Definition: Real Estate A piece of land, including the air above it and the ground below it, any buildings or structures on it also called realty, and improvements there to, also called real property.
In law, the word real means relating to a thing (res/rei, thing, from O.Fr. reel, from L.L. realis "actual," from Latin. res, "matter, thing"), as distinguished from a person. Thus the law broadly distinguishes between "real" property (land and anything affixed to it) and "personal" property (everything else, e.g., clothing, furniture, money).
Our ancestors abandoned the hunter-gatherer lifestyle gradually over the period from 30,000 B.C. to 15,000 B.C. This change was far from global and hunter-gatherer societies still survive in some areas of the world today, but it did mark a transition toward an agrarian society.
A transition that also heralded the advent of home ownership, the birth of home ownership and real estate.
Staking A Claim
Many agrarian systems progressed like this: Fertile plains were staked out and settled in a might-makes-right manner in which those who could defend the land were those who kept it. Eventually, a system of tribal leaders developed, and those who had the approval of the tribe would disperse lands, settle disputes and require a payment from all his subjects.
The shift toward more and more powerful tribal leaders culminated in a pooling of labor resources, to direct efforts. Irrigation channels were dug, strongholds were built, farming methods improved and temples were erected.
With the land improvements, populations also exploded. Now, where a family of hunter-gatherers might be able to support one or two children at best, farmers could produce several children. The increased fertility also meant increased available laborers.
In return for the sacrifice of familiarity, people living in these small societies gained the safety of numbers. A well-fed army easily repelled any desperate raiders. In return for this security, the people all paid homage to the lord or king who claimed ownership of the land - which, in essence was the first system of rent.
As these farming villages grew into cities, the leading families maintained ownership by right of lineage - their ancestors had clubbed all other challengers senseless - thus becoming the kings, pharaohs, daimyos and the heads of other feudal dynasties.
An invaluable glimpse of legal history regulating the most valuable asset of them all: land. In medieval times, land was the sole form of wealth.
Land ownership in feudal times, as with most objects, depended primarily on possession:
You had it, you owned it.
You wanted it, you fought for it.
You found it, you kept it.
There were no courts or police force ready to recognize or enforce "legal rights" as we know them today.
A king and a feudal system is establish.
This system of labor-for-protection developed into two separate systems in most countries: taxes and tenancy. Royal families spread their wealth to friends, signing away titles and deeds to lands that allowed the holders to collect the revenues (rent) produced by the peasants living on the land.
On top of this rent, all the people within a ruler's realm were generally required to pay a tax. Many other demands were made by a king or a ruling Nobleman, such as military service, and they were grudgingly met because these rulers owned the land not only by birthright, but by military might as well.
Rulers could be overthrown by other rulers, and sometimes by peasants, but a new ruler would sit on the throne and the average peasant could rarely notice a difference.
People were eventually able to trade with other kingdoms and the general level of wealth increased, giving rise to a merchant class as well as specialized laborers - the tradesmen, who were able to earn a living with their skills and not by their crops.
This, in turn, resulted in non-agrarian shops and houses that still paid rent and taxes to the various lords and kings, but were bought, sold and rented among the common folk rather than by the royal class.
Richer merchants became the first common-born landlords and gained wealth and status. These merchants did not own the land, but they owned the houses on it.
What happen lands with titles were broken into smaller parcels and sold on a free market of sorts, but the people with the money to buy the deeds were either merchants or former aristocrats who managed to escape from being depose or killed by revolutionary fervor.
Peasants had yet to make much progress from the original farming-tribesmen 30,000 years before them.
The Development and Origins of Modern Real Estate.
The conceptual difference was between immovable property, which would transfer title along with the land, and movable property, which a person would retain title to.
The oldest use of the term "RealEstate" that has been preserved in historical records was in 1666.
The use of "real" to refer to land also reflects the ancient preference for land and the ownership thereof (and the owners thereof). This, in turn reflects the values of the medieval feudal system, which is the ultimate root of the common law.
The word Real is derived from "royal" (The word royal-and its Spanish cognate real-come from the related Latin word rex-regis, meaning king. For hundreds of years the Royal family / King owned the land, and the peasants paid rent or property taxes to be on the Royal's land (Estates). Thus, the term Real Estate.
Today, just like hundreds of years in the past, we pay property taxes to the government, or rent to be on the government's land. However, the "real" in "real property" is derived from the Latin for "thing.
Estates and Ownership Define:
The underlying principle of the system was that nobody owned land but the king. The expressions dominion directum and dominion utile are often used to describe the relative ownership of king and lords; the former as landlord the latter as tenant.
This represents a significant difference between real estate and chattels. Chattels can be owned outright. It can also be contrasted with those countries that have an allodialsystem (absolute ownership of land). Even today, in those countries that have inherited the tenurial system, all land belongs to the Crown; persons only own an estate in the land.
The device used by the king to control and administer his land was that of tenure. Tenure was the key component of the feudal system. The king struck a bargain with a lord for a large chunk of land. The lords that held their tenure directly from the king were called tenants-in-chief or in capite
The most important of the incidents is the concept of "escheat" which allowed the land to revert back to the lord. There were two causes for escheat. The first was the death without heirs of the tenant. The second was the conviction of the tenant of a felony.
The loss of ones land, not only for oneself but also for one's heirs, led to a cruel and unusual punishment called peine forte et dure(see The Law's Hall of Horrors). A person pleading guilty to a felony lost his land to the lord. But if he died without a plea, the next of kin remained eligible to claim the property by paying relief as discussed above.
The system changed somewhat in 1290, when the Statute Quia Emptoreswas passed to prohibit further subinfeudation and allowing tenants to sell their rights without requiring the prior consent of the lord.
From this point on, the number of tenures was frozen except that the king was exempt from the Statute and he could grant additional tenures. Eventually, incidents were prohibited and socage of all kind were eliminated and replaced only by free and common variety.
Tenures were of a variety of duration known as "estates":
The fee simple estate was the most extensive and allowed the tenant to sell or to convey by will or be transferred to the tenant's heir if he died intestate. In modern law, almost all land is held in fee simple and this is as close as one can get to absolute ownership in common law.
Fee tail estate meant that the tenure could only be transferred to a lineal descendant. If there were no lineal descendants upon the death of the tenant, the land reverted back to the lord.
The life estate was granted only for the life of the tenant, after which it reverted automatically to the lord.
Hope you found it interesting and gain a greater appreciation of how Real Estate began and the origins of the modern term for Real Estate.
