a great buy. Now, just one more hurdle-getting a loan-and you're home free.
Often, buyers are so eager to get this "final detail" behind them, they rush through this portion of the transaction, and end up with less-than-ideal terms. Borrowers, however, have something lenders want-their business. This positions them to negotiate the best possible price (cost of loan), terms and service.
Let's look at price, or the cost of the loan. The first thing to do is find out what the current rates are, information readily available on the internet, in your newspaper or from your real estate agent. When comparing rates, figure the annual percentage rate (APR), which includes interest, extra fees and costs amortized over the life of the loan. Also determine the number of points, if any, that the lender will charge to make the loan.
(A point is equal to one percent of the loan amount.) Next, consider what loan options the lender offers. There are six or seven basic types of loans, which vary in their duration. Check how rates are calculated (fixed versus variable), and whether charges are fully amortized over the life of the loan, or whether you'll have to pay points up front and/or balloon payments at the end.

Is there a prepayment penalty clause?
Which terms are best for you depends on such factors as what changes you expect in your income and what you predict will happen in loan rates in the years ahead. For example, if you only plan to reside in the home for a year or two, starting with a lower Adjustable Rate Mortgage (ARM) might be the best choice. If you have no plans to move, and feel that inflation will rise rapidly, a fixed rate would obviously be better. Finally, and perhaps most importantly, consider speed and service. Buyers shouldn't have to wait days for approval and weeks for closing just because the lender is slow. Remember, qualified buyers are great prospects for lenders - so give your business to the lender who demonstrates they not only want it, they deserve it.

How difficult is it to qualify for a mortgage if you have a past credit problem?
Credit problems can make it harder to qualify, but it's quite possible for buyers with poor credit to obtain a home loan. Anyone who has had a financial problem-whether it was a matter of late credit payment, delinquent taxes, or even a judgment that was filed-should expect this data to be a factor when applying for a mortgage.

How critical a factor?
Minor lapses will probably have little or no effect. However, buyers with serious problems may still qualify for a loan, but they may have to pay a higher rate of interest or provide a larger down payment.
There are three steps that a person with past credit problems should take before applying for a loan. First, request a credit profile from one of three major credit reporting agencies. To get copies of your credit report, start at: CreditNow - Credit Reports Second, the buyer should optimize his or her credit profile by citing prompt payment of rent, utilities, and other bills not reported on the credit profiles. Finally, the buyer should be prepared to provide comprehensive and candid explanations for any late payments to the loan officer. This is important because problems not reported by the buyer but discovered by the lender will reflect unfavorable.
Many lenders are understanding about one-time problems such as the loss of a job, a medical emergency, etc. Buyers with patterns of delinquent payments might want to consider adding six months or a year of flawless credit to their track record before pursuing their home-buying plans. So remember-if you are thinking about purchasing a home, but are worried about your past financial record-don't give up. There are solutions, lenders and agents who are in business to help. What are the five most common mistakes made by first-time buyers-and how can you avoid them? A good home-buying decision is one that fits your lifestyle and your budget-a house you'll be able to resell when the time is right. Sound simple? Not always.

Five common mistakes frequently made by first-time buyers.
1. Looking outside your price range. To avoid disappointment, contact a real estate agent who can help you pre-qualify before you start looking for a home. The agent can also provide valuable insight on taxes and other expenses associated with a home (utility bills, etc.) 2. Buying on impulse. Buyers-especially first-timers-may be impressed by the first two or three homes they view. Look at a good selection. List the positives and negatives. Narrow the prospects to three or four, and then return for a closer look. Evaluate more than just the property. Look at the surrounding area and community amenities. Is this what you-and your family-want and need?
3. Not planning ahead. Think seriously about any personal changes you are planning in the next five to seven years.
For instance, if you are planning on having children, consider how the home will meet both your current and future needs. If a double-income is necessary to qualify for financing-and make your payments-do your plans foresee an income sufficient to continue making payments? 4. Failure to focus on location. Don't just focus on the house, examine the neighborhood. Is the area safe, well maintained, moderately quiet and close to work, stores, and schools? Find out about zoning and what new construction is planned on any vacant land in the immediate neighborhood. Will the property be easy to market when you are prepared to sell it?
5. Failure to understand the home buying process. Once you select a home, get involved. Find a real estate agent willing to spend time with you, and don't hesitate to ask questions. Have them explain the negotiation, financing and escrow processes and other elements involved in the transaction. Home-buying involves knowing the price, and what's inside and around the property. Consider all your options carefully. This may be the most important financial transaction of your life.

What's the real difference between a new home and an old one?
While each offers its own style and charm, the difference usually boils down to two things:
1. How the home fits into the buyer's lifestyle.
2. The condition of the property.
Homes that are 10 years old or less are generally better insulated - or have dual-glazed windows or thermal panes - which translate into lower heating and cooling bills. And, in today's rising energy cost environment, these considerations are significant. Although there are some exceptions, homes that have been built with all-electric systems, generally have higher utility bills. Homes that range between 15 and 20 years old may be in need of new water pipes, especially if the old ones were galvanized and if a water softener was used. Water softeners and galvanized pipe can be deadly and, after 15-20 years, re- plumbing is usually required. Have a plumber or general contractor inspect the pipes. Needless to say, it can be expensive to re-plumb an entire system. Check the built-in fixtures and appliances for any signs of damage. Flush toilets, test all the water taps and the electrical sockets, open and shut the windows, and try all the lights. A window that will not open may be a sign of a more significant problem-for example, a wall may have shifted, or worse yet, it could indicate a problem with the foundation itself. It is also a good idea to ask the seller for copies of past utility bills. Examine them for some insight into what you can expect monthly gas and electric costs to be. Although newer homes may be free of significant physical or structural problems, there are other things to consider in making your decision.
Generally, room size and yard size tend to be smaller in some newer homes. While, on the other hand, they usually offer the benefit of the latest building and design technology. Many new homes also have more windows and natural light incorporated into their design plan, allowing for a more spacious feel and efficient energy usage.

Should a buyer get a professional inspection for the home they are buying?
Definitely. Hiring a professional home inspector can save a great deal of grief for buyers. The one exception would be when the home is new and carries a written warranty by the builder. Many buyers mistakenly believe that the only reason to have a home inspection is to make sure that the house they're buying doesn't have defects serious enough to warrant backing out of the transaction. But there's more to it than that. Certainly, an inspection will usually reveal major problems that may even surprise the seller. The obvious ones are corroded plumbing, antiquated and unsafe electrical systems, or structural and foundation problems. And, the discovery of such problems may cause the buyer to re- think his or her offer. Although a competent inspector can uncover deal-crushing defects, these problems are usually not commonplace. Typically, the seller will already have told the buyer about anything major. More often, inspections reveal less serious problems; problems that may not be serious but can be aggravating. For instance, there could be a minor electrical defect, or inferior ventilation of a heating system or fireplace. If so, the buyer is usually in the position of having the purchase price reduced, or the defect corrected. More important, it also prevents the minor problem from developing into a major disaster a year or two down the road. There is, of course, the possibility that the home inspection will produce another outcome: everything is fine. In this case, they buyer gains piece of mind, confident about the major investment he or she is about to make. That, too, is an enormous benefit for the cost of the inspection.

Now, how does a buyer find a home inspection?
By asking their real estate agent, friends, or lender. Inspectors are also listed in the Yellow Pages under "Home Inspection Services." But, a word of advice, don't hire a contractor. Contractors earn their living doing repair and renovation work, so their recommendations aren't likely to be as objective as those of a professional inspector.

Is real estate a wise investment?
There are fewer investments that have shown a better return. However, the key to investing wisely in real estate is understanding how the industry differs from others. For example, when the defense industry dips, it usually shows a national decline and the stock prices of defense-oriented firms drop across the board. The same is true of most industries. They are impacted nationally. That is not the case with real estate, which is actually an industry and investment driven by local conditions. One community may suddenly lose a manufacturing facility, and almost overnight the market is flooded with properties for sale. An excellent example is southern California. Several years ago, when defense cutbacks began an excess of homes went up for sale, increasing the supply and lowering demand. There, it was a buyer's market. At the same time, Bakersfield, a community less than 150 miles from Los Angeles continued to experience high demand for real estate. With supply short, it was a seller's market. Obviously, the key to successful real estate investing, like stocks and bonds, is to buy low and sell high. But, how do you know when the "low" has been reached? Or, for that matter, how can you judge when you property may be peaking in value? Some investors rely partially on the media. They read the daily newspaper, watch television and follow the trends. Although the media provides a good deal of information, remember that by the time things are printed or broadcast, the news may be old. For instance, you will find statistics frequently quoted in the media that have been supplied by the National Association of REALTORS (NAR). But, NAR statistics-like most- tell you where things have been, not where they are going.

So what can you do?
First, check local economic indicators. If, for example, a community depends on defense spending, and there is a government cutback, you can be assured that your area will be impacted. Even if the community does not have a major defense contractor, it may have subcontractors. The local chamber of commerce can frequently help. They usually have information on which companies are moving in and out of an area. Logically, the relocation of a firm into a community generally indicates that demand for real estate in that marketplace will increase-while if firms are moving out of the area, housing demand will often shrink. Aside from economic indicators, check real estate trends and cycles. Talk to a real estate agent. They can provide statistics on how quickly homes have sold, how prices have fluctuated in the past six to 12 months, and projections of future home sales. They can show you how today's market compares to last year's. Are sales headed up? Down? The same?
The answers will not only help you determine what the market is like in your area, but they will also be critically important in helping you determine when and where to make your real estate investment.

Does a home warranty protect a buyer in the event something goes wrong after they have purchased a property?
Sometimes. That's because home warranties are often times misunderstood and not every warranty provides the same protection. All warranty companies are not equal, either. Warranties, of course, were designed to protect buyers from problems that emerged after they moved into a dwelling. For example, if a major appliance breaks or the roof leaks, the ideal warranty kicks in and pays for the repairs. On the surface, this sounds simple and straight-forward. But, most of the time it is not. First, all warranties differ. Aside form the obvious differences, the amount of deductible required, they may also vary as what is covered and what is not. For instance, with some warranties if the hot water heater works on the day of closing, but suddenly does not work six months later, then it may be covered. And, with other policies if the water heater was not in good working condition when the home was purchased, and it breaks a week or two later, there is no coverage. Warranties can be critically important when it comes to new construction, too. Obviously, the reputation of the builder is an important consideration. However, problems with new homes can be enormously expensive if they are not covered by a warranty. There are two types of defects when it comes to new homes - patent or latent. Patent are those problems which can be seen. Cracked plaster, a fence that is off-kilter, etc. Latent problems develop later, and may not show up for five or six months. Ground shifting, for example. Latent problems are usually more expensive than patent problems. Thus, the warranty for a new home can be one of the most important documents executed during the buying process. Whether you're purchasing a new home or a resale, remember that warranties definitely have a place when it comes to protection and peace or mind in the real estate transaction, but make sure that you check them out carefully.

