Reno Sparks Real Estate Today

HR 3221 Becomes Law

The Housing and Economic Recovery Act of 2008 was signed into law on July 30, 2008. The following summary highlights just a few of the bill's many important provisions:

Permanently increases conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. Loan limits will not go into effect until December 31, 2008.  In Reno the loan limits will remain at $417,000.  Loan limits will not go into effect until December 31, 2008.

Increases down payment requirement on FHA loans to 3.5%. Creates a new $7500 tax credit (repayable over 15 years) is available to first-time home buyers for any qualified purchase between April 8, 2008 and June 30, 2009. A first-time home buyer is defined as someone who has not owned a home for the last three years.

Creates a refinance program that allows lenders to write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Loan limit is $550,440 and is effective on October 1, 2008. Important note: Borrowers have to share with FHA a minimum of 50% of all future appreciation.

Prohibits the use of down payment assistance programs funded by those who have a financial interest in the sale beginning October 1, 2008. Non-profit assistance programs funded by churches, employers, or family members are not prohibited.

Puts risk-based pricing on FHA on hold for one year, beginning October 1, 2008 through September 30, 2009.

Lifts FHA cap on reverse mortgages, allowing the FHA to insure reverse mortgages for as much as the full value of a home.

Strengthens the existing mortgage originator licensing and registration system.

H.R.3221 (full text)
NAR Summary and Resources

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Consumer Reports Weighs In On Real Estate Commission and Service

Consumer Reports recently conducted a survey of home buyers and sellers about a number of topics. You can find the report here. There were a number of interesting findings, some a surprise and some not so much.

Here are a few of the findings.

For Home Buyers: The 66 percent of our readers who used a real-estate agent in buying a home paid an average of $5,000 less than the listing price. Some of the agents were buyers’ brokers (they generally work exclusively for the buyer) and some were conventional agents whose legal obligation is to the seller, even if the buyer brought them into the deal. The 34 percent of buyers who negotiated their own deals, without an agent, paid close to the asking price.

Looks like using an agent to purchase a home is a good move that will not only protect your interests, but save you money.

For Home Sellers:

You can negotiate the fee. The usual 6 percent commission that agents charge sellers has been standard for so long that many homeowners apparently don’t realize it’s negotiable. But 46 percent of the sellers in our poll attempted to negotiate a lower commission and roughly 71 percent of that group succeeded.

We found that paying an agent a lower commission rarely had any effect on the sales price. And readers who paid commissions of 3 percent or less were just as happy with their brokers’ performance as those who paid 6 percent or more. People who paid extra, in fact, were more likely to say they had regrets about the selling process. The biggest regret? Nearly one-third said they should have been more assertive in negotiating their agent’s fee.

Paying less won’t hurt service. The industry generally defends the full 6 percent commission by saying it enables brokers to provide all the services home sellers need. And some of our survey respondents who paid lower commissions did get fewer services from their agents. But there wasn’t as big a gap as you might expect. For example, 81 percent who paid 3 percent or less said the agent provided a competitive market analysis of their home, compared with 87 percent of people who paid 6 percent or more. And those who paid a lower commission were somewhat less likely to have agent-sponsored open houses (54 vs. 59 percent).

That’s right, commissions are negotiable. What I find interesting is lower or “discount” commissions rarely had an effect on sales price. Even better, when people paid less they were just as happy with the service they received. There has been a long standing misconception that in order to receive “full service” you need to pay “full price.” This is simply not true.

As real estate agents, we all have the same tools at our disposal. We all have access to the same information. The only difference will be in the experience and expertise of the agent.  On the experience and expertise front, I find “discount” agents generally have much more experience because they to a lot more business.

Before you hire an agent to sell your home, do a bit of research. There is no reason to pay to much. 

Shakespeare Lake Tahoe extends their season...

A short 30 minute drive from Reno takes you to the beautiful public beach located at Sand Harbor.  The entry fee per vehicle is $8 and many amenities are available.  This weekend some friends from Spanish Springs joined my wife and I to see the performance of Richard III.  I am sharing this information because in the 10-plus years we have been attending these plays this is by far the best performance and I encourage others to attend.  Have a great time!