When trying to contact your lender to work out a payment plan or some other deal, knowing who owns your mortgage can be very helpful. Unfortunately finding out is not as easy as it sounds. You should be able to call the phone number on your last mortgage statement or the number in your payment coupon book and connect directly with your lender.
More often than not, this merely puts you in touch with the servicer - the business that collects and processes your payments. In some cases, the servicer is prohibited from divulging the true identity of your lender. In other cases, the person you're dealing with has no idea who your lender is.
Mortgages are often sliced and diced and repackaged into mortgage backed securities (MBS's) that are sold and traded on Wall Street. Many investors subscribe to an automated system called MERS (Mortgage Electronic Registration System) that keeps track of who owns the mortgage and note as it changes hands among investors, as well as who services it for that investor. MERS can provide another level of anonymity to the process. On many mortgages, the Mortgagee (the party that was granted the mortgage) is listed only as MOM (MERS as Original Mortgagee).
No, that doesn't mean you can call your mom to find out who owns your mortgage note. It means you have to try to look it up in the MERS registry. Customers trying to look up the investor on the MERS registry will not find it. MERS makes the name and contact information of the servicer available, but not the name and contact of the investor. That information is for the servicer or investor to disclose, not MERS.
To add to the confusion, the mortgage meltdown sank many banks and other lending institutions which were taken over by other banks or regulators.
So, what should you do if you're trying to track down your lender? Take the following approach:
1. Call the phone number on your most recent mortgage statement or your payment coupon book. This will put you in touch with the servicer who may also be the lender who owns your mortgage or at least be able to tell you the name of your lender. (Remember, the person may not know or may not be permitted to tell you.)
2. If you have an FHA loan, contact FHA's National Servicing Center to determine who owns your mortgage:
(800) CALL- FHA / (800) 225- 5342
Email hsg-lossmit@hud.gov
Department of Housing and Urban Development National Servicing Center 301 NW 6th Street, Suite 200 Oklahoma City, OK 73102
3. You can try to contact Fannie Mae. If they own the note, they may provide the identity of the investor:
1-800-7FANNIE (1-800-732-6643).
4. If the mortgage is listed as MOM or has a MIN (Mortgage Identification Number) assigned to it, you can search the MERS database by mortgage identification number (MIN), your name and social security number, or the property's address. Dial the toll-free MERS Servicer Identification System at 888-679-6377 (an automated touch-tone system) or search online.
5. If you know the name of the bank or other lending institution that owns your mortgage but have no contact information for them, check out Hope Now .
One of the most important steps to saving your home from foreclosure is to get in touch with your lender immediately. Better yet, hire a qualified attorney with experience in foreclosures and loan modifications to contact your lender on your behalf, so you have legal representation on your side.
I can guarantee that your lender has an attorney reviewing the paperwork. You should have one to watch your back, too.
Descriptions of Agency: The Buyer Agency Agreement
There are agents, and then there are agents. Yes, it sounds confusing. That's because the term "agent" is often used in a casual manner, referring to any real estate practitioner.
But agent also refers to someone with whom you've established a formal agency relationship-someone who represents your best interests in a real estate transaction and owes you fiduciary responsibilities. Agency relationships are usually established in writing with buyer agency agreements, and require:
loyalty
obedience
disclosure
confidentiality
reasonable care and diligence
accounting
The birth of buyer agency
For many years, real estate was practiced in such a manner that agency relationships were only extended to sellers. Any real estate agent who brought a buyer to the table was actually working as a sub-agent to the seller.
This all began changing in the 1980s, when buyer agency started gaining momentum in residential transactions. Today, agency laws still vary from state to state. But even if you live in a state that recognizes buyer agency, you can't assume that you will automatically receive fiduciary responsibilities from the agent you're working with as a potential homebuyer.
That's why it's vitally important to talk to the agent or broker early in your working relationship about his/her agency status. You may also want to consult your state association of REALTORS® to gain a better understanding about agency laws in your particular state, or contact the agency charged with regulating real estate professionals in your state, often referred to as the state real estate commission.
Details vary from one state to another, and each brokerage has its own contract terms within these broader guidelines. But for purposes of illustration, this table outlines how your status may affect the level of service to which you are entitled:
Are you a buyer-customer or a buyer-client? Services will vary, depending on your agency status*
If you are a CUSTOMER (no agency relationship), an agent will:
If you are a CLIENT (agency relationship), your agent will:
Maintain loyalty to the seller's need
Pay full attention to your needs
Tell the seller all that they know about you
Tell you all that they know about the seller
Keep information about the seller confidential
Keep information about you confidential
Focus on the seller-client's property
Focus on choices that satisfy your needs
Provide just the material facts
Provide material facts as well as professional advice
Only provide price information that supports the seller's listing price
Provide price counseling based on comparable properties and their professional insights
Protect the seller
Protect and guide you
Negotiate on behalf of the seller
Negotiate on your behalf
Attempt to solve problems to the seller's advantage and satisfaction
Attempt to solve problems to your advantage and satisfaction
* This chart is for general illustration purposes only. Agency laws vary by state; and specific terms of individual agency contracts will vary from one agent to another.
You may not know if you're a customer or a client.
Depending on the laws in your state, you may find yourself working with someone who is actually negotiating for the seller, not you the buyer. The best way to be certain your interests are being considered and protected is to sign a buyer agency agreement with a trained buyer's rep, which clearly establishes client-level services and spells out what services you can depend upon.
What about dual agency?
In some cases, it will become necessary for your real estate professional to deviate from the single agency model. For example, a buyer-client may become interested in a house that also happens to be offered for sale by a seller-client of their buyer's rep, or by the same brokerage firm. How can a buyer's rep, in this instance, maintain complete loyalty to their buyer if he or she also owes complete loyalty to the seller?
Obviously, they can't. But, depending on the real estate license laws in your state, and your status with the brokerage firm, the manner in which this situation is handled will vary. To get concrete answers, you should read and discuss the brokerage services disclosure statement, which should reflect your state's agency law. If your agent hasn't supplied a disclosure statement, you should ask for it. It spells out the different categories of agency services they provide and how they address dual agency.
Almost all states require disclosure of dual agency and often require that a buyer's rep (or his or her brokerage firm) only act as a dual agent with the written consent of all parties to the transaction. In such a situation, the brokerage agrees to endeavor to be impartial between both parties and will not represent the interest of either party to the exclusion or detriment of the other party. Neither will they share the confidential information of one party with the other party. This is how brokerage firms and their agents strive to create win-win situations for everyone involved. There are a few states that prohibit dual agency even with disclosure and consent.
Other types of relationships
Some states also allow different types of relationships beyond agency relationships. For example, a transaction broker assumes responsibility to facilitate the transaction, rather than represent one side over the other. Further obligations may also be set forth in a written contract with a client.