Is a final walk through, an inspection of the property by the buyer before they move in really important?
Yes, it is. The intent of a pre-closing inspection is to give the buyer one last opportunity to verify that they are getting all that was promised in the sales contract. Although buyers still have legal recourse if they discover-even after closing-that the condition of the home is not as it should be. The best time to identify problems is before closing, when the seller will be motivated to correct any deficiencies in order to close the transaction.
Typically, a buyer takes possession of a property one to three months after signing the sales agreement. But, a lot can happen before the actual move-in. Appliances and fixtures can break down, and walls, carpets and doors can be damaged during the seller's move-out. Sometimes the seller will simply have forgotten that he or she had agreed to leave the refrigerator or window coverings with the house. Whatever the reason, problems identified before closing have the best chance of being remedied. If possible, schedule the inspection right before the closing, such as the day before. Ask your real estate agent to attend the inspection with you. What should you be inspecting? Using a copy of the sales contract as a checklist, first make sure that all items that should be in place (appliances, built-in furniture, window coverings, fixtures, etc.) are there. Test each appliance to make sure they work properly. Test all electrical switches and the garage door opener, if there is one. Run the garbage disposal and turn on every water faucet, checking under the sinks for leaks. Flush the toilets. Inspect the floors, carpets, walls and doors for recent damage. If you discover that something is damaged or missing, make a note of it and inform your agent immediately. In most cases, the seller is usually able to take care of small problems immediately, either by making a needed repair or offering compensation to handle it. And, if there are major problems the seller can even sign a statement acknowledging the deficiency and agree to correct it. Although pre-closing inspections take time and may be inconvenient, they are important and well worth the buyer's time.

What are "contingencies" and why are they important?
A "contingency," is an escape-clause that is added in-writing to a contract which allows a buyer to back out of the transaction if certain conditions aren't met. Some contingencies, often called `riders'-like attorney approval of the contract, or the passing of a home inspection-are obviously designed to protect buyers from a poorly written contract or a defective home. Other purchase contingencies may hinge on the buyer's current living situation, or his or her cash-flow. For example, when it comes to contingencies many first-time buyers can be better prospects for a seller's home than move-up buyers. Why? Because offers from homeowners usually are contingent upon the sale of their present home. And, even if a move-up buyer has an offer for their home in-hand, their buyer's offer may be contingent on another contingency (or sale) and so on down the line. If one transaction in the chain falls through, they all might. Cash offers can also be more attractive to sellers. Why? After all, the seller will get their money at closing whether or not the buyer has cash or takes out a loan. True, but cash offers don't require lender approval, and loan approval is never a certainty and may delay or prevent closing. (Incidentally, for this reason, buyers who get pre-qualified for a loan have an edge over other buyers. A pre-qualified buyer is the same as a cash buyer.) Buyers offering a larger-than-customary amount of "earnest money", (a deposit that accompanies an offer) can be more appealing too. More money deposited with the signed contract often demonstrates greater sincerity and motivation to close the transaction.

What Your Real Estate Agent Knows That You Don't

Jason Thoele (Watson Touchstone Real Estate Group) — Sun, 02 Dec 2007 00:36:44 -0600

When you make the decision to sell your home, you are under no obligation to hire a real estate agent or broker to help you with the sale. Nonetheless, most people prefer to hire a real estate agent in order to better protect themselves. And, it also puts them in a better position to successfully sell the home in a short amount of time.

When you hire a real estate agent, you gain access to a wealth of knowledge that can help keep you out of trouble and will help provide for a smooth transaction. Here are just a few things your real estate agent knows that you probably do not.

The Federal Fair Housing Act

According to the Federal Fair Housing Act, you cannot discriminate against someone when selling a home. The act defines seven different classes of people who are protected against discrimination. These include:

race
color
national origin
sex
religion
handicap
familial status

If you do not enlist in the help of a real estate agent, you put yourself at risk of violating this act if you refuse to sell your home to an interested buyer who may be in a protected class. In addition, you might even accidentally violate these laws without realizing it. For example, there are certain words that cannot be included in your advertisements for your home because they are in violation of the Fair Housing Laws. Some of these words include:

bachelor apartment
children welcome
couples
gentleman's farm
golden agers
handicapped
integrated
married
mature
mother-in-law quarters
professional
seniors
singles only
sports-minded

As you can see, some of these terms seem perfectly innocent. Therefore, it is a good idea to get the help of a real estate agent so you can tap into his or her knowledge and experience in order to stay out of trouble.

State Real Estate Laws

Although there are similarities in real estate laws from one state to the next, each state has its own set of rules that must be followed. If you do not understand these laws, or are unaware of these laws, you can inadvertently break the law when selling your home. In addition, by not being fully aware of your seller's rights, you might actually lose out on money during the transaction.

Taking Advantage of Connections

Aside from legal matters, a real estate agent simply has a vast number of connections making it possible to sell a home more quickly and for a higher asking price. Similarly, because people come to real estate agents when searching for homes, you are able to tap into a much larger market of interested buyers when you get the help of a real estate agent.

Because a real estate agent has experience with selling homes, he or she can also provide you with tips to help increase the market value of your home and to make the process go by more quickly. For example, small things such as painting a room a different color can go a long way when it comes to increasing the appeal of the home. By taking advantage of the agent's expertise, you just might have a much more profitable selling experience.

Top 7 New Home Buying Mistakes

Jason Thoele (Watson Touchstone Real Estate Group) — Tue, 27 Nov 2007 11:26:00 -0600

Buying a new home is great! You get to choose where your home will be built, add a sunroom here, third garage bay there and before you know it you are moving into your dream home. With all the options to choose from it is very easy to overlook crucial elements to your new home buying experience that could cost you greatly in both time and money.

1. Choosing upgrades with the lowest ROI or too many upgrades, period.

This is truly the most common mistake made by new home buyers who don't consider the resale value of their home in the future. When buying a new home be sure to stick with the essential upgrades like two sinks in the master bathroom, high quality cabinetry and above all else, top quality padding under the carpeted areas.

2. Not examining your lot choice thoroughly enough.

A recent United Feature Syndicate by Lew Sichelman highlights some very important aspects to choosing a lot for your new home to be built on. Among them are: terrain, noting that people psychologically feel more secure looking down at the street rather than up, location and lot shape which can affect your surroundings including the possibility of facing the rear of a neighbor's home.

3. Finding communities first, vitals second.

When you are buying a home you have to shop differently than you would if you were buying a car or shopping for clothes. To save yourself much heartache and frustration, be sure to hammer out your lifestyle requirements before even searching for a community to build a home in. For example, if you commute to New York City and have school age children you would want to find a school district that you approve of in an area with multiple mass transit options (train, bus, highway) and then locate new home communities within close proximity to both.

4. Overlooking the "inspection" clause in builder contracts.

A dirty little secret in the new home industry is the fact that some builders, national builders included, send out contracts with a clause stating that they don't allow home inspections by an independent, third party home inspector until after you close on and own the home. They offer to do a walkthrough of the home with you before you close but chances are, unless you are a licensed home inspector with many years of experience, you won't notice any red flags beyond the superficial.

5. Not using a buyer agent.

When looking for a new home, be sure to find a buyer agent who specializes in new homes. There are numerous important steps when buying a new home that a new home buyer agent will be prepared to work with such as price negotiation, lot choice, researching future development around the community and the pros and cons of building materials your builder will use in the construction of your new home. At present, the buyer agent's services are paid for out of the builder's marketing budget.

6. Using the builder endorsed financing company out of convenience.

Many large builders have their own in-house financing company and they often offer incentives on their products by tying in the use of the incentives to financing through their in-house lender. In some instances you will find that the builder's in-house lender financing and incentives will cost you more money in the long run than if you had financed your purchase through an outside lender. Rule of thumb: Always check your financing options with the builder's in-house lender, a mortgage broker and a loan officer for a direct lender before committing.

7. Believing everything you read in advertisements.

If it looks too good to be true, it probably is. Always verify everything you read in real estate advertisements including newspaper ads and the community's standard features list. Aside from the obvious typographical errors that occur I have also seen blatant false advertising. For example, I have seen new home community literature advertising the community's short "less than an hour" drive to New York City despite the fact that it would take at least 90 minutes on a good day from that community.

Buying a new home is a wonderful, dazzling experience that will cater to your every need. By using reasonable care and professional guidance you will enjoy many great years in your new home and reap substantial rewards from your diligent buying efforts when selling your home in the future.

Remove Contingency to Sell

Jason Thoele (Watson Touchstone Real Estate Group) — Tue, 27 Nov 2007 11:11:27 -0600

Negotiation Tips to Remove Contingency to Sell Your Home
Making an offer to buy a home when your own home is not yet sold is a dilemma for many home buyers. Regardless of whether it's a buyer's market or a seller's market, sellers aren't too eager to accept an offer that is contingent upon the sale of a buyer's home, either. But especially in buyer's markets, you will see an increase in offers with a contingency to sell the buyer's home.
Types of Sale Contingent Offers

Although there are many variations of a contingent offer, most adhere to one of two formats:

Seller will keep the property on the market but accept a contingent offer, providing buyers with a 72-hour notice to perform in the event seller receives a better offer.

Seller will take the property off the market and wait for the buyer to sell the buyer's existing home.
The likelihood is the seller will choose option one.

What is a 72-Hour Notice to Perform?
The notice to perform can be of any agreeable duration, 24 hours, 48 hours or any number of days. The time period is negotiable. First the seller sends the 72-hour notice to perform to the buyer, informing the buyer that another offer has been received and the buyer now has 72 hours to remove the contingency to sell the buyer's existing home.

If the buyer does not remove the contingency to sell, the seller has the right to demand a cancellation of contract and refund the earnest money deposit to the buyer.

Options for Removing Sale Contingency

Obtain a bridge loan. It is best to get preapproved for a bridge loan before receiving the 72-hour notice to perform. This way, you won't be scrambling around trying to line up financing over an impossible 3-day period. Bridge loans are an expensive option because you will pay loan fees.

Tap a home equity line of credit. Most lenders will not give you a home equity loan once your home is on the market, and a seller is not likely to accept a contingent offer unless your home is on the market. But it's not a Catch-22. If you set up a home equity line of credit before you put your home on the market, you can simply transfer funds or write a check.

Change your mortgage to a higher loan-to-value. If you were planning on putting down, say, 20% to buy your new home, put down less and get a higher mortgage amount. Then, when your home eventually sells, you can use the proceeds to pay down the mortgage. Be aware that many higher loan-to-value ratios carry higher interest rates.

Borrow the down payment from a relative. Some home buyers tap the bank of Mom and Dad when an emergency arises. I don't know if buying a new home constitutes an emergency in your family, but in some families, it does. Perhaps Uncle Joe will give you that inheritance early? Might not hurt to inquire.

Remove your sale contingency and hope for the best. I know what you might be thinking right now: "Is she smoking crack?" But if you are confident your home will eventually sell, some buyers choose this option.

Bottom-line Risk for Removing Sale Contingency
Before you remove a sale contingency, review your purchase contract with a lawyer and obtain legal advice to determine your rights under the contract. California purchase contracts, for example, clearly state your earnest money deposit is at stake if you default on the contract. How much did you put up? $1,000? $5,000? $10,000? If you can live with losing that amount by taking a gamble that your home will sell, it might be worth it to you.

Evidence of Funds to Close
When a contingency is removed, sellers often ask for evidence of funds to close. This prevents buyers from arbitrarily removing a contingency without an actual intention to close. If a relative has the funds, typically a gift letter from the relative and copy of bank statements or stock accounts is enough to satisfy your lender and the seller.

