Despite a slow market and a slight decrease in the resale value of most remodeling projects, Realtors® report that the smartest home improvement investments may also be some of the least expensive. Results from the 2009 Remodeling Cost vs. Value Report show that small-scale exterior projects are the most profitable at resale, according to estimates by Realtors who completed a recent survey.
On a national level, eight out of the top 10 projects in terms of costs recouped were exterior replacement projects that cost less than $14,000. Certain types of door and siding replacements, as well as wood deck additions all returned more than 80 percent of project costs upon resale. A steel entry door replacement – a new addition to this year’s list – recouped 128.9 percent of costs, followed by upscale fiber-cement siding replacements at 83.6 percent. Wood deck additions recouped 80.6 percent of costs.
"Once again, this year’s Remodeling Cost vs. Value Report highlights the importance of a home’s first impression," said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. "With exterior projects returning a high percent of project costs upon resale, Realtors can help give your home curb appeal while adding value to the real estate transaction."
The 2009 Remodeling Cost vs. Value Report compares construction costs with resale values for 33 midrange and upscale remodeling projects comprising additions, remodels and replacements in 80 markets across the country. Data are grouped in nine U.S. regions, following the divisions established by the U.S. Census Bureau. This is the 12th consecutive year that the report, which is produced by Hanley Wood, LLC, was completed in cooperation with REALTOR® Magazine, as Realtors® provided their insight into local markets and buyer home preferences within those markets.
On a national level, the project with the biggest improvement from 2008 was the attic bedroom addition, recouping 83.1 percent of remodeling costs compared to 73.8 percent in 2008. The only other interior project that landed in the top 10 was a minor kitchen remodel with 78.3 percent costs recouped.
Other exterior projects in the top 10 include midrange vinyl and upscale foam-backed vinyl siding replacements, which returned more than 79 percent of costs. In addition, several types of window replacements – midrange wood, midrange vinyl, and upscale vinyl – all returned more than 76 percent of costs upon sale.
Similar to last year’s report, the least profitable remodeling projects in terms of resale value were home office remodels and sunroom additions, returning only 48.1 percent and 50.7 percent of project costs.
Written by Realty Times Staff
Wednesday, August 11, 2010
Monday, August 9, 2010
Love The House, Hate The Traffic Noise -- There Is Hope!
Depending on the location, whether you're shopping for a new home or trying to sell your current residence, one of the biggest challenges is trying to reduce street noise.
Tony Sola, founder of Acoustics.com cautions homeowners and buyers about too high expectations when it comes to reducing traffic noise.
"Too many times I have seen homeowners try to do something about the noise by adding another layer of drywall, or something to the wall itself. It's not minimal return, it's zero return. Unless you control the weak point, that does nothing," says Sola.
Sola says there are some cases where the wall might be the weak point but he says usually that's just one percent of the time. Generally the windows are the weakest noise link.
So, if you've fallen in love with a home that's perfect for you but butting up a little close to a busy road, there are options to help make the traffic less noticeable.
Starting with the interior of the house, the first area to listen closely to are the windows. They can tend to let in a significant amount of noise.
"The sound almost always goes through the window and doing anything at all to the walls will be pointless until you have fixed the noise that comes through the window," says Sola.
Windows have a Sound Transmission Class (STC) rating. The higher the rating the less outside noise you should hear inside the home. A typical single-pane window only has a 22-25 STC rating whereas a dual-pane window might have a STC rating of 27-32. There are also specialty windows with even higher STC ratings available.
Choosing the right STC rating depends on what you're planning to do.
"If you're looking at a STC 30 window versus a STC 33 window, you're not going to notice a huge difference in that but it might be worth it to you, if they're about the same price. But if you're looking at replacing windows and you're planning to go from a STC 30 to a STC 33, that's a lot of work to get virtually little improvement. If you can get a five or six decibel difference, then that can start to make a noticeable change," explains Sola.
Keeping sound from coming into your home is usually only part of the solution. Many people want to enjoy a traffic-noise-free backyard. This can be a little more complicated but not impossible.
"One of the first things you would look at is the barrier. If you've got a view wall or wrought iron fence that's not going to block anything, or if you have large oleander bushes, that might block the view but it doesn't block the sound at all," says Sola.
Instead he says a solid wall that doesn't have gaps in it will help a little.
"Auto noise comes from the tires. So to control auto noise the wall will work pretty well because the source is really low -- it's at ground level but truck noise -- the medium trucks or the semi truck -- comes from about eight feet off the ground, so even if you build a six, seven, or eight-foot wall, that won't help much," says Sola.
However, if you couple a barrier wall with a noise-masking system such as a water feature then you can virtually wash away the traffic sounds.
"A water feature, if done right, can work very well," says Sola.
"You wouldn't want a water feature that's just trickling water. You would want something more substantial that does have a noise level to it and more of a broad band noise," says Sola.
He says the problem with water features is they tend to be very localized. Sola says he's been to some homes where the homeowner placed one water feature in the backyard and it drowned out the traffic noise in that one area of the yard but the street noise could be heard from other parts of the backyard. He says that's when a couple of fountains might need to be used.
Getting creative is the key. Working with a sound acoustic expert and landscaper can result in a beautifully designed outdoor area that's doesn't reveal any sign of the chaotic hustle and bustle of the nearby road.
Written by Phoebe Chongchua
Tony Sola, founder of Acoustics.com cautions homeowners and buyers about too high expectations when it comes to reducing traffic noise.
"Too many times I have seen homeowners try to do something about the noise by adding another layer of drywall, or something to the wall itself. It's not minimal return, it's zero return. Unless you control the weak point, that does nothing," says Sola.
Sola says there are some cases where the wall might be the weak point but he says usually that's just one percent of the time. Generally the windows are the weakest noise link.
So, if you've fallen in love with a home that's perfect for you but butting up a little close to a busy road, there are options to help make the traffic less noticeable.
Starting with the interior of the house, the first area to listen closely to are the windows. They can tend to let in a significant amount of noise.
"The sound almost always goes through the window and doing anything at all to the walls will be pointless until you have fixed the noise that comes through the window," says Sola.
Windows have a Sound Transmission Class (STC) rating. The higher the rating the less outside noise you should hear inside the home. A typical single-pane window only has a 22-25 STC rating whereas a dual-pane window might have a STC rating of 27-32. There are also specialty windows with even higher STC ratings available.
Choosing the right STC rating depends on what you're planning to do.
"If you're looking at a STC 30 window versus a STC 33 window, you're not going to notice a huge difference in that but it might be worth it to you, if they're about the same price. But if you're looking at replacing windows and you're planning to go from a STC 30 to a STC 33, that's a lot of work to get virtually little improvement. If you can get a five or six decibel difference, then that can start to make a noticeable change," explains Sola.
Keeping sound from coming into your home is usually only part of the solution. Many people want to enjoy a traffic-noise-free backyard. This can be a little more complicated but not impossible.
"One of the first things you would look at is the barrier. If you've got a view wall or wrought iron fence that's not going to block anything, or if you have large oleander bushes, that might block the view but it doesn't block the sound at all," says Sola.
Instead he says a solid wall that doesn't have gaps in it will help a little.
"Auto noise comes from the tires. So to control auto noise the wall will work pretty well because the source is really low -- it's at ground level but truck noise -- the medium trucks or the semi truck -- comes from about eight feet off the ground, so even if you build a six, seven, or eight-foot wall, that won't help much," says Sola.
However, if you couple a barrier wall with a noise-masking system such as a water feature then you can virtually wash away the traffic sounds.
"A water feature, if done right, can work very well," says Sola.
"You wouldn't want a water feature that's just trickling water. You would want something more substantial that does have a noise level to it and more of a broad band noise," says Sola.
He says the problem with water features is they tend to be very localized. Sola says he's been to some homes where the homeowner placed one water feature in the backyard and it drowned out the traffic noise in that one area of the yard but the street noise could be heard from other parts of the backyard. He says that's when a couple of fountains might need to be used.
Getting creative is the key. Working with a sound acoustic expert and landscaper can result in a beautifully designed outdoor area that's doesn't reveal any sign of the chaotic hustle and bustle of the nearby road.
Written by Phoebe Chongchua
Friday, August 6, 2010
Sell Faster When You Understand The Buyers Mindset
When most sellers list their home for sale the first thing they think about is how much will I get and that is usually followed by how soon will I get the money. It's certainly understandable that those two concerns are, most often, top of mind. After all, you're likely selling your home to buy another one or invest the money in something else.
But, if as a seller, you can get into the buyer's mindset, the sale of your home can come faster and for more money.
Understanding the way buyers think involves seeing things not from your perspective but from your potential buyer's mindset. It can sound easy but actually it's often harder to do than most sellers think. The psychology of buying is driven by emotional experiences, money, and timing. With that in mind, sellers can help create optimal circumstances that literally help walk the buyer through the process and completion of the sale of your home.
It starts with a feeling. When you meet someone for the first time, you form a first impression based on a feeling. That's exactly what happens when buyers set foot into your home. Work with an experienced agent to learn exactly what kind of impression your home is giving off. If it's a small home, make sure it's not overfilled and cluttered.
Pick up all the loose clutter that's floating around. Throw out old magazines. People like to see things that are streamlined or clean or fresh looking. There's nothing worse than walking into a place and seeing a stack of magazines all over the place or an unmade bed.
Go the extra step and take care of items that might have been overlooked for quite some time. Steam clean the carpets, the upholstery, the furniture, if that's what's needed. Have the windows cleaned, light fixtures cleaned. Make it feel clean when you walk in.
Go back to basics. You may love your turquoise carpet but do you really think buyers will? Getting inside the buyers mind will help you answer these questions. You can also pick up home décor magazines and see what appeals to the masses. You don't have to change everything in your home, but going back to basics in a few areas will help buyers see how your home can become their home.
As soon as buyers see a really loud red, orange or lemon-green color they automatically think about re-doing. That, of course, means the buyers are already beginning to calculate the amount of money they need to take off of the sale price in order to get the home in the condition they would like it.
If instead you stick with neutral colors such as painting the walls off-white, light beige or Navajo white, you have a better chance in preserving the sale price.
Repair anything that looks torn, worn or broken If you walked into a retail store and saw a garment that you liked but it was torn or missing buttons, chances are you'd search for another one or ask for a discount if that were the only one of its kind.
That's what buyers will do with your home when they spot torn screens, garage doors that don't open, or broken light fixtures that are hanging out of the wall. Buyers, if at first they don't get completely turned off and walk away from the sale, will first begin to think that there is more damage to the home than what they're able to see and then they start to calculate the cost of repairing those damages. But buyers often exaggerate the amount of money needed to fix the repairs.
In today's market people are looking desperately to find out what's wrong with a home so that they can lower the price.
In the buyers' minds, they come up with some kind of incredible price to fix repairs. In their mind, they go way overboard and eventually it affects the bottom line price for the seller.
Don't miss an opportunity to get the word out about your home being listed for sale. It only makes sense to let your neighbors know. By doing this your neighbors can sometimes become great facilitators and supporters of the sale.
Most people are visual buyers. If the home doesn't look clean, spotless, and repaired then the buyer thinks what's behind the walls, how much more money do I have to put into this home.
Remember understanding the psychology of the buyer's mindset can help you sell faster and for the price you really want.
Written by Phoebe Chongchua
But, if as a seller, you can get into the buyer's mindset, the sale of your home can come faster and for more money.
Understanding the way buyers think involves seeing things not from your perspective but from your potential buyer's mindset. It can sound easy but actually it's often harder to do than most sellers think. The psychology of buying is driven by emotional experiences, money, and timing. With that in mind, sellers can help create optimal circumstances that literally help walk the buyer through the process and completion of the sale of your home.
It starts with a feeling. When you meet someone for the first time, you form a first impression based on a feeling. That's exactly what happens when buyers set foot into your home. Work with an experienced agent to learn exactly what kind of impression your home is giving off. If it's a small home, make sure it's not overfilled and cluttered.
Pick up all the loose clutter that's floating around. Throw out old magazines. People like to see things that are streamlined or clean or fresh looking. There's nothing worse than walking into a place and seeing a stack of magazines all over the place or an unmade bed.
Go the extra step and take care of items that might have been overlooked for quite some time. Steam clean the carpets, the upholstery, the furniture, if that's what's needed. Have the windows cleaned, light fixtures cleaned. Make it feel clean when you walk in.
Go back to basics. You may love your turquoise carpet but do you really think buyers will? Getting inside the buyers mind will help you answer these questions. You can also pick up home décor magazines and see what appeals to the masses. You don't have to change everything in your home, but going back to basics in a few areas will help buyers see how your home can become their home.
As soon as buyers see a really loud red, orange or lemon-green color they automatically think about re-doing. That, of course, means the buyers are already beginning to calculate the amount of money they need to take off of the sale price in order to get the home in the condition they would like it.
If instead you stick with neutral colors such as painting the walls off-white, light beige or Navajo white, you have a better chance in preserving the sale price.
Repair anything that looks torn, worn or broken If you walked into a retail store and saw a garment that you liked but it was torn or missing buttons, chances are you'd search for another one or ask for a discount if that were the only one of its kind.
That's what buyers will do with your home when they spot torn screens, garage doors that don't open, or broken light fixtures that are hanging out of the wall. Buyers, if at first they don't get completely turned off and walk away from the sale, will first begin to think that there is more damage to the home than what they're able to see and then they start to calculate the cost of repairing those damages. But buyers often exaggerate the amount of money needed to fix the repairs.
In today's market people are looking desperately to find out what's wrong with a home so that they can lower the price.
In the buyers' minds, they come up with some kind of incredible price to fix repairs. In their mind, they go way overboard and eventually it affects the bottom line price for the seller.
Don't miss an opportunity to get the word out about your home being listed for sale. It only makes sense to let your neighbors know. By doing this your neighbors can sometimes become great facilitators and supporters of the sale.
Most people are visual buyers. If the home doesn't look clean, spotless, and repaired then the buyer thinks what's behind the walls, how much more money do I have to put into this home.
Remember understanding the psychology of the buyer's mindset can help you sell faster and for the price you really want.
Written by Phoebe Chongchua
Wednesday, August 4, 2010
First-Timer's Guide To Mortgage Shopping
It's not everyday you go looking for a mortgage.
It's not a trip to the mall.
It's a methodical, step-by-step process requiring planning, time, effort and attention to details.
Here are some guidelines for beginners, especially first-time home buyers -- assuming you've already laid the groundwork by inspecting your credit report.
Inspecting your credit report and getting it in the best shape possible is your first step to the best mortgage. In today's tight money world it behooves you to take the time necessary to carefully scrutinize your credit report and credit score to be prepared to explain to creditors any dings you can't fix.
Shop around for a mortgage from a variety of sources to determine what's available. Shop mortgage brokers, mortgage lenders, banks and credit unions. Don't forget to examine your local and state mortgage programs as well as community service and housing agency mortgages and mortgage assistance programs.
Obtain all loan cost information, not just the monthly mortgage payment and annual percentage rate (APR). Check the cost of points (in dollar amounts, not just number of points), broker fees, origination fees, underwriting fees, administrative costs, mortgage insurance, yield spread premiums, commissions, escrow and closing costs -- each and every cost associated with your mortgage. You need these numbers to make a fair comparison.