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

What are the options if I owe more on my mortgage than the value???

Nevada has been one of the hardest hit States when it comes to property values and Reno was not immune to these drastic declines.  In fact, the Federal Government went so far as to implement a 5% value fade (highest percentage issued for declining markets) on any conventional mortgage backed by the US Government and issued in Washoe County.  The values from our market high have been dramatic and options for homeowners that purchased before 2007 may be upside down in their mortgage (mortgage is higher than the property's value).  This instance may have also been induced by the homeowner pulling equity from their home.  I have listed several options below and I hope that this information is helpful.

Option 1

Continue making your payments on time and ride out the storm

• Your lender cannot take your home away as long as you make your payments on time. Therefore, if you want to keep your home and you can afford your payments, you should do whatever it takes to continue making your payments on time. Although it is a hard pill to swallow, this is likely to be your best option because it is the most responsible thing to do and it protects your credit rating.
• Even if you are experiencing other financial difficulties and you are faced with declaring bankruptcy, you are not required to include your home in the bankruptcy. For more information, check with an attorney who is familiar with the laws in Nevada.

Option 2

Stop making your payments and go into foreclosure

• This is probably the worst decision you could make, but depending on your circumstances, you may have no other choice. Foreclosure laws vary from state to state, but here are a few things to keep in mind:
  • Foreclosures reflect very negatively on your credit rating and could preclude you from borrowing money through credit cards and car loans. In fact, if you become delinquent on your mortgage, this will likely have an immediate negative impact on the interest rates and terms of all your credit cards. Credit card companies typically have the right to increase your interest rates, close your accounts and/or reduce your credit limit as soon as you default on any other debt (including your mortgage).
  • Fannie Mae, which is very influential in setting the mortgage guidelines, has recently updated their lending rules to state that individuals who have gone through foreclosure need to wait anywhere from 3-5 years before qualifying for a new mortgage. This means that it will be very difficult, if not impossible, for you to buy a home and qualify for a new mortgage for at least 3-5 years.

Option 3

Try to modify the terms of your mortgage

• Nearly everything in life is negotiable — this includes the current status of your mortgage. You could either hire an attorney or try to call your lender yourself and renegotiate the terms of your loan. Keep in mind that your chances of success are always better if you get an attorney involved (www.strategic-equity-solutions.com). Remember, lenders would rather not have you go all the way through foreclosure if it can be avoided. In fact, after regulators took over the failed IndyMac Bank, Sheila Bair who is the Chairman of the Federal Deposit Insurance Corporation (FDIC) said, "We will very aggressively pursue loan-modification strategies for unaffordable loans to make them affordable on a long-term, sustainable basis."
• This may also be accomplished by refinancing your current mortgage by performing a short-refi or a conventional refinance that will be possible effective October 1, 2008 (look for blog relating to HR Bill 3221 coming soon).

Option 4

Try to sell the home on the open market as part of a "Short Sale"

• A short sale is where a property owner sells property for less than what is owed on the mortgage. The mortgage lender is asked to approve the sale and forgive the difference between the sales price of the property and the remaining balance of the mortgage. Consider this example:
  • $200,000 sales price
  • $250,000 mortgage balance
  • $50,000 difference that is forgiven by the mortgage lender
• Understand the impact on your credit rating — a short sale has virtually the same negative impact on your credit rating as a foreclosure. Both short sales and foreclosures are treated as "settled accounts." In other words, the lender is settling with you and agreeing to be paid less than what they are legally entitled to receive. Therefore, you are developing a reputation for paying back to your lenders less than what you originally agreed to pay them, and this reflects negatively on your credit rating.
• Understand the new Fannie Mae rules — beginning August 1, 2008, an individual who has sold a home as part of a short sale will not be able to qualify for a new mortgage for another 2 years!
• Understand the tax impact — depending on the type of mortgage and property you have, you may be subject to income taxes on the portion of the mortgage that is being forgiven by the mortgage lender! There is only one case where income taxes do not apply: if the forgiven debt is attached to your primary home and the mortgage balance itself was originally used to buy, build or improve your home. In other words, forgiven mortgage debt on second homes and investment property is taxed, as well as all forgiven debt where cash-out loan proceeds were not used for home improvement.