This is a great commentary from Schwarzenegger

Jason Thoele (Watson Touchstone Real Estate Group) — Tue, 20 Nov 2007 21:11:59 -0600

http://www.centralvalleybusinesstimes.com/links/schwarzenegger.mp3

Great Article: Current State of the Mortgage Market (From a mtg brokers point of view)

Jason Thoele (Watson Touchstone Real Estate Group) — Fri, 02 Nov 2007 15:50:23 -0500

Current State of the Mortgage Market

By Matthew Graham - OP-ED COLUMNIST

What a fascinating and tumultuous time is upon us! Both the housing and the mortgage market are convulsing wildly! There are so many facets to the "big picture" that I would never presume have all the answers, so the following disclaimer is in order: I am a mortgage broker and the following is my opinion based on my experience and my knowledge. You might agree with me, you might not. But I urge you not to jump to any conclusions based on what I or anyone else has to say about the current state of affairs. No one can predict accurately how this is all going to turn out. My point of view is incredibly cynical in some ways, yet leaves room for optimism with the famous caveat of "it depends." In other words, my cynical prognostications can all be erased if certain entities take certain actions. Last thing is that this article is written for the masses, laypersons included. If you are an industry insider, I apologize, but I will be stopping to explain some things you definitely already know. Away we go...

The Beginning

In this case, the beginning is not an exact date or marked by an exact event, but rather the confluence of two important factors: the incredible loosening of lending standards and the overly-exuberant boom in the housing market. Yes, there are other important factors, and yes, I will discuss them, but these two are the big two in my mind.

Let's start with the loosening of lending standards. People with large amounts of money (banks, etc...) put systems into place to evaluate the potential risk associated with a loan. They've been evaluating the risk on loans since well before I was born. In the mortgage industry, this is called underwriting. There are underwriters (human beings), and underwriting systems (computers) that render decisions. Be they human or machine, the underwriting systems are employed and acting on the instruction of the money source.

"Money source" is a purposely ambiguous term so I can make the following point. Where does the money for mortgage loans really come from? If Wells Fargo gives you a mortgage loan, you might guess the money for that mortgage came from Wells Fargo, and you'd partly be right. Wells did indeed have the money to fund that transaction, and they may actually hold on to your loan forever, but there is a deeper layer to the money source than that. Even big banks need LIQUIDITY in order to continue doing business. When Wells needs liquidity, they obtain their money at a certain rate based on the appetites of the bond market. Sometimes this means "selling" your mortgage. Ultimately, the actual market metric is what's known as the "mortgage-backed security."

Mortgage-backed-securities (MBS's) are bought and sold just like stocks and bonds. By the time someone buys a MBS, its underlying risk and obligation have passed hands many times. It's gone from the consumer's intention to finance a house, to a mortgage broker, to a mortgage lender's underwriting staff, to the corporate structure of that lender, to be packaged in a "pool." Then it's either sold or held. When it's sold, it can be sold multiple times. The point is that those that are buying and selling them cannot simply call up the consumer that got the loan and ask them if they are a good credit risk. They are many times removed.

So this creates the necessary and crucial task of "judging" how sound of an investment the MBS is. After all, if a bank was selling a pool of loans with an average interest rate of 8%, the effective interest rate would only be 8% if none of the loans defaulted. Just based on historical statistics, a certain percentage of loans go into default. This risk of default is factored into the value of an MBS. In determining risk of default, investors look at several aspects of the mortgages that comprise MBS's: loan amount, credit score, whether income was documented or not, liquid assets, amount borrower compared to appraised value, whether cash was taken out, and many more.

Over time, default rates on certain "standard issue" mortgages have become very predictable. While there are many different types of mortgages, in recent history, but still before the period of so-called "meltdown," a certain type of mortgage was by far the most common. This is a 30 year fixed mortgage, with documented income and assets, with a down payment of some sort (or compensating factors to offset it), and with a reasonably strong credit history. In general, these are the components of a "Conforming" loan. A conforming loan is any loan that "conforms" to the guidelines set forth by Fannie Mae or Freddie Mac, huge Government-Sponsored-Enterprises put in place to help the American public realize the dream of home-ownership while protecting investors. So life is good right? Fannie and Freddie have their conforming loan guidelines in place. Investors can anticipate a predictable default rate and people can buy houses.

Enter the Problem #1

Unfortunately, not every family's scenario fits the conforming guidelines. In the not too distant past, there were little or no financing options for these families. To make a long story very short, investors saw great potential for this untapped market demographic. Alternative loans started to emerge with different standards than conforming loans. Interest rates were raised to account for increased risk of default and investors "guessed" at what would be the best indicators of likelihood of default. They knew it would be higher, but unlike the years and years of historical data behind conforming-type loans, there was no track record for these alternative loans.

What followed was a cataclysmic downward spiral of overly-exuberant underwriting standards. To keep up with competition, lenders got more and more aggressive, all the while operating in a market segment with a non-existent track record. Default rates were being guessed at, and were becoming evident in real time. Also evident was the fact that "experts" underestimated the actual default rate of these new alternative loans. Ratings Agencies (wall street analyst companies), were listing these new MBS's as much better than they were (because no one really knew how they would turn out). This goes back to the point of the investor being so far removed from the consumer. Wall Street analysts were saying that MBS's from these new alternative loans were a hot buy, so investors bought more. And more demand among investors drove an increase in the aggressiveness of loan programs and underwriting standards. It was a downward spiral in which anyone with a pulse could finance a house.

If this existed in a vacuum, it might not be so devastating, but it does not. This fire happened to be ignited at the same time that a large amount of gasoline, in the form of a real estate boom was occurring. There can be numerous "chicken versus the egg" arguments about the housing boom and the loosening of the mortgage market. The fact is they occurred at relatively the same time and they fed off each other.

Problem #2

People talk about the real estate boom that began around 2001 and ended about mid 2006. People and "experts" talk about the boom as if it's something that's happened before. "There have been up times and down times" they say. "This is just another boom." Those "experts" are wrong. There has never been a period like this. We have just experienced the largest housing boom in history. Might there be another one that supersedes it in the future? Possibly, but I would argue that the current time period will serve as a sobering lesson for us in the future. I would argue, this is as big as it gets. And it's not because I have the experience to have lived through previous ups and downs. It's not because I have decades of experience tracking these issues (because I don't). It's not because I have the foresight to predict the future of the markets. It is due to a simple truth: this "boom" is so much more inflated than any previous booms that it will stand as an obvious outlier in historical home price data. That is to say, compared to other upturns and downturns, the current boom is a much much larger digression from the mean than we have ever seen.

Here is an absolutely brilliant graph by the Yale economist Robert Shiller:

As you can see, there have been ups and downs. All have been within a certain standard deviation of the mean. The highest highs and the lowest lows have not deviated more 35% from the mean. Now take a look at the last 5 years. Adjusting for inflation a house today costs twice as much as the average value of a home for the last 100 years! We're over 100% away from the mean. I don't remember a lot from my statistics class in business school, but I do remember the concept of regression, or a return to the mean. It will happen. But remember this doesn't mean a house will eventually return to the same price it was in 1940, it means it will return to the same inflation-adjusted price. Even so, we are in the middle of a housing price correction right now that will likely continue. The severity of the correction and the length of the correction are two things that no one can accurately predict. That is where opinion comes in. You will hear a lot of opinions on the news, especially the economic focused news outlets. They vary, but I don't really think the "experts" realize just how bad things are. This is where my opinion comes in. but first, we need to talk about the interconnectedness of the mortgage market and the housing market.

There are a couple of caveats to the negativity. First, the mean housing data does not necessarily take into consideration that houses are much bigger and nicer (in general) than they were in the past. This may ease some of the regression to the mean. Furthermore, it's very important to note that different real estate markets around the country have behaved very differently. Although the media is national and national home data seems to spell doom for the entire nation, there are pockets around the country where the real estate market should be staying more steady. Some have already hit past the bottom, some have leveled out, and some will actually continue to grow. It just depends where you are and what market forces at play in your local market.

Mortgages and Home Prices: How They Are Connected

In the late 90's, the demand for housing began to rise steadily. Builders rushed to meet that demand by building more homes, yet the demand continued. The mortgage market had to do it's part by making sure more people could qualify to buy homes, so lending guidelines loosened. This also coincided with a period of decreasing interest rates. All the ingredients for the meltdown were in place. The lower interest rates drove an already high demand for homes higher. The easy lending guidelines made sure everyone could get the loan they wanted. Existing homeowners tapped their home equity to finance their lifestyles. Home equity was apparently an infinite well of money. Everyone, including industry professionals, made future plans on the assumption that values would continue to increase and money would continue to be easy to obtain.

There is an obvious downward spiral here. It is now culminating with one of the most dangerous gambles the mortgage market took. Before you read the following sentence, let me say that there is nothing wrong with adjustable rate mortgages (ARMS) if used for the appropriate purpose in the appropriate market. That said, ARMS are one of the main contributors to the meltdown. Short term ARMS were created that allowed someone to have a fixed payment for 1, 2, or 3 years. The introductory rates on these were low enough to allow first time homebuyers to buy homes well beyond their means. Brokers and banks assured these borrowers not to worry because their home would increase in value and they could refinance in 2 to 3 years to a more favorable loan. It seemed like a workable plan as long as everything stayed steady.

It Didn't Stay Steady

The new alternative loans (remember the ones with no track record to judge risk), started to show their track record, and it was worse than expected. When a loan-type has a worse than expected track record, it leads to investors not wanting to buy it any more. As a result, the money to fund these alternative loans began drying up and lenders began to go out of business. This led to a gut-check among all alternative loans and investors preemptively pulled the plug on other less-aggressive products as well. So starting in 2007, it has become much more difficult to obtain any sort of alternative financing. For instance, in 2005, a homebuyer could finance 100% of their home's value, without proving their income, with a 620 credit score. Now, lenders don't even do stated income loans to 100% with ANY credit score! That's a major change that's happened in just a short 3-4 month period.

At the same time, builders had become so exuberant that they had (and still have) immensely over-built for current housing demand. There is far more inventory on the market in terms of new homes than demand can meet. Even if there was demand for these homes, people can't get financing any more. Also, let's not forget about the scores of families that bought homes with short term fixed loans with the hopes of their values increasing, their credit improving, and refinancing into a better loan. In general their credit has not improved. In general, their house has not appreciated, and consequently they cannot refinance into a better loan. BUT they also cannot afford their payment.

Gloom and Doom

Now we have existing homeowners forced into default or short sale scenarios. This has a direct effect on banks and investors. Guidelines are further tightened to prevent future woes and this prevents even more people from getting financed right now. So their foreclosed or short-sold homes are coming onto the market and bringing prices down. Also, let's not forget about the huge inventory of new homes on the market. Builders are languishing and they are forced to drop prices as well. About the only thing that has stayed positive are interest rates. Historically speaking they are near an all time low, but it doesn't matter because they are only low on the Conforming programs. The lending standards are returning to the mean. Home prices are returning to the mean as well.

All that is to be expected, but here is why it's so bad. The volume of adjustable rate mortgages that are "coming due," or in other words, hitting their adjustable period where the payment goes up above what the homeowner can afford, will be even higher in 2008 than it is in 2007. At the same time, loans are harder to obtain than ever. Many of these people will be forced into foreclosure or short sales. These sales hitting the market at incredibly low prices lower the comparable sales data. The builders with too much inventory on their hands also lower the comparable sales data average.

And That's Why It's Worse Than Most People Think

We have hundreds of thousands of families across the nation in homes that are worth less than what they owe. They need to refinance to get out of their ARMS, but cannot due to both lending guidelines and home values. These families default or short sell which causes the lenders to take serious damage, which in turn causes lending guidelines to be further restricted. We are only just on the way down now. The crash landing has not yet occurred. As I said, there are more ARMS coming due in 2008 than there were in 2007, coupled with a tougher financing environment. When these come due and default or short sell, it further drives down the already decreasing value of real estate. This in turn harms builders who now have to take much less profit than expected and in some cases, losses. D.R. Horton's CEO said "2007 is going to suck," and he was right.