Get an explanation for every fee you don't understand. Use the Federal Deposit Insurance Corporation's (FDIC) "Mortgage Shopping Worksheet" to help keep your costs in check.
Check the loan terms for a variety of loans. Know what down payment you'll need, the term of the loan, whether the loan is a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) and the specific terms of each. For ARMs, ask for the beginning rate, when and how often adjustments occur, how much adjustments could cost, and the ARM's ceiling rate.
Be aggressive. Prepare to negotiate with the information you've gathered on the mortgage worksheet. The more information you have about each loan the move negotiating leverage you'll have. A pristine credit record can also give you an edge. Look particularly to quibble over points, yield spread premiums and other broker's fees or commissions. Don't be afraid to ask the lender or broker to waive or reduce one or more of its fees or to agree to a lower rate or fewer points.
Make sure the lender or broker isn't just lowering one fee to raise another or lowering the rate to raise points. There's also no harm in asking lenders or brokers if they can give better terms than the original ones they quoted to you, especially if you've found better terms elsewhere.
Once you are satisfied with the terms you have negotiated, consider a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, the number of points to be paid and a lock on as many other costs and terms as possible.
Also seek a written loan commitment that guarantees you the terms and costs you've locked. A loan commitment puts you ahead of the pack in the eyes of the home seller who wants to sell quickly.
Written by Broderick Perkins
It's not a trip to the mall.
It's a methodical, step-by-step process requiring planning, time, effort and attention to details.
Here are some guidelines for beginners, especially first-time home buyers -- assuming you've already laid the groundwork by inspecting your credit report.
Inspecting your credit report and getting it in the best shape possible is your first step to the best mortgage. In today's tight money world it behooves you to take the time necessary to carefully scrutinize your credit report and credit score to be prepared to explain to creditors any dings you can't fix.
Shop around for a mortgage from a variety of sources to determine what's available. Shop mortgage brokers, mortgage lenders, banks and credit unions. Don't forget to examine your local and state mortgage programs as well as community service and housing agency mortgages and mortgage assistance programs.
Obtain all loan cost information, not just the monthly mortgage payment and annual percentage rate (APR). Check the cost of points (in dollar amounts, not just number of points), broker fees, origination fees, underwriting fees, administrative costs, mortgage insurance, yield spread premiums, commissions, escrow and closing costs -- each and every cost associated with your mortgage. You need these numbers to make a fair comparison.
Get an explanation for every fee you don't understand. Use the Federal Deposit Insurance Corporation's (FDIC) "Mortgage Shopping Worksheet" to help keep your costs in check.
Check the loan terms for a variety of loans. Know what down payment you'll need, the term of the loan, whether the loan is a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) and the specific terms of each. For ARMs, ask for the beginning rate, when and how often adjustments occur, how much adjustments could cost, and the ARM's ceiling rate.
Be aggressive. Prepare to negotiate with the information you've gathered on the mortgage worksheet. The more information you have about each loan the move negotiating leverage you'll have. A pristine credit record can also give you an edge. Look particularly to quibble over points, yield spread premiums and other broker's fees or commissions. Don't be afraid to ask the lender or broker to waive or reduce one or more of its fees or to agree to a lower rate or fewer points.
Make sure the lender or broker isn't just lowering one fee to raise another or lowering the rate to raise points. There's also no harm in asking lenders or brokers if they can give better terms than the original ones they quoted to you, especially if you've found better terms elsewhere.
Once you are satisfied with the terms you have negotiated, consider a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, the number of points to be paid and a lock on as many other costs and terms as possible.
Also seek a written loan commitment that guarantees you the terms and costs you've locked. A loan commitment puts you ahead of the pack in the eyes of the home seller who wants to sell quickly.
Written by Broderick Perkins
Monday, August 2, 2010
50 Ways to Gain Neighbor
Paul Simon wrote a song called "50 Ways to Leave Your Lover" which never really got around to actually listing fifty ways. I guess it's the thought that counts. But one of a homeowner association's challenges is helping neighbors "make nice." It seems that neighbors have lost the art of making friends and, instead, want the board to intervene in conflicts between the strangers that live next to each other.
What exactly is a "good" neighbor? To be one, you don't need to be friends or hang out together. A good neighbor attitude allows you to live as privately or as sociably as you wish. Being a good neighbor is an attitude. Here's how to cultivate and nurture it:
Meet Them. While marching up to their door with hand extended is great, the chance encounter works well, too. Introduce yourself at the mailbox, while walking the dog or when you take out the trash. Learn their names and offer a friendly: "Hello," "Good Morning" or "Howdy Doody" when you see them. (As weird as "Howdy Doody" is, it does make you memorable.)
Keep Them Informed. Contact them before undertaking something that might affect them, such as hosting a big party, building a fence or cutting down a tree. Contacting a neighbor in advance so rarely happens, it will take them weeks to recover from the shock and by that time the announced event will have passed. Seriously, you will gain their respect.
Be Aware of Differences. Age, faith, ethnic background and marital status can drastically affect lifestyles. Be aware of the differences between you and your neighbors that could create friction or disagreement.
Look for Things in Common. You both might like to garden, bike or jog. Zero in on what you have in common. Be a keen observer of your neighbors and look for tell-tale signs that can draw you closer.
Point of View. From your neighbor's viewpoint, how does your compost pile, swing set or junk car look? Would you like that view? (If you do, refer to your neighbor's viewpoint).
Be Appreciative. If a neighbor does something you like, tell them! They'll be pleased that you noticed the new awning, patio furniture, plants, etc.
Assume the Best. Most people don't intentionally create problems. Assume the neighbor doesn't know about the annoyance when you speak to them. Your delivery will be dramatically kinder. And assume they will be cooperative.
Be Candid. If your neighbor does something that bothers you, let them know as soon as possible in factual, not emotional terms.
Be Calm. When discussing a point of contention, speak calmly, listen carefully and thank them for telling you how they feel. You don't have to agree or justify your behavior. If you don't react defensively, anger usually subsides, lines of communication remain open and resolution is possible.
Take Your Time. If caught in angry confrontation, take a break to reflect and finish the discussion when cooler heads prevail. Don't leave it hanging. Time and lack of resolution will intensify hostilities.
Best Advice of All. Treat others as you would like to be treated. This attitude will pave the way for good neighborliness. Love your neighbor as yourself.
Oh, I could go on and list 50 ways but like the song, you probably catch my drift. Being a good neighbor is worth the effort. If one of these ways doesn't get you there, try 50 more until one does.
Written by Richard Thompson
What exactly is a "good" neighbor? To be one, you don't need to be friends or hang out together. A good neighbor attitude allows you to live as privately or as sociably as you wish. Being a good neighbor is an attitude. Here's how to cultivate and nurture it:
Meet Them. While marching up to their door with hand extended is great, the chance encounter works well, too. Introduce yourself at the mailbox, while walking the dog or when you take out the trash. Learn their names and offer a friendly: "Hello," "Good Morning" or "Howdy Doody" when you see them. (As weird as "Howdy Doody" is, it does make you memorable.)
Keep Them Informed. Contact them before undertaking something that might affect them, such as hosting a big party, building a fence or cutting down a tree. Contacting a neighbor in advance so rarely happens, it will take them weeks to recover from the shock and by that time the announced event will have passed. Seriously, you will gain their respect.
Be Aware of Differences. Age, faith, ethnic background and marital status can drastically affect lifestyles. Be aware of the differences between you and your neighbors that could create friction or disagreement.
Look for Things in Common. You both might like to garden, bike or jog. Zero in on what you have in common. Be a keen observer of your neighbors and look for tell-tale signs that can draw you closer.
Point of View. From your neighbor's viewpoint, how does your compost pile, swing set or junk car look? Would you like that view? (If you do, refer to your neighbor's viewpoint).
Be Appreciative. If a neighbor does something you like, tell them! They'll be pleased that you noticed the new awning, patio furniture, plants, etc.
Assume the Best. Most people don't intentionally create problems. Assume the neighbor doesn't know about the annoyance when you speak to them. Your delivery will be dramatically kinder. And assume they will be cooperative.
Be Candid. If your neighbor does something that bothers you, let them know as soon as possible in factual, not emotional terms.
Be Calm. When discussing a point of contention, speak calmly, listen carefully and thank them for telling you how they feel. You don't have to agree or justify your behavior. If you don't react defensively, anger usually subsides, lines of communication remain open and resolution is possible.
Take Your Time. If caught in angry confrontation, take a break to reflect and finish the discussion when cooler heads prevail. Don't leave it hanging. Time and lack of resolution will intensify hostilities.
Best Advice of All. Treat others as you would like to be treated. This attitude will pave the way for good neighborliness. Love your neighbor as yourself.
Oh, I could go on and list 50 ways but like the song, you probably catch my drift. Being a good neighbor is worth the effort. If one of these ways doesn't get you there, try 50 more until one does.
Written by Richard Thompson
Friday, July 30, 2010
Five Tips for a Successful Home Remodel
As spring approaches, many home owners grow eager to start remodeling projects to update and refresh their surroundings. Before getting started, it's a good idea to hire a professional remodeler for a workable plan and better results, according to the National Association of Home Builders (NAHB).
"A professional remodeler knows how to translate a home owner's dreams and budget into a beautiful reality," said Donna Shirey, CGR, CAPS, CGP, President of Shirey Contracting in Issaquah, Wash. and 2010 chairman of NAHB Remodelers. "They have the expertise and skills to satisfy a customer while keeping the budget in check."
Here are five tips for planning a successful home remodel that you can enjoy for many years to come.
Compile a list of home remodeling ideas and draft a budget for the work.
You likely have some projects in mind, such as modernizing the bathroom, renovating the kitchen, replacing windows or repairing the roof. Prioritize your wish list: Maybe you don't have the budget for your dream remodel, but professional remodelers can maximize your dollars by doing the work in phases, suggesting budget-friendly products and materials, and implementing creative design solutions.
Look for a professional remodeler to help plan the project.
Start by searching NAHB's Directory of Professional Remodelers at nahb.org/remodel. You'll get a list of nearby remodelers to contact. Asking friends and neighbors for names of qualified remodelers will also help you find a match for your project.
Check the references and background of the remodeler.
After you start speaking with remodelers and find one or two who match your project's needs, be sure to conduct some background research by checking with the Better Business Bureau, talking to their references, and asking if they are a trade association member (such as NAHB Remodelers). Remodelers with these qualities tend to be more reliable, better educated, and more likely to stay on top of construction and design trends.
Agree on a contract.
Talk over the details of the home remodeling project and begin reviewing the contract. You'll want to check the remodelers' insurance coverage, ask about any warranties on their work, know who is responsible for obtaining any building permits, and understand the process for making any change orders after the contract is signed. Make sure that you and your remodeler see eye to eye before you sign on the dotted line.
Take advantage of the energy efficiency tax credits.
If your remodel includes replacing windows or doors, adding insulation, installing new roofing, upgrading heating or air-conditioning units, updating the water heater, or installing energy generating products (such as solar panels, heat pumps, or wind turbines) then you can take advantage of federal energy efficiency tax credits through 2010 that will help defray costs and maximize your remodeling budget while reducing home energy bills. Written by Realty Times Staff
"A professional remodeler knows how to translate a home owner's dreams and budget into a beautiful reality," said Donna Shirey, CGR, CAPS, CGP, President of Shirey Contracting in Issaquah, Wash. and 2010 chairman of NAHB Remodelers. "They have the expertise and skills to satisfy a customer while keeping the budget in check."
Here are five tips for planning a successful home remodel that you can enjoy for many years to come.
Compile a list of home remodeling ideas and draft a budget for the work.
You likely have some projects in mind, such as modernizing the bathroom, renovating the kitchen, replacing windows or repairing the roof. Prioritize your wish list: Maybe you don't have the budget for your dream remodel, but professional remodelers can maximize your dollars by doing the work in phases, suggesting budget-friendly products and materials, and implementing creative design solutions.
Look for a professional remodeler to help plan the project.
Start by searching NAHB's Directory of Professional Remodelers at nahb.org/remodel. You'll get a list of nearby remodelers to contact. Asking friends and neighbors for names of qualified remodelers will also help you find a match for your project.
Check the references and background of the remodeler.
After you start speaking with remodelers and find one or two who match your project's needs, be sure to conduct some background research by checking with the Better Business Bureau, talking to their references, and asking if they are a trade association member (such as NAHB Remodelers). Remodelers with these qualities tend to be more reliable, better educated, and more likely to stay on top of construction and design trends.
Agree on a contract.
Talk over the details of the home remodeling project and begin reviewing the contract. You'll want to check the remodelers' insurance coverage, ask about any warranties on their work, know who is responsible for obtaining any building permits, and understand the process for making any change orders after the contract is signed. Make sure that you and your remodeler see eye to eye before you sign on the dotted line.
Take advantage of the energy efficiency tax credits.
If your remodel includes replacing windows or doors, adding insulation, installing new roofing, upgrading heating or air-conditioning units, updating the water heater, or installing energy generating products (such as solar panels, heat pumps, or wind turbines) then you can take advantage of federal energy efficiency tax credits through 2010 that will help defray costs and maximize your remodeling budget while reducing home energy bills. Written by Realty Times Staff
Wednesday, July 28, 2010
Pre-Qualifying for a Mortgage
One of the first steps to take as a potential home buyer is to get pre-qualified for a loan. This step helps both you and your lender learn just how much home you can afford. And you should begin this process before you even start looking for a home.
According to the Federal Housing Administration (FHA), their pre-qualification essentials include:
Having a steady employment history, at least two years with the same employer.
Consistent or increasing income over the past two years.
Credit report should be in good standing with less than two thirty day late payments in the past two years.
Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
Any foreclosure must be at least three years old with good credit for the past three years.
Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
Other lenders' ideas regarding pre-qualification are all similar to those outlined above. A mortgage lender will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.
Why is this important? In recent years there has been a “mortgage crisis,” where the industry was rampant with fraud and with loans that put homeowners into situations they could not afford. As payments rose, homeowners found themselves unable to meet their monthly obligations. According to Realtytrac.com and their U.S. Foreclosure Market Report, in January 2010, one in every 409 households in the country had received a foreclosure filing.
Since pre-qualification for a home loan typically costs you nothing, but gives you both a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment, you can hardly wait to take this step.
What if the home you want is out of your reach? Experts recommend reducing your debt and saving up a larger amount for your down payment. Let's say your dream home is $225,000, but you only qualify for a $180,000 loan. If you have a downpayment of $45,000, then you are ready to make a move!
During the pre-qualification process, you will be expected to provide the following information:
your gross monthly income
your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)
The lender will be looking to see that your debt to income is below about 40 percent, and the lower the better. So, if you are looking to buy in the near future, be sure to talk to your lender soon!
Written by Carla L. Davis
According to the Federal Housing Administration (FHA), their pre-qualification essentials include:
Having a steady employment history, at least two years with the same employer.
Consistent or increasing income over the past two years.
Credit report should be in good standing with less than two thirty day late payments in the past two years.
Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
Any foreclosure must be at least three years old with good credit for the past three years.
Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
Other lenders' ideas regarding pre-qualification are all similar to those outlined above. A mortgage lender will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.