Even though the laws concerning agency can vary from one state to another, one thing that is constant throughout the U.S. is the obligation for all REALTORS® to comply with the National Association of REALTORS® Code of Ethics.
Issues to discuss with a buyer's representative
Real estate agency relationships, like all business relationships, can be formed in a number of ways. In order to help talk through your options, here are several questions to ask your buyer's rep:
Do you represent buyers, sellers or both?
What services are provided to (or excluded from) me, based on my status as a buyer-customer or buyer-client?
When does representation begin? When does it conclude?
If I'm not ready to commit to your normal term, can you offer me a one-day buyer agency agreement or a 24-hour opt-out clause?
The Internet is changing the way that Realtors do business and market themselves to such an extent that many will not be around in a few short years. Survival of the fittest is the way of the world, and the fittest in real estate will be those agents and brokers who understand the new Internet consumer and how to engage them from first contact through a commission.
The very first contact that most of you with websites or blogs will have with a consumer will usually be their visit to your site to search for listings. And, you will probably never know that they were there. They come anonymously, and they want to stay that way. They want to find homes or land that meets their requirements and, on this first visit, they do not want to be contacted or to talk to you. If you ever want to talk to these people, ever, then pay heed to the Ten Commandments of IDX.
1. Thou Shalt Not Underestimate IDX. It doesn't matter whether it's a buyer or seller visiting your website or blog for the first time. Surveys have shown that 95+% of first time visitors for listing searches want to see all of the listings in the MLS, not just yours. Not having IDX will cost you huge amounts of future web-generated business. Again, no IDX, no leads, no business.
2. Thou Shalt Not Make Assumptions About Your Yisitors. Successful Web real estate lead generating site owners will all tell you the same thing. They have had clients tell them that the business came to them because other online Realtors dismissed, ignored or underestimated them. They were visiting the sites months before they were ready to talk to anyone, and the site owner didn't serve them well in this phase. Though they aren't ready to get into the car with you right now, they do not want to be ignored until you think they are a "hot" prospect.
3. Thou Must Take Ownership of Your IDX. Do you think you've diverted a bullet, getting an IDX link for your web presence by linking out to your broker's site? Would you take every one of your walk-in prospects into your broker's office, introduce them, and leave them there to be served? Don't send your prospects off to be served by others by not having an IDX solution ON your site.
4. Thou Shalt Not Secret Away Your IDX. How does a site visitor get to your IDX search page? Don't make it a tiny button, or make them go through several clicks to find it. If you're doing PPC, bring them straight to the search page if that's the key phrase you're marketing. Make it a highly visible one-click link from your home page.
5. Thou Shalt Make IDX Easy to Use. Web visitors are not patient people. They want to locate listings by characteristics, location, price, school systems, and in other ways. Make the search process easy for them to find homes the way they want to find them.
6. Thou Should be Generous with Other Information and Tools. If you were buying a home in a new area, what would you want to know? Give your visitors interactive maps, calculators for mortgages, gadgets for climate information, shopping and banking locations, and more. Give them easy access to information and tools to determine what it will be like to live in the home on the screen. And, lots of photos!
7. Thou Shalt Deliver. Once a visitor has decided that your IDX search is a good one for them, don't lose them to another who makes it even easier to use. Give them the ability to create custom searches with their criteria and have new listings delivered to their email. This is the delivery that will keep them coming back and keep you on the top of their mind when the timing is right.
8. Thou Shalt Promote Your Visitors to Management for Leads. Once these visitors are using your site and IDX, give them the ability to log in to manage their accounts, including multiple saved searches. This is great for them, but it's even better for you ... now you have that email address lead to market.
9. Thou Shalt Always be Right There. No matter what screen they are looking at, no matter how many homes they view, always have an easy one-click link to email you. When they are finally ready to ask a question and get personal, don't make them search around for contact information.
10. Thou shalt Never Sit Still. The most difficult target to hit is the one that's moving, and the Internet and your prospects are moving constantly. Use an IDX solution provider who understands this and stays on the leading edge of Internet consumer engagement.
There you are. If you can live by those 10 IDX commandments on your website or blog, success will be yours in online real estate business generation.
Peyman Aleagha is the founder and President of RealtySoft.com.
RealtySoft provides Realtors with Real Estate Web Design (http://www.realtysoft.com), Real Estate Print Marketing and Free IDX (http://www.realtysoft.com/freeidx.php) solutions. Find out more about RealtySoft by visiting RealtySoft.com
REALTORS® are ideally situated to improve housing opportunities where they live. They are the first stop for the prospective homebuyer or renter. Accordingly, REALTORS® can reach out - through personal involvement in their own communities - to those who need greater access to quality, affordable homeownership and rental opportunities.
NAR's Housing Opportunity Program was created in 2002 with the vision of positioning, educating and assisting REALTORS® to create housing opportunities for all. The Housing Opportunity Program offers programs, grants, trainings, and resources that help REALTORS® and REALTOR® associations expand housing availability and insure an adequate supply of rental housing and homeownership opportunities in their communities.
NAR Survey Shows Americans Want More Government Involvement in Lending NAR's sixth pulse survey revealed that with an unstable American economy and slowdowns in the housing market, most consumers are open to the federal government taking a more active role in overseeing mortgage and lending practices. Review the new Pulse Survey.
New Home From Work Brochure for Employers NAR has developed a new brochure for Realtors® to give to employers to explain the Home From Work program and employer-assisted housing benefits. The brochure is downloadable from the Home From Work web site and can be customized with your contact information. Download the brochure.
Employer Assisted Housing Conference NAR hosted the first national conference on Employer-Assisted Housing (EAH), Employer-Assisted Housing: Bring Workers Home in Chicago in October. This one-day conference highlighted successful EAH programs from companies and local governments, provided strategies on ways that REALTORS®, housing organizations, lenders, public officials and other stakeholders can partner on EAH programs and workforce housing initiatives. Review the conference materials.
REALTORS® and Chambers Working Together To Promote Workforce Housing Solutions! The National Association of REALTORS® (NAR) and the Institute for a Competitive Workforce (ICW), an affiliate of the US Chamber of Commerce, have collaborated to develop a report profiling efforts in five communities of businesses and REALTOR® associations working together to address the bottom-line effect of housing shortages on working families. Download the report.
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a public default notice. The foreclosure process can end one of four ways:
The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure.
The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
A third party buys the property at a public auction at the end of the pre-foreclosure period.
The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
Foreclosure Buying Opportunities The foreclosure process offers three bargain-buying opportunities, represented by six different property statuses on RealtyTrac.
