A Case Where ‘Produce the Note’ is Victorious
Score one for the little guy: New York judge wipes out borrower’s mortgage debt when lender can’t produce the note.
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7 Things Every Home Buyer Should Know – Part 2 – Don’t Worry
Time to take a look at the second installment in the 7 things series. If you recall, last time, we looked at the fact that, in a rapidly changing market like we are, 6 months ago is ancient history. What someone paid 6 months ago…… Well, just read about that at 7 Things – Part 1.
So what’s Part 2 about? Here’s what I wrote last time:
2. Don’t worry so much about what you paid for your house. Instead, look at the difference between what you can expect to sell your house for and what it’s going to cost you to buy the new one that you want. I expect you’ll find that those are much more important numbers (unless you end up without any equity, in which case you don’t sell).
There are a couple of things that I think still hold true and one big thing that I think doesn’t hold true any more. First the things that hold true:
- If you are selling one home to buy another, the most important number is not what you paid for the existing home, the most important number is the difference between the two homes. If the value of your home has fallen by $40,000 but you’re in a situation where you can buy a newer home with less maintenance and 1000 square foot bigger for a “net” difference of $20,000, then it might very well be a good deal.
- If your family situation has changed (i.e. – We got married and are expecting our second set of twins in the last 2 years! – Yikes!) then what you paid for your house doesn’t matter. I’ve got a client who is negotiating on a house where the seller has to sell within the next three weeks but they are “hung up” on what they paid for the house. If you need to do something, don’t worry about what you paid for your house, just focus on what the financial and logistical aspects and make the move. I’m working with a client who is relocating for a new job. His new position is a nice enough “step up” from his current position that they sold their home for approximately 20% less than they paid for it and still be able to buy a new house. He told me that while he didn’t want to sell his house for less, the overall picture of the move is “the right thing” for them at that point.
Now, the one big thing that has changed since last year. Let me lay it out this way:
- On March 4, 2009, Bloomberg reported that More than 8.3 Million Home Owners were underwater.
- On October 20, 2009, I was on a conference call where Dr. Nouriel Roubini said that if housing prices drop another 7 to 10% over the course of the next year, by the end of 2010, there will be 25 million home owners who are under water. Oh and he said that it’s almost guaranteed that they will drop because of the imbalance between supply and demand. There already is too much inventory, credit is still tightening, foreclosures are still climbing and jobs are still getting eliminated. That means the inventory problems aren’t going to go away any time soon.
Let me make that perfectly clear. There are approximately 51 million home owners in the United States who have mortgages on their homes. By the end of 2010, almost half of them will owe more on their homes than what they are worth.
If you’re sitting in a coffee shop reading this on your laptop, look at the guy at the table next to you. Now look at the guy on the other side. 1 out of the 2 of them owes more on his house than what it’s worth. Ouch.
That means a number of things that are different than last time:
- There will be sustained upward pressure on foreclosures.
- There will be marked lack of geographic mobility. A lot of people who would consider and/or actually relocate to get a job/a better job won’t be able to because they can’t sell their house. Or they’ll relocate, give the old house back to the bank (lots of credit ramifications – topic for some other time) and rent.
- Over the years, the “old rule of thumb” was that the average home owner would move every 7 years. Now with almost 50% of the homeowning population “trapped” in their homes, we’re going to see people staying in their homes a LOT longer and we’re going to see a lot less move up buyers, a lot less move “over” buyers and a lot less downsize buyers. That’s going to accentuate the inventory problems and keep downward pressure on house prices.
- That also means that there will be a lot less opportunities for builders, Realtors and lenders because of the decreasing mobility of the American population.
So, on the one hand, things are similar to what they were last year in that if you are going to make a move, what you paid for your house isn’t that important, it’s the difference that matters. But, for more and more people, the changes in the market since last year mean that if they want to move, they have no good options. They can stay put or they can do the short sale/foreclosure/rent for a long time option.
The market is different than it was in the summer of 2008.
Tom Vanderwell
P.S. Stay tuned for Part 3 – Is this the market for Do It Yourselfers?
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First-Time-Home-Buyer Tax Credit Extension Info
The current $8,000 tax credit for first time home buyers is set to expire in approximately a month. Since then, there has been a rush for buyers to find a home and close before the December 1st, 2009 deadline.
In a related CNBC interview, several industry experts discuss whether extending the tax credit is a good idea and some details of some of the bills currently in Congress.
Finding information of the current bills being proposed to Congress isn’t the easiest thing to find. Kudos to Jay Thompson from www.phoenixrealestateguy.com who posted details of the bills last June.
Here are some details of the 6 proposals currently being discussed in Washington as mentioned in his blog. 5 were discussed in a post in June and the 6th on a blog posted last month.
Here is an excerpt from Jay’s June blog post:
Currently there are FIVE bills flitting about Washington, D.C. that would, assuming they are signed into law, either extend or expand the currently existing $8,000 homebuyer tax credit due to end on December 1, 2009.