I argue that the aspects that make 2007 "suck" are the in greater supply in 2008. "Experts" and analysts incessantly like to state that housing only comprises a small percent of the entire American economy. This may be true in terms of jobs, but these "experts," all with much more education than me and much more air time are failing to see the biggest one of several critical factors in all of this: HOME EQUITY HAS FINANCED CONSUMER SPENDING. When we talk about the housing market being a small portion of the economy, that may be true inasmuch as construction jobs, but what about all of the ancillary effects?

Where do these experts think consumers are getting the money to buy the plasma TV? Maybe it's on a credit card, but eventually consumers want to consolidate that credit card with home equity. In the past they have done this, used home equity to increase their lifestyle, run up the credit cards again, and get bailed out again by home equity. BUT this will not be available in 2008! The simple fact that housing is a small part of the economy does not take into effect the interconnectedness it has with the rest of the economy. Builders losing money hurts the economy on it's scale, but what about lenders going out of business? Less people can get financed, so more people default, so more investors lose money, and less people can pump money into our economy, both on the end consumer level and the investor level.

It's a bad, bad situation. Intervention can come from many places. There are several congressional bills that have passed or that are proposed that would re-work Fannie Mae and Freddie Macs guidelines to allow some aid to the troubled areas of the mortgage market. It's not a panacea, but it will help. One thing is for sure: home prices MUST eventually return to their mean on the inflation adjusted index. Also, lending guidelines MUST return to a sustainable and predictable level of risk assessment. These two things are in the process of happening now, but they have definitely not already happened. It will be well in to 2008 and probably into 2009 before they do.

Should you worry? If you are one of the Conforming borrowers that is strong in 2 of at least the 4 following areas, you will be fine:

Income
Assets
Equity or Down Payment
Credit History

These 4 aspects are compensating factors for conforming loans and you will be able to get a decent 30 year fixed loan. That means that even someone with a 600 credit score and no down payment can get a loan right now if they have a good debt to income ratio and have several thousand dollars in liquid assets. But don't expect your home value to be going up like it used to (of course there are different markets all throughout the country, this assertion is general in nature). So buckle in for a bit of a bumpy ride. It's not the end of the world, and it will pass, but it certainly will be the most violent correction of home prices and lending standards this country has seen to date, and it's not over.

	Contributed By: Matthew Graham Matthew Graham has diverse experience in the mortgage industry having worked as a loan originator, processor, manager, trainer, wholesale rep, and now chief of operations at Residential Lending Group in Portland OR.

Wanted: Fixer Upper & Un-wanted Houses

Jason Thoele (Watson Touchstone Real Estate Group) — Fri, 02 Nov 2007 15:35:40 -0500

WANTED

Fixer Upper & Un-wanted Houses

Probate, Divorce, Bankruptcy, Foreclosure, anything else

Any Condition, Any Situation!!! We can Pay Cash & Close Quickly.

Visit our website to learn more: www.tholco.com

California's mortgage defaults hit record level in Q3

Jason Thoele (Watson Touchstone Real Estate Group) — Fri, 26 Oct 2007 15:45:33 -0500

Notices of Default: Houses and condos
County/Region	2006Q3	2007Q3	Yr/Yr%
Los Angeles	5,565	13,583	144.1%
Orange	1,500	3,882	158.8%
San Diego	2,355	5,673	140.9%
Riverside	3,040	9,250	204.3%
San Bernardino	2,548	7,038	176.2%
Ventura	578	1,377	138.2%
SoCal*	15,676	41,062	161.9%
San Francisco	149	252	69.1%
Alameda	803	2,126	164.8%
Contra Costa	1,012	3,216	217.8%
Santa Clara	670	1,655	147.0%
San Mateo	290	581	100.3%
Marin	89	172	93.3%
Solano	510	1,513	196.7%
Sonoma	231	749	224.2%
Napa	43	163	279.1%
Bay Area	3,797	10,427	174.6%
Santa Cruz	103	267	159.2%
Santa Barbara	188	598	218.1%
San Luis Obispo	94	249	164.9%
Monterey	202	751	271.8%
Coast	587	1,865	217.7%
Sacramento	1,761	4,947	180.9%
San Joaquin	898	2,961	229.7%
Placer	443	728	64.3%
Kern	741	2,196	196.4%
Fresno	789	1,807	129.0%
Madera	106	320	201.9%
Merced	282	1,076	281.6%
Tulare	268	595	122.0%
Yolo	101	303	200.0%
El Dorado	120	278	131.7%
Stanislaus	631	1,909	202.5%
Kings	46	108	134.8%
San Benito	63	178	182.5%
Yuba	66	227	243.9%
Colusa	18	54	200.0%
Sutter	77	155	101.3%
Central Valley	6,410	17,842	178.3%
Mountains*	185	417	125.4%
North California*	563	958	70.2%
Statewide	27,218	72,571	166.6%

Short Sales : I Hate Them - Real Estate Investors and Agents Decry Short-Sale Process

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 24 Oct 2007 15:03:20 -0500

A popular theme in the responses we have received to our request for feedback from the foreclosure front has been the confusion, delays, and inflexibility on the part of mortgage servicers in handling "short sales."

Short sales are requests to discharge mortgages when a third party is willing to purchase the property for an amount "short" of the total owed on the mortgage.

Complaints about the short sale process came in from homeowners who had offers to purchase their distressed properties, from investors, or from real estate agents who were hoping to put together short sale deals. Most of the letters mentioned specific lenders/servicers as responsible for their problems; however, given our longstanding aversion to litigation we have purged all names. Suffice it to say that most of the usual suspects were targeted.

Nearly everyone remarked on the perceived inflexibility of lenders on price and the amount of time, paperwork, and aggravation involved in getting a short sale approved - or even rejected.

A reader and Realtor® from Utah commented on both aspects. Saying that he specializes in both listing and buying short sales for his own portfolio, he stated "Since I started about 2 years ago I have never had my cash offer to the bank accepted in less than three months; 11 months is the longest I had to wait." He went on to say that lenders have been slow to realize that property values are falling. One property he has listed for $75,000 has an appraisal for $78,000 with $60,000 being the best offer he has received so far. The lender holds a note for $110,000 and they have postponed the foreclosure auction three times yet "they are refusing to accept the fact that the property is worth half of what they lent on it."

A Nevada correspondent - and judging from his email address also a real estate agent - wrote, "I have found trying to close a deal via a short sale gets bogged down with lawyers. It seems they only care about their fees and billable hours rather than helping resolve this mess. Some type of streamlining would certainly help. It seems that the banks are still asleep at the wheel. It is very discouraging."

Another real estate agent in the Bay Area of California said he recently had a "ready, willing, and able buyer to purchase a property as a 'short sale.' The home had been on the market for months prior to our bid. It took three months for the lender to get back to me and my client and then only to notify us that our offer was declined. The lender felt they could get more money later, (after the property was foreclosed). One month after the foreclosure the property was back on the market for the exact amount of our original bid four months earlier."

Loss mitigation departments are where workout and short sale proposals and decisions are processed for the banks and for mortgage servicers. Another real estate agent, who did not list his home base, wrote the following:

"Our experience is that the loss mitigators are so backed up and take so long to do anything (60 days in the case of (one lender) to even begin the process) that homeowners are being hurt terribly. Even if the homeowner is proactive and hires a real estate agent who has experience in short sales, the likelihood of the sale being successful has very little to do with the actual offer being received. No real estate agent has the time to spend a couple hours a day on the phone trying to push the bank to a decision. Some banks are even putting up barriers to communicating with the mitigators like refusing to transfer calls to them unless the mitigator requested the call. It is a real catch-22 because the mitigators don't have time to actually call anyone.

"In the end this hurts everyone. The homeowner loses their home to foreclosure and irreparably damages their credit. The real estate agent does a ton of work but doesn't end up getting paid, and the banks are stuck with owned real estate that will inevitably sell below any offer they received pre-foreclosure.

From Georgia: "I called (major servicer) last month to present an offer from my company to purchase a nearly new home in the Savannah area. We had a signed purchase and sale and were guiding an unschooled homeowner through preparing a complicated package of financial info for the lender. We asked for a short delay in the foreclosure that we had been told was scheduled for less than a week later. Not only was the servicer totally wrong about the date of the sheriffs sale, the she insisted that her company never, ever granted postponements unless a deal was approved and that only a completed package would be reviewed for approval

"We deal with short sales all of the time and we have never known a major lender to refuse to allow a little time for a deal - without even knowing the sale amount - to come together."

Quite a different take on the short-sale situation, however, came from a reader who is in the business of loss mitigation and has "been assisting home owners and commercial property owners to short sale their properties nation wide." He sees the banks as being a little victimized themselves as more and more investors look to profit from the current mortgage mess.

"We have been doing this for 17 years and have seen a dramatic change in the way banks work. Their slow ability to respond to short sellers is of great concern. Banks are simply unable to respond to the very large number of individuals trying to resolve their defaults. In our opinion the large number of "so called" investors and short sellers who try to flip or double close and make a hefty margin creates tremendous delays on the already burdened loss mitigation departments. Banks are much better equipped now-a-days to recognize these "investors" and in most cases these deals won't fly but the "traffic," with short sellers calling and sending offer packages to lenders affects the possibility that what we call honest short sales will be completed efficiently. We do short sales for fair market price; a far better solution for both borrowers and lenders who can receive much more for their defaulting loan. Our success rate remains very high but we have to be selective about who we help. Certain banks are simply unable to process the short sales. We have seen many buyers losing patience.

"Another issue is that banks are slow to understand that the markets are moving down. In many cases they stick with appraisals based on six-month old comparables and don't take into account that a property they are not willing to sell for fair market value will end up on their books and will become a big financial burden.

"There is no doubt that REO (real estate owned) portfolios are much larger than they have to be. If banks don't hire and train more loss mitigation specialists their losses will be staggering. Usually a short sale takes 2-4 months to complete but we have seen cases that lasted 8 months even with a good offer and a willing buyer."

Countrywide Starts to point fingers

Jason Thoele (Watson Touchstone Real Estate Group) — Thu, 18 Oct 2007 19:53:13 -0500

SEC Turns Spotlight on Countrywide CEO Mozilo

Reuters News Service and the Associated Press are both quoting a story in the Wall Street Journal on Wednesday that the controversial CEO of Countrywide Mortgage, Angelo Mozilo, is under an informal investigation by the Securities and Exchange Commission (SEC).

Countrywide is the largest mortgage company in the country and Mozilo, its founder, is generally credited or blamed for the company's evolution from a mostly conventional lender into one where subprime products dominated.

Along with dozens of other companies Countrywide faced a liquidity crisis several months ago. Because of rising default rates among its loans 61 percent of its capitalization ($15 billion) evaporated during the first eight months of 2007 and its survival was in some doubt until Bank of America stepped forward to invest $2 billion in the company, Countrywide is still casting around for additional investors and a Reuters article on September 12 said that there were large numbers of $10 Countrywide October Puts outstanding. A Put is an option that allows an investor to purchase a stock at that price - essentially a bet that a stock price is going to fall before expiration of the Put. At that time Countrywide was trading at $16 and change. The stock, however, closed yesterday at $17.35. One year ago the stock was selling in the $40 range.