Option 5

Consider a sale-leaseback or rent-to-own strategy

• A sale-leaseback is where you sell your property to an investor (as part of either a short sale or traditional sale), and then you lease it back from the investor. This allows you to remain in your home without the trauma of having to move away and find new housing. The thing to be cautious of is that some variations of the sale-leaseback strategy are centerpieces in some of the so-called "foreclosure rescue" scams that prey on unsuspecting home owners. Before engaging in sale-leasebacks, consider the laws of your state, and make sure the transaction is properly and ethically structured to protect the interests of all the parties involved.
• A rent-to-own strategy allows you to find a new home now and rent it from an investor with the option of buying the home at a pre-determined price at some point over the next two to three years. You would do the house shopping and find a home where you would like to live. The investor then buys the home, preferably getting a good deal by buying a home that is being sold short or through a foreclosure. You then sign two agreements with the investor:
  • Lease agreement that spells out the terms of the rent payments
  • Option agreement that spells out the predetermined price and terms under which you can buy the home from the investor at some point within two to three years

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Is this a good time to buy a home?

This is definitely a buyer's market! Your negotiating power in this market is greater than at any point in the last several years. If you are interested in buying a home for the long-term, this is a great time to do so.  The Reno/Sparks area is saturated with vacant homes and motivated sellers.  According to data provided on this blog approximately 5,000 are currently on the market which represents an 11 month inventory.   

However, if you are a novice looking to speculate in the real estate markets, now is an extremely dangerous time. Only the truly savvy investors will be able to navigate the market today, but they need to act quickly. There is so much panic selling in the marketplace right now that the deals that are available today will not likely be around in the future. Of course, there will always be deals available, but the types of deals available today are not going to last forever. Martin Barrett of MacLean Financial Group said, "Now is the best time to buy Real Estate in Reno....everything is on SALE."  This is easy to say because everyone talks about buying low and selling high, but hardly anyone actually does it! Once the market stabilizes, everyone will want to jump in again and the best deals will have disappeared. 

As long as your time frame is greater than two years, now is probably the best real estate buying opportunity in over two decades.

The best thing for you to do is work with a team of professionals to help you structure your home purchase transaction in ways where you could save the most money. Strategies for you to consider include seller-paid closing costs, maximizing acquisition indebtedness to create tax benefits and structuring the down payment in the proper way are a couple of issues to address.

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

I Accepted an Offer, Here Comes the Home Inspector

You can now breath a sigh of relief.  Both parties have signed the purchase agreement and everyone is excited to close the sale.  If you have read my prior posts hopefully you had your home inspected before you put it on the market but if you didn't you need to get ready for the buyers inspector to look over your property. 

What should you do to prepare your property for a home inspections?  Here are some tips that with little or no cost to you can prepare your home to avoid items I may call out on the inspection report. 

1)  Divert all water away from the house and clean out the gutters.
2)  Ensure the grade around the house carries water away from the foundation.
3)  Trim all trees and bushes away from the house as well as the roof, siding and chimney.
4)  Seal any cracks in the driveway, walks and patios.
5)  Caulk around windows, trim, door frames and the chimney.
6)  Paint any weathered exterior wood.
7)  Point up any failing mortar joints in brick and block.
8)  Make sure the crawl space is accessible and is dry with a vapor barrier present on the ground.
9)  Check all the windows and door to ensure proper operation and repair any cracked glass.
10) Test all GFCI outlets for proper operation.
11) Test all plumbing fixtures to make sure there are no current leaks.
12) Replace regular outlets to GFCI outlets near all water sources especially bathrooms and kitchens.
13) Clear access to the attic, crawlspace, heating system, hot water heater and the garage.
14) Replace or clean the filter to your HVAC system.
15) Make sure all the utilities are still on for the inspection.

These items will help you avoid many of the small issues we as inspectors see daily and can delay the closing of your home.

Ty Kirkpatrick, Owner  TEK Inspections  www.tekinspections.com  775.746.4990