If the public and government ever needs to hear our voice, it's NOW !!! I never like to sound negative in my blogs, but we need to face reality. Yes, there are some reports saying that the economy is turning around. There are some reports that say that people are spending money. And even some realtors are saying that they are busier than ever before, in the last 4 months or year. But let's break down some of the reasons why it might seem positive, when overall, I believe that it's really bad out there. This is just my opinion.
Keep in mind, most of what is mentioned below would not cost the taxpayers extra money. So important.....
- Real Estate is very local. Some markets are flourishing now, some are average, and some are just outright sluggish. Part of the problem is that many first time homebuyers can't buy, which doesn't allow for those that own a home to move up or out. I call this the ripple effect. I'll talk about this later.
- The news reports that people are spending more money. Okay, but what about unemployment that might hit 10% very soon. What about the fact that many Americans just got their tax refunds back and might just be willing to spend it, rather than save. The summer and nicer weather makes many of us spend also.
- Many companies reducing their prices, such as airlines and companies that book trips. People are using this to their advantage. Yet, specific foods are costing much more, which isn't mentioned often.
Let's not forget about the news. People report what they want us to hear in many cases. No matter if it's right or wrong. In other cases, realtors or loan officers are interviewed, giving misleading information. Or there are some that claim to be experts in their field, yet they have no clue in what they are talking about. I wrote about it here, "Hey media outlets, I am pissed."
Overall, we need to be heard, in regards to real estate solutions. Talk to those in the trenches and possibly help correct this mess.
Target Money - We need to create better outlets - Call to Action
- Foreclosures- We keep seeing more and more foreclosures and inventory that is not selling. We need to figure out a few programs to help get these foreclosures off the market. I talk about possibly using the seller-funded DPA's as a way to increase the purchases of foreclosures. Please read : Seller-Funded programs can work and have worked in the past.
What about using the $8,000 Tax Credit as a way to help curb the foreclosures. How allowing to get the whole tax credit and be able to use it as your down payment, if you by a foreclosure. How about increasing the first time homebuyers tax credit to $10,000 if you buy a foreclosure. And keep in mind that HUD has a $100 down payment program on all HUD programs. Why can't we make something like this work on foreclosures? At least try something.
- Investor properties- How about making better programs and giving incentives if you buy an investment property. Now, I am not talking about just anyone. You would need to have a proven track record when it comes to investment properties. There have been many realtors that have stated that rentals have picked up in certain areas. Beth Forbes wrote about how she solved the housing crisis. Explaining how we can turn around some of the real estate crisis by getting investors more involved.
- Seller funded down payment assistance programs and or 100% financing - Many of you will disagree with these statements, that we need to bring back seller-funded down payment assistance and or 100% financing. Sure, I will agree partially that buyers should have some skin in the game. But what about VA loans and USDA loans. They allow for 100% financing and they have a decent track record. I am currently working on some stats to prove this. As mentioned above, how about allowing some of the first time homebuyers tax creditbe used for the initial down payment. As of now, this is how the tax credit can be used. : Tax Credit can be used for partial down payment & closing costs.
HUD did try to get 100% financing approved, but congress shot it down. And HUD wanted seller-funded DPA's discontinued at the same time. I will agree, that with these types of loans comes higher risk. But many of the figures from the past were of those that had credit scores under 600. If we raise the standards and requirements on these kinds of programs, it will lower risk in my opinion. There is a main reason to these foreclosures, and it wasn't seller funded DPA's. Sure, some did foreclosure, but so did every other type of loan program. Besides, most FHA programs require 620 credit scores now anyhow. SO we can use this as a standard/guideline. And I would rather my client keep $3,000 to $5,000 in their pocket after closing, then dump it into the house. In my opinion, Lenn Harley did a great job in bringing up this point. And please read the 2nd comment. Please read : Skin in the game? WHo? Homebuyers or Wall Street?
Conclusion : Here is some information that doesn't get mentioned often. The tax credit being raised to $15,000, in my opinion, will not open up the real estate flood gates. Keep in mind, you need at least 3.5% of your own money for the down payment. Also, these tax credits will cost the tax payer money in the near future. Who do you think is paying for this kind of money being printed by the government.
Foreclosures, because of 100% financing? So many scream that you need skin in the game, money into the real estate transaction. This can be a matter of opinion, backed up by misleading information. Keep in mind, the subprime market and 100% subprime loans didn't help in many cases. Coupled with borrower who had low credit scores and who were assisted with such programs as the seller-funded down payment assistance. Let's look at the reality of this. People losing jobs is a huge reason to why people lose their homes and go into foreclosure. We can sit here and point fingers at so many issues, such as the DPA programs and or not putting skin into the transaction. People without income, just can't pay their bills.
Lastly, those that state that the current tax credit, and possibly raising the tax credit to $15,000, will boost the economy. That it will stimulate it immensely. Yes, it will help, but I don't think it will solve our real estate industry or help it as some think. As mentioned, we need to make the monies available upfront to be used as your initial downpayment.
My pleadge to you : I want to make this work, hoping to get some changes made in congress now. Not waiting for the economy to get worse. If you have other ideas or want to add to some of my ideas above, please list them in your comment. My goal is to get some loan officers, realtors, and politicians to meet at a round table in the next month, to possibly hear these thoughts and opinions. I am working on this and hope to get some big time media coverage for this event also. Anyone that has any contacts with both politicians or the media, please let me know. And anyone that might want to participate in this round table discussion, please let me know. My goal is to possibly hold something in D.C. in the next 3 weeks. thanks
Further thought & explanation - Matt Stigliano expanded on my post and we actually think a like. He did an excellent job at breaking down some of my thoughts and elaborating on them, expanding on them. Please read : Thoughts from a Round Table
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger
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