Report says pending home sales rise unexpectedly

By Jim Droz

Pending sales of existing U.S. homes unexpectedly rose in June from May and rose sharply from a year ago, data from a real estate trade group showed on Thursday.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in June, was up 2.4 percent to 90.9 from 88.8 in May. The index was up 19.8 percent from a year ago.

Economists polled by Reuters ahead of the report were expecting pending home sales to fall 2 percent.

The association’s senior economist, Lawrence Yun, said the latest monthly reading shows tight credit and economic uncertainty is still constricting the market.

“The best way to ensure a more solid recovery in housing is to simply return to normal, sound credit standards so more creditworthy home buyers can get a mortgage,” he said.

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Agents need to make sure clients understand pricing perspectives

By Jim Droz

One of the most perplexing things about today’s real estate market is that the timing is right for qualified people to buy, yet few prospective buyers are taking advantage of the situation. Why?

Perhaps it’s perspective, and the current market dictates that real estate agents must do whatever it takes to give their clients a clear image on how affordable homes are in today’s climate. But when dealing with a high-ticket item like a home and all of the other monetary aspects that go into a purchase, it can still be a scary thought, particularly for those navigating the real estate waters for the first time.

Try breaking it down in terms your customers can understand. When figuring in today’s low interest rates, the cost of a home hasn’t risen as much in the past couple of decades as the price of a new car, a gallon of gas or a loaf of bread. The cost of the latter two items has more than tripled since 1989, and car prices have nearly doubled. While the median price of a new home has increased 70 percent, mortgage interest rates, which were 10 percent in 1989, are less than half that figure today. That means that the monthly mortgage payment on a median-priced home increased only $4 since 1989.

By pointing out facts like these to your clients, they’ll realize that staying on the sidelines waiting for prices to go even lower will only result in a missed opportunity.

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Figuring out the formula is crucial to getting the best home loan

By Jim Droz

Of all the important numbers to consider when applying for a home loan, your debt to income ratio is the most important.

Don’t worry. You don’t have to be a math genius to figure it out. Debt to income ratio, or DTI, is actually two numbers: a front-end ratio and a back-end ratio. If calculated and used correctly, debt to income ratios also can save you headaches once you begin paying off your new mortgage.

Both the front- and back-end ratios are used by mortgage lenders to help determine whether you’ll be able to pay them back each month. But the ratios are also critical for homebuyers to know because they present a simple way to step into the shoes of the lender early in the home-shopping process. They’re reality checks that give you quick insight into which houses are within your reach financially.

What’s in the front-end ratio?

There are two main types of loans available to most borrowers: conventional loans and FHA loans. Conventional loans typically have conservative thresholds for