Senator Johnny Isakson (R-GA) introduced Senate Bill S1230 – the Home Buyer Tax Credit Act of 2009 – on June 10. Senator Isakson created the original $15,000 homebuyer tax credit that morphed into the current $8,000 first-time homebuyer tax credit that became law when the Stimulus Bill was passed. This bill proposes a non-refundable tax credit up to $15,000, that can be split equally over two years, for all primary residence purchases – not just purchases by first time home buyers. The bill has been referred to the Senate Finance Committee for further debate. It has 12 cosponsors, notably including Senator Chris Dodd (D-CT), the Senate Banking Committee Chairman. It would expire one year after enactment.
Representative Kenny Marchant (R-TX) introduced House Bill HR 2619 on May 21. This proposes to extend the existing $8,000 tax credit to July 1, 2010 and adds provisions for a tax credit of up to $3,000 for homeowners who refinance. This bill has been referred to the House Ways & Means Committee for further debate. There are currently no cosponsors.
Representative Eddie Bernice Johnson (D-TX) introduced HR 2606 – the Home Buying Credit Expansion Act – on May 21. This bill proposes to remove the first-time homebuyer requirement (allowing all principle residence purchases to qualify for a tax credit) as well as extends the bill through Jan 1, 2010. It has one cosponsor (Rep Timothy Bishop D-NY) and has been referred to the House Ways & means Committee.
Representative Howard Coble (R-NC) introduced HR 2801 – the Home Ownership Move the Economy (HOME) Act – on June 10. From the Department of Redundancy Department, this bill appears virtually identical to Rep Johnson’s in that it opens the tax credit up to all primary residence purchases and extends the credit to Jan 1, 2011. It has no cosponsors yet and has also been referred to the House Ways & Means Committee.
Representative Dan Burton (R-IN) introduced HR 2655 on June 2. It has picked up six cosponsors, four Republicans and two Democrats. It joins its cousins in the House Ways & Means Committee and also eliminates the first time home buyer requirement while extending the credit to Jan 1, 2011. CLICK HERE TO READ THE ENTIRE POST
Here is an excerpt from Mr. Thompson’s recent post discussing the 6th proposal:
…a sixth bill to extend the tax credit was introduced in the Senate last week. Senate Bill S1678 extends the existing first-time homebuyer tax credit to June 1, 2010. It makes no changes to the requirement that one must be a first time buyer (defined as not owning a home in the last three years) or to income limits that currently exist in the current law. CLICK HERE TO READ THE ENTIRE POST
In the most recent news, Senate Majority Leader Harry Reid is proposing a counter to Senator Johnny Isakson’s Bill S1230. His proposal would extend the credit through December 31, 2010 with a plan to phase the credit down to $6,000 in April through the end of June, $4,000 from July through the end of September and $2,000 from October until the end of the year.
What’s interesting is how much these tax credits differ. Personally, I don’t feel making the credit larger will help much. Will a buyer really say, “$8,000 isn’t enough to get me excited. However, $15,000 would do the trick!” Every buyer I’ve talked to is throughly pleased with the amount.
I do think that raising the qualifying income limits, extending it to all home buyers and extending the deadline will. The goal for the tax credit is to incentivize home buyers into making a decision. I’ve found that many of the most undecisive buyers are ones who currently own a home. They know they’re going to lose money when they sell which often hampers their decision. I think an incentive for existing home owners is a great idea. This will help move inventory of sellers who are waiting for the market to turn, which may slow the growth of the real estate market for many years as mentioned by Spencer Rascoff on Bloomberg (Related Blog post here).
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Zillow Mortgage Marketplace: Changes Make It Better For Consumers
I have found that few things in life separate the sheep from the goats men from the boys efficient from the not-so-efficient like the free market does.
Earlier this week, I received an email from the people at Zillow saying that they were making changes to their Zillow mortgage marketplace and were going to start to charge lenders for each contact with borrowers and my first thought was:
“Well, this oughtta be fun to watch”.
I think it might be the social scientist in me that casually enjoys watching people squirm whenever a perceived “big change” is announced – whether it is a global, national, corporate or maybe even just a marketplace change.
It has been my experience that whenever change occurs, there is almost always a group of people who thinks change is “fun” – no matter what it is – and finds a way to adapt to the change and continue on with life. It has also been my experience that there is also a group of people who resist change and can’t figure out why they never end up on the good end of the changes.
If you enjoy seeing both sides (and everything in between), be sure to follow the debate about the recent changes Zillow announced and how people are reacting to them.
What This Change Means For You: The Consumer
If you are a consumer, be sure to put Zillow on your Holiday greeting card list. They did you a big favor by making sure that lenders are valuing your contact – in fact… they are making your interest and qualifications a “market”.
If you are interested in a loan, have good credit, good income, good assets and want to buy a $500,000 house do you think you are more valuable to speak with than someone who has lousy credit, no money and wants to find out how to use the $8000 tax credit to buy a house?
Of course you are.