Buying a home in foreclosure can begin with you logging into RealtyTrac and decide where you want to search for property. RealtyTrac allows you to search by county, city or zip code. We recommend starting with a broader search (like county or city) and narrowing the search later if necessary. Decide the status of foreclosure for which you want to search. You choose the status under Property Status on the Property Search page.
Select Pre-Foreclosure for Default Notices or Lis Pendens.
Select Auction for Trustee Sales or Sheriff's Sales.
Select Bank Owned or Government Owned for REOs (repossessions).
See Step 4 in this guide for more about the different property statuses. The Advanced Property Search allows you to enter other search criteria, such as price range and number of bedrooms and bathrooms. We recommend that you leave all those other criteria at "no minimum" to "no maximum" when you first search to get the best results. We also recommend you don't change the Recording Date Range when you first search. If you use the Advanced Search, leave the search Sort by "Entered On" and the Basic Property Type as "Residential," unless you are specifically looking for Commercial property. If you want to receive daily e-mail alerts of new properties posted on RealtyTrac that match your search criteria, follow these instructions.
After you select your search criteria, type a name for the search in the Name This Search box.
Check the "Receive daily e-mail notifications of new listings that match this search" box.
Click the "Save My Search" link.
View and edit your daily alerts on the My RealtyTrac page under Saved Searches.
On the Search Results page, you can sort your results by date, address, price or number of bedrooms or bathrooms. You can also view the results on a map by clicking the "View Map" button at the top of the search results. Click "Get Details" on any property to see the detailed information for that property. On the property details page, you can click the "Save Listing to My RealtyTrac" link to save the property to the My RealtyTrac page.
Property Details
The Property Details page should always include the address of the property and the name of the owner, trustee or lender involved with the foreclosure, depending on the property status. Also included should be an estimate of the unpaid loan balance, which will appear either as the Balance, Opening Bid or First Loan Amount. The Estimated Property Market Values provided are based on comparable sales. Click on Comparable Sales to view a report that includes up to 15 recently sold neighborhood properties and an analysis of property values in that neighborhood. The Trans Date and Trans Value represent the date and purchase amount the last time the property changed ownership. The Balance or Opening Bid provides a good estimate of the amount owed on the loan in foreclosure. The Default Amount (usually only relevant for Pre-Foreclosure properties) is the amount the owner/borrower is behind on payments. Click on Lien & Loan History to view a report that lists additional debts encumbering the property. The Recorded date is the date when the document with the foreclosure information was recorded with county records. The Entered On date is the date RealtyTrac entered the foreclosure information on the website. You can also click on most of the field names on the Property Details page for a definition. Some fields of information are missing simply because the field is not relevant to the status of foreclosure. For instance, you will never see a sale date on Pre-Foreclosure properties because the auction date has not been scheduled yet. When the sale date is set, the property will appear with Auction status. Some fields of information are missing because they were not available from the recorded document that has the foreclosure information. This usually applies to property details such as photo, year built, bedrooms and bathrooms and square footage. RealtyTrac continues to search other data sources to find as much of this information as possible on each property.
Obtaining financing not only gives you an estimate of what you can afford, it also enables you to move quickly once you locate a property that interests you. When you approach a borrower/owner or a foreclosing lender about a property, secured financing will demonstrate that you are a serious buyer and are ready to buy quickly. You can apply for financing with RealtyTrac's financing partner. The application is free. Subscribers can click on the Get Financing tab on any member page after you log in or click on financing links on the Search Results or Property Details pages. You will be able to apply online or by phone.
If you're a first-time homebuyer and you've never purchased a home, let alone a foreclosure property, it is beneficial to contact a local real estate agent who can guide you through the process of buying a foreclosure. If you work with an agent, make sure they know your priorities. Ask any potential agents if they have experience with foreclosures. Especially for first-time buyers, a good agent can be a comforting and helpful resource. You can contact an agent using the RealtyTrac Agent Network. There is no cost to contact an agent, although you should ask the agent how much he or she charges for commission. Subscribers can click on the Contact An Agent tab on any member page after you log in or click on any corresponding links on the Search Results or Property Details pages.
Depending on the property status, the seller will be the owner in default, the trustee or the foreclosing lender. To determine the property status on RealtyTrac, look at the Foreclosure Status gauge on the Property Details page. Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20 percent to 40 percent below market value. If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner. If the lender or government agency takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender usually sells the property to recover the unpaid loan amount. The lender typically clears the title for any buyer, but the potential bargain is often less than a pre-foreclosure or auction property.
When a property is in pre-foreclosure (NOD, LIS), the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property. The pre-foreclosure period can last several months, so you may need to be patient when trying to contact the owner in default. The first step is to call the trustee or attorney listed on the Property Details page to confirm if the property is still in foreclosure. The trustee or attorney has the most up-to-date information if the owner has sold or reinstated the property. The trustee or attorney cannot answer other questions about the property. If you haven't done it already, you'll want to evaluate the property's value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment. On the Property Details page, click on the Comparable Sales section to view a report that evaluates the home's market value based on comparable sales in the neighborhood. Click on the Loan & Lien History section to view a report that lists additional encumbrances on the property. If the trustee confirms the property is still in foreclosure, and you believe the property could be a wise investment, you should contact the owner in default as soon as possible. The quickest way to make contact with the owner using RealtyTrac is to click on the "Contact Owner" link on any Property Details page to send a postcard to the owner. You can print a postcard and mail it yourself or have RealtyTrac mail a postcard for you. You can choose pre-written wording for the postcard or type your own wording. If you save a property to My RealtyTrac, you will be able to view a record of when you sent a postcard for the property. If the owner does not respond to a postcard you can try to send another postcard (the owner may have a change of heart as the end of the pre-foreclosure period approaches) or you can wait to see if the property is scheduled for auction and attend the auction. One option is to call the owner if you can track down the phone number. Another option is to go to the property and try to contact the owner in person, as long as you recognize the ownership rights of the owner. We don't recommend either of these options if you don't have previous experience.
