Having attended at least one listing appointment per week for the last several months, we have had to share our fair share of bad news.  In fact, we talk more people out of selling than into selling.  That’s the truth.  As we have said before, we are in the market of selling homes, not listing homes.  If we take a listing it is because we think we can sell it.  This is not the market to get what you want for your house, and it’s really not, in some cases, the market to get what you need.  If I can paint with a broad brush here, I don’t think I’m going out on a limb by saying that inventories remain high and homeowners remain frustrated. 

There is some positive though.  This strange market we are in has created a counter culture for the rental market for the landlord and the tenant.  It has become harder and harder to secure financing thanks to the tightening credit market so more and more renters are looking to take advantage of the market not by buying, but by renting.  What does that mean? 

Many homeowners find themselves upside down on their mortgage or simply refusing to take a large loss by selling their home.  So, what’s a homeowner to do?  Rent it baby!  As in the resale market, a well priced rental home rents fast.  It’s really a great time for the tenant too because they are, in many cases, able to rent a home/townhome/condo at a discount versus the traditional apartment complex.  It’s a win-win for everybody because these new opportunities for tenants allow the landlord homeowner to move on and accomplish goals as well, such as moving up, down, or out of town. 

We have been fortunate to work with some smart couples recently that did not let the market scare them.  In fact, they are rolling with the punches and maximizing their opportunity.  Two couples in particular have already bought or are under contract to buy their “move up” home while renting their current condo/townhome.  This window of opportunity to buy in a perfect storm of high inventory, depressed home values, and historically low interest rates will not last forever.  The smart buyer understands the economics of this decision beyond the initial sticker shock of two mortgages.  A break even on a rental, or even a slight negative cash flow, can pay massive dividends when coupled with a purchase in these times.  As said before, money can be made in an “up” market, but a whole heck of a lot more can be made in a “down” market. 

If you want to move, but you feel stuck or out of options, let’s talk.  We have some great ideas, and we will be happy to discuss the options available to you with no obligation to buy whatsoever.  We aren’t here to talk you in to anything.  We don’t operate like that.  In fact, I think our clients would agree that we are fairly conservative on the risk front.  Regardless, we have relevant statistics and ideas to share with you, and we want all of our clients to make the decisions that are best for them and consistent with their long term goals.

Everyone is looking for a deal.  Unfortunately that deal sometimes needs some sweat and nails to realize its full potential.  So, how do you do it?  In the past most people bought the home and then financed the renovations.  The problem with that is that it’s typically a construction loan or a general personal loan, which can carry a larger interest rate.  What if you could buy a house and finance the repairs/renovations on the front end before you even start?  You can, and it’s called a 203(k) loan.  The loan follows the common FHA lending guidelines, which allows you to put down as little as 3.5% down.  I think it’s important to start from the source when trying to explain the loan and its benefits.  FHA is a division of HUD so click here for HUD’s specific information on the loan.  Standard FHA loan limits apply at $346,250, which is an increase over last year.  Rates typically for this particular loan are only moderately higher (approximately .50% higher).  Currently FHA purchase loans are around 5% so this rehab loan would fall somewhere in the 5.5% range.  Although higher than a conventional loan in the high 4% range, this is still an amazingly low interest rate, historically speaking.

We recently attended a seminar about the 203(k) sponsored by our friends at Countrywide Home Loans, and they provided us with some great Q & A on the loan.  Countrywide is one of the only lenders utilizing this loan currently.  Here is some great information from Countrywide:

Top 10 203K Questions

1.       What is the difference between a regular 203K and a streamline 203K?

• Streamline – between 5K and 35K with no structural changes to the property
• Regular – greater than 35K and / or structural changes to the property

 2.       Is the borrower allowed to perform the work to the home?

·         Yes but very difficult to get approved.

3.       Is the house appraised “As is” or with work completed?

• The house is appraised taking repairs / rehab into consideration of the value.

 4.       How long do you have to complete the work?

• Up to 6 months.

 5.       It the rate higher on a 203K than a regular FHA loan?

• Yes.  Anywhere from .5% to 1% higher in rates.

 6.       Is it harder to qualify for a 203K than a regular FHA loan?

• Yes. 

 7.       Are the 203K limited to single family residences?

• No.  The program can be used for owner occupied 1 to 4 unit dwellings and condos.

 8.      How does the contractor get paid?

• The contractor gets paid through Countrywide’s escrow department.  They are allowed 2 to 5 draws depending on the cost of the rehab.

 9.       What type of out-of-pocket expenses should the buyer be prepared to pay?

• There is a home inspection or an FHA consultant fee to determine the scope of the work.  The cost varies from $300 to $1,000. 

