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Real Estate Profession - our own worst enemy

Real Estate Broker/Owner with UNcommon Homes

2008 was the end of a long chain of government mistakes and the beginning of the current real estate nightmare.  The cause was simple, 20 years of bad policies and real estate lobbing to grow the homeownership rolls, specifically more minority, lower-income earners and those with poor credit ratings.

The government "persuaded" lenders with an iron fist in a velvet glove - forcing - them to forego prudent underwriting guidelines; predictably the real estate bubble BURST.

Would be homeowners borrowed far beyond their means to buy homes at artificially inflated prices - due to the artificial demand of all the new unqualified buyers.  FNMA/FHLMC guaranteed that "all is well" while Rome burned.  How could anyone lose?

Everything collapsed when the unqualified buyers couldn't make their payments.  A massive wave of foreclosures overwhelmed the market and lenders lost billions.  As the inventory of homes when up and the buyer pool went down - values plummeted.

Real estate lobbying efforts and others are now forcing The Federal Housing Administration to pick up the dropped ball of Fannie and Freddie chasing the same folly that caused the last bubble; in an attempt to "save the market."

FHA still underwrites loans to borrowers with scores of 580.  Most landlords won't even rent to someone with less than 640 scores.  Lenders are trying to raise the 580 threshold but are being sued by greedy community organizations claiming to represent lower income communities.

The real estate profession should lobby congress to make FHA-insured loans comply with the same standards now in place at FNMA/FHLMC and support all lenders who apply the stricter guidelines. 

If the real estate community continues to exploit lax rules for their own short term gain another real estate crash will surely come

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You’ve sold the home.  You got the price your sellers wanted.  Now what?  The appraiser calls, don’t panic, you’re prepared – or are you?

Here are a few tips for you to assist the appraiser and ensure a smooth path to closing.

Make every effort to be available to the appraiser for the requested inspection date or make sure he has convenient access.

If you attend the inspection do not distract the appraiser during the inspection.

Advise the appraiser of all the homes, you, your office and competitors have sold in the neighborhood.  Let him know YOU are the expert in the neighborhood [even if your not].

Appraisers want statistics and FACTS regarding values, amenities, neighborhood and market area data.  Provide a highlight sheet of all pertinent patent and latent information about the house, i.e. furnace updated, roof replaced, electric upgraded etc…

Provide the sales contract with all addenda and agreements.  Appraisers must consider ALL value-influencing factors.  Undisclosed terms or conditions could adversely influence the reliability of the appraisal report.

Provide a copy of the current deed.  The appraiser needs to know the exact legal description, how title is held and any encumbrances, restrictions, covenants and easements that may affect value.

Providing a site drawing with location and house dimensions is also very useful.  With the site plan, the appraiser can confirm the legal description, lot size, location in or near flood zones and the square footage of the dwelling.

Provide a recent tax bill.  Again, this document will corroborate the legal description, states the annual taxes and occasionally provides the site size.

Provide the appraiser at least three relevant sales – don’t just give him the highest sales you can find.  Remember, he has access to all the data and can corroborate whatever you give him.  If your sales aren’t relevant you lose credibility and the appraiser may not rely on your expertise.  Try to find relevant sales less than 90 days old; you can still supply sales up to six months old.  You should also provide any pending sales and several active listings.  Sold, Pending and Active listings are ALL valuable tools to the experienced appraiser.

Any other information you have floor plans, condominium documents, local developer plans, home inspection reports etc…  all help the appraiser reach accurate conclusions and enhances the opinion of value.