Before the auction, you may have a chance to work out a last-minute deal with the owner in default. Usually a property is scheduled for auction just a few weeks before the auction occurs, so you may have to move quickly if you want to contact the owner. Auctions can be postponed or canceled anytime, so no matter what the auction date listed on RealtyTrac (even if it's in the past), it's always a good idea to contact the trustee or attorney to confirm. We recommend you call when you first locate the property and the day before the property is scheduled for auction. The trustee/attorney has the most up-to-date information if the auction has been canceled or postponed. The trustee/attorney cannot answer other questions about the property. Some auction properties on RealtyTrac allow you to bid online for the property. If this is the case, you'll see a "Bid Now" button on the search results page and "Bid Now" links on the property details page. Just click on any of those to be taken to a bidding page where you can see more details about the bidding and submit a bid if you wish. If you haven't done it already, you'll want to evaluate the property's value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment. On the Property Details page, click on the Comparable Sales section to view a report that evaluates the home's market value based on comparable sales in the neighborhood. Click on the Loan & Lien History section to view a report that lists additional encumbrances on the property. If you believe the property could be a wise investment, you can attend the auction to bid on the property. RealtyTrac usually has the auction date, time, location and opening bid. If any of this information is missing, you can often get it from the trustee or attorney. If you've never bought at auction before, we recommend you attend several auctions just to observe before you attend an auction to bid. View our State Foreclosure Laws Overview for more details.
If the property is Bank Owned (REO), your first step is to contact the lender, whose information is usually on RealtyTrac's Property Details page. You should contact the lender directly and ask for their REO or asset management department to find out how you can view and possibly make an offer on the property. REO means "Real Estate Owned" by the lender. It's another way to say the property has gone through the foreclosure process and has now been repossessed by the foreclosing lender. If you haven't done it already, you'll want to evaluate the property's value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment. On the Property Details page, click on the Comparable Sales section to view a report that evaluates the home's market value based on comparable sales in the neighborhood. Click on the Loan & Lien History section to view a report that lists additional encumbrances on the property. Some bank-owned properties on RealtyTrac will give you the option to contact the property's listing agent directly. You'll see a link to do this either at the top of the property details page or in the Contact section of the property details page. RealtyTrac usually has the name of the lender/bank listed on the property, but if you have trouble finding a phone number or address for them through the Internet or otherwise, below are suggestions for tracking down the lender. 1. Contact an Agent to find a local real estate agent in the RealtyTrac Agent Network who can help you contact the lender and who can check if the property is already listed on the market with a real estate agent. 2. Use the History of Notices tool to check if RealtyTrac has any further information on that property. To use this feature, click on the "History of Notices" link on the Property Details page (under property photo). This feature will give you a list of records RealtyTrac has for the property. Other records may have more information, such as the lender name, address and phone number that was missing on the original property record. 3. You can use RealtyTrac's Xamine tool to check if the property is listed with a real estate agent. RealtyTrac's Xamine tool can be accessed by clicking "What's Next>Evaluate The Property" on any Property Details page. On the Xamine worksheet, select the MLS tab and click "Search" at the bottom of the page. If the property is not listed with an agent, then you will need to contact the lender directly. 4. You can contact the local property assessor to find out the owner's name and mailing address. Since the property is bank owned, the property assessor should have the bank or lender listed as the owner. Go to statelocalgov.net to find the local property assessor in your area.
Many government-owned properties are already listed with a real estate agent, and you should see a link to contact that agent in the Contact section of the property details page. If the listing agent's information is not available, you can contact a local agent using RealtyTrac's Agent Network (click on the "Contact an Agent" tab at the top of any member page on the website). Or you can try to contact the government agency listed directly.
STEP 5. Make an Offer
If you have never purchased a foreclosure property before, we recommend that you have a real estate agent help you prepare and make an offer. Contact an Agent to find a local real estate agent in the RealtyTrac Agent Network. To get an estimate of the potential bargain for any property, you need to find out the estimated market value of the property, how much is owed on the property and if the owner has any other loans or liens encumbering the property. On the Property Details page, RealtyTrac usually provides the estimated market value and the estimated balance of the loan in foreclosure, called either the Balance, Opening Bid or First Loan Amount.
Click on the Check Loan & Lien History section to view a report that lists additional loans or liens on the property. Click on "Check Comparable Sales" to view up to 15 recently sold neighborhood properties and an analysis of property values in that neighborhood.
Add together any outstanding loans and liens and estimated repair costs and subtract that total from the estimated market value of the property. You can plug the numbers into RealtyTrac's Xamine tool and it will calculate the potential bargain for you. RealtyTrac's Xamine tool can be accessed by
Think about how much income you've lost because of your inability to persuade. How many times have you been unable to convince a good prospect to buy a home you knew met all criteria but couldn't close the sale? I believe the way to improve sales lays in your ability to incorporate the law of contrast into your sales presentation.
When people visit a home they immediately do three things. They look, compare and contrast. They look to understand what is offered. They compare to make sure what they see satisfies their buying criteria and thirdly, they contrast what they see against what they presently have or other homes they may have just seen. Using the law of contrast helps a prospect make a decision. A decision that is easier to make and, most likely, will end in a sale for you.
The law of contrast states that when two items are different, a person will see them as more diverse if they are placed close together.
The use of contrast is based on a person's perception of things that happens one right after the other. For example, if you've had a rotten day because you found out two buyers suddenly cancelled an agreement you were counting on and you go to the parking lot and find a big scratch on your car, you will have a different reaction to the scratch, if you were having a great day because you sold two homes and then found the scratch. It's the same scratch, but you will have a different reaction to it depending on what you're personally experiencing at the time.
What I'm talking about is perception. The human mind has to find a benchmark of comparison to make judgments. This happens when a prospect is considering different homes, communities and locations. By presenting your prospects with contrast, you are helping to create comparisons for them. Using the law of contrast
Here is an example on how to use the law of contrast to introduce two different homes that are located in the same community but priced differently. To demonstrate contrast you would say: "Before we look at the more expensive home let's look at the lower priced home first."
Since the two homes are in the same community, the more expensive home will have more features and options you can use as "hot buttons" and more importantly, it's the last home the prospect will see. People tend to remember the last thing they were shown versus something demonstrated earlier. Since the last home will have more amenities than the first, then the memory of the upgraded home will make the less expensive home seem drab and unexciting.
The law of contrast can be used in many ways. Here are just a few:
Contrast homes;
Contrast homesites;
Contrast communities;
Contrast locations;
Contrast financing programs;
Contrast amenities;
Contrast available services.
To experience the law of contrast try this experiment: Fill three buckets with water, one with hot water, another with cold water, and the third with tepid water. Place one hand in the hot bucket and the other one in the cold bucket for thirty seconds. Now place both hands in the tepid bucket and you will feel the law of contrast. The water in the third bucket is considered warm, but to the hot hand it feels cold and to the cold hand it feels warm. It is the same water but two completely different reactions. This is the law of contrast.
Any home, community, location and amenity can be contrasted to appear different from what a prospect has seen by using the law of contrast.