 10.  How long does it take to close and receive the first draw?

• We need 60 days to close and it will take up to two weeks after closing to receive the first draw

With mounting foreclosures, the savy homebuyer can buy lower than low, rehab a house, and realize some major equity all within a single loan.  We would be happy to help you find that diamond in the rough so you too could take advantage of the market and all the possibilities it presents.  If you have additional questions about the 203(k) loan or any other loans, we encourage you to talk with Scott Meldrum at Countrywide Home Loans.  Scott can be reached at scott_meldrum@countrywide.com.

Unless you’ve been living in a cave for the last 30 days, you probably have heard about the Economic Stimulus Bill that was passed and signed into law last month by President Obama. If you have been cave dwelling, click here.  We here at The Peters Company were most concerned with the First Time Homebuyer’s Tax Credit.  We had a mediocre tax credit previously in place, which basically gave the first time homebuyer an interest free loan of $7,500 that they paid back over a 15 year period.  That has been blown up, replaced, and upgraded.  Although it wasn’t as good as we were hoping for, the new plan makes significant progress over the previous credit/loan program.  We thought it might be beneficial to outline the differences for you.  If someone you know is on the fence about buying their first home, now is the time to share this with them.  We are entering the busier Spring real estate season, and there will be some great homes hitting the market over the coming months.  This credit lasts until December 1, 2009.  The high inventories and low rates are now only helped by an $8,000 tax credit, which by the way you don’t have to repay.  Check it out, and let us know if we can help in any way.

FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Italicized
February 2009

Chart courtesy of Leigh Clack at Neel & Robinson, Attorneys at Law, LLC.  Contact Leigh at lenox@neelandrobinson.com.  She is an excellent closing attorney.

On February 13th, President Obama signed the Stimulus Bill into law.  Is this what we’ve all been waiting for? Well, as a real estate agent, if falls a little short of what I was hoping for, but there are some clear benefits to you in the new plan, and I felt like it would be helpful to share. Thanks to Michael Pemberton, a Certified Financial Planner, who helped us navigate the bill. Here’s what he thinks is important to note:

• AMT: There is a $70 billion provision to keep the alternative minimum tax from slamming about 24 million taxpayers.

• Car Buyers: Anyone who buys a new car in 2009 gets to deduct the sales tax. To qualify, buyer must make less than $125,000 individually or $250,000 jointly.

• Home Buyer Tax Credit: First-time homebuyers who purchase this calendar year get an $8,000 tax credit which does not have to be repaid like a similar measure last year. This phases out for people making more than $75,000 individually or $150,000 jointly. “First-time homebuyer” is defined as someone who has not owned a home for the past three years.

• Income Tax Credit: Anyone making $75,000 individually or $150,000 as a family will get refundable tax credit up to $400 per person or $800 per family.

• Paying for College Tax Credits: Individuals making less than $80,000 or families making less than $160,000 can get up to $2,500 in tax credits for college tuition. 40 percent ($1,000) of the credit is refundable. Cost: $13.9 billion over 10 years.

Michael Pemberton is with Russell and Associates. 1050 Crown Pointe Parkway, Suite 1000, Atlanta, GA 30338, mcpemberton2000@yahoo.com, Click the link below to check out our reviews on Kudzu.com! http://www.kudzu.com/merchant/reviews/17586067.html. 

The emails have been racing in with everyone wanting to contribute content.  Here’s a great Q&A session provided by Scott Meldrum at Countrywide Home Loans which is a great resource for all your real estate questions:

Today may have been the most positive day in the last year for our beaten down real estate market.   John Adams is reporting today, according to his sources, that Fannie Mae is lifting it’s 4 property limit.  In other words, an individual can only have 4 Fannie Mae loans currently on his/her credit report under current FNMA policy.  In order to understand the magnitude of this potential move, you need to back up a little bit.  In August of last year, Fannie Mae cut off investors from financing more than 4 properties with an announcement known as 08-22.  The previous policies allowed investors to have up to 10 financed properties on their credit report at any given time.  The changing financial market and added risk was just too much apparently, and Fannie Mae felt they needed to do something.  It was a bonehead move though because it crippled investors.  Their once “easy” source of financing was severed, which meant they had to self finance or rely on the help of private money.   One thing that the investors do is buy ugly, unwanted houses, the glut of the housing market.  They have vision for what others don’t, and they don’t get emotionally involved with property.  This Fannie Mae announcement created a ripple effect in the investor network, and the rise in foreclosures, short sales, and distressed properties only compounded the trouble in the housing market.  The investor network and many of us in the real estate business have been lobbying FNMA to get their heads in the game and lift this silly policy.  The results of reverting back to the 10 property limit could really help us mop up the excess inventory, and we will need it if the rising tide of short sales comes through like many are predicting.  John is reporting that we will see an official announcement from Fannie Mae in the coming weeks, and let’s keep our fingers crossed. 