Why is this important? In recent years there has been a “mortgage crisis,” where the industry was rampant with fraud and with loans that put homeowners into situations they could not afford. As payments rose, homeowners found themselves unable to meet their monthly obligations. According to Realtytrac.com and their U.S. Foreclosure Market Report, in January 2010, one in every 409 households in the country had received a foreclosure filing.
Since pre-qualification for a home loan typically costs you nothing, but gives you both a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment, you can hardly wait to take this step.
What if the home you want is out of your reach? Experts recommend reducing your debt and saving up a larger amount for your down payment. Let's say your dream home is $225,000, but you only qualify for a $180,000 loan. If you have a downpayment of $45,000, then you are ready to make a move!
During the pre-qualification process, you will be expected to provide the following information:
your gross monthly income
your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)
The lender will be looking to see that your debt to income is below about 40 percent, and the lower the better. So, if you are looking to buy in the near future, be sure to talk to your lender soon!
Written by Carla L. Davis
Monday, July 26, 2010
Does Moving Up Make Sense?
The following are some questions that will help you decide whether you’re ready for a home that’s larger or in a more desirable location than your current one.
If you answer yes to most of the questions, it’s a sign that you may be ready to move.
Have you built substantial equity in your current home?
Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.
Has your income or financial situation improved?
If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.
Have you outgrown your neighborhood?
The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you’d like to be closer to your job, relatives, or live in a better school district.
Are there reasons why you can’t remodel or add on?
Sometimes you can create a bigger home by adding a new room or building up. But if your property isn’t large enough, your municipality doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.
Are you comfortable moving in the current housing market?
If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.
Are interest rates attractive?
A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.
Written by Realty Times Staff
If you answer yes to most of the questions, it’s a sign that you may be ready to move.
Have you built substantial equity in your current home?
Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.
Has your income or financial situation improved?
If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.
Have you outgrown your neighborhood?
The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you’d like to be closer to your job, relatives, or live in a better school district.
Are there reasons why you can’t remodel or add on?
Sometimes you can create a bigger home by adding a new room or building up. But if your property isn’t large enough, your municipality doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.
Are you comfortable moving in the current housing market?
If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.
Are interest rates attractive?
A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.
Written by Realty Times Staff
Friday, July 23, 2010
Top 10 Home Buying Mistakes.
Buying a home is perhaps the most arduous, expensive and, ultimately, valuable acquisition you'll ever complete
Just one mistake could mean disaster -- perhaps the worst mistake you'll ever make.
In order to avoid titanic trip ups during such a trying transaction, buyers should get to know the most common home buying blunders.
To know them is to avoid them.
Going solo: Buying a house is a complex transaction. It should be a team effort. You'll need a REALTOR®, lender, inspector, insurer, perhaps a lawyer, and other team members to help you through each step of the way. Team build before you start the search.
Love at first sight: If you believe in fairy tales you probably shouldn't be buying a home. You won't live happily ever after if you emote your way through the home buying process. Your home should fit your real needs, not your yen for drama. Buy a home that fits your budget and your lifestyle. Be sure the home is in a community and neighborhood you desire. Visit neighborhoods several times before you buy to check out schools, noise and traffic patterns.
'Loanless' shopping: Being pre-qualified gives you a general idea of how much you can afford to borrow. It's better to be pre-approved for a given loan. Sellers will take you more seriously. You'll stay on budget.
Overbuying: Home buyers buying more than they could truly afford, in part, led to the collapse of the housing market. Buy more than you can afford and your dream home will become the same nightmare. Analyze all your monthly costs including debts, food, transportation, entertainment, and savings. Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Don't forget to budget closing costs (often two to five percent of the home's purchase price), plus moving, redecorating and maintenance. Look ahead and allow for increases in ongoing expenses such as utilities and taxes.
Misplaced trust: You are engaged in what's likely your most valuable acquisition ever. It's a business transaction. Ask family, friends, co-workers, professionals and others you trust for referrals, but don't take their word for it. Vet your team members.
Accepting oral agreements: Get it in writing. The rate lock, the home inspection, disclosures, the contract. Always. Should a dispute arise, you've got the details documented.
Skipping the fine print: Understand what's really in any document before picking up a pen. Get documents in advance, take time to read them and ask questions. Get copies of your mortgage and closing papers a few days ahead of closing.
Forgetting or betting on resale: Avoid buying a home that costs 50 percent more than neighboring homes. Reconsider buying the most expensive home on the block. Neighbors' lower home values will weaken yours. Buy intending to flip your investment only to have the market fail means when it's time to sell your price may not cover your costs.
Making an unconditional offer: Protect yourself with these contingencies:
1. Mortgage financing: You may be preapproved but is the house? A formal appraisal confirms -- or not -- that there is sufficient value in the home to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.
2. Inspection: Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
3. Insurance: Confirm you can get adequate insurance coverage. In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.
Written by Broderick Perkins
Just one mistake could mean disaster -- perhaps the worst mistake you'll ever make.
In order to avoid titanic trip ups during such a trying transaction, buyers should get to know the most common home buying blunders.
To know them is to avoid them.
Going solo: Buying a house is a complex transaction. It should be a team effort. You'll need a REALTOR®, lender, inspector, insurer, perhaps a lawyer, and other team members to help you through each step of the way. Team build before you start the search.
Love at first sight: If you believe in fairy tales you probably shouldn't be buying a home. You won't live happily ever after if you emote your way through the home buying process. Your home should fit your real needs, not your yen for drama. Buy a home that fits your budget and your lifestyle. Be sure the home is in a community and neighborhood you desire. Visit neighborhoods several times before you buy to check out schools, noise and traffic patterns.
'Loanless' shopping: Being pre-qualified gives you a general idea of how much you can afford to borrow. It's better to be pre-approved for a given loan. Sellers will take you more seriously. You'll stay on budget.
Overbuying: Home buyers buying more than they could truly afford, in part, led to the collapse of the housing market. Buy more than you can afford and your dream home will become the same nightmare. Analyze all your monthly costs including debts, food, transportation, entertainment, and savings. Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Don't forget to budget closing costs (often two to five percent of the home's purchase price), plus moving, redecorating and maintenance. Look ahead and allow for increases in ongoing expenses such as utilities and taxes.
Misplaced trust: You are engaged in what's likely your most valuable acquisition ever. It's a business transaction. Ask family, friends, co-workers, professionals and others you trust for referrals, but don't take their word for it. Vet your team members.
Accepting oral agreements: Get it in writing. The rate lock, the home inspection, disclosures, the contract. Always. Should a dispute arise, you've got the details documented.
Skipping the fine print: Understand what's really in any document before picking up a pen. Get documents in advance, take time to read them and ask questions. Get copies of your mortgage and closing papers a few days ahead of closing.
Forgetting or betting on resale: Avoid buying a home that costs 50 percent more than neighboring homes. Reconsider buying the most expensive home on the block. Neighbors' lower home values will weaken yours. Buy intending to flip your investment only to have the market fail means when it's time to sell your price may not cover your costs.
Making an unconditional offer: Protect yourself with these contingencies:
1. Mortgage financing: You may be preapproved but is the house? A formal appraisal confirms -- or not -- that there is sufficient value in the home to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.
2. Inspection: Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
3. Insurance: Confirm you can get adequate insurance coverage. In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.
Written by Broderick Perkins
Wednesday, July 21, 2010
Top 10 Tips for Satging a Home
Provided your home-for-sale has the curb appeal to get potential buyers inside, keeping them inside for a further look requires a staging strategy that sticks the deal.
HGTV's FrontDoor.com offers what it considers the Top 10 tips that can turn a languishing listing to a multiple offer attraction.
Reclaim the yard. First impressions rule. Spruce up curb appeal by maintaining a clean yard, adding plants for a splash of color and applying a fresh coat of paint to the front door.
Let the foyer flourish. The home portal sets the tone for the entire home. Make the space up-to-date, well-maintained and eye catching -- top to bottom.
Back off beige. Don't let neutral colored walls dominate a room. Splashes of color liven up boring spaces. Throw pillows, artwork and fresh flowers add pops of color and personality.
Cure kitchen craziness. Consistency pleases. All countertops and cabinets should match. New hardware, a new backsplash and a thorough cleaning can transform a bleak kitchen into one with smiles.
Denude the dining room. De-cluttering and depersonalizing is the first rule of home staging. Homebuyers can have trouble envisioning themselves living in a home that's full of the seller's personal items.
Avoid focal point faux-pas. Highlight the great features in a home by positioning furniture to highlight them. Windows, fireplaces and other architectural details will be noticed by a buyer if they are emphasized in the home correctly.
Perk up the patio. The outdoor space is an extension of the home. Capture a higher selling price by cleaning and adding style to any outdoor space with furniture, lighting and accessories.
Master the master suite. The best approach to staging is often working with existing accessories. Using what is already in the room and repositioning the furniture will highlight the room’s best features.
Cure bathroom blues. Older vanities and dreadful wallpaper will make any bathroom feel outdated. Apply a fresh coat of neutral-hued paint and new hardware to modernize and brighten.
Repurpose extra rooms. The value of a space decreases when homebuyers see a room without direction (think part office, part playroom, part home gym). Though almost every homeowner is guilty of having a "junk room," take sure to stage each room with a clear purpose before putting the home on the market.
Written by Broderick Perkins
HGTV's FrontDoor.com offers what it considers the Top 10 tips that can turn a languishing listing to a multiple offer attraction.
Reclaim the yard. First impressions rule. Spruce up curb appeal by maintaining a clean yard, adding plants for a splash of color and applying a fresh coat of paint to the front door.
Let the foyer flourish. The home portal sets the tone for the entire home. Make the space up-to-date, well-maintained and eye catching -- top to bottom.
Back off beige. Don't let neutral colored walls dominate a room. Splashes of color liven up boring spaces. Throw pillows, artwork and fresh flowers add pops of color and personality.
Cure kitchen craziness. Consistency pleases. All countertops and cabinets should match. New hardware, a new backsplash and a thorough cleaning can transform a bleak kitchen into one with smiles.
Denude the dining room. De-cluttering and depersonalizing is the first rule of home staging. Homebuyers can have trouble envisioning themselves living in a home that's full of the seller's personal items.
Avoid focal point faux-pas. Highlight the great features in a home by positioning furniture to highlight them. Windows, fireplaces and other architectural details will be noticed by a buyer if they are emphasized in the home correctly.
Perk up the patio. The outdoor space is an extension of the home. Capture a higher selling price by cleaning and adding style to any outdoor space with furniture, lighting and accessories.
Master the master suite. The best approach to staging is often working with existing accessories. Using what is already in the room and repositioning the furniture will highlight the room’s best features.
Cure bathroom blues. Older vanities and dreadful wallpaper will make any bathroom feel outdated. Apply a fresh coat of neutral-hued paint and new hardware to modernize and brighten.
Repurpose extra rooms. The value of a space decreases when homebuyers see a room without direction (think part office, part playroom, part home gym). Though almost every homeowner is guilty of having a "junk room," take sure to stage each room with a clear purpose before putting the home on the market.
Written by Broderick Perkins
Monday, July 19, 2010
Common Buyers Fears.
Whether you are a first time home buyer or someone who is looking to move up or down, getting into the market can be a fearful time.
Here are some of the most common buyer fears:
Do I have enough money to buy a home?
To first step to finding out how much home you can truly afford is to get pre-qualified for a mortgage.
Also, take a step back and look at your finances. Ideally, you should have around 20 percent of the purchase price to put down. You should also have less than a 36 percent debt to income ratio. Be sure to include all of your monthly obligations in that equation, including student loans, child support payments, alimony, car payments, credit cards, etc.
Once you've looked at your savings, make sure that apart from your down payment, you'll have enough left over to pay closing costs, which include such things as attorney fees and transfer fees. The National Association of Realtors (NAR) reports that this amount averages between 2 and 7 percent of the home price. You also need to have money left as a cushion. What if unexpected repairs, either to your house or car, come up? What if you or a family member needs medical attention? Be sure that you have enough money leftover after the purchase to keep your life running smoothly.
Will I have buyer's remorse?
There is no such thing as the perfect house, so you should prepare yourself for some mild feelings of "what if". You may have to give up a few "wants" to get a few "needs" when you buy your next home. Or if this is your first purchase, you may have to buy something a little short of your dream house, and build equity in order to move up at a later date. Try not to lose sight of the big picture. This is a home that you own. You now get the benefits of tax breaks. You are building equity as you pay off the loan. And, hopefully, your home will appreciate in value over the coming years.
How can an unhandy owner handle repairs?
Before you swear off doing some of your own projects or repairs, know that everyone starts somewhere. Take a class at your local home improvement store, invest is a handyman's guide, or ask a friend that has already tiled their bathroom or fixed a leaky sink to come and give you some pointers.
Be prepared for repairs, maintenance, and updates. Even with a new home, there will be projects. Plan accordingly financially. And if all else fails, hire a professional.
What if I need to move?
Experts recommends that to build equity, you need to have owned your home for at least 3 to 5 years. The NAR recommends, "Look at your annual mortgage statement or call your lender to find out. Usually, you don't build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you've owned your home for five or more years, you may have significant, unrealized gains." If the time is less than five years, then you should be prepared to not make any money on the sale of your home, and even, to "lose" some -- in the form of closing costs.
Written by Carla L. Davis
Here are some of the most common buyer fears:
Do I have enough money to buy a home?
To first step to finding out how much home you can truly afford is to get pre-qualified for a mortgage.
Also, take a step back and look at your finances. Ideally, you should have around 20 percent of the purchase price to put down. You should also have less than a 36 percent debt to income ratio. Be sure to include all of your monthly obligations in that equation, including student loans, child support payments, alimony, car payments, credit cards, etc.
Once you've looked at your savings, make sure that apart from your down payment, you'll have enough left over to pay closing costs, which include such things as attorney fees and transfer fees. The National Association of Realtors (NAR) reports that this amount averages between 2 and 7 percent of the home price. You also need to have money left as a cushion. What if unexpected repairs, either to your house or car, come up? What if you or a family member needs medical attention? Be sure that you have enough money leftover after the purchase to keep your life running smoothly.
Will I have buyer's remorse?
There is no such thing as the perfect house, so you should prepare yourself for some mild feelings of "what if". You may have to give up a few "wants" to get a few "needs" when you buy your next home. Or if this is your first purchase, you may have to buy something a little short of your dream house, and build equity in order to move up at a later date. Try not to lose sight of the big picture. This is a home that you own. You now get the benefits of tax breaks. You are building equity as you pay off the loan. And, hopefully, your home will appreciate in value over the coming years.
How can an unhandy owner handle repairs?
Before you swear off doing some of your own projects or repairs, know that everyone starts somewhere. Take a class at your local home improvement store, invest is a handyman's guide, or ask a friend that has already tiled their bathroom or fixed a leaky sink to come and give you some pointers.
Be prepared for repairs, maintenance, and updates. Even with a new home, there will be projects. Plan accordingly financially. And if all else fails, hire a professional.
What if I need to move?
Experts recommends that to build equity, you need to have owned your home for at least 3 to 5 years. The NAR recommends, "Look at your annual mortgage statement or call your lender to find out. Usually, you don't build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you've owned your home for five or more years, you may have significant, unrealized gains." If the time is less than five years, then you should be prepared to not make any money on the sale of your home, and even, to "lose" some -- in the form of closing costs.