How to Survive and Prosper in Today's Slow Real Estate Market
By: Ben Curry
The news has been full of Doom and Destruction concerning the housing market. Is this really what's going on in the U.S housing market? Real Estate Agents had it easy during the booming market. As long as you had buyers or listings, you were guaranteed to make money.
Homes closed quickly and banks were quick to accept sketchy loans. Borrowers with no job could buy a house. People with damaged credit could buy a home with little out of pocket. And agents in their first year in the business could make six figures easy.
Remember not so long ago, when you could make your fortune in real estate. It was nothing then to buy a home, wait a short while, and then sell it at a tidy profit. And then do it all over again. Investors and house flippers bought homes and flipped them for big bucks.
All the spec home builders were selling their homes before they were even finished. Builders Ire making $10,000 to $30,000 more if they waited to the end of construction before they sold because prices Ire going up so fast. Homebuyers were waiting in line to buy, and sending personal letters to homeowners who had a home for sale telling them how badly their family wanted their home. It seemed like everyone was buying at the same time.
So, what happened and why has everything seemed to have come sliding down. Ill, when home builders, investors, developers and banks saw the buyer frenzy get started they all jumped in at once. Many lowered their standards and let down their guard.
Home builders started building more spec homes than ever before and new builders Ire popping up everywhere wanting to get in on the money. Banks lowered their lending standards and lent money to anyone who could fog a mirror. Investors bought everything they could get their hands on and don't forget all the would-be house flippers looking to get rich. Developers built way too many new housing developments and communities.
They all made a fortune for a while until home sales started slowing down. But they could not stop because many new homes, developments and communities Ire halfway done and had to be finished. I'm sad to say it but now it's all catching up. Interest rates started creeping up again.
Banks and lenders lent money to home buyers with crazy rates and the buyers are defaulting on their loans. They are unable to refinance their homes to bail out of trouble. Banks are now investigating more before granting a loan. Buyers got scared and started to re-consider buying a home.
Builders who overbuilt are stuck with multiple homes and discounting them just to unload them. Developers have over developed and now there are is a flood of lots for sale. Many new subdivisions are not even completed. Investors and house flippers are freaking out and doing whatever they can to get rid of their homes. Not everyone will sell and already builders, developers, banks and investors have gone belly up. Despite all this sellers Ire still thinking that their house was worth more money than ever.
The housing market is controlled by supply and demand. When demand is high and supply is low it's a seller's market and Seller's are in control. That's what happened between 2003 and 2005. Now the reverse is true.
Supply is high and demand is low.We are in a buyer's market. Buyers are making the rules and have become very discriminating with what home their money buys. It's not uncommon to have a buyer look at a home and not like one thing and decide to buy a different home.
How do you get an unrealistic seller and uneasy buyer
to the closing table?
I don't have a magic pill answer to that question, but it is a lot of work. Us agents now have to figure out how to survive this slow market. What can I do to make it? How can I get our listings to sell? How do I make money in this market? I'll go through and answer some of these questions.
So sit down... relax... turn off the television and grab yourself a warm cup of coffee or a cold soda and find your favorite easy chair. I want you to relax and have your eyes and ears open because this is going to be one of the most important guides you may ever read.
Selling a home during the hot market didn't take any skill. Throw a buyer into your car and show them the few homes available on the market. Or, if you knew someone that needed to sell their home, when you got the listing it was almost like a guaranteed check. So thousands and thousands of brand new agents were able to make money in this business.
Today's market is a lot tougher
Buyers are scared that the home they buy today will be worth less tomorrow. Sellers still think their home is worth what comparable home used to sell for. And if they reduce their price, they want you to reduce your commission. So, how do I get homes sold?
If I look at selling a home from a very basic level, there are two things necessary to sell a home. A buyer that has the money to buy it, and a house that the buyer likes that is priced where they have enough money to buy it. There are buyers out there buying homes right now.
2007 will be the fifth highest year on record for existing homes sales. 2007 will be a better year for sales than 2002. The year 2002 was a record year for sales up to that date. There is business out there. We just have to go out and find it.
The Key is Motivated Buyers and Motivated Sellers
If a seller or buyer is motivated, they don't worry as much about the market. They want to sell their home or buy a home, come regardless. Let me explain. If a seller must sell their home to move to a different city for a new job, they will reduce the price on the home to sell it so they can move. See, a motivated seller just wants to sell the home and get moved on to the next one.
They might complain about a lower price, but they will accept it because they want the new job. If the motivating factor is stronger than the amount of money they are ‘'losing'' (come on, the market went up 38% from 2004 to 2006 and you are now still priced 19% higher than 2004) because of a lower price, they don't care as much.
Despite conventional wisdom that buyers are good in down markets, buyers are actually a worse source of business in a down market. Let me explain. Buyers take longer to make decisions, they "nibble" more, and they will eat away your net profit versus taking listings. The best way to make money in a down market is to list more homes at a much greater rate than during the boom. You are going to have to pre-qualify listings and sellers much more. Before even going out on a listing appointment, you must determine the seller's motivation. The reason is simple.
The only sellers who will sell in a down market are those who are motivated. Sellers that don't have to move and are overpriced will only whine and complain. They will call and ask; "You told us we could get $380,000 for our home. How come you haven't been able to find a buyer yet?" After hearing enough of this you will be pretty fed up with the constant blame.
I read somewhere that an expert said that people get stressed out most from one thing. Things they can't control. And we can't control buyers and which home they buy. It's not like I can put a gun to a buyer's head and tell him he must buy this home. And no amount of marketing will bring in the buyer who wants to pay more money for a home when he can buy the same home down the street for less.
How do I find Motivated Sellers?
There are several sources: FSBOs, Expired Listings, and Foreclosures. The key is to find sellers just like usual, but to determine how motivated they are before wasting time on them. For me, the absolute best source of new listings has been Expired Listings. When I realized what it took to survive this slow market, I focused most of my time on Expireds. Here's why.
Expireds are the easiest sellers to convert to a commission check. They have already listed with an agent (so they are willing to use an agent), they are motivated (they have already been on the market for 6 months), they aren't listing with the agent that promises the highest price, and they are willing to price the home right.
Now, there are lots of expireds to chase. And, they are very receptive to my sales message. Overall, it is much easier to grow your business and production today than it was during the boom. The trick is to know how to get the listings sold. That is what I learned how to do in 2006 and 2007, after the market had shifted. Prices were coming down, and you couldn't sell anything unless you asked for and got price reductions. I have actually put together a program that any agent can use to list expireds and get them sold.
Here are the three things you must be able to do to be successful with expireds:
Get Your foot in the door for a listing presentation. I find that easy to do with my Mail-Call Plan. I get some appointments right upfront by calling the expired the day the listing runs out. But, then I keep calling and mailing them for another month or so. All the other agents have disappeared and I am the only one left standing.