So now the lenders on the back end are going to be actually “bidding” for that interest and hoping that you contact them. When you do contact them (hint: if I were you, I would contact one of the ones who has a stellar reputation), then they will be charged.
Just a hunch here, but I wouldn’t be surprised if Zillow doesn’t start out segmenting you as a customer and assigning a different value to you based on certain criteria, they will over time. Which will only help the process.
I know, I know – it still remains to be seen just exactly how much money Zillow will be willing to pay lenders to talk with people who have lousy credit and no down payment (that was a joke) but one thing is almost certain:
Now that there is a price-tag that lenders are going to be paying each time you contact them – you as a consumer have an even higher chance of getting the best service from your loan officers working right here on Zillow.
Or, maybe I should say it like this: It seems to me that if a lender has to pay $100 for you to talk to him, you have a better chance of getting his/her full attention than if they didn’t have to pay anything for you to talk to them.
Or at least that is where I always try to put my mouth… where my money is.
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Social Networking: A Virtual Landscape for the Real Estate Market
Back in the day, marketing homes for sale involved a listing on the MLS, buying ad space in newspapers, displaying signs on site, and lighting scented candles for the open house. Now, there are countless avenues to gain exposure to buyers and sellers. Through social networks (which connect groups sharing common backgrounds and interests), you can reach a larger sphere of influence and extend your reach.
You’ll save time and trips by utilizing existing technology and groups. Here are a few of the basics — and their relevant ties to the real estate market:
Broadcast your home! When shopping for a home, you can see listing photos or even a virtual tour on an agent’s website. But now, realtors post videos of actual property walk-throughs on YouTube, giving buyers a direct, first-hand look at new construction developments that aren’t yet open to the public.
Twitter enables realtors to stay connected with clients. They “Tweet” (or “post”) short updates with home sale statistics, home improvement tips, and links to local events. And if you’re a buyer, Twitter is often the first place to hear about “Just Listed” properties or developer incentives.
Facebook enables realtors to post links to properties for sale or rent and to share ideas with clients and other industry professionals.
LinkedIn is a networking tool primarily used by professionals in the corporate world. As a buyer or seller, you can read real testimonials and find trusted referrals.
Zillow, as you know, offers a comprehensive list of homes for sale, both by agent and by owner, as well as neighborhood statistics and home sale trends. Zillow’s vast directory includes real estate professionals, useful articles, and frequent updates to help you stay tuned into the market.
Blogs give companies an immediate and direct opportunity to provide readers with breaking news, industry insight, and new media. Realtors discuss new developments and market trends. Financial experts blog about legislative changes, rates, new programs and other educational topics.
By combining traditional marketing methods with social networking, you can maximize your exposure for selling your property, connecting with real estate professionals, and finding real answers.
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Don’t Read This Book! … And Never Learn How You Can SAVE And Quite Possibly MAKE Money On Your New
October 25, 2009 San Francisco, CA. SmartShopperSolutions.com announced the release of a new book titled "First Time Homebuyer’s Handbook: Secrets To Saving Thousands On Your New Home". Full of sage advice, it’s a must-read for all perspective buyers
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East Costa Mesa, CA ~ Single Level SFR homes now for sale
East Costa Mesa, one of the most popular residential areas at South Orange County during recent five years, located west of the Back Bay and east of SR55.
See East Costa Mesa single level SFR homes now for sale (click here for free active link).
Please let us know whether this information is helfpul. Thanks.
Harrison K. Long
Realtor and broker, Explore Group, Coldwell Banker Previews, Irvine, CA.
www.BuyersExploreHomes.com
ExploreProperties@gmail.com
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Steady Mortgage Rates Put to The Test as Fed Exits Treasury Market
The well defined range we have used to gauge our lock/float sentiment is being challenged. Since the range proved itself a reliable indicator of demand for debt in the benchmark fixed income market, we have advised consumers to lock when mortgage prices were near the high side of the range and to float when MBS prices were at the the low side of the range. Well…this morning the range broke and prices fell through a key level of support. While we are not in panic mode, our preferred indicator of lock/float strategy is being put to the test. …(read more)
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Market Tests Our Lock/Float Strategy; FTHB Tax Credit Getting Bad Press
Reports from fellow mortgage professionals indicate lender rate sheets are similar to what we had yesterday morning. The par rate for a conventional 30 year fixed rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and secure a higher interest rate or pay additional fees to buy a lower rate….(read more)
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Lenders Take Back Yesterday’s Rate Sheet Gains
After opening the day lower yesterday, MBS managed to rally steadily off the lows before a late day stock sell off added steam to the upward price momentum, which resulted in a few lenders repricing for the better by day's end. Several factors contributed to the late day price spike. The findings of the Fed's Beige Book painted an uncertain economic picture, then Wells Fargo was downgraded from 'hold' to 'sell' by a prominent analyst. These two events combined to knock the wind out of the stock market, which resulted in a rally in the benchmark debt and MBS market. Unfortunately the early morning weakness has forced most lenders to take back yesterday's rate sheet gains….(read more)
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