Written by Carla L. Davis
Friday, July 16, 2010
Five Key Areas to Pay Attention to When Buying a Home.
Looking for a new home can be exciting and frustrating. You can help alleviate the frustration by paying close attention to five key areas of the homes you're considering buying; it may save you money in the long run.
Don Walker is an inspector and owner of Ace Home Inspections. He says there are five areas in homes that he frequently reports problems with. They are electrical, foundation, plumbing, the attic, and landscaping.
Electrical
Walker says sometimes homeowners assume with newer homes that all will work just fine but that's often not the case. "I inspected a brand new house—four years old but the electrical was all done incorrectly," says Walker.
Having a complete home inspection will help to rule out any problems and point out any areas of concern. However, even as you're browsing homes, buyers can start to make note of the key areas that Walker mentioned, such as the foundation.
Foundation
Walker says a four-year-old home he inspected recently was already showing trouble signs which could result in a costly repair project. "It was a model home. What the homeowners did was plant trees for shade to make it look really nice, but they planted the wrong trees and they're going to crack the foundation and it's going to cut the property value down by $50,000," says Walker.
Walker says in the case of that home, the trees were causing micro-fractures in the tile in various locations of the home. "As you walk through the house, 21 feet in and 30 feet deep, there's just too much root invasion and it's going to ruin their tile," explains Walker.
He says some tell-tale signs with this home were the minor cracks in the foundation that were causing a lifting and separation of the foundation. Also, the windows were not opening and closing properly, "which means the foundation is moving."
However, just because you see cracks doesn't mean there is a foundation problem. "Most people don't understand that there are natural cracks in a house. That's why when we do an inspection report we have to look at it and say 'Okay, this is a typical crack and this one is an untypical crack,'" says Walker. He says some cracks may lead to other problems while others won't.
Plumbing
Walker says another big area of concern is the plumbing. It's an area that you can't always spot as easily but it can create expensive repairs if plumbing issues go either undetected or are not properly fixed. "Mold forms underneath sinks when people have a leak and they fix the pipe but they don't take care of the mold," says Walker.
He says things like caulking the sink can help prevent mold. "That's my number one thing I always find—bad sinks," says Walker.
He says that when you look at the sink, look behind it and most of the time you will discover a little crack. "What happens is, when you wash dishes or you wash your hands in the bathroom or the kitchen, the water gets in that crack and seeps down. Once the water gets behind the cabinet it's in a perfect position to create mold," says Walker. The dampness, humidity, and lack of light can turn that area beneath the sink into a mold-breeding ground.
Attic
"You can tell everything about the house by the attic," says Walker. He says other areas of the home can be covered up if a repair had occurred. For instance, if there was a leak and it damaged a wall, with the right contractors and repairs it can be made to look like new and, hopefully, function like new. But Walker says the attic is sort of the eyes to the soul of the home. "In the attic you can tell where all the damage has been," says Walker.
"If you're in a 20-year-old house and you see that the insulation is brand new, you know that there was a water leak because it had to be replaced," says Walker. He adds, "You can tell if the roof is good because you can look right at the wood."
Landscaping
"There should not be moisture or plants next to your house," says Walker. He says there should be a 12 inch barrier between the landscape and the house. Walker says otherwise you run the risk of having the foundation crack and affect the home. What happens is, as the landscape that is too close to the home is watered, the foundation and soil expand. Then, when no watering occurs, the foundation dries up and shrinks and this can cause it to crack.
Remember, knowledge is power, so learning about the home before you close the deal on it will keep you from making a mistake that may cost you extra out-of-pocket money later.
Written by Carla Davis
Don Walker is an inspector and owner of Ace Home Inspections. He says there are five areas in homes that he frequently reports problems with. They are electrical, foundation, plumbing, the attic, and landscaping.
Electrical
Walker says sometimes homeowners assume with newer homes that all will work just fine but that's often not the case. "I inspected a brand new house—four years old but the electrical was all done incorrectly," says Walker.
Having a complete home inspection will help to rule out any problems and point out any areas of concern. However, even as you're browsing homes, buyers can start to make note of the key areas that Walker mentioned, such as the foundation.
Foundation
Walker says a four-year-old home he inspected recently was already showing trouble signs which could result in a costly repair project. "It was a model home. What the homeowners did was plant trees for shade to make it look really nice, but they planted the wrong trees and they're going to crack the foundation and it's going to cut the property value down by $50,000," says Walker.
Walker says in the case of that home, the trees were causing micro-fractures in the tile in various locations of the home. "As you walk through the house, 21 feet in and 30 feet deep, there's just too much root invasion and it's going to ruin their tile," explains Walker.
He says some tell-tale signs with this home were the minor cracks in the foundation that were causing a lifting and separation of the foundation. Also, the windows were not opening and closing properly, "which means the foundation is moving."
However, just because you see cracks doesn't mean there is a foundation problem. "Most people don't understand that there are natural cracks in a house. That's why when we do an inspection report we have to look at it and say 'Okay, this is a typical crack and this one is an untypical crack,'" says Walker. He says some cracks may lead to other problems while others won't.
Plumbing
Walker says another big area of concern is the plumbing. It's an area that you can't always spot as easily but it can create expensive repairs if plumbing issues go either undetected or are not properly fixed. "Mold forms underneath sinks when people have a leak and they fix the pipe but they don't take care of the mold," says Walker.
He says things like caulking the sink can help prevent mold. "That's my number one thing I always find—bad sinks," says Walker.
He says that when you look at the sink, look behind it and most of the time you will discover a little crack. "What happens is, when you wash dishes or you wash your hands in the bathroom or the kitchen, the water gets in that crack and seeps down. Once the water gets behind the cabinet it's in a perfect position to create mold," says Walker. The dampness, humidity, and lack of light can turn that area beneath the sink into a mold-breeding ground.
Attic
"You can tell everything about the house by the attic," says Walker. He says other areas of the home can be covered up if a repair had occurred. For instance, if there was a leak and it damaged a wall, with the right contractors and repairs it can be made to look like new and, hopefully, function like new. But Walker says the attic is sort of the eyes to the soul of the home. "In the attic you can tell where all the damage has been," says Walker.
"If you're in a 20-year-old house and you see that the insulation is brand new, you know that there was a water leak because it had to be replaced," says Walker. He adds, "You can tell if the roof is good because you can look right at the wood."
Landscaping
"There should not be moisture or plants next to your house," says Walker. He says there should be a 12 inch barrier between the landscape and the house. Walker says otherwise you run the risk of having the foundation crack and affect the home. What happens is, as the landscape that is too close to the home is watered, the foundation and soil expand. Then, when no watering occurs, the foundation dries up and shrinks and this can cause it to crack.
Remember, knowledge is power, so learning about the home before you close the deal on it will keep you from making a mistake that may cost you extra out-of-pocket money later.
Written by Carla Davis
Wednesday, July 14, 2010
Buyers Should Be Careful About Credit Use Prior to Closing.
Buyers and their agents need to be aware that it is a very bad idea for buyers to increase their credit balances or to open new lines of credit shortly before they close escrow on their new home. More specifically, they should avoid such activity during the period of time between loan application and closing. This is because policies under Fannie Mae's Loan Quality Initiative, effective June 1, 2010, requires lenders to "refresh" a borrower's credit report just prior to closing.
Here's what happens: Bill and Betty Buyer are excited to make an offer on a home they just love. They realized that they are stretching, but the loan officer has pre-qualified them and is confident that they will receive full loan approval. When formal loan approval comes, then, they are ecstatic. In eager anticipation of closing, they visit their favorite furniture store and purchase (that is, charge) a new bedroom set, dining room furniture, and a sectional that will be perfect for the family room. It all adds up to a pretty penny, but they are confident that they will be able to pay it off in a timely manner. Things are going well at work. What could go wrong?
Well, here's one thing that could go wrong: Following FNMA's guidelines, the lender runs an updated credit report on Bill and Betty just before closing. With their newly-acquired credit balance, Bill and Betty no longer meet the required debt-to-income (DTI) ratio in order to qualify for their loan. The loan is pulled. Sadness reigns.
Fannie Mae's Loan Quality Initiative was introduced in a lender letter February 26, 2010. The letter noted that, during the past three years, the need had been highlighted "for an improved approach for working with lenders to deliver loans that meet Fannie Mae's underwriting and eligibility guidelines." In other words, the loans that had been delivered to Fannie Mae turned out too often not to meet Fannie Mae guidelines. Regrettably, this tended to be discovered well after Fannie Mae had purchased the loan. The idea of the Loan Quality Initiative, which was to become effective June 1, 2010, was to focus "on capturing critical loan data earlier in the process and validating it before, during, and immediately after loan delivery."
Borrower qualification was not the only issue of concern. Among others were determining owner occupancy, verification of social security numbers, a new policy on excluding certain entities from Fannie Mae loans, and updated quality-control requirements.
Technically speaking, the Fannie Mae guidelines do not require that updated ("refreshed") credit checks be performed for borrowers. Fannie Mae states that "It is the lender's responsibility to develop and implement its own business processes to support compliance with Fannie Mae's requirements on loans delivered to Fannie Mae." But, in the same memo, Fannie Mae does provide "tips for lenders to consider." One of those tips is "Refreshing a credit report just prior to closing."
Does anyone think that a lender who sells its loans to Fannie Mae is going to ignore such tips? Hardly.
The tips point out that not only might a refreshed credit report show newly-acquired debt (as in the example), but also that it may show new credit inquiries. "Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional credit resulting in repayment obligations." Don't go buy a new car until after you close.
Given recent history, it would be unreasonable to fault Fannie Mae for tightening up its procedures in every way possible. Buyers just need to remember that loan approval is based on statements of income and liabilities at the time of the loan application. If those factors change materially prior to closing, it is likely to be discovered and it could undo a deal.
Congratulations on your new home, and go ahead and buy new furniture; but wait until after escrow has closed.
Written by Bob Hunt
Here's what happens: Bill and Betty Buyer are excited to make an offer on a home they just love. They realized that they are stretching, but the loan officer has pre-qualified them and is confident that they will receive full loan approval. When formal loan approval comes, then, they are ecstatic. In eager anticipation of closing, they visit their favorite furniture store and purchase (that is, charge) a new bedroom set, dining room furniture, and a sectional that will be perfect for the family room. It all adds up to a pretty penny, but they are confident that they will be able to pay it off in a timely manner. Things are going well at work. What could go wrong?
Well, here's one thing that could go wrong: Following FNMA's guidelines, the lender runs an updated credit report on Bill and Betty just before closing. With their newly-acquired credit balance, Bill and Betty no longer meet the required debt-to-income (DTI) ratio in order to qualify for their loan. The loan is pulled. Sadness reigns.
Fannie Mae's Loan Quality Initiative was introduced in a lender letter February 26, 2010. The letter noted that, during the past three years, the need had been highlighted "for an improved approach for working with lenders to deliver loans that meet Fannie Mae's underwriting and eligibility guidelines." In other words, the loans that had been delivered to Fannie Mae turned out too often not to meet Fannie Mae guidelines. Regrettably, this tended to be discovered well after Fannie Mae had purchased the loan. The idea of the Loan Quality Initiative, which was to become effective June 1, 2010, was to focus "on capturing critical loan data earlier in the process and validating it before, during, and immediately after loan delivery."
Borrower qualification was not the only issue of concern. Among others were determining owner occupancy, verification of social security numbers, a new policy on excluding certain entities from Fannie Mae loans, and updated quality-control requirements.
Technically speaking, the Fannie Mae guidelines do not require that updated ("refreshed") credit checks be performed for borrowers. Fannie Mae states that "It is the lender's responsibility to develop and implement its own business processes to support compliance with Fannie Mae's requirements on loans delivered to Fannie Mae." But, in the same memo, Fannie Mae does provide "tips for lenders to consider." One of those tips is "Refreshing a credit report just prior to closing."
Does anyone think that a lender who sells its loans to Fannie Mae is going to ignore such tips? Hardly.
The tips point out that not only might a refreshed credit report show newly-acquired debt (as in the example), but also that it may show new credit inquiries. "Credit inquiries listed on the credit report should be investigated to determine whether the borrower did in fact open additional credit resulting in repayment obligations." Don't go buy a new car until after you close.
Given recent history, it would be unreasonable to fault Fannie Mae for tightening up its procedures in every way possible. Buyers just need to remember that loan approval is based on statements of income and liabilities at the time of the loan application. If those factors change materially prior to closing, it is likely to be discovered and it could undo a deal.
Congratulations on your new home, and go ahead and buy new furniture; but wait until after escrow has closed.
Written by Bob Hunt
Monday, July 12, 2010
Home Warranty FAQ's
Home warranties are on the rise. Let's take a moment to look at some of the most common questions regarding these products.
What is a home warranty?
A home warranty is a residential service contract giving the homeowner repair and replacement coverage for major operating systems and appliances in a home. These repairs must be due to wear and tear, and not negligence or damage.
How can you benefit from a home warranty?
Repairs to homes are inevitable. And while homeowners cross their fingers in hopes that these repairs are relatively inexpensive, what if an entire system needs replaced, and you are left staring at a bill with a few too many zeros? A home warranty can offer you some level of protection.
Your home warranty plan also provides you with a selected network of professionals from which to choose. Many homeowners prefer having a list to choose from instead of taking a guess at which repair company will be reliable.
According to the Service Contract Industry Council (SCIC), a home warranty, also called a home service contract, offers many benefits to buyers and sellers, including:
Repair or replacement coverage of most major appliances and home systems including heating, plumbing, and electrical;
Toll-free access to technical support and prequalified repair professionals;
Comfort for new owners and protection for sellers while their property is on the market;
Optional coverage for structural components such as roofs; recreational equipment such as swimming pools; etc.
Ability to transfer the contract from homeowner to buyer.
What are the average costs of a home warranty? MSN Money says you will be looking to spend somewhere from $250 to $600. And then expect to spend from $25 to $75 for each service visit.
What isn't covered?
According to The Home Warranty Review, you should make sure you get any repairs approved by your warranty company prior to calling a repair company. This will help to ensure you are reimbursed. Keep in mind that pre-existing conditions, improperly installed or mismatched equipment, and poorly maintained systems are not usually covered.
Warranties also do not cover "acts of God." This means the pet damage, the graffiti, and the lightning strike are your own responsibility.
Keep in mind, as well, that items "outside the perimeter" of your home may also be off limits. The Review writes, "Some people are surprised to learn that the plumbing leak in the yard is not covered."
How have home warranty changed in our current economy?
According to the SCIC director, Timonty Meenan, there was a "significant increase in home warranty contract renewals in 2009. Existing homeowners fueled the increase over the previous year, while sales by real estate professionals to home sellers and buyers held nearly steady."
Florida broker/owner Ed Smith has seen a jump in home warranties sales over the past five years, noting, "buyers and sellers have come to understand the benefits of home warranties and there are plenty of customer testimonials demonstrating their value. It's both a good marketing tool for selling and good protection policy for buyers and sellers."
How do I choose a company?
MSN Money reporter, Liz Pulliam Westom, gives you three helpful tips.