This exciting news coupled with the new tax credit passing through the Senate, courtesy of Senator Johnny Isakson from Georgia, and we have two awesome pieces of news for our beloved real estate market today.  The tax credit would incent ANYONE who may buy a home in the current year with 10% of the home’s purchase price up to $15,000.  The home has to be the primary residence, and the homebuyer must live in the home for at least two years.  This new credit would replace the current $7,500 credit available over the next few months ONLY to IRS-qualified first time homebuyers. 

Hello Mr. and Mrs. Buyer!  You have a perfect storm vastly in your favor right this minute, and the stars won’t align like this forever.  You’ve got depressed values, the lowest interest rates in the last 30+ years, high inventory, and now the government is potentially paying you to buy.  What else do you need?

Stay tuned here for more developments that are relevant.  As always, if we can help you in any way, please know it would be our pleasure.

The buyers are coming, the buyers coming!  Why do I feel like Paul Revere on his famous midnight ride?  We have spent a great deal of time in the field with our buyer clients over the last three weeks.  With all this renewed activity, I had a couple of observations.  First of all, I don’t think the sellers were prepared for this type of bump in activity so early in the year.  Of course, this is what we were hoping for and the trends suggested as much.  The rates continue to hover in the mid to high-4% range, and buyers are hard pressed for a better time to buy than right now.   We have had several clients here recently that are renting their primary residence so that they can take advantage of the opportunities in this market.  After meeting with these clients, we have a clear cut strategy to help them achieve their goals in a short window.  I think, no matter the market, every buyer wants to feel good about getting a good deal on their home purchase.  Now that I’m in the business, I have a little different take on what value is and how I, as a buyer myself, determine it.  It’s not all about getting a seller to come off the purchase price at a ridiculous percentage.  It’s about getting the best house that meets specific needs at the best price possible – that’s value to me.

Part of our fiduciary responsibility as real estate agents is to provide accurate and helpful data that aids our clients in making sound business decisions so we can market homes to sell and find values for our buyers.  A lot of sellers think that a real estate agent’s interpretation of the market, as it relates to a list price, is a determination of value.  No, that’s an appraiser’s job.  It’s a tough position to be in right now as a real estate agent.  Sellers look at you like you have a third eye when you simply report the news.  We are empathetic with our sellers, but we wouldn’t be doing our job if we were anything shy of honest.  When we list a house, we are not listing it at it’s value neccessarily; the buyer determines the value.  We are listing it at the best marketable price to attract a buyer and ultimately an offer.  That’s our job.  As mentioned here before when Lesley and I list a home, we list it to sell.  We aren’t in the business of listing houses.  We’re in the business of selling houses.  As a general rule when pricing, we try and find that “worry price.”  I wish I could take credit for that term, but we picked it up from our broker.  Nevertheless, it’s an accurate strategy that I wish every agent proclaimed and every seller subscribed to.  Here’s how it works.  Buyers today are not just looking at 3 homes and making a decision.  They’re looking at 15+ houses and making a decision.  Therefore, it’s important to be the prettiest and most competitively priced.  You’re looking for that price that a buyer walks into your home, loving it, loving it, loving it, and then worrying that its not going to last long at this price.  When I look back on my own personal real estate purchases, I followed a similar logic.  It’s where emotional attachment meets reality. 

When trying to evaluate value in a home, we think it’s important to take into consideration everything you have looked at.  In a buyer’s market, you have to rely more on the active listings as competition when pricing as a seller and determining value as a buyer.  The ultimate principle at work here is that the home is worth what you think it’s worth, but just be careful with that.  The story about your buddy getting a home at 85% of list was about 4 months ago.  Those kind of deals just are not out there as much anymore in the resale market because prices have been falling, and agents have been busy adjusting.  Even on the foreclosures and short sales, banks are pricing properties to sell, and you won’t find them coming significantly off their prices.  If they don’t sell within a short period of time, the prices are adjusted lower.  If you are fortunate enough to get a home at 85% of list price right now, the home was most likely overpriced and/or the owner was probably already considering a 5%+ reduction before your offer came along.  The latest figures from the fourth quarter of last year suggest that 53% of all homes on the market required a price reduction.  That says two things to me.  First, as professional real estate agents ALL OF US have done a lousy job pricing property, and secondly, this market has changed enough that it has thrown everyone off. 

So, where does that leave us?  Values are down, sure, but let’s all think twice about that lowball offer on the prettiest and most competitively priced listing that you are so worried someone else is going to grab.  The worry price works with pricing property for listings, and chances are good that if you, as a buyer, like something out there because you think it’s a good deal, someone else thinks its a good deal too.  Move on it if all things add up because it won’t last long.  Always keep in mind that the best opportunities sell first and sell for the most money.