Countrywide has announced plans to eliminate 10,000 to 12,000 jobs - approximately 20 percent of its workforce - and will take a $125 to $150 million pretax restructuring charge resulting from the downsizing.

The SEC is apparently investigating a dozen or so companies, including Countrywide, in connection with the subprime mess but, according to The Wall Street Journal article it is taking a special if informal look at Mozilo.

At issue is the sale by Mozilo of some 130 million of his company's stock in the first six months of 2007. It seems that there is a rather large loophole... ahem, provision, in the rules against insider trading that allows an insider to set up what is called a 10b51 trading plan. Such a plan, once established, allows the insider to proceed with transactions such as buying, selling, or exercising options even if he or she subsequently comes into possession of information that might impact stock prices which is not available to the public.

North Carolina's state treasurer Richard Moore last week asked the SEC to investigate Mozilo's stock sales, claiming that there were changes made to the pre-set trading plans in the months before the company's stock fell. An SEC insider speaking under a guarantee of anonymity, however, said that the informal inquiry into Mozilo's stock activities had been going on for a while.

The SEC had no immediate comment on the report nor did Countrywide, but the agency has previously said it is "looking hard at the general issue of whether executives are illegally trading on insider information and using a preset trading plan to avoid suspicion."

Forbes lists the 68-year-old Mozilo as the nation's seventh most highly compensated chairman with a total compensation package of $141.98 million (approximately $48 million in salary.) Over the last five years his total compensation was $295.73 million. He is listed as the top-ranked executive within Forbes category of Diversified Financials.

Do you know about my referral program?

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 17 Oct 2007 12:51:07 -0500

Do you know about my referral program?

If you know anyone buying or selling a home in the Bakersfield, CA or Kern County area then I would greatly appreciate your referrals. I cooperate with all Agents and will gladly pay a 25% referral fee. Please let me know if I can be of any further assistance.

Best Regards,

Jason Thoele
Tel: (661) 829-4070
Fax: (661) 846-6959
Ofc: (661) 663-3600 ext. 111
Email: jason@jasonthoele.com

Search for homes and check the value of your home for free at: http://www.jasonthoele.com/

Treasury Secretary - Housing Decline Significant Risk To Economy

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 17 Oct 2007 12:45:47 -0500

Secretary of The Treasury Henry M. Paulson, Jr., is in danger of becoming a household name in the midst of the sharp housing downturn. He is front and center in what has, to this point, been a tepid response on the part of the Bush Administration to rising defaults on subprime mortgages and the attendant layoffs of employees and the bankruptcies and/or closings of mortgage companies. In the last week or so, however, Paulson has been both speaking out and apparently doing a little maneuvering behind the scenes to try and address some of the problems.

On Monday we reported that three major banks were joining a consortium, primarily at Treasury Department urging, to pump money into markets for commercial paper. Then Tuesday Paulson, speaking before an audience of law school and business students at Georgetown Law Center made it clear in his prepared remarks that he thought the "ongoing housing correction" was not ending as quickly as might have been believed and hoped at the end of 2006. "And it now looks," he said, "like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet. Even so, I believe we have a healthy, diversified economy that will continue to grow."

Secretary Paulson summarized the current situation and its impact on the economy. Housing starts are off more than 40 percent from the peak of 2.3 million units in early 2006; employment in residential building, including specialty trade contractors, has dropped by almost 200,000 since early 2006, offsetting about one-quarter of the jobs gained in the housing boom, and mortgage defaults and foreclosures are rising. At the end of the second quarter of this year, more than 900,000 subprime loans were at least 30 days delinquent. Foreclosures have increased about 50 percent from 2000 to 2006 and those involving subprime loans are up over 200 percent in that same period. Current trends suggest there will be just over 1 million foreclosure starts this year - of which 620,000 will be subprime.

"The housing decline is still unfolding," the Secretary said, "and I view it as the most significant current risk to our economy. The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.

"So," the Secretary asked, "where do we go from here and what is the proper role for government?"

The first concern, he said, must be to keep as many homeowners as possible in their homes. Foreclosures are costly for borrowers, mortgage servicers, and investors and can cause whole neighborhoods to lose value. The second concern is the potential impact on the entire economy. "When (the involved parties) are relieved of the costs of bad decisions, they are more likely to repeat their mistakes. Still, we must recognize the very real harm to families affected by the housing downturn. "We must take steps to minimize the neighborhood effects and the macroeconomic effects of this housing market correction.

"Third, we need to identify public policy changes that will reduce the likelihood of repeating some of the excesses of recent years while maintaining access to credit for able homeowners. Yet, he said, "Today's mortgage market is different than in the past and it requires policymakers to think and act creatively.

"A first and important step is to bring mortgage servicers and the mortgage investors together in a coordinated effort to identify struggling borrowers early, connect them to a mortgage counselor and find a sustainable mortgage solution.

Recent surveys have shown that as many as 50 percent of the borrowers who have gone into foreclosure never had a prior discussion with a mortgage counselor or their servicer. That must change. Early intervention is critical - the earlier borrowers explore alternative options, the more likely they will find a workable solution and keep their home. We cannot expect to avert every foreclosure and, indeed, some are warranted. Even in years of strong housing performance, we witness several hundred thousand foreclosures. But today many homeowners out there can be helped, and we are committed to efforts designed to do just that."

The Secretary referred to Hope Now of which we wrote last week. This alliance of mortgage servicers, counselors, and investors is designed to coordinate outreach to homeowners to find solutions to their individual problems. He said that the immediate need is for more loan modifications and refinancing and other flexible methods for addressing problems. "The current process is not working well. This is not about finger pointing; it is about putting an aggressive plan together and moving forward. This alliance is dedicated to seeing that happen and I expect to see results. I also call on those servicers who are not yet a part of this alliance to join. You have an obligation to help meet this challenge, and you can do so more effectively as part of an integrated effort.

"Not all servicers," Paulson said, "are staffed for aggressive loss-mitigation. Preventing foreclosures is in investors' interest and investors must take an active role in demanding that all servicers, large or small, are pursuing all available loss-mitigation strategies. Today the industry doesn't have a thorough, standardized set of loss-mitigation metrics with which to evaluate servicers' performance. I expect the Hope Now alliance to quickly develop and begin reporting those metrics so investors, policy makers, and homeowners can measure results.

"There must also be steps taken to make more affordable mortgage products available for struggling homeowners." He cited President Bush's call on Congress to pass FHA modernization to make affordable FHA loans more widely available and to temporarily eliminate taxes on mortgage debt forgiven on a primary residence.

Paulson did not throw a bone to those hoping that the limitation of the portfolios of Freddie Mac and Fannie might be lifted. Instead he called on the two government sponsored enterprises (GSEs) to increase their securitization of mortgages - i.e. moving them out of their respective portfolios into the private sector - to increase the flow of capital into the credit markets. He stressed the particular importance of such securitization for loans designed to refinance borrowers out of current subprime mortgages.

In the realm of policy changes Paulson suggested homebuyer education and effective ways of disclosing the impact of loans and terms were key to protecting homeowners. "We must identify what information is most critical for borrowers to have so that they can make informed decisions. At closing, homebuyers get writer's cramp from initialing pages and pages of unintelligible and mostly unread boilerplate that appears to be designed to insulate the originator or lender from liability rather than to provide useful information to the borrower. We can and must do better."

But borrowers must also do their part and cannot be excused from their obligation for due diligence. Homebuyers have a responsibility to understand their mortgages.

The Secretary also criticized the fragmented regulatory and enforcement authority across and among state governments and federal agencies as a "patchwork structure (that) should be streamlined and modernized," and called for regulation and licensing requirements for mortgage brokers that will reveal prior fraudulent activity and require proper training and education.

While his first steps have been tentative, that Secretary Paulson is addressing the housing situation at all is reassuring. He does not seem to share the Administration's determination to let the private markets that created the problems in the first place now solve them. His current solution seems to involve talking the big players in the market into positive action but one can sense that he is not going to let the issues arising out of the housing downturn further endanger the economy before taking stronger measures.

Bankers expect 18% decline in mortgage originations in '08

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 17 Oct 2007 11:11:16 -0500

Saw this article on Inman News, says prices are forecasted to drop 18%, I have been hearing and thinking myself about 10%, let me know your thoughts on this.

http://www.inman.com/hstory.aspx?ID=64928

Top 10 Reasons to Buy a Home NOW!

Jason Thoele (Watson Touchstone Real Estate Group) — Tue, 16 Oct 2007 12:03:57 -0500

Selection, selection, selection. There are plenty of houses from which to choose. Just a few years ago the resale inventory dropped below 1,000 units. A buyer was forced to make compromises if they were going to locate the home of their dreams. There is a great selection of attached homes, condos, and townhouses. You can find large lots, small lots, and a lot that will accommodate your boat or RV. There are lots of options in this market.

No Bidding Wars. In 2005 we had one client that made an offer on ten homes. They lost the first nine to the 'feeding frenzy' that existed. Other buyers bid the properties up substantially from the original listing price. There were escalation clauses where buyers authorized their agents to outbid other offers by thousands of dollars. There is no competitive bidding in this buyer's market.

You can make an offer. A few years ago when you made an offer, the only question was how high above the list price could the buyer reach in hopes of being the best offer on the table. Today the sell price list vs. price ration is about 96%. A seller will not be insulted if you 'make them an offer they can't refuse'.

Patience is tolerated. In the hot seller's market that existed everything was rushed. Find a house before other buyers did. Hurry up and make the offer. Today a buyer can take their time. Look at several homes and think about your decision for a few hours.

Due diligence is welcomed. In this market a buyer is encouraged to obtain a home inspection, termite inspection, and appraisal. In 2005 many buyers waived these contingencies in order gain an advantage with multiple offers.

There are plenty of specs. In the not too distant past buyer had to 'play games' if they wanted a new home. There were lotteries and waiting lists in order to obtain new construction. Some buyers slept in their cars in order to get to the head of the lines. R.L. Brown estimates that builders have thousands of specs ready for immediate occupancy.

Repair requests are welcomed. After a buyer completes a home inspection, they are allowed to submit a repair request to the seller. In the past a seller might insist the home was sold 'as is'. Many times, there were back-up buyers waiting for a primary buyer to upset the seller whose home was increasing in value almost daily.

Few, if any investors. It is estimated that one third of all sales in 2005 were to investors. These non-owner occupied buyer caused the market to inflate and affordability to decline. Mortgage fraud became commonplace. It's a great time to buy without having to compete with hundreds of prospective landlords.

Location, location, location. Today's buyers can find homes closer to work. In the past buyers flocked to Maricopa and Queen Creek in order to find affordable homes. In this market, reasonably priced homes are within biking or walking distance to schools, rapid transit lines, and relatives.

Real Financing is available. The 'wink, wink' zero down, no doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first time homeowner bond programs, special loans for teachers, and police officers are back in business. It's a great time to buy real estate!

Report: Foreclosed homes down in September

Jason Thoele (Watson Touchstone Real Estate Group) — Tue, 16 Oct 2007 11:51:27 -0500

Here's an article I read, very interesting information. The article states that even thogh foreclosure rates are down we deffinitely are NOT out of the danger zone.

The number of homes going back to mortgage lenders dropped 21.5 percent in September compared to August, according to Foreclosures.com, a Fair Oaks-based foreclosure information company.