Find out which government agency, if any, regulates home warranty companies in your state and check its complaint records.
If regulation is loose or nonexistent, pick a company that has a long track history in your state and solid financials. (If the company is public, you can ask for an annual report to see if its home warranty operations are making a profit.)
If someone else -- the home seller or a real estate agent -- is paying for the policy, insist that the warranty premium be paid in full for the term of the agreement before the sale closes. Check to be sure the amount is listed on the final escrow statement.
A final tip for anyone considering a home warranty, is to read carefully. A warranty is a contractual agreement, and like all contracts, you should know what you are signing. Warranties can vary in price and coverage depending on the company you choose, so be sure to shop around before signing on the dotted line.
Written by Carla Hill
What is a home warranty?
A home warranty is a residential service contract giving the homeowner repair and replacement coverage for major operating systems and appliances in a home. These repairs must be due to wear and tear, and not negligence or damage.
How can you benefit from a home warranty?
Repairs to homes are inevitable. And while homeowners cross their fingers in hopes that these repairs are relatively inexpensive, what if an entire system needs replaced, and you are left staring at a bill with a few too many zeros? A home warranty can offer you some level of protection.
Your home warranty plan also provides you with a selected network of professionals from which to choose. Many homeowners prefer having a list to choose from instead of taking a guess at which repair company will be reliable.
According to the Service Contract Industry Council (SCIC), a home warranty, also called a home service contract, offers many benefits to buyers and sellers, including:
Repair or replacement coverage of most major appliances and home systems including heating, plumbing, and electrical;
Toll-free access to technical support and prequalified repair professionals;
Comfort for new owners and protection for sellers while their property is on the market;
Optional coverage for structural components such as roofs; recreational equipment such as swimming pools; etc.
Ability to transfer the contract from homeowner to buyer.
What are the average costs of a home warranty? MSN Money says you will be looking to spend somewhere from $250 to $600. And then expect to spend from $25 to $75 for each service visit.
What isn't covered?
According to The Home Warranty Review, you should make sure you get any repairs approved by your warranty company prior to calling a repair company. This will help to ensure you are reimbursed. Keep in mind that pre-existing conditions, improperly installed or mismatched equipment, and poorly maintained systems are not usually covered.
Warranties also do not cover "acts of God." This means the pet damage, the graffiti, and the lightning strike are your own responsibility.
Keep in mind, as well, that items "outside the perimeter" of your home may also be off limits. The Review writes, "Some people are surprised to learn that the plumbing leak in the yard is not covered."
How have home warranty changed in our current economy?
According to the SCIC director, Timonty Meenan, there was a "significant increase in home warranty contract renewals in 2009. Existing homeowners fueled the increase over the previous year, while sales by real estate professionals to home sellers and buyers held nearly steady."
Florida broker/owner Ed Smith has seen a jump in home warranties sales over the past five years, noting, "buyers and sellers have come to understand the benefits of home warranties and there are plenty of customer testimonials demonstrating their value. It's both a good marketing tool for selling and good protection policy for buyers and sellers."
How do I choose a company?
MSN Money reporter, Liz Pulliam Westom, gives you three helpful tips.
Find out which government agency, if any, regulates home warranty companies in your state and check its complaint records.
If regulation is loose or nonexistent, pick a company that has a long track history in your state and solid financials. (If the company is public, you can ask for an annual report to see if its home warranty operations are making a profit.)
If someone else -- the home seller or a real estate agent -- is paying for the policy, insist that the warranty premium be paid in full for the term of the agreement before the sale closes. Check to be sure the amount is listed on the final escrow statement.
A final tip for anyone considering a home warranty, is to read carefully. A warranty is a contractual agreement, and like all contracts, you should know what you are signing. Warranties can vary in price and coverage depending on the company you choose, so be sure to shop around before signing on the dotted line.
Written by Carla Hill
Saturday, July 10, 2010
Choosing The Best Home
After weeks of searching for your next home, you now have it narrowed down to two great options. One offers a shorter commute, but the other offers more square footage for your growing family. How can you make the best choice?
There are several strategies you can employ in your decision making process. Above all, be confident in your decision making abilities. "The fear of making serious decisions is a new kind of fear, called decidophobia," proclaimed by Walter Kaufmann at Princeton University in 1973. Worry and procrastination do nothing to aid the process, so buyers, be confident that you will make a sound choice.
Pro/Con list: In this case, you are deciding between two houses as your prospective home. For each house, divide a sheet of paper into two columns: pro and con. Be realistic about what the positive and negative factors would be for each purchase. Considerations could include: price, location, schools, repairs, square footage, floorplans, street noise, neighborhood value, comparables, and gut intuition.
Brainstorm scenarios: Chances are, whatever house you decided upon will be your residence for many years to come. Try and think ahead to situations that may arise in the future, and how each residence would affect those situations. Do you have aging parents that could move in? If so, then which house provides the best floorplan for this? Planning on having children? Check out ratings on local schools.
Do the math: Business executives might call this the "cost/benefit analysis." Buying a home is a huge financial decision, and while personal preferences (e.g. location, schools, square footage) all come into play in homebuying, many purchases are based on what makes the best financial sense. Discuss numbers and neighborhood comparables with your real estate agent. One home may be a smaller dollar amount, but the other may be a better deal in the long run. Some neighborhoods are up and coming, while others have come and gone. Are either homes overpriced or underpriced for their neighborhoods? Do either homes need repairs or updates?
Priorities list: Yes, you know you want the pool, landscaping, granite counters, close proximity to work, extra bath, and the list goes on. But when push comes to shove, and it might, what items are your priority, really? For some, driving a longer commute is worth having a larger house or a cheaper price. For other buyers, the exact opposite can be true.
Change perspectives: Sometimes you simply must step out of your own shoes to see a situation clearly. There are many different ways to approach this decision. You can look at it from an emotional point of view (which home do you love), an intuitive view (what does your gut tell you), and even a devil's advocate view (what if). Experts consider this the "Six Thinking Hats," introduced by Edward de Bono in a book of the same title, where you put on six different hats during a decision making process. Try and see the buying process from the perspective of your spouse, your children, friends, and even your worst enemy.
Finally, be realistic in your own abilities. While the final decision rests on your capable shoulders, you should rely on the professionals that are by your side. This includes your agent, lender, attorney, and even your family. And while you are the final say, remember that you have a team to help give you information to fuel that sound decision.
Written by Carla Hill
There are several strategies you can employ in your decision making process. Above all, be confident in your decision making abilities. "The fear of making serious decisions is a new kind of fear, called decidophobia," proclaimed by Walter Kaufmann at Princeton University in 1973. Worry and procrastination do nothing to aid the process, so buyers, be confident that you will make a sound choice.
Pro/Con list: In this case, you are deciding between two houses as your prospective home. For each house, divide a sheet of paper into two columns: pro and con. Be realistic about what the positive and negative factors would be for each purchase. Considerations could include: price, location, schools, repairs, square footage, floorplans, street noise, neighborhood value, comparables, and gut intuition.
Brainstorm scenarios: Chances are, whatever house you decided upon will be your residence for many years to come. Try and think ahead to situations that may arise in the future, and how each residence would affect those situations. Do you have aging parents that could move in? If so, then which house provides the best floorplan for this? Planning on having children? Check out ratings on local schools.
Do the math: Business executives might call this the "cost/benefit analysis." Buying a home is a huge financial decision, and while personal preferences (e.g. location, schools, square footage) all come into play in homebuying, many purchases are based on what makes the best financial sense. Discuss numbers and neighborhood comparables with your real estate agent. One home may be a smaller dollar amount, but the other may be a better deal in the long run. Some neighborhoods are up and coming, while others have come and gone. Are either homes overpriced or underpriced for their neighborhoods? Do either homes need repairs or updates?
Priorities list: Yes, you know you want the pool, landscaping, granite counters, close proximity to work, extra bath, and the list goes on. But when push comes to shove, and it might, what items are your priority, really? For some, driving a longer commute is worth having a larger house or a cheaper price. For other buyers, the exact opposite can be true.
Change perspectives: Sometimes you simply must step out of your own shoes to see a situation clearly. There are many different ways to approach this decision. You can look at it from an emotional point of view (which home do you love), an intuitive view (what does your gut tell you), and even a devil's advocate view (what if). Experts consider this the "Six Thinking Hats," introduced by Edward de Bono in a book of the same title, where you put on six different hats during a decision making process. Try and see the buying process from the perspective of your spouse, your children, friends, and even your worst enemy.
Finally, be realistic in your own abilities. While the final decision rests on your capable shoulders, you should rely on the professionals that are by your side. This includes your agent, lender, attorney, and even your family. And while you are the final say, remember that you have a team to help give you information to fuel that sound decision.
Written by Carla Hill
Wednesday, July 7, 2010
Debunking Credit Score Myths
In March, ING Direct bank commissioned Harris Interactive to conduct an online survey of 1,042 parents of children age 17 years and younger.
The survey discovered more than half, 56 percent, of those surveyed thought bouncing a check or paying a fee for having non-sufficient funds in their bank account would reduce their credit scores.
Wrong.
Credit reports typically don't include information about checking and debit accounts, nor non-sufficient fund issues unless they somehow impact an attached credit account.
Also one in five (21 percent) thought checking their credit scores would hurt credit scores. Nearly as many (18 percent) thought accessing their credit report, would hurt their credit scores.
Wrong and wrong.
Obtaining your credit report and credit score has no bearing on your credit standing.
In fact, you should check your credit reports regularly. Every year, federal regulations allow you three free credit reports (ONLY through AnnualCreditReport.com), one each from the three credit reporting agencies, Equifax, Experian and TransUnion.
If you visit some other sound-alike, come-on web site, instead of AnnualCreditReport.com, expect to pay for credit services you may not need in exchange for that so-called "free" report.
From AnnualCreditReport.com, get the three free reports all at once if you haven't seen them for years. Otherwise get one from a different company every four months to regularly monitor your credit report for errors, identity theft, black marks you may need to work on and other issues.
For your credit score it will cost you a nominal fee (it's worth it) paid to each of the three credit reporting agencies.
A credit score -- virtually always examined by lenders when you apply for a mortgage, credit card, car loan, other credit, even homeowners insurance and other financial accounts -- is a numerical rendition of your creditworthiness.
Scores range from about 300 to about 850. The higher the number the more likely you are to get credit and the more likely you are to get cheap credit. Your score should be at 760 or above to land the best interest rate, according to FICO, a leading credit scoring system provider.
Debunking the myths
To help debunk credit score myths, misunderstandings, misdirection and to stop financial behaviors that could be passed onto future generations, ING Direct and Experian developed five tips to help parents separate fact from fiction.
Practice what you preach. Simple financial behaviors such as paying your bills on time will keep your credit in good standing and will allow you to obtain better interest rates on big asset purchases like a house or car. Lead by example.
Start early. When you kids start to ask you to buy things for them, it's time for the "money talk." Later, introduce more complex credit topics with stern statements like "credit is not free money." Talk about interest rates, paying on time, paying off balances and saving money.
Make credit a family affair. Let children in on household financial discussions that reveal the true cost of necessities. Sit them at the table during budget and bill paying sessions. Explain the fallout from making poor financial decisions.
Set family financial goals. Teach children how money doesn't grow on trees. Show them how to save for things they desire rather than accessing credit to spend money they do not have. It's a way to encourage your children to set financial goals and work towards achieving them. Children savor things more when they put in the time and effort to purchase items with their hard earned cash.
Explain the difference. Talk to children about the differences between needs versus wants, especially at times when they want you to give into impulse buying. During grocery store visits, show kids the difference in prices between name brands and generic brands as a way to expand on this lesson.
Written by Broderick Perkins
The survey discovered more than half, 56 percent, of those surveyed thought bouncing a check or paying a fee for having non-sufficient funds in their bank account would reduce their credit scores.
Wrong.
Credit reports typically don't include information about checking and debit accounts, nor non-sufficient fund issues unless they somehow impact an attached credit account.
Also one in five (21 percent) thought checking their credit scores would hurt credit scores. Nearly as many (18 percent) thought accessing their credit report, would hurt their credit scores.
Wrong and wrong.
Obtaining your credit report and credit score has no bearing on your credit standing.
In fact, you should check your credit reports regularly. Every year, federal regulations allow you three free credit reports (ONLY through AnnualCreditReport.com), one each from the three credit reporting agencies, Equifax, Experian and TransUnion.
If you visit some other sound-alike, come-on web site, instead of AnnualCreditReport.com, expect to pay for credit services you may not need in exchange for that so-called "free" report.
From AnnualCreditReport.com, get the three free reports all at once if you haven't seen them for years. Otherwise get one from a different company every four months to regularly monitor your credit report for errors, identity theft, black marks you may need to work on and other issues.
For your credit score it will cost you a nominal fee (it's worth it) paid to each of the three credit reporting agencies.
A credit score -- virtually always examined by lenders when you apply for a mortgage, credit card, car loan, other credit, even homeowners insurance and other financial accounts -- is a numerical rendition of your creditworthiness.
Scores range from about 300 to about 850. The higher the number the more likely you are to get credit and the more likely you are to get cheap credit. Your score should be at 760 or above to land the best interest rate, according to FICO, a leading credit scoring system provider.
Debunking the myths
To help debunk credit score myths, misunderstandings, misdirection and to stop financial behaviors that could be passed onto future generations, ING Direct and Experian developed five tips to help parents separate fact from fiction.
Practice what you preach. Simple financial behaviors such as paying your bills on time will keep your credit in good standing and will allow you to obtain better interest rates on big asset purchases like a house or car. Lead by example.
Start early. When you kids start to ask you to buy things for them, it's time for the "money talk." Later, introduce more complex credit topics with stern statements like "credit is not free money." Talk about interest rates, paying on time, paying off balances and saving money.
Make credit a family affair. Let children in on household financial discussions that reveal the true cost of necessities. Sit them at the table during budget and bill paying sessions. Explain the fallout from making poor financial decisions.
Set family financial goals. Teach children how money doesn't grow on trees. Show them how to save for things they desire rather than accessing credit to spend money they do not have. It's a way to encourage your children to set financial goals and work towards achieving them. Children savor things more when they put in the time and effort to purchase items with their hard earned cash.
Explain the difference. Talk to children about the differences between needs versus wants, especially at times when they want you to give into impulse buying. During grocery store visits, show kids the difference in prices between name brands and generic brands as a way to expand on this lesson.
Written by Broderick Perkins
Monday, July 5, 2010
Transform Your Home With Home Staging
We know that dressing for success is important when it comes to establishing an image. Well, when it comes to selling your home, it's important to dress it up too. Staging homes has become increasingly more popular because it works.
I think of it like setting the stage for a theatrical production. The director wants everything on the set to have a specific place. Using a critical eye, the director makes sure that the set ambience (furniture, decorations, and even open space) is going to convey the exact feel she intends. That's what staging can do for your potential buyers - if done correctly.