Inflation. Is it our friend or foe? Well, we all know that dollar won’t get what it used to. I bought a jumbo sized package of Wrigley’s gum the other day and paid $1.69. It doesn’t seem like that long ago when it was 79 cents. Everything goes up in price. The same can be said for home prices. That’s why 30-year loans are so attractive. You’re buying and locking at a time in space that typically over a 30 year period will see massive amounts of inflation, positively affecting price and value.

Looking at this economy and the money that is being thrown around or proposed to be thrown around, one thing is obvious. We’re going to be printing more money folks and lots of it. The most likely solution to this economic dilemma is good old fashioned spending. Lots of spending. What’s President elect Obama calling for? Survey says, “Spending!” These events will sooner rather than later lead to a classic case of stagflation, for all you economic minded folks out there. All that means is that we will have an ecomony that isn’t growing while prices are rising. Unemployment will rise as well for a time period as the economy searches for a bottom. This infusion of dollars into our economy will dillute our buying power, costing us more and more to buy the things we want and love. That’s the negative. The positive is that it’s going to add value to our appreciating assets at a larger than life rate. In perhaps one of the most historic times to buy a home from an inventory, price, and interest rate point of view, we have something else to consider now in short term inflation. It’s bound to happen. It’s simply a matter of how much inflation we’ll see. The likely response to the stagflation is to spend more and more and more to a point that we out run it and get over the hump. The cash will eventually lead to more than an artificial boost to our economy. Meanwhile, property owners will see their home values rise considerably. Unfortunately, so will interest rates. The government has demonstrated that it is prepared to do whatever it takes to boost our economy. So fire up that money press, Mr. U.S. Mint, and lock those floating interest rates and lines of credit!

If you are taking a significant hit right now on the sale of your home, don’t sell. Rent. Keep your home. We have told many clients this here recently. We’ve told clients for months now to buy investment property.  Why not treat your primary residence as an investment property and buy your next home while the rates are ridiculously low, prices are painfully low, and inventory is incredibly high?  Nothing pains us more than to give bad news, but we are not going to expect or coach you to list your house below what you paid for it, if we can help it at all. The rental market is great with plenty of folks looking for a deal to rent that depressed valued home that either they can’t afford right now or are too scared to buy. Despite low interest rates, the lenders are ruthless in making you stand on your head to qualify for loans. In addition, first time homebuyers have to put down a minimum of 3% on the purchase of a home, which is downright hard to come by for some aspiring homeowners. I might argue that if you don’t have 3% to put down on a house, perhaps you should not be thinking about buying a home, but that’s a totally different conversation. By renting, you may not be in a position to get your value back to where you need it to be in the time frame you want, but it can’t get much worse, right? Give it a couple of years and let inflation help you out. I’m not cashing in my IRA right now just because it lost 25% of its value over the last quarter. By the way, that’s a true story. Whew! I’m buying real estate from now on as opposed to the stock market. Call me crazy, but at least I can do something to the real property. Improve it, rent it, something besides pray it goes up in the stock market. Hang on folks. This year is going to be historic for the economy, and the housing market will lead the charge back. We’ll be here whenever you need us.

They all say buy now. 

As is typical, Keller Williams is leading the charge with more valuable statistics and views on our real estate market.  This is a great short and sweet 6-minute update one what’s going on.  You should see this.

The “Jewel of the South,” as many have called Atlanta, refuses to be denied.  With an influx in population due to steady job growth, Atlanta earns the #10 spot in a recent Forbes Magazine article. 

This just in case you were about to jump off the cliff after listening to the national real estate update on the news.  You really have to filter the news when anything is reported as a national statistic or trend.  You wouldn’t listen and believe a weatherman if he told you it was going to be sunny over the entire United States tomorrow, would you?  How is that any different from the real estate market?

Certainly be thankful you are in a growing city like Atlanta, where there will always be demand for housing.  What is down, won’t be down long.

In another sign that the government is going to do whatever it takes to get us out of this mess, the Fed rate was cut again last week, which has created another dip in mortgage interest rates.  Despite tighter lending requirements, this market is going to make a lot of smart people a lot of smart money.  Smart money is already starting to move in.  Our phones are buzzing over these historically low rates, depressed home values and inflated inventory levels.  If you have been considering buying a home, now is without a doubt the time to explore it further.  If you have been considering buying a second home, now is the time to explore it further.  If you have been considering selling and moving up, now is the time to explore it further.  If you have been considering refinancing, now is definitely the time to consider it.   We are very skilled at interpreting the market, getting homes sold quickly, and finding amazing opportunities for our clients.  Let us show you how to maximize this market.