"Despite what some other data aggregators are saying, the big news is that many states, including some typically hit hard by rising foreclosures, actually saw a drop in the number of people who lost their homes to foreclosures last month," says Alexis McGee, president of Foreclosures.com.

According to the figures compiled by the company, September saw 30 states reporting a drop in REO filings from August and one was unchanged. An REO (real-estate owned) filing is the final stage in the foreclosure process in which a property that does not sell at foreclosure auction reverts back to the bank or lender.

The foreclosure leaders with declining numbers, according to Foreclosures.com's calculations, were:

• California -- down 14.24 percent)

• Colorado (down 57.97 percent)

• Florida (down 14.18 percent)

• Michigan (down 21.13 percent)

• Ohio (down 29.22 percent)

• Texas (down 1.65 percent)

"These new numbers are in stark contrast to what have been staggering month-to-month increases in foreclosures virtually nationwide," says Ms. McGee. "Year over year, of course, the numbers of foreclosures - per capita and actual filings - are up as reported in the majority of states. Given all the real estate and credit market turmoil of the past year, that's not unexpected."

She says the mortgage meltdown has not yet run its course.

"The foreclosure crisis isn't over - far from it. Per capita and year to date plenty of homeowners still haven't and won't be able to extricate themselves successfully from escalating mortgage debt and have or will lose their homes to foreclosure as a result," she says.

So far this year, on a per capita basis five out of every 1,000 households -- nearly 400,000 properties nationwide -- have been lost to foreclosure. That compares with 3.6 foreclosures per 1,000 households (285,826 filings) a year ago, according to ForeclosureS.com reports. Per capita can be a measure of the real impact of housing market trends, the company says.

"Those numbers will keep rising, too, as hundreds of thousands of ARMs (adjustable rate mortgages) continue to reset this year and next and leave homeowners with crippling and inescapable debt," Ms. McGee says.

She sees some positive developments.

"As mortgage markets stabilize, investors and lenders who had been scared away by August's subprime lender implosion slowly are returning to the market. For homebuyers that means greater liquidity - the availability of more money to lend," she says.

"Another bright spot is the recent introduction of FHASecure, the federal government-sponsored program to give qualified subprime borrowers an affordable refinancing alternative to foreclosure.

"It all is beginning to add up to a light at the end of the foreclosure tunnel," says Ms. McGee.

Hope Now Mortgage Website

Jason Thoele (Watson Touchstone Real Estate Group) — Fri, 12 Oct 2007 14:15:25 -0500

Looks like some mortgage companies and banks are finally looking at soing some good. A group has established a website (http://www.hopenow.com/) which, at present, is not particularly helpful. It informs debtors how to ID their servicers (i.e., look on your mortgage statement), and recommends several approved credit counselors and provides links to other foreclosure information. However, according to Secretary Paulson, participating lenders will be sending out direct mail to borrowers to help them understand the available services and the companies have been asked to establish a model which includes a toll-free phone number, email address, and fax number.

October Newsletter

Jason Thoele (Watson Touchstone Real Estate Group) — Thu, 11 Oct 2007 17:26:33 -0500

Before Disaster Strikes
Fires . . . hurricanes. . . floods . . . earthquakes . . . tornadoes.... Natural or other disasters can strike suddenly, at any time, and anywhere. Your first priority, of course, would be to protect your family and your property. But it's also important to protect against the financial consequences of a disaster. A disaster can damage or destroy your property, force you to temporarily live somewhere else, cut the flow of wages and other income, or ruin valuable financial records.

Listed here are some simple, common-sense steps you can take now. Before you take any actions, however, you should be sure you have involved your family or friends whenever possible in decision making and planning. You also may want the assistance of an advisor, such as a Certified Financial Planner, insurance agent, or similar financial professional.

The important thing is to begin planning now, before the unexpected becomes a harsh reality.

Protect your property
One of the first things to do is find out what disasters could strike where you live----fire, flood, earthquake, hurricane, or tornado, for example. The following steps can help you avoid or reduce substantially the potential physical destruction to your property if you were to be hit with a disaster. These steps can reduce your insurance costs, too. For example, you could:

Install smoke detectors to warn of an apartment or home fire.
Elevate utilities to upper floor or attic.
Clear surrounding brush to protect your home against wildfires.
Anchor your house to the foundation, and anchor the roof to the main frame.
Secure objects that could fall and cause damage in an earthquake, such as a bookcase or hot water heater.
Install hurricane shutters on windows, and prepare plywood covers for glass doors.
Cover windows, turn off utilities, or move possessions to a safer location if you have adequate warning of something like a hurricane or flood.
If your home is in a high risk flood area, on a fault line, or threatened by coastal erosion, consider relocating.
Have your house inspected by a building inspector or architect to find out what structural improvements could prevent or reduce major damage from disasters.
If you haven't yet bought a house, you might take construction type into account. Frame houses tend to withstand some disasters, while brick homes hold up better in others.
If you're not sure where to start, you could contact your local fire department. Fire departments will often make house calls to evaluate your property and make suggestions on how to improve safety. In earthquake-prone areas, the local utility can be called upon to come to your location and show you how and where to shut off gas lines or how to elevate utilities to get them above a possible flood.

Conduct a household inventory
Inventory your household possessions by making a list of everything you own. If disaster strikes, this list could:

Help you prove the value of what you owned if those possessions are damaged or destroyed.
Make it more likely you'll receive a fast, fair payment from your insurance company for your losses.
Provide documentation for tax deductions you claim for your losses.
To conduct a thorough home inventory:

Record the location of the originals of all important financial and family documents, such as birth and marriage certificates, wills, deeds, tax returns, insurance policies, and stock and bond certificates. Keep the originals in a safe place and store copies elsewhere. You'll need accessible records for tax and insurance purposes.
Make a visual or written record of your possessions. If you don't own a camera or videotaping equipment (and can't borrow or rent it), buy an inventory booklet and fill it out, or make a simple list on notebook paper. Ask your insurance agent if he or she can provide one.
Go from room to room. Describe each item, when you bought it, and how much it cost. If you're photographing or videotaping, have someone open closet doors and hold up items.
Record model and serial numbers.
Include less expensive items, such as bath towels and clothes. Their costs add up if you have to replace them.
Be sure you include items in your attic, basement, and garage.
Note the quality of building materials, particularly for such furnishings as oak doors or expensive plumbing fixtures.
Photograph the exterior of your home. Include the landscaping---that big tree in the front yard may not be insurable, but it does increase the value of your property for tax purposes. Make special note of any improvements, such as a patio, fencing, or outbuildings.
Photograph cars, boats, and recreational vehicles.
Make copies of receipts and canceled checks for more valuable items.
Get professional appraisals of jewelry, collectibles, artwork, or other items that are difficult to value. Update the appraisals every two to three years.
Update your inventory list annually.
Sound like too much work? Computer software programs designed for such purposes can make the task much easier. These programs are readily available in local computer stores.

Most important, once you have completed your inventory, leave a copy with relatives or friends, or in a safe deposit box. Don't leave your only copy at home, where it might be destroyed.

Buy insurance
Even with adequate time to prepare for a disaster, you still may suffer significant, unavoidable damage to your property. That's when insurance for renters or homeowners can be a big help. Yet, many people affected by recent disasters have been underinsured-or worse-not insured at all. Homeowners insurance doesn't cover floods and some other major disasters. Make sure you buy the insurance you need to protect against the perils you face.

If you own a home:

Buy, at a minimum, full replacement or replacement cost coverage. This means the structure can be replaced up to the limits specified in the policy.
Investigate buying a guaranteed replacement cost policy. When and where available, these policies can pay to rebuild your house, including improvements, at today's prices, regardless of the limits of the policy.
Have your home periodically reappraised to be sure the policy reflects the real replacement cost.
Update the policy to include any home improvements, such as basement refinishing. Annual automatic increases may not be enough to cover these.
Buy a policy that covers the replacement cost of your possessions. Standard coverage only pays for the actual cash value (replacement cost discounted for age or use).
Be very clear about what the policy will and will not cover, and how the deductibles work (the part you pay before the policy pays).
Check government operated insurance pools if you find it difficult to obtain private coverage because of a recent disaster. Premiums often run higher than market rates, but this is better than no coverage.
Use your home inventory list to check that your policy's coverage matches the value of your possessions.
If you rent:

If you are renting, consider locating outside a high risk flood area or away from a fault line.
Buy renter's insurance, which pays for damaged, destroyed, or stolen personal property. Your landlord's insurance won't cover damage to or loss of your possessions. Also, consider special coverage like flood insurance for your belongings.
Be clear about what a policy will cover. Some policies cover more than others. For example, will the policy pay for living expenses if you have to live somewhere else temporarily, or for damage from sewer backup?
Comparison shop for the best coverage at the best price. Other than government flood insurance, policies vary from company to company. Policies in most areas are very affordable. Start with the company that insures your car. Discounts are often available if you carry more than one policy with a company.
If you are moving:

Select a home in an area not on a fault line, in a flood area, or at risk from costal erosion.
Consider special coverage
Insurance for renters and homeowners won't cover certain types of losses. Ask your insurance agent or financial planner about special or additional coverage for the following:

Floods- Homeowner policies don't cover damage from flooding. Call your current insurance company or agent first about getting coverage.
Earthquakes- Premiums typically are high, and deductibles may range from 5% to 20% of the policy's coverage. Still, such coverage may be better than no coverage. (Earthquake coverage for the contents of a home usually is separate.)
Home offices- Some policies automatically extend coverage to computer equipment and a few other items of business property. Talk to your agent to determine what items would or would not be covered. If necessary, you could buy additional business coverage at a modest cost. Or it may be better to buy a separate small business policy, which would also provide more coverage.
Building codes- Ask your agent about additional insurance to cover the costs of meeting new, stricter building codes. Frequently, after a disaster people get shocked with rebuilding costs that are much higher because building codes have changed. All current codes must be met when rebuilding. Consider additional structural improvements that provide more protection.
Other potential problems- This would include problems such as underground mines (located beneath your property) sewer backup, or mudslides.
Big-ticket items- Purchase additional coverage for specific jewelry, collectibles, artwork, furs, or other big-ticket items.
Where to keep cash
After a disaster, you may need cash for the first few days, or even several weeks. Income may stop if you can't work. To help stay solvent, consider the following:

Keep a small amount of cash or traveler's checks at home in a place where you can get at it quickly in case of a sudden evacuation. A disaster can shut down local ATMs and banks. The money should be in small denominations for easier use.
Set aside money in an emergency fund. That can be tough to do on a tight budget, but it can be well worth the effort. The fund can be very helpful, not only in a disaster, but in other financial crises, such as during unemployment or when unexpected expenses like legal fees arise.
Keep your emergency funds in a safe, easily accessible account, such as a passbook savings account or a money market account.
Keep some funds outside the local area, since the disaster that affects you could also affect your local financial institutions. A mutual fund money market account in another city is one option to consider.
Keep your credit cards paid off. You may have to draw on them to tide you over.
Use an evacuation box
Buy a lockable, durable "evacuation box" to grab in the event of an emergency. Even a cardboard box would do. Put important papers into the box in sealed, waterproof plastic bags. Store the box in your home where you can get to it easily. Keep this box with you at all times, don't leave it in your unattended car.