Staging a home can allow buyers to understand how to best use the space in a particular room. It de-clutters a home. Think about those pictures of model homes … you never see all the electrical cord chaos in an office, right? Instead, you see a single computer (likely an Apple because they look cool) atop the desk. There might also be a big window offering plenty of natural light and that has an unobstructed view to the outside grassy hills. Nearby, a Feng Shui combination of flowing water, rocks, and glass in some sort of ornamental water fountain might sit on a countertop. A filing cabinet that isn't overstuffed with files takes up a small area of the room. And, yes, it's important that it really not be overflowing. Buyers will snoop around … in closets and cabinets. Anything that looks like it's been stuffed to capacity leaves an uneasy feeling for many buyers. But this look is streamlined. The emotional feeling conveys a non-verbal message of accomplishment, success, and an attitude that shouts, 'Wow! I can get a lot done here!' Bingo. That's good staging. And, perhaps, the very thing that causes a buyer to make an offer.
You can hire an expert to stage your home. Your real estate agent will likely also have many valuable tips. And you can also start to do some things on your own. It's often said, "You don't stage a home the way you live in a home." But, sometimes a staged home looks so good (if it's practical) you might want to keep your home that way. I have seen amazing changes from home stagers…sometimes you don't even recognize the home! Debra Gould of Six Elements, a home staging company, says that staging your home can increase the sale of your home by $10,000 to $70,000. She also points out on her Web site that "One of the side benefits of home staging is that it helps you see your house as a real estate listing instead of your home." This gives you the chance to really think about the sale of your home from a buyer's perspective. If you're selling your long-time home, it might have been a while since you shopped for a home. When we live in our homes, we begin to see them through a single lens. When home staging is completed it can give your home a completely new look, transforming it into a home that others can see as theirs.
There are typically a few major tasks to act on first when it comes to staging. They are:
1. De-clutter: I know we all accumulate lots of clutter and then get used to living with it. But really, clutter is a big distraction for buyers. Often they simply can't imagine what the home would look like without all that clutter. So, make it easy for them. Start with a clutter-free home when you list it for sale.
2. De-Personalize: do you want buyers spending more time looking at your personal photos or your home? Easy answer…so, put away the photos and trinkets. Besides, you're moving…you need to pack them up anyway.
3. Deep clean: don't leave dirty floors, carpets, windows, hallways, railings, or floorboards. It's just too easy to lose a buyer's interest due to something that really is such an easy fix.
4. Lighten and brighten: dark and mood lighting can be good for your creative ambiance but light and bright is best for showing the home.
5. Keep traditional rooms traditional. Gould writes on her Web site that she has seen hundreds of homes where the dining room is not used for its original purpose. While that might work for the homeowner, Gould explains that buyers need to see it as a dining room or else they might be inclined to think there isn't one.
Doing just these five tips will help improve the look and feel of your home and increase the chance of buyers seeing their belongings and their family in your home—and that means you may be closer to getting and offer and, ultimately, a sale.
Written by Phoebe Chongchua
I think of it like setting the stage for a theatrical production. The director wants everything on the set to have a specific place. Using a critical eye, the director makes sure that the set ambience (furniture, decorations, and even open space) is going to convey the exact feel she intends. That's what staging can do for your potential buyers - if done correctly.
Staging a home can allow buyers to understand how to best use the space in a particular room. It de-clutters a home. Think about those pictures of model homes … you never see all the electrical cord chaos in an office, right? Instead, you see a single computer (likely an Apple because they look cool) atop the desk. There might also be a big window offering plenty of natural light and that has an unobstructed view to the outside grassy hills. Nearby, a Feng Shui combination of flowing water, rocks, and glass in some sort of ornamental water fountain might sit on a countertop. A filing cabinet that isn't overstuffed with files takes up a small area of the room. And, yes, it's important that it really not be overflowing. Buyers will snoop around … in closets and cabinets. Anything that looks like it's been stuffed to capacity leaves an uneasy feeling for many buyers. But this look is streamlined. The emotional feeling conveys a non-verbal message of accomplishment, success, and an attitude that shouts, 'Wow! I can get a lot done here!' Bingo. That's good staging. And, perhaps, the very thing that causes a buyer to make an offer.
You can hire an expert to stage your home. Your real estate agent will likely also have many valuable tips. And you can also start to do some things on your own. It's often said, "You don't stage a home the way you live in a home." But, sometimes a staged home looks so good (if it's practical) you might want to keep your home that way. I have seen amazing changes from home stagers…sometimes you don't even recognize the home! Debra Gould of Six Elements, a home staging company, says that staging your home can increase the sale of your home by $10,000 to $70,000. She also points out on her Web site that "One of the side benefits of home staging is that it helps you see your house as a real estate listing instead of your home." This gives you the chance to really think about the sale of your home from a buyer's perspective. If you're selling your long-time home, it might have been a while since you shopped for a home. When we live in our homes, we begin to see them through a single lens. When home staging is completed it can give your home a completely new look, transforming it into a home that others can see as theirs.
There are typically a few major tasks to act on first when it comes to staging. They are:
1. De-clutter: I know we all accumulate lots of clutter and then get used to living with it. But really, clutter is a big distraction for buyers. Often they simply can't imagine what the home would look like without all that clutter. So, make it easy for them. Start with a clutter-free home when you list it for sale.
2. De-Personalize: do you want buyers spending more time looking at your personal photos or your home? Easy answer…so, put away the photos and trinkets. Besides, you're moving…you need to pack them up anyway.
3. Deep clean: don't leave dirty floors, carpets, windows, hallways, railings, or floorboards. It's just too easy to lose a buyer's interest due to something that really is such an easy fix.
4. Lighten and brighten: dark and mood lighting can be good for your creative ambiance but light and bright is best for showing the home.
5. Keep traditional rooms traditional. Gould writes on her Web site that she has seen hundreds of homes where the dining room is not used for its original purpose. While that might work for the homeowner, Gould explains that buyers need to see it as a dining room or else they might be inclined to think there isn't one.
Doing just these five tips will help improve the look and feel of your home and increase the chance of buyers seeing their belongings and their family in your home—and that means you may be closer to getting and offer and, ultimately, a sale.
Written by Phoebe Chongchua
Friday, July 2, 2010
Five Key Areas to Pay Attention to When Buying a Home
Looking for a new home can be exciting and frustrating. You can help alleviate the frustration by paying close attention to five key areas of the homes you're considering buying; it may save you money in the long run.
Don Walker is an inspector and owner of Ace Home Inspections. He says there are five areas in homes that he frequently reports problems with. They are electrical, foundation, plumbing, the attic, and landscaping.
Electrical
Walker says sometimes homeowners assume with newer homes that all will work just fine but that's often not the case. "I inspected a brand new house—four years old but the electrical was all done incorrectly," says Walker.
Having a complete home inspection will help to rule out any problems and point out any areas of concern. However, even as you're browsing homes, buyers can start to make note of the key areas that Walker mentioned, such as the foundation.
Foundation
Walker says a four-year-old home he inspected recently was already showing trouble signs which could result in a costly repair project. "It was a model home. What the homeowners did was plant trees for shade to make it look really nice, but they planted the wrong trees and they're going to crack the foundation and it's going to cut the property value down by $50,000," says Walker.
Walker says in the case of that home, the trees were causing micro-fractures in the tile in various locations of the home. "As you walk through the house, 21 feet in and 30 feet deep, there's just too much root invasion and it's going to ruin their tile," explains Walker.
He says some tell-tale signs with this home were the minor cracks in the foundation that were causing a lifting and separation of the foundation. Also, the windows were not opening and closing properly, "which means the foundation is moving."
However, just because you see cracks doesn't mean there is a foundation problem. "Most people don't understand that there are natural cracks in a house. That's why when we do an inspection report we have to look at it and say 'Okay, this is a typical crack and this one is an untypical crack,'" says Walker. He says some cracks may lead to other problems while others won't.
Plumbing
Walker says another big area of concern is the plumbing. It's an area that you can't always spot as easily but it can create expensive repairs if plumbing issues go either undetected or are not properly fixed. "Mold forms underneath sinks when people have a leak and they fix the pipe but they don't take care of the mold," says Walker.
He says things like caulking the sink can help prevent mold. "That's my number one thing I always find—bad sinks," says Walker.
He says that when you look at the sink, look behind it and most of the time you will discover a little crack. "What happens is, when you wash dishes or you wash your hands in the bathroom or the kitchen, the water gets in that crack and seeps down. Once the water gets behind the cabinet it's in a perfect position to create mold," says Walker. The dampness, humidity, and lack of light can turn that area beneath the sink into a mold-breeding ground.
Attic
"You can tell everything about the house by the attic," says Walker. He says other areas of the home can be covered up if a repair had occurred. For instance, if there was a leak and it damaged a wall, with the right contractors and repairs it can be made to look like new and, hopefully, function like new. But Walker says the attic is sort of the eyes to the soul of the home. "In the attic you can tell where all the damage has been," says Walker.
"If you're in a 20-year-old house and you see that the insulation is brand new, you know that there was a water leak because it had to be replaced," says Walker. He adds, "You can tell if the roof is good because you can look right at the wood."
Landscaping
"There should not be moisture or plants next to your house," says Walker. He says there should be a 12 inch barrier between the landscape and the house. Walker says otherwise you run the risk of having the foundation crack and affect the home. What happens is, as the landscape that is too close to the home is watered, the foundation and soil expand. Then, when no watering occurs, the foundation dries up and shrinks and this can cause it to crack.
Remember, knowledge is power, so learning about the home before you close the deal on it will keep you from making a mistake that may cost you extra out-of-pocket money later.
Written by Carla Davis
Don Walker is an inspector and owner of Ace Home Inspections. He says there are five areas in homes that he frequently reports problems with. They are electrical, foundation, plumbing, the attic, and landscaping.
Electrical
Walker says sometimes homeowners assume with newer homes that all will work just fine but that's often not the case. "I inspected a brand new house—four years old but the electrical was all done incorrectly," says Walker.
Having a complete home inspection will help to rule out any problems and point out any areas of concern. However, even as you're browsing homes, buyers can start to make note of the key areas that Walker mentioned, such as the foundation.
Foundation
Walker says a four-year-old home he inspected recently was already showing trouble signs which could result in a costly repair project. "It was a model home. What the homeowners did was plant trees for shade to make it look really nice, but they planted the wrong trees and they're going to crack the foundation and it's going to cut the property value down by $50,000," says Walker.
Walker says in the case of that home, the trees were causing micro-fractures in the tile in various locations of the home. "As you walk through the house, 21 feet in and 30 feet deep, there's just too much root invasion and it's going to ruin their tile," explains Walker.
He says some tell-tale signs with this home were the minor cracks in the foundation that were causing a lifting and separation of the foundation. Also, the windows were not opening and closing properly, "which means the foundation is moving."
However, just because you see cracks doesn't mean there is a foundation problem. "Most people don't understand that there are natural cracks in a house. That's why when we do an inspection report we have to look at it and say 'Okay, this is a typical crack and this one is an untypical crack,'" says Walker. He says some cracks may lead to other problems while others won't.
Plumbing
Walker says another big area of concern is the plumbing. It's an area that you can't always spot as easily but it can create expensive repairs if plumbing issues go either undetected or are not properly fixed. "Mold forms underneath sinks when people have a leak and they fix the pipe but they don't take care of the mold," says Walker.
He says things like caulking the sink can help prevent mold. "That's my number one thing I always find—bad sinks," says Walker.
He says that when you look at the sink, look behind it and most of the time you will discover a little crack. "What happens is, when you wash dishes or you wash your hands in the bathroom or the kitchen, the water gets in that crack and seeps down. Once the water gets behind the cabinet it's in a perfect position to create mold," says Walker. The dampness, humidity, and lack of light can turn that area beneath the sink into a mold-breeding ground.
Attic
"You can tell everything about the house by the attic," says Walker. He says other areas of the home can be covered up if a repair had occurred. For instance, if there was a leak and it damaged a wall, with the right contractors and repairs it can be made to look like new and, hopefully, function like new. But Walker says the attic is sort of the eyes to the soul of the home. "In the attic you can tell where all the damage has been," says Walker.
"If you're in a 20-year-old house and you see that the insulation is brand new, you know that there was a water leak because it had to be replaced," says Walker. He adds, "You can tell if the roof is good because you can look right at the wood."
Landscaping
"There should not be moisture or plants next to your house," says Walker. He says there should be a 12 inch barrier between the landscape and the house. Walker says otherwise you run the risk of having the foundation crack and affect the home. What happens is, as the landscape that is too close to the home is watered, the foundation and soil expand. Then, when no watering occurs, the foundation dries up and shrinks and this can cause it to crack.
Remember, knowledge is power, so learning about the home before you close the deal on it will keep you from making a mistake that may cost you extra out-of-pocket money later.
Written by Carla Davis
Thursday, July 1, 2010
How To Make Buyers Want Your Home
You love your home but when it comes time to sell, you have to share the love. In the other words, you have to make your home be seen in the eyes of potential buyers as their home. That can be tricky.
But if you do some of the basic things such as clearing clutter, creating light, bright, and open space, adding curb appeal, removing personal items (family photos, trinkets), fresh paint, and clean or new carpet -- you'll be on your way to attracting serious buyers.
Let's look at specific areas that create widespread appeal inside the home.
Here are some of the top areas to improve: countertops, flooring, built-in furniture, and old-style attached fixtures such as those big sheet mirrors in the bathroom. However, when making these improvements, there's one important consideration.
Functionality is the greatest concern cited by homeowners, according to the latest poll conducted by the National Association of the Remodeling Industry (NARI).
"The functionality of a home is very important, especially over the long term, as many homeowners in this economy have opted for remodeling over moving to new homes," says NARI National President Paul Zuch, CR, president of Capital Improvements.
So let's explore the areas I mentioned earlier and see how improving these items can lead to greater interest in your home. Countertops are fixtures in homes. So making sure that you select the best material to endure the daily wear and tear is important. If we're talking about the kitchen, for instance, there are many options: granite, tile, recycled glass (for a green option), solid steel, composite stone, butcher block, laminate, and even concrete. Yes, that last one sounds surprising but concrete is being used for countertops and laminate isn't necessarily trying to mimic other materials anymore. Instead, homeowners are embracing laminate's own unique high-tech look. The popular trend is a mixing of several styles creating a blended custom look for the kitchen. But in the end, functionality will rate highest for potential buyers. All of the countertop materials mentioned above have advantages and disadvantages when it comes to maintenance and usage; make sure you completely research the material before selecting it for your home.
Fixtures are an important area to improve. "People know a lot more about design," Laura Kirar from Larua Kirar-TRU Design told the Alexandria Times. These days, quirky, eclectic styles from international trends are becoming more prevalent in the United States. However, push the envelope too far with quirkiness and you just might lose a potential buyer. What's important to know is that buyers are paying attention to fixtures. If you have damaged or worn out faucets or lighting, it's best to replace them before showing your home. Also, replacing those big, nothing-special sheet mirrors with some framed mirrors can add a unique look without costing very much. While you don't want to have to spend a lot just before you sell your home, remember that these seemingly small items can have a great impact on improving buyers' interest in your home.
Flooring is a big interest for buyers. Wood floors are still very popular. Many Realtors say buyers are looking for hardwood floors. That's partly because they endure and don't go out of style. However, if they're damaged it can be a drawback because buyers may focus on how much work it will take and cost to do the repairs.