Once you get your foot in the door for a presentation, you've got to be able to sell them on listing with you. I have a Power Point Presentation that handles that. I shows them why they should not go with all the other agents, and how tough the market really is. Then, I show them why they need me and what I can do for them.
You got to get the listing priced to sell, before it expires on you. After much practice I have figured out how to do this. It's not too complicated, because the key is keeping in touch with the sellers and building trust.
I have put together a solid system that handles all of these items. It comes with solid letters you can send, a good script to call the expireds, a listing presentation that closes them, and an explanation of how to get price reductions. I have packaged all of these for sale as what I call my Real Estate Agent's Motivated Seller Gold Mine System. You can get more info on this system here www.cuttingedgerealtormagazine.com/Motivated_Seller_GoldMine.html.
Not all homes are affected by the current market. If your home is priced under $200,000 in our area you're in pretty good shape compared to the rest of the market. The Gen-Y, First Time Buyers in our area are still buying home. Gen-Y is the people born between 1978 and 1998. These are called ‘'Echo Boomers''. Their number is estimated at 78 million population. These are starting to buy their first homes. Buying your first home is very exciting. First time buyers are not as worried about price declines that scare off move up buyers.
Also, in big cities like New York and San Francisco the expensive homes close to the urban center are going up in price and demand. With the rich getting richer, demand for premium properties is high. The rich people in these cities are willing to pay top dollar to live close to work and in the city. With ‘'Urban Living'' becoming popular again these big city properties are popular again and the prices are rising.
See, There Is Still Plenty of Business Available
For The Agent That Works To Find It
If you think there isn't enough business, you'll never go out and get it. And if you aren't trying to get business, someone else is. Right now, monthly home sales are comparable to the years 2000 and 2001. So people are still buying homes. We simply have to find the buyers that are buying and the sellers that are selling.
A lot of agents think that they won't make any sales in December. I know of several agents who make December their most productive month in the year. How? They work just as hard looking for new business in December as they do during the busy months.
They work hard looking for business while all the other agents stop working. The other agents say to themselves; ‘'Oh, it's the holidays, no one is buying and nobody wants to sell. I might as well stay home''. There are still sales in December. A lot of re-locating buyers have to buy before the end of the year for their company's tax purposes. And a lot of listings will expire in December and the first of the year. Whoever lists those homes will have a great spring when the buyers buy. And you have little competition because no other realtor's are working to list and sell homes.
Set a date to stop work in December and a date to start working again in January. I always go back to work on January 2nd because that is the day to list a lot of expireds. If you work hard in January, you will have a great, profitable spring.
Few Agents Do a Decent Job of ChasingExpireds
Expired Listings are the easiest listings for you to take. But nobody is doing a good job listing them. Sure, some agents call them, but that doesn't always break thru the frustration they feel. Remember, they are frustrated because they have been on the market for 6 months and few buyers have looked at their home. My letters ring a cord with the expired seller. Then they educate the seller on marketing to sell a home. Basically in a very roundabout way it sells the expired seller on using me to sell their home.
For more info, go to my website (www.cuttingedgerealtormagazine.com) that enables us to list a lot of expireds. Using this system causes me to get the best priced, most saleable listings.
Here are a Few More Tips on Succeeding in a Slow Market
Don't hang around with negative real estate agents! 95% of agents are negative about the market, and they aren't going to buy a house from you. Spend the time instead on finding new buyers and sellers. Don't listen to their negativity. If you think the market is bad, you won't go out and work to find new business. And right now, the opportunity to find new business is better than ever. And I'm talking about new business that will make you money. Motivated sellers who will price their home to sell and be happy that you can sell their home.
Finding new business is easier in a Slow Market. It takes more work to get homes sold and buyers to buy in a slow market, but it is a lot easier to get the business in the door. Most agents don't succeed because they are unwilling to do what it takes to make sales in a slow market.
Here are the items you must do if you want to be successful in this slow market:
Ask your Listings for Price Reductions.
Don't take responsibility or blame for the "losses" that sellers have to live with when selling their home. Even though prices have declined by 15-20% from the peak, prices are still higher than in 2004. So compared to then, sellers have made money. I couldn't take credit for the increase in prices during the boom and I am sure not going to take the blame for the current decline.
Only spend time with the most motivated buyers that need to buy quickly. Buyer takes even more time to turn into a sale during a down market because they are much more picky and scared of making the wrong decision. They "nibble" more and suck up more of your time.
Look at the MLS numbers. For example, last month in my area, 24 homes sold. And 456 are on the market. Based on just the homes on the market, we have a 19 months supply of homes on the market. That is 456 divided by 24. That's a lot of homes for buyers to go thru before making a decision to buy. Which one do you think the buyers are going to buy, the most expensive homes or the ones that offer the most home for the money? Even worse, last month 53 homes came on the market. Ultimately, this means that buyers have a lot of choices. Only the competitively priced homes are going to sell. Break up the numbers just like that and show them to your sellers. That, more than anything else shows them the reality of the market, and how even Superman or some crazy marketing plan can't sell their home if it's overpriced.
Ask your listings to take offers that are lower than what the home appraises for based on past sales. If the sellers get mad that they can't get their price, then tell them; "A home is only worth what a buyer is willing to pay. If the US government collapsed and the US dollar wasn't worth anything, how much would your home be worth? Would it be worth what it appraises for? So, it's only worth what the person buying it from you is willing to pay you for it. No on has agreed to pay you what you are asking so far, right? It must be overpriced then.'' You just have to use common sense and explain it to them.
Find Motivated Buyers. These can be first time buyers who are more excited about buying a home than if they lose a little money. With "Generation Y" starting to buy homes there are a lot of first time buyers out there. Generation Y is the people born between 1978 and 1998. Their number is 78 Million people, which is just a little less than the Baby Boomers. These are a great source of buyers that will pay off.
You must follow a plan. Here are the parts of the plan that I follow:
First, have a plan for how much business you are going to do and how you are going to get it. For example, if you want to sell 50 homes next year that means you need to get 4 sales every month. Where and how are you going to get those sales? So many expireds converted? So many buyers? At the beginning of the year we must plan what we are going to do to be successful and hit our goals.
The second important thing to consider is blocking time. Blocking time is when you focus on completing just one item or task at a time. For example, when I handle closings I don't take phone calls, check e-mails, or let staff people interrupt me. This enables me to complete the task at hand much faster.