The box should be large enough to carry:

A small amount of traveler's checks or cash and a few rolls of quarters.
Negatives for irreplaceable personal photographs, protected in plastic sleeves.
A list of emergency contacts that includes doctors, financial advisors, clergy, reputable repair contractors, and family members who live outside your area.
Copies of important prescriptions for medicines and eyeglasses, and copies of children's immunization records.
Health, dental, or prescription insurance cards or information.
Copies of your auto, flood, renter's, or homeowners insurance policies (or at least policy numbers) and a list of insurance company telephone numbers.
Copies of other important financial and family records (or at least a list of their locations). These would include deeds, titles, wills, a letter of instructions, birth and marriage certificates, passports, relevant employee benefits documents, the first two pages of the previous year's income tax returns, etc. Originals, other than wills, should be kept in a safe deposit box or at another location.
Backups of computerized financial records.
A list of bank account, loan, credit card, driver's license, investment account (brokerage and mutual funds), and Social Security numbers.
Safe deposit box key.
Rent a safe deposit box
Safe deposit boxes are invaluable for protecting originals of important papers. If you don't have a safe deposit box, keep copies in your evacuation box or with family or friends. Original documents to store in a safe deposit box include:

Deeds, titles, and other ownership records for your home, autos, RVs, boats, etc.
Birth certificates and naturalization papers.
Marriage license/divorce papers and child custody papers.
Passports and military/veteran papers.
Appraisals of expensive jewelry and heirlooms.
Certificates for stocks, bonds, and other investments.
Trust agreements.
Living wills, powers of attorney, and health care powers of attorney.
Insurance policies (copies are sufficient).
Home improvement records.
Household inventory documentation.
Generally, originals of wills should not be kept in a safe deposit box since the box may be sealed temporarily after death. Keep originals of wills with your local registrar of wills or your attorney.

Deciding on a safe and convenient location is an issue. You may want to consider renting a safe deposit box in a bank far enough away from your home so it is not likely to be affected by the same disaster that strikes your home (for instance, bank vaults have been flooded). Keep the key to the safe deposit box in your evacuation box.

Home safes and fire boxes
Safes and fire boxes can be convenient places to store important papers. However, some disasters, such as hurricanes, floods, or tornadoes, could destroy your home. Usually, it's better to store original papers in a safe deposit box or at another location well away from your home.

If you have time...

Some disasters, such as tornadoes or earthquakes, strike with little or no warning. Others, such as floods or hurricanes, may allow some time to prepare. If there is enough time, you could take the following actions:

Decide what household items you would put on a very short priority list. For example, imagine you could take only one suitcase or pack a single carload. What would you take? Involve the whole family in this discussion. Take jewelry and other small valuables.
Take irreplaceable heirlooms, mementos, and photos.
Don't bother with replaceable items such as televisions, furniture, computers, and clothing (except what you need to wear for a few days).
Be sure, however, to take a battery-powered radio and spare batteries so you can stay informed.
Take important papers and computer disks if you have a home business.
Whew! These are a lot of ideas. You may not be able to do everything that is suggested---that's OK. Do what you can. Taking even limited action now will go a long way toward preparing you financially before a disaster strikes.

How to Buy A Home with Absolutely No Money Down

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" Now you can realize the dream of owning your own home with zero down payment."

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The Zero Cash Down payment Program offers you a way to buy a home with no down payment. That's right zero down payment. You may have owned a home before and are presently renting, or are a first time homebuyer and need a way to break into the housing market but held back because you thought you required a substantial down payment. Or you may be in the position where you do not want to liquidate your financial assets to use as a down payment on a home. Regardless of your present situation, you want a way to get into or to re-enter the housing market without having to make a cash down payment. The Zero Cash Down payment Program may be just the answer you need. Here's what is required to qualify for the Zero Cash Down payment Program.

Program Qualifications
1. An excellent credit history
no recent history of bad debts

consistent and timely payment of current liabilities

2. Limited liabilities
You will be required to disclose all current liabilities you have in order to determine how much more debt you can carry. (ie. present car loan, credit cards, etc.)

3. At least 3 years of employment stability
You will be required to show proof of employment for the past 3 years, ie. a letter of employment from your employer or financial statements for the past 3 years if self-employed.

4. The financial ability to carry larger monthly payments
Without a down payment you will be required to meet the obligation of larger mortgage payments. Your monthly payments could vary from a few to several hundred dollars more per month.

Under the Terms of the Program You Can Purchase Many Types of Properties
They include:

detached or semi-detached homes

free-hold town homes

condominium town homes

It is important to note that not all properties qualify for the Zero Cash Down payment Program. To ensure that you get an accurate picture of what properties may or may not be included in this pro-gram in your particular area, it is advisable to review the terms of the program with your Realtor ® .

Benefits of the Zero Cash Down payment Program
1. No Down payment
If you are renting, why pay your landlord's mortgage? Why not reap the benefit of building your own equity? Are you renting because you are held back from owning your own home because you think you need a substantial down payment? The general perception of many would-be-homebuyers and even that of some Realtors ® is that a substantial down payment is required in order to purchase a home. This is simply not true. Because of this perception many would-be-home-buyers feel they have to save for years before they have enough money for a down payment so that they can finally enter the housing market. In the meantime they are lining someone else's pockets, while waiting a long time before they can start building their own equity. Well, with the Zero Cash Down payment Program you don't need a down payment to buy a home.

2. Buy a Home Now!
If needing a down payment is keeping you from owning your own home, this new program offers you an immediate way to get into the housing market. With the Zero Cash Down payment Program you don't have to wait to purchase a home.

3. Approved Bank Program
It is important to know that the Zero Cash Down payment Program is an approved bank program. Review this program with your lender or Realtor ® who has specialized knowledge in financing and can assist you with the Zero Cash Down payment Program.

Buying a Great Used Car
So, you need a new set of wheels but you can't afford to shell out more than $20,000 - the average cost of a new car. And you don't want to drive around in an unreliable "old bomb" either. What are your options? The good news is that there are lots of great deals available on "previously owned" cars. But be aware that buying a great used car requires navigating through a few special steps to ensure that you will get the most reliable and safe car. Follow these tips and you'll be rolling down the highway with confidence.

Get the Facts
Figure out which car best suits your needs and how much you are able to spend. Use the internet to do your homework. Go online to find out the value of a particular model, scan online classified ads, and search car finance loans, among other things. Each car buying site has a certain area of expertise.

Of course, you can do your research the old fashioned way - at your local library. Look through popular consumer publications such as Consumer Reports for reliability and repair ratings, as well as general advice on the used car buying process.

Places to look for used cars include: new car dealerships, used car dealers, private individuals, and auctions. Unless you plan to pay cash, get quotes from at least two financing institutions, so that you know what payment and interest rate options exist before you talk to dealers.

Avoiding Problems and Pitfalls
Try to find out as much as possible about the history of the vehicle. Ask the seller to provide you with copies of the repair records, if available. In addition, get a vehicle history report. The report includes such important information as to whether the car has ever been issued a salvage title (from being in an accident), a flood title, or a junked title, and if the odometer has been tampered with.

Depending upon the mileage and prior maintenance performed, a used car could require more repairs sooner after you purchase it than a new car would. There are several additional steps you can take before you buy to insure that you are not buying a car in poor condition. Consider paying a mechanic to look the car over first. This might cost up to $100, but if you are serious about the car, this should be money well spent to insure that you are buying one that's reliable and safe. Take the car for a test drive and check out the braking, steering, shifting, acceleration, engine noise, and how well the accessories work.

A Word About Certified Used Cars
Since the mid-1990s, dealers have been selling a special type of used car - the "certified" used car. Cars which have been leased or traded-in are evaluated to see if they qualify for certification. Vehicles that qualify are usually in very good condition, with low mileage. The dealers have their mechanics perform a detailed inspection and they offer various warranties. Certification can mean different things to different car manufacturers, so it's important to check with each dealer to get the details of their certification program. Review the warranties carefully to see which repairs are covered and which are not. You can check the websites for car manufacturers or contact dealers for information on their certification programs.

Buying a certified used car is a way to pay much less than you would for a new car, and still get recent models and features. The warranties should offer greater peace of mind because the dealers have taken the guesswork out of what condition the vehicle is in.

Check for Car Safety Features
One of the most important considerations when looking for a car is what safety features they have. You should be able to understand what they are and what they are worth to you. If you haven't bought a car in many years, you may not be familiar with some of the newest safety features. Some features are mandatory and some are optional. Safety features on many recent models include:

Front and side air bags.
Head injury protection such as head air bags (shield you from impact with the upper interior of the car).
Anti-lock brake systems (ABS).
4-wheel drive with traction control (usually with ABS).
Automatic dimming rear-view mirrors (to reduce glare).
Daytime running lights.
New child seat attachment systems.
Built-in child safety seats.
Dealing with Dealers and Private Sellers
Once you have done your homework, know which car you want, and how much you want to spend, it's time to start bargaining with the sellers.

Finding private sellers is as easy as checking the newspaper classifieds or going online to the electronic "classifieds" at websites such as AutoTrader. Don't forget to check with your family and acquaintances to see if anyone is selling their car. When you buy from private sellers, you usually pay less than you would if purchasing from a dealer. However, you may not have as many legal protections. Therefore, although you pay less initially, you run the risk of getting lower quality as well.

When talking to car dealers, remember that it is very difficult to get out of a contract once you sign on the dotted line. Therefore, do not commit to buying or sign anything the first time you go in. Since you did your homework, take the information you gathered and show the dealer you are an informed person, so you can make the deal on your terms instead of theirs. Negotiate based upon the selling price - not payment plans - and be sure to get full disclosure of every charge involved. Don't take their word on promises made - get any proposal in writing.

Finally, follow your instincts - if you feel pressured or powerless when dealing with any seller or you sense they are playing games with you, LEAVE. There is always another good deal waiting for you around the block.

Tips for Negotiating a Good Deal
Regardless of who you are dealing with, a good strategy is to let them know you have "cash in hand" or pre-arranged financing.
If you have done your homework, you should be able to tell if they are asking for too much money for their vehicle. Let them know you have checked the prices at other sources and ask them to lower the price.
Notice the condition of the body, paint, and tires. If it needs work, this is a reason to ask the seller to lower the price.
If you have had the car inspected and found it needs mechanical repairs, inform them that the price should be lowered accordingly.
Try to find a balance between appearing uninterested and being too anxious to buy. If you seem indecisive and hesitant, the seller might respond by lowering the price. But, be careful because this could backfire. If you seem too hesitant, someone else might be close by with cash in hand to buy the car.

5 Things You Must Know about Recent Mortgage Loan Changes

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"....Insider Secrets that can make owning your Dream Home possible..."

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Increased Ability To Finance Your Closing Costs
You can now finance up to 100% of your closing costs thanks to recent changes in Federal Housing Administration (FHA) guidelines, compared to the old limit of 57%. This is very good news for the first time home buyer who typically has less cash available at the time of closing.

Increased FHA Limits
There FHA loan amount maximums have increased, which is particularly helpful for people living in high cost housing markets. FHA 's mortgage limit is now tied to local housing costs. The limit is now 95% of the median home price, or 75% of the Fannie Mae maximum loan amount, which ever is lower. This is another avenue for the first time home buyer to achieve the dream of home ownership.

Increased Accessibility to Down Payment Assistance Programs
With the rapid increase in home prices over recent years, more and more people are having the dream of home ownership ripped from their hands. Typically one had to go through a rigorous process to qualify for a down payment assistance program. Today, there are now programs which have very little hassle. Ask your mortgage broker if they have access to such options.

Rapid Loan Approval
One of the latest innovations in the mortgage industry is the advent of computerized loan approval. These programs provide both rapid loan approval and more uniform loan approval practices. This type of approval is done by scoring a borrower's credit worthiness which quantifies the risk they will default on the loan. Does your mortgage broker use such a program?