Built-in furniture can improve a home. Built-in bookcases and entertainment centers can save space and help make the room look larger. However, there's a downside. Built-in furniture isn't easily movable. So, potential buyers will have to really find the furniture useful and suitable for their needs. "It's all about personalization—homeowners want to know that their space can be converted easily into a different space in the future," Zuch said in a press statement by NARI. And that's what buyers want as well—the ability to make your home theirs when the sale closes.
Written by Phoebe Chongchua
But if you do some of the basic things such as clearing clutter, creating light, bright, and open space, adding curb appeal, removing personal items (family photos, trinkets), fresh paint, and clean or new carpet -- you'll be on your way to attracting serious buyers.
Let's look at specific areas that create widespread appeal inside the home.
Here are some of the top areas to improve: countertops, flooring, built-in furniture, and old-style attached fixtures such as those big sheet mirrors in the bathroom. However, when making these improvements, there's one important consideration.
Functionality is the greatest concern cited by homeowners, according to the latest poll conducted by the National Association of the Remodeling Industry (NARI).
"The functionality of a home is very important, especially over the long term, as many homeowners in this economy have opted for remodeling over moving to new homes," says NARI National President Paul Zuch, CR, president of Capital Improvements.
So let's explore the areas I mentioned earlier and see how improving these items can lead to greater interest in your home. Countertops are fixtures in homes. So making sure that you select the best material to endure the daily wear and tear is important. If we're talking about the kitchen, for instance, there are many options: granite, tile, recycled glass (for a green option), solid steel, composite stone, butcher block, laminate, and even concrete. Yes, that last one sounds surprising but concrete is being used for countertops and laminate isn't necessarily trying to mimic other materials anymore. Instead, homeowners are embracing laminate's own unique high-tech look. The popular trend is a mixing of several styles creating a blended custom look for the kitchen. But in the end, functionality will rate highest for potential buyers. All of the countertop materials mentioned above have advantages and disadvantages when it comes to maintenance and usage; make sure you completely research the material before selecting it for your home.
Fixtures are an important area to improve. "People know a lot more about design," Laura Kirar from Larua Kirar-TRU Design told the Alexandria Times. These days, quirky, eclectic styles from international trends are becoming more prevalent in the United States. However, push the envelope too far with quirkiness and you just might lose a potential buyer. What's important to know is that buyers are paying attention to fixtures. If you have damaged or worn out faucets or lighting, it's best to replace them before showing your home. Also, replacing those big, nothing-special sheet mirrors with some framed mirrors can add a unique look without costing very much. While you don't want to have to spend a lot just before you sell your home, remember that these seemingly small items can have a great impact on improving buyers' interest in your home.
Flooring is a big interest for buyers. Wood floors are still very popular. Many Realtors say buyers are looking for hardwood floors. That's partly because they endure and don't go out of style. However, if they're damaged it can be a drawback because buyers may focus on how much work it will take and cost to do the repairs.
Built-in furniture can improve a home. Built-in bookcases and entertainment centers can save space and help make the room look larger. However, there's a downside. Built-in furniture isn't easily movable. So, potential buyers will have to really find the furniture useful and suitable for their needs. "It's all about personalization—homeowners want to know that their space can be converted easily into a different space in the future," Zuch said in a press statement by NARI. And that's what buyers want as well—the ability to make your home theirs when the sale closes.
Written by Phoebe Chongchua
Wednesday, June 30, 2010
Loan losses put Granite Bay bank at risk of failure, seisure
By Charles Piller
cpiller@sacbee.com
Problem loans for residential and land development have placed Granite Community Bank, a small lender in Granite Bay, at risk for failure and seizure by the government, according to regulatory filings and banking analysts.
The bank lost more than $5.5 million last year, including more than $3.5 million in the fourth quarter. According to Oakland-based Foresight Analytics, Granite Community holds $14.2 million in loans that are in default or close to default – about four times the bank's reserve fund to cover such losses.
"They do face a takeover at some point in time unless they can improve their capital situation," said Bert Ely, a banking industry analyst in Alexandria, Va., who reviewed the bank's most recent government filing for The Bee. Ely said the bank reported an unusual burden of bank-owned real estate – a result of area foreclosures – and a perilous dependence on construction and commercial real estate loans.
"It's quite possible that their losses … will wipe out their capital and render them insolvent," said Ely.
Last March, just 30 U.S. banks or thrifts faced such severe problems, according to data from Foresight, a market research firm. All but one have since been seized by regulators. As of September, 56 banks or thrifts struggled with challenges as extreme as Granite Community's current plight; since then, 41 of those have failed.
After a bank failure, depositors are safe, protected by insurance for up to $250,000 each, but shareholders lose their investments and local commerce could suffer.
"Our special marketplace, south Placer County, has been impacted dramatically" by the recent economic downturn, said David R. Kaiser, Granite's chief executive. "We've been aggressive at recognizing problems. We haven't tried to sugarcoat anything.
"We see a fairly bright future," he added, noting that remaining challenges are "not a bottomless pit." Kaiser said he hoped to increase lending to small businesses this year as the economy recovers.
The Granite Bay lender, founded in 2002, is among several small local banks that have been hammered by the region's exceptionally severe real estate bust and ill-fated lending practices. Just five of the 15 commercial banks based in the Sacramento area made money last year.
Granite Community did not receive funds from the federal TARP bailout, unlike the second-biggest regional loser in 2009, Community Business Bank in West Sacramento. It lost nearly $4.2 million – more than its entire $4 million bailout.
Last year, The Bee examined Community Business Bank's unusually high level of insider lending to its own directors and their family members. Since then, the West Sacramento lender has sharply reduced its loans to officers and directors.
Mark Day, Community Business Bank's chief financial officer, said tax disadvantages due to his bank's status as a relatively new institution worsened its 2009 losses. He did not respond to a question about whether the bank still intends to repay its bailout funds, as officials said last year it would.
Sacramento's River City Bank lost $3.3 million in 2009, Five Star Bank in Rocklin lost nearly $2.3 million, and Community 1st Bank, a Roseville lender that also got TARP funds, lost $1.2 million.
Granite Community's condition is by far the worst of any local bank, according to leading financial rating companies. It's the second lowest-rated bank of its size in California and is in worse shape than more than 98 percent of peers nationally, according to Bankrate.com. Bauerfinancial.com gave Granite Community zero stars – the lowest possible rating.
In 2008, Granite Community entered a formal agreement with its chief regulator, the U.S. Comptroller of the Currency. The agency required the bank to increase capital reserves to cover bad loans. But the bank's condition has since deteriorated, as demand for housing and commercial development collapsed.
Granite Community is trying to raise $6.5 million from investors to return its capital holdings to levels demanded by regulators. So far, the bank has taken in about $2.2 million, Kaiser said, which is being held in escrow until other funds are raised.
Raising enough capital "is definitely an uphill battle" for a small, struggling bank in today's economic climate, Foresight's Matthew Anderson said. Takeover by a larger, healthier bank might be another option, he said.
"Someone putting capital in has to ask," Ely said, "is this bank insolvent, and if so, am I throwing good money after bad?"
cpiller@sacbee.com
Problem loans for residential and land development have placed Granite Community Bank, a small lender in Granite Bay, at risk for failure and seizure by the government, according to regulatory filings and banking analysts.
The bank lost more than $5.5 million last year, including more than $3.5 million in the fourth quarter. According to Oakland-based Foresight Analytics, Granite Community holds $14.2 million in loans that are in default or close to default – about four times the bank's reserve fund to cover such losses.
"They do face a takeover at some point in time unless they can improve their capital situation," said Bert Ely, a banking industry analyst in Alexandria, Va., who reviewed the bank's most recent government filing for The Bee. Ely said the bank reported an unusual burden of bank-owned real estate – a result of area foreclosures – and a perilous dependence on construction and commercial real estate loans.
"It's quite possible that their losses … will wipe out their capital and render them insolvent," said Ely.
Last March, just 30 U.S. banks or thrifts faced such severe problems, according to data from Foresight, a market research firm. All but one have since been seized by regulators. As of September, 56 banks or thrifts struggled with challenges as extreme as Granite Community's current plight; since then, 41 of those have failed.
After a bank failure, depositors are safe, protected by insurance for up to $250,000 each, but shareholders lose their investments and local commerce could suffer.
"Our special marketplace, south Placer County, has been impacted dramatically" by the recent economic downturn, said David R. Kaiser, Granite's chief executive. "We've been aggressive at recognizing problems. We haven't tried to sugarcoat anything.
"We see a fairly bright future," he added, noting that remaining challenges are "not a bottomless pit." Kaiser said he hoped to increase lending to small businesses this year as the economy recovers.
The Granite Bay lender, founded in 2002, is among several small local banks that have been hammered by the region's exceptionally severe real estate bust and ill-fated lending practices. Just five of the 15 commercial banks based in the Sacramento area made money last year.
Granite Community did not receive funds from the federal TARP bailout, unlike the second-biggest regional loser in 2009, Community Business Bank in West Sacramento. It lost nearly $4.2 million – more than its entire $4 million bailout.
Last year, The Bee examined Community Business Bank's unusually high level of insider lending to its own directors and their family members. Since then, the West Sacramento lender has sharply reduced its loans to officers and directors.
Mark Day, Community Business Bank's chief financial officer, said tax disadvantages due to his bank's status as a relatively new institution worsened its 2009 losses. He did not respond to a question about whether the bank still intends to repay its bailout funds, as officials said last year it would.
Sacramento's River City Bank lost $3.3 million in 2009, Five Star Bank in Rocklin lost nearly $2.3 million, and Community 1st Bank, a Roseville lender that also got TARP funds, lost $1.2 million.
Granite Community's condition is by far the worst of any local bank, according to leading financial rating companies. It's the second lowest-rated bank of its size in California and is in worse shape than more than 98 percent of peers nationally, according to Bankrate.com. Bauerfinancial.com gave Granite Community zero stars – the lowest possible rating.
In 2008, Granite Community entered a formal agreement with its chief regulator, the U.S. Comptroller of the Currency. The agency required the bank to increase capital reserves to cover bad loans. But the bank's condition has since deteriorated, as demand for housing and commercial development collapsed.
Granite Community is trying to raise $6.5 million from investors to return its capital holdings to levels demanded by regulators. So far, the bank has taken in about $2.2 million, Kaiser said, which is being held in escrow until other funds are raised.
Raising enough capital "is definitely an uphill battle" for a small, struggling bank in today's economic climate, Foresight's Matthew Anderson said. Takeover by a larger, healthier bank might be another option, he said.
"Someone putting capital in has to ask," Ely said, "is this bank insolvent, and if so, am I throwing good money after bad?"
Monday, June 28, 2010
10 indicted in Elk Grove case of alleged mortgage fraud.
By Jim Wasserman
jwasserman@sacbee.com
Three years after a 30-home buying spree during the worst excesses of the housing boom, five Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove residents and five accomplices face federal charges of writing phony loan applications and defrauding lenders of $5.5 million.
Allegations surfaced in a 48-count federal grand jury indictment announced Wednesday against the owner of Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove-based Liberty Mortgage Co. and Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty Real Estate and Investment Co. Nine others, including Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty employees, homebuyers across California and an Elk Grove attorney alleged to have written phony letters for three buyers, also were indicted.
Charges include conspiracy to commit mortgage fraud, mail fraud and making false statements in Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/mortgage+applications/" rel=nofollow>mortgage applications to federally insured banks.
This week's action is one of the biggest sweeps yet against locals alleged to have helped seed the housing meltdown through real estate fraud. Following thousands of foreclosures across the Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Central+Valley/" rel=nofollow>Central Valley, federal authorities say prosecuting mortgage and real estate fraud is one of their highest priorities.
U.S. Attorney Benjamin Wagner alleged Wednesday that Liberty owner Hoda Samuel, 58, of Elk Grove and nine others masterminded home purchases from April 2006 through February 2007 with loan applications that lied about incomes and job histories. Their goal, said the indictment, was to "enrich themselves" with "substantial" loan brokerage and closing fees or with thousands of dollars kicked back to buyers after close of escrow.
Most of the homes were financed by subprime lenders that later failed or imploded due to lax loan standards used at the height of the housing frenzy. Lenders financed 26 of the homes with so-called "100 percent financing" in which buyers in the alleged scheme made no down payments. Later, all but two of the 30 homes in Sacramento, Elk Grove, Oakley, Lodi and Olivehurst were foreclosed, costing the U.S. financial industry $5.5 million, said Wagner.
Liberty's real estate and loan firms are closed, said Samuel, reached by telephone Wednesday in Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove.
"We're not doing any business," she said.
Citing advice from her attorney, Samuel said: "I cannot talk about it. I know I am not guilty. But I cannot talk about it."
Four other indicted Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove residents included Connie Devers, 40, Charles Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Robert+Maness/" rel=nofollow>Robert Maness, 32, Ronald Burris, 36, and Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Sean+Patrick+Gjerde/" rel=nofollow>Sean Patrick Gjerde, 34.
Those indicted from Lodi, Oakland and San Diego included Dana Faulkner, 43, Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Tracy+Painter/" rel=nofollow>Tracy Painter, 50, Ygnacia Bradford, 34, Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Nicole+Dawson/" rel=nofollow>Nicole Dawson, 40, and Daniel Harrison, 40.
Samuel, Devers, Maness, Painter, Gjerde and Harrison pleaded not guilty in federal court.
Appearances by the others are pending, federal authorities said.
The indictments allege that buyers represented by Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty offered sellers $15,000 to $40,000 more than the asking price for their homes, saying the extra money was going to contractors to make the properties livable for disabled people.
That money never paid for any work, however, but was funneled back to Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty's clients, their friends and family members, the indictments state.
Liberty employees made up jobs and incomes for buyers, then acted as contacts to verify the information when lenders called, said the indictment.
Gjerde, an Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove attorney, is accused of writing letters for three buyers, "falsely" verifying their employment, and claiming he had prepared their tax returns for years, according to the indictment.
On Wednesday, Gjerde's attorney, Tom Johnson of Sacramento, said: "We intend to go to trial. We intend to contest the allegation."
Johnson also said the federal government is targeting the wrong people.
"The real culprit was the lenders and the large banking institutions," he said. "The same people who were just venomous to our economy are the same people who are not being indicted."
jwasserman@sacbee.com
Three years after a 30-home buying spree during the worst excesses of the housing boom, five Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove residents and five accomplices face federal charges of writing phony loan applications and defrauding lenders of $5.5 million.
Allegations surfaced in a 48-count federal grand jury indictment announced Wednesday against the owner of Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove-based Liberty Mortgage Co. and Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty Real Estate and Investment Co. Nine others, including Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty employees, homebuyers across California and an Elk Grove attorney alleged to have written phony letters for three buyers, also were indicted.
Charges include conspiracy to commit mortgage fraud, mail fraud and making false statements in Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/mortgage+applications/" rel=nofollow>mortgage applications to federally insured banks.
This week's action is one of the biggest sweeps yet against locals alleged to have helped seed the housing meltdown through real estate fraud. Following thousands of foreclosures across the Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Central+Valley/" rel=nofollow>Central Valley, federal authorities say prosecuting mortgage and real estate fraud is one of their highest priorities.