I schedule one afternoon a week for three hours to call my sellers, since my most profitable time spent is servicing my listings and getting price reductions. These cause my listings to sell, my sellers to get moved on with their lives, and me to make money. It takes literally hours of time to take a listing. Calling all fifteen plus at a time sellers takes less than two hours a week.
I spend my mornings on Lead Generation. First I get all my letters mailed out. Then I spend a little time cold calling the best expired listings. Then I finish up with Lead Follow Up to any and all leads that I need to call that day. Finally when I am finished with generating new business I return any calls I received that morning.
I usually take lunch when all the morning stuff is complete.
After Lunch I first prepare for any listing appointments I have.
Then I handle my closings. A lot of agents I know just jump from closing item to closing item. Before I start making any calls I write down the items that need to be done. For example: follow up on Walter's WDO, call the title attorney about the Daugherty Closing, call the lender for the King closing, etc. Then I decide which item is the most important and call on that one. I do not go to a new item until that one is complete. And, if I call on an item and can't get an answer I simply leave a message and forget about it until tomorrow (if we are a few days from closing then I will be more persistent.) Many agents spend all their time on closings. That is not in their best interest. I prefer to spend more time on Lead Generation and then I have more closings which means more are likely to close. No agent, no matter how skilled can save a closing if it is doomed to start with.
Finally, I go on any listings appointments I have or work with a buyer. When I am done with that, I handle anything else that needs to be done and go home. During a slow market we have to be more productive with our time. We must make sure that each moment of the day is used to service clients or bring in more business. There is a lot of opportunity and business out there for the agent that looks for it. There are frustrated sellers that want an agent that can sell their home and buyers that need reassurance from an agent that they are doing the right thing. You can be that agent! Now, let's go find some business.
Bush signs housing bill to provide mortgage relief
By JENNIFER LOVEN, Associated Press Writer
WASHINGTON - President Bush on Wednesday signed a massive housing bill intended to provide mortgage relief for 400,000 struggling homeowners and stabilize financial markets.ipt"
Bush signed the bill without any fanfare or signing ceremony, affixing his signature to the measure he once threatened to veto, in the Oval Office in the early morning hours. He was surrounded by top administration officials, including Treasury Secretary Henry Paulson and Housing Secretary Steve Preston.
"We look forward to put in place new authorities to improve confidence and stability in markets," White House spokesman Tony Fratto said. He said that the Federal Housing Administration would begin right away to implement new policies "intended to keep more deserving American families in their homes."
The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes.
It offers a temporary financial lifeline to troubled mortgage companies Fannie Mae and Freddie Mac and tightens controls over the two government-sponsored businesses.
The House passed the bill a week ago; the Senate voted Saturday to send it to the president.
Bush didn't like the version emerging from Congress, and initially said he would veto it, particularly over a provision containing $3.9 billion in neighborhood grants. He contended the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.
But he withdrew that threat early last week, saying hurting homeowners could not wait - and even blaming the Democratic Congress' delays in action for forcing an imperfect solution.
Meanwhile, many Republicans, particularly those from areas hit hardest by housing woes, were eager to get behind a housing rescue as they looked ahead to tough re-election contests. Paulson's request for the emergency power to rescue Fannie Mae and Freddie Mac helped push through the measure. So did the creation of a regulator with stronger reins on the government-sponsored companies, as Republicans long have sought.
Democrats won cherished priorities in the bargain: the aid for homeowners, a permanent affordable housing fund financed by Fannie Mae and Freddie Mac, and the neighborhood grants.
The bill takes several approaches to curing the ailing housing market.
It aims to spare an estimated 400,000 debt-strapped homeowners, many of whom owe more their houses are worth, from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration.
The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. Banks would first have to agree to take a large loss on the existing loans in exchange for avoiding an often-costly foreclosure.
The plan also is designed to relieve a broader credit crunch that has taken hold because of rising defaults and falling home values. To free up safer and more affordable mortgage credit, the bill permanently would increase to $625,000 the size of home loans that Fannie Mae and Freddie Mac can buy and the FHA can insure. They also could buy and back mortgages 15 percent higher than the median home price in certain areas.
It goes far beyond addressing the current crisis, however.
The legislation overhauls the Depression-era FHA. It requires lenders to show how high a borrower's payment could get under the terms of his mortgage. It provides $180 million in pre-foreclosure counseling for struggling homeowners.
The Treasury Department gains unlimited power, until the end of 2009, to lend money to Fannie Mae and Freddie Mac or buy their stock should they need it. The Federal Reserve takes on a new "consultative" role overseeing the companies.
The measure includes $15 billion in tax cuts, including a significant expansion of the low-income housing tax credit and a credit of up to $7,500 for first-time home buyers for houses purchased between April 9, 2008, and July 1, 2009.
Democratic leaders, recognizing that the measure could be one of the last items to become law during what's left of their abbreviated election-year schedule, tacked on an $800 billion increase, to $10.6 trillion, in the statutory limit on the national debt.
Conservative Republicans were vehemently opposed to the bill, particularly the help for Fannie Mae and Freddie Mac. Critics charge the companies enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.
WASHINGTON - The Federal Reserve will issue new rules next week aimed at protecting future homebuyers from dubious lending practices, its most sweeping response to a housing crisis that has propelled foreclosures to record highs.
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Fed Chairman Ben Bernanke spoke of the much-awaited rules in a broader speech Tuesday about the challenges confronting policymakers in trying to stabilize a shaky U.S. financial system. To that end, Bernanke said the Fed may give squeezed Wall Street firms more time to tap the central bank's emergency loan program.
To prevent a repeat of the current mortgage mess, Bernanke said the Fed will adopt rules cracking down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers - those with spotty credit or low incomes - who were hardest hit by the housing and credit debacles.
The plan, which will be voted on at a Fed board meeting on Monday, would apply to new loans made by thousands of lenders of all types, including banks and brokers.
Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.
"These new rules ... will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Bernanke said.
Consumer groups have complained that the proposed rules aren't strong enough, while mortgage lenders worry that they are too tough and could crimp customers' choices.
In an extraordinary action aimed at averting a financial catastrophe, the Fed in March agreed to let investment houses go to the Fed - on a temporary basis - for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.
"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.
The Fed's decision to act - temporarily at least - as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.
Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.
Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk.
Bernanke, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.
In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.
"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.
The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.
Policymakers - in the White House, in Congress and other federal agencies - will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.
Although those efforts are already under way and will be the focus of a House Financial Services Committee hearing Thursday, it will fall to the next president and next Congress to settle them. Both Bernanke and Treasury Secretary Henry Paulson are scheduled to testify at Thursday's hearing.
The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.
The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.
Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.
Bernanke recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.
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