Affordable Mortgages Which Don't Verify Income
These loans are perfect for those people who are self employed, real estate investors, retired persons and anyone who doesn't want to have to prove their income. It is essential to have a good credit score in order to qualify for non income verified loan.

Prop 8 Reminder - Get your property taxes reduced

Jason Thoele (Watson Touchstone Real Estate Group) — Thu, 11 Oct 2007 02:08:40 -0500

http://assessor.co.kern.ca.us/assessor/property_valuation.cfm

PROPOSITION 8 (DECLINE IN VALUE):
Proposition 8 allows the Assessor to review both the factored base-year value and the current market value of a property as of January 1 of each year and enroll the lesser value. When the current market value replaces the higher Proposition 13 value, that lower value is commonly referred to as a "Prop 8 Value". In no circumstance can the Assessor value a property higher than its Proposition 13 factored base-year value.

Although the annual increase for Proposition 13 values is limited to no more than 2%, the same restriction does not apply to values adjusted under Proposition 8. Actual market value must be enrolled as a Proposition 8 value and any subsequent increase or decrease in market value is enrolled regardless of its percentage. However, when the current market value of a Proposition 8 property exceeds its factored Proposition 13 base-year value, the Assessor simply reinstates the factored Proposition 13 value.

Property owners who feel that their assessed value exceeds current market value should contact our office and request a Proposition 8 review. The last day to request a Proposition 8 review of the assessment on the current tax bill is October 30. Requests made after October 30 will apply to the upcoming tax year. Owners may also elect to file a formal assessment appeal during the open filing period.

California home prices to drop further

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 10 Oct 2007 18:53:07 -0500

Home prices throughout most of California will post "modest declines" next year while sales of existing homes will stabilize from the precipitous decrease experienced in 2007, according to the California Association of Realtors.

The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007, the Realtors group preducts.

In the Central Valley, the Realtors' August median price of $309,740 was 14.8 percent below the region's peak in August 2005.

Its price figures are based on surveys of member Realtor groups and do not include all types of sales, such as those by non-members and sales by home owners directly to buyers.

"Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year," says Colleen Badagliacco, president of the association. "Now is not the time for homeowners to ‘test the waters' - only serious sellers should put their homes on the market in what will continue to be a challenging sales environment."

She says sales could decline more steeply in 2008 if the current liquidity crunch in the mortgage markets has a longer-than-expected duration or if interest rates unexpectedly increase.

More affordable regions such as the Central Valley and Inland Empire will experience greater softness in the resale market because of the large number of new homes coming onto the market in recent years, according to CAR Vice President and Chief Economist Leslie Appleton-Young. "Higher priced regions of the state, such as the San Francisco Bay Area and parts of San Diego, Los Angeles, and Orange counties will react more to affordability constraints."

"By price-range, the highest-priced markets - those with medians over $1 million -- will show less stress," she says. "The lower-priced markets will continue to face fallout from the subprime crisis, tighter underwriting standards, and competition from new home developments where price-cutting has been even more severe."

CAR economists also project a 23 percent decline in sales this year to 367,500 units compared with 2006, and a 3.5 percent increase in the statewide median price to $576,000. However, the projected increase in the 2007 statewide median stands in contrast to the situation in most counties, regions, and communities of the state, where slight to modest year-to-year percentage declines have become more prevalent and will continue next year, it says

Historically, the last time the sales level fell below 2007's projected 367,500 units occurred in 1995, when annual sales totaled 342,540 units, according to the Realtors' figures. Sales last fell below 2008's 334,500-unit forecast in 1985, with 328,270 units, the association says.

The last time the statewide median price fell was a 0.5 percent decline in 1996. The most recent statewide median price decline greater than 4 percent was a 4.5 percent decline in 1993.

Central Valley has some of nation’s greatest risks of home price drops

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 10 Oct 2007 18:50:32 -0500

Central Valley cities are among the most likely in the nation to see further home price drops within the next two years, according to figures compiled by PMI Mortgage Insurance Co., the Walnut Creek-based subsidiary of PMI Group Inc. (NYSE: PMI).

There is a 62.3 percent chance of price declines in Stockton, says PMI. That's the third highest in the nation, it says, exceeded only by Salinas at 63.9 percent and Naples, Fla., at 66.1 percent.

For the nation's 50 largest metropolitan, the average score, weighted by population, translated into a 32.9 percent chance that prices will be lower in two years. The average risk score for the 50 largest MSAs was down 1.7 percentage points from the previous quarter, PMI says.

The index shows that declining home prices have improved affordability, which led to minor decreases in risk scores for most MSAs, it says.

"Home price appreciation rates have slowed significantly and have gone negative in some areas. This will cause some pain in the immediate future. But in order to restore a healthy market balance, prices need to come back in line with incomes," says Mark Milner, chief risk officer of PMI Mortgage Insurance Co. "The drop in appreciation rates and slight improvements in affordability caused the average risk score to decline 17 points, the first drop since the fourth quarter of 2004. Despite this slight drop, the risk of price declines remains high nationally, and particularly high in California, the Southwest, and Florida."

The rate of home price appreciation declined in the second quarter, says PMI. Since peaking in the second quarter of 2005, appreciation rates have decelerated in seven of the last eight quarters. At the end of the second quarter, prices appreciated at a year-over-year rate of 3.2 percent, a drop from the previous quarter's year-over-year rate of 4.5 percent.

Here's PMI's list of Central Valley cities' likelihood of price declines by this time in 2009:

• Bakersfield: 56.4 percent

• Chico: 41.8 percent

• Fresno: 48.1 percent

• Hanford-Corcoran: 41.2 percent

• Madera: 42.1 percent

• Merced: 59.3 percent

• Modesto: 57.0 percent

• Sacramento: 52.2 percent

• Stockton: 62.3 percent

• Visalia-Porterville: 53.3 percent

"What we found is that owning a home for ten years during that period was a good strategy to build wealth and increase net worth over the long term," says Mr. Milner. "The market's changing tide doesn't necessarily mean it is a bad time to buy or own a house, but it is a reminder that homeownership is a long-term investment. People who are considering buying, as well as those who already own, need to take the long-term view."

PMI says its index is a proprietary statistical model that measures geographic house price risk by predicting the probability that home prices in the nation's 379 largest metropolitan statistical areas and metropolitan statistical area divisions as measured by the House Price Index from the Office of Federal Housing Enterprise Oversight will be lower in two years. The conclusions are based on the OFHEO House Price Index, labor market statistics from the Bureau of Labor Statistics, and the PMI Affordability Index, which uses local per capita household income, home price appreciation, and a blended mortgage rate to calculate the local share of mortgage payment to income relative to its baseline year of 1995.

10.8% decline forecasted for 2007

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 10 Oct 2007 18:38:37 -0500

NAR: Existing-home sales to fall 10.8% in 2007

Hefty declines expected for single-family housing starts

Wednesday, October 10, 2007

Inman News

The National Association of Realtors expects sales of previously owned homes to fall 10.8 percent this year compared to last year, and for prices to fall 1.3 percent, according to the group's latest annual forecast.

The Realtor group's forecast, prepared by Lawrence Yun, its senior economist, also anticipates a 27.1 percent drop in housing starts for single-family units, a 24 percent overall drop in housing starts, a 23.5 percent decline in new single-family home sales, and a 2.1 percent drop in new-home prices this year compared to 2006.

Yun's forecast calls for sales of 5.78 million previously owned homes this year, compared with 6.78 million sales in 2006. Existing-home sales are expected to grow 5.8 percent, to 6.12 million, in 2008 compared to 2007.

In its previous annual forecast, the Realtor group predicted that existing-home sales would drop 8.6 percent this year compared to 2006 and then rise to 6.27 million in 2008. That report also predicted a 1.7 percent drop this year in the median price of previously owned homes.

The latest forecast calls for housing starts to drop to 1.37 million this year compared with 1.8 million last year, and to drop 9.2 percent in 2008 compared to 2007, to 1.24 million. Single-family housing starts are expected to drop to 1.07 million this year compared with 1.47 million last year, and to sink another 13.7 percent next year to 922,000.

Sales of new single-family homes are expected to fall to 804,000 this year compared with 1.05 million last year, and to drop 6.4 percent next year to 752,000.

The median price of previously owned homes is expected to rebound in 2008, rising 1.3 percent compared to 2007, with the new-home median price rising 1 percent.

Yun said that despite the slowdown compared to 2006, this year is still on pace to be the fifth-highest year on record for existing-home sales, and "a lot of people are, in fact, buying homes," he stated. "One out of 16 American households is buying a home this year.

"The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs," he stated. The cutback in home construction "will help lower inventory and firm up home prices," he added.

The 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and then rise to the 6.6 percent range in the second half of 2008. Additional cuts are expected in the Fed funds rate, according to the Realtor group's forecast.

Growth in the U.S. gross domestic product is expected to be 2 percent this year, below the 2.9 percent growth rate in 2006, and GDP is expected to grow 2.7 percent in 2008.

The forecast calls for the unemployment rate to average 4.6 percent this year, or level with the 2006 rate. Inflation, as measured by the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income is expected to rise 3.6 percent in 2007, up from 3.1 percent last year, according to the forecast.

Why would builder jeopardize sale in a down market?

Jason Thoele (Watson Touchstone Real Estate Group) — Wed, 10 Oct 2007 18:36:32 -0500

Here's what you do: If you decide to go back to see this development again, hire an agent first. Then, don't turn up without your agent in tow. If the salesperson gives you a hard time, push back. Inform the builder's representative that you're going to make an offer but only with your agent. If that's unacceptable to the builder, you'll take your business elsewhere.

Then, walk out the door. Most builders won't let you get too far before they call you back.

As I say, some builders are in fairly desperate straits right now. That may put you in the driver's seat.

Q: How important is the loan servicing agreement? What happens if the buyer doesn't sign it?

A: The servicing agreement you're referring to is part of a package of disclosures that a lender gives to a buyer for his or her signature at a closing. This document tells a buyer that it is likely that the loan will be sold to an investor or another lender on the secondary mortgage market. It also describes the process that the lender will take in notifying the buyer of the transfer of the servicing rights to the loan.

When you buy a house and get financing, the lender may end up selling the loan to another bank or investor, or, in some cases, may sell the rights to service the loan (that is, to collect your monthly payments) to a company that specializes in loan servicing.

As an owner, you'll want to know how to contact the lender that is servicing your loan and need to know where to send the monthly mortgage payments. Signing the disclosure means you understand that it is likely that your loan will be sold and that you understand how you'll be notified of this change.

What I don't understand is why you'd object to signing the servicing agreement form. In some cases, the lender may refuse to give you the loan if you fail to sign the disclosures and documents that it requests at the closing.

Unless the document is somehow out of the norm or the document changes the economic terms of the loan, there shouldn't be any reason not to sign it.

In some cases, some lenders have inserted documents into a loan package that are out of the norm for a closing, such as a requirement for you to obtain mortgage credit insurance as a condition for closing on the loan. If you get a document like that, you can refuse to sign it. But a loan servicing agreement is fairly standard and I'd sign it.

Contact Ilyce through her Web site, http://www.thinkglink.com/.

Half built homes

Jason Thoele (Watson Touchstone Real Estate Group) — Tue, 09 Oct 2007 17:07:50 -0500

http://www.centralvalleybusinesstimes.com/stories/001/?ID=6611