U.S. Attorney Benjamin Wagner alleged Wednesday that Liberty owner Hoda Samuel, 58, of Elk Grove and nine others masterminded home purchases from April 2006 through February 2007 with loan applications that lied about incomes and job histories. Their goal, said the indictment, was to "enrich themselves" with "substantial" loan brokerage and closing fees or with thousands of dollars kicked back to buyers after close of escrow.
Most of the homes were financed by subprime lenders that later failed or imploded due to lax loan standards used at the height of the housing frenzy. Lenders financed 26 of the homes with so-called "100 percent financing" in which buyers in the alleged scheme made no down payments. Later, all but two of the 30 homes in Sacramento, Elk Grove, Oakley, Lodi and Olivehurst were foreclosed, costing the U.S. financial industry $5.5 million, said Wagner.
Liberty's real estate and loan firms are closed, said Samuel, reached by telephone Wednesday in Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove.
"We're not doing any business," she said.
Citing advice from her attorney, Samuel said: "I cannot talk about it. I know I am not guilty. But I cannot talk about it."
Four other indicted Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove residents included Connie Devers, 40, Charles Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Robert+Maness/" rel=nofollow>Robert Maness, 32, Ronald Burris, 36, and Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Sean+Patrick+Gjerde/" rel=nofollow>Sean Patrick Gjerde, 34.
Those indicted from Lodi, Oakland and San Diego included Dana Faulkner, 43, Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Tracy+Painter/" rel=nofollow>Tracy Painter, 50, Ygnacia Bradford, 34, Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Nicole+Dawson/" rel=nofollow>Nicole Dawson, 40, and Daniel Harrison, 40.
Samuel, Devers, Maness, Painter, Gjerde and Harrison pleaded not guilty in federal court.
Appearances by the others are pending, federal authorities said.
The indictments allege that buyers represented by Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty offered sellers $15,000 to $40,000 more than the asking price for their homes, saying the extra money was going to contractors to make the properties livable for disabled people.
That money never paid for any work, however, but was funneled back to Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Liberty/" rel=nofollow>Liberty's clients, their friends and family members, the indictments state.
Liberty employees made up jobs and incomes for buyers, then acted as contacts to verify the information when lenders called, said the indictment.
Gjerde, an Roman',Times,serif; FONT-SIZE: 15px; CURSOR: pointer; FONT-WEIGHT: 400" class=" lingo_link lingo_link_hidden" href="http://topics.sacbee.com/Elk+Grove/" rel=nofollow>Elk Grove attorney, is accused of writing letters for three buyers, "falsely" verifying their employment, and claiming he had prepared their tax returns for years, according to the indictment.
On Wednesday, Gjerde's attorney, Tom Johnson of Sacramento, said: "We intend to go to trial. We intend to contest the allegation."
Johnson also said the federal government is targeting the wrong people.
"The real culprit was the lenders and the large banking institutions," he said. "The same people who were just venomous to our economy are the same people who are not being indicted."
Friday, June 25, 2010
Sacramento region's housing market slowly, fitfully rebounds.
By Jim Wasserman
jwasserman@sacbee.com
As housing led us into the Great Recession, goes popular wisdom, housing needs to lead us out. And housing looks unready to lead us anywhere.
Those words were used to tease a national radio broadcast Wednesday about the housing market.
The message: Housing is down. Run for your life.
Every day the media report some confusing new monthly data about housing. It's all breathlessly urgent. But it often makes no more long-term sense than the stock market. Markets plunge one day when investors get more pessimistic about the recovery. They soar the next when they get more optimistic. Daily, a blizzard of reports arrives. Something's looking better. Or it's worse.
Home Front knows nothing for certain in this fragile economic environment. But inside a swirl of dueling data, a few things are still real.
All real estate is local
What's true on national news may not be true where you live. Nine days ago the nation hyperventilated because a federal agency reported May single-family housing starts fell 17 percent from April. It was "the largest monthly drop since January 1991." Oh no!
But Thursday came new California counts from the Construction Industry Research Board. May housing starts in Sacramento, Placer, El Dorado and Yolo counties were up almost 10 percent. End of the world? Not here.
This is a long, slow slog
Nobody said recovering from a crash would be easy or fun. But one day, one house at a time, this market is resetting itself. Foreclosed homes get buyers at today's prices. These owners stay and heal neighborhoods.
Negative equity – owing more than your house is worth – is still terrible. But it's slowly, slowly easing. A year ago more than half of area mortgaged houses had negative equity. Now it's less than half. The trend is moving the right direction. It is not getting worse.
Foreclosures are stalling
It's hard to fathom why this is true. More people than ever are behind on payments with unemployment at 12 percent. But banks have managed to prevent a tidal wave of repos that would further tank your home values. Maybe it's just muddling through. But it has slowed foreclosures.
Government, too, has muddled along with program after program to save borrowers. Most of them have been perceived as lame. But more than 6,200 area borrowers did have permanent loan modifications at May's end.
Now, governments, even lenders, are drifting toward principal reduction. That cuts what people owe to keep them from walking away. It's too late for many. But slowly, institutions are becoming more open to what many believe is the best possible cure.
It's still cheap to borrow
Predictions since 2006 said interest rates would cross the 7 percent barrier and shut down homebuying. They remain below 5 percent. And almost all of today's mortgages have safer terms. The supply of people with the nastiest loans is shrinking, not growing.
Many who can refinance are also trimming their debt. Day in and out, that's a big thing happening amid the daily blizzard of economic reports. Many who can are slowly deleveraging. It's painful. It was necessary.
Nobody's saying things are swell. But keep perspective. From the bottom, so slowly, the direction is usually up.
jwasserman@sacbee.com
As housing led us into the Great Recession, goes popular wisdom, housing needs to lead us out. And housing looks unready to lead us anywhere.
Those words were used to tease a national radio broadcast Wednesday about the housing market.
The message: Housing is down. Run for your life.
Every day the media report some confusing new monthly data about housing. It's all breathlessly urgent. But it often makes no more long-term sense than the stock market. Markets plunge one day when investors get more pessimistic about the recovery. They soar the next when they get more optimistic. Daily, a blizzard of reports arrives. Something's looking better. Or it's worse.
Home Front knows nothing for certain in this fragile economic environment. But inside a swirl of dueling data, a few things are still real.
All real estate is local
What's true on national news may not be true where you live. Nine days ago the nation hyperventilated because a federal agency reported May single-family housing starts fell 17 percent from April. It was "the largest monthly drop since January 1991." Oh no!
But Thursday came new California counts from the Construction Industry Research Board. May housing starts in Sacramento, Placer, El Dorado and Yolo counties were up almost 10 percent. End of the world? Not here.
This is a long, slow slog
Nobody said recovering from a crash would be easy or fun. But one day, one house at a time, this market is resetting itself. Foreclosed homes get buyers at today's prices. These owners stay and heal neighborhoods.
Negative equity – owing more than your house is worth – is still terrible. But it's slowly, slowly easing. A year ago more than half of area mortgaged houses had negative equity. Now it's less than half. The trend is moving the right direction. It is not getting worse.
Foreclosures are stalling
It's hard to fathom why this is true. More people than ever are behind on payments with unemployment at 12 percent. But banks have managed to prevent a tidal wave of repos that would further tank your home values. Maybe it's just muddling through. But it has slowed foreclosures.
Government, too, has muddled along with program after program to save borrowers. Most of them have been perceived as lame. But more than 6,200 area borrowers did have permanent loan modifications at May's end.
Now, governments, even lenders, are drifting toward principal reduction. That cuts what people owe to keep them from walking away. It's too late for many. But slowly, institutions are becoming more open to what many believe is the best possible cure.
It's still cheap to borrow
Predictions since 2006 said interest rates would cross the 7 percent barrier and shut down homebuying. They remain below 5 percent. And almost all of today's mortgages have safer terms. The supply of people with the nastiest loans is shrinking, not growing.
Many who can refinance are also trimming their debt. Day in and out, that's a big thing happening amid the daily blizzard of economic reports. Many who can are slowly deleveraging. It's painful. It was necessary.
Nobody's saying things are swell. But keep perspective. From the bottom, so slowly, the direction is usually up.
Thursday, June 24, 2010
California to offer program to trim underwater mortgages
By Jim Wasserman
jwasserman@sacbee.com
Lots of people will want to get in on this one: California is going to use federal money to pay down the mortgages of struggling homeowners.
The California Housing Finance Agency announced Wednesday that it will spend $420 million to trim individual mortgages by up to $50,000. Lenders will be asked to match the amount, a deal that could make thousands of mortgages newly affordable across the Sacramento area.
The program, launching Nov. 1, will be run on a first-come, first-served basis, said Evan Gerberding, marketing manager for the CalHFA's "Keep Your Home" initiative.
"Unfortunately, there will likely be more demand than funding," she said.
Specifics on the selection process are still in the works. But CalHFA will exclusively fund applicants from low- to moderate-income households. In Sacramento, that's expected to mean people earning less than $68,000 a year. Borrowers will have to be delinquent or in imminent danger of defaulting, but have adequate income to continue paying after getting the help.
Gerberding advised people to keep checking the Keep Your Home website for applicant criteria to be posted later. She said people struggling to make payments shouldn't wait for the program to start, but should contact lenders and loan counselors now.
Thousands of Californians who meet the income guidelines will want in, but one fact will block many.
"This is to help people with purchase loans," Gerberding said Wednesday.
That rules out borrowers whose troubles began with cash-out refinances when their homes were worth more than now. Gerberding said exceptions may be made for people who refinanced to get lower interest rates. The program also requires that homeowners live in the house they mortgaged.
For years, federal and state governments have rolled out programs to stimulate loan modifications, and most have proved disappointing. California's new program is one of the first large-scale attempts at wholesale "principal writedowns," where loans are shrunk to more closely match today's home values.
"We think it's encouraging that they took on principal reduction in the way that they did, devoting most of the resources to it," said Kevin Stein, associate director of the California Reinvestment Coalition.
The low-income advocacy group has campaigned for principal reductions since 2007.
"That's the real need in California, to address the negative equity of borrowers being underwater," Stein said.
CalHFA, the state's affordable housing bank, estimates it will help 40,000 or more households avoid foreclosure with principal writedowns and other plans unveiled Wednesday. In all, the agency received $700 million for the relief programs, part of a $1.5 billion federal initiative to curb foreclosures in the hardest-hit housing crash states.
"We anticipate offering this over the next three years," Gerberding said.
The agency will also spend $129 million providing up to $15,000 to help people catch up with late payments.
An additional $64 million will provide the unemployed up to $1,500 a month to pay the mortgage for six months.
Finally, homeowners will receive up to $5,000 to move when they cannot afford the mortgage under any circumstances.
In all, the program will steer a maximum of $50,000 to qualifying households to avert foreclosures.
The CalHFA manager said there is no geographical quota. But help will roll first to hardest-hit counties, including much of the Central Valley.
In Sacramento, Placer, Yolo and El Dorado counties, 12 percent of mortgages are seriously delinquent or in the foreclosure process. And nearly half the region's mortgaged households owe more than the house is worth, according to housing industry tracker CoreLogic.
"There are thousands who could benefit," said Pam Canada, executive director of Sacramento nonprofit loan counselor NeighborWorks Homeownership Center.
Gov. Arnold Schwarzenegger pledged Wednesday to work with CalHFA "to ensure that these programs are implemented in a way that assists the greatest number of Californians."
CalHFA hopes banks will match the $700 million.
"We're asking lenders to come to the table with us on this," Gerberding said. "We can't force them to do that. But many of them have indicated they are happy to do that," she said.
Gerberding said CalHFA will add fewer than 10 new staff members to run the program. Administrative costs are estimated at about $52 million – 7.5 percent of the funding.
More information is available at the Keep Your Home website: www.keepyourhomecalifornia. com; or call (916) 373-2585.
jwasserman@sacbee.com
Lots of people will want to get in on this one: California is going to use federal money to pay down the mortgages of struggling homeowners.
The California Housing Finance Agency announced Wednesday that it will spend $420 million to trim individual mortgages by up to $50,000. Lenders will be asked to match the amount, a deal that could make thousands of mortgages newly affordable across the Sacramento area.
The program, launching Nov. 1, will be run on a first-come, first-served basis, said Evan Gerberding, marketing manager for the CalHFA's "Keep Your Home" initiative.
"Unfortunately, there will likely be more demand than funding," she said.
Specifics on the selection process are still in the works. But CalHFA will exclusively fund applicants from low- to moderate-income households. In Sacramento, that's expected to mean people earning less than $68,000 a year. Borrowers will have to be delinquent or in imminent danger of defaulting, but have adequate income to continue paying after getting the help.
Gerberding advised people to keep checking the Keep Your Home website for applicant criteria to be posted later. She said people struggling to make payments shouldn't wait for the program to start, but should contact lenders and loan counselors now.
Thousands of Californians who meet the income guidelines will want in, but one fact will block many.
"This is to help people with purchase loans," Gerberding said Wednesday.
That rules out borrowers whose troubles began with cash-out refinances when their homes were worth more than now. Gerberding said exceptions may be made for people who refinanced to get lower interest rates. The program also requires that homeowners live in the house they mortgaged.
For years, federal and state governments have rolled out programs to stimulate loan modifications, and most have proved disappointing. California's new program is one of the first large-scale attempts at wholesale "principal writedowns," where loans are shrunk to more closely match today's home values.
"We think it's encouraging that they took on principal reduction in the way that they did, devoting most of the resources to it," said Kevin Stein, associate director of the California Reinvestment Coalition.
The low-income advocacy group has campaigned for principal reductions since 2007.
"That's the real need in California, to address the negative equity of borrowers being underwater," Stein said.
CalHFA, the state's affordable housing bank, estimates it will help 40,000 or more households avoid foreclosure with principal writedowns and other plans unveiled Wednesday. In all, the agency received $700 million for the relief programs, part of a $1.5 billion federal initiative to curb foreclosures in the hardest-hit housing crash states.
"We anticipate offering this over the next three years," Gerberding said.
The agency will also spend $129 million providing up to $15,000 to help people catch up with late payments.
An additional $64 million will provide the unemployed up to $1,500 a month to pay the mortgage for six months.
Finally, homeowners will receive up to $5,000 to move when they cannot afford the mortgage under any circumstances.
In all, the program will steer a maximum of $50,000 to qualifying households to avert foreclosures.
The CalHFA manager said there is no geographical quota. But help will roll first to hardest-hit counties, including much of the Central Valley.
In Sacramento, Placer, Yolo and El Dorado counties, 12 percent of mortgages are seriously delinquent or in the foreclosure process. And nearly half the region's mortgaged households owe more than the house is worth, according to housing industry tracker CoreLogic.
"There are thousands who could benefit," said Pam Canada, executive director of Sacramento nonprofit loan counselor NeighborWorks Homeownership Center.
Gov. Arnold Schwarzenegger pledged Wednesday to work with CalHFA "to ensure that these programs are implemented in a way that assists the greatest number of Californians."
CalHFA hopes banks will match the $700 million.
"We're asking lenders to come to the table with us on this," Gerberding said. "We can't force them to do that. But many of them have indicated they are happy to do that," she said.
Gerberding said CalHFA will add fewer than 10 new staff members to run the program. Administrative costs are estimated at about $52 million – 7.5 percent of the funding.
More information is available at the Keep Your Home website: www.keepyourhomecalifornia. com; or call (916) 373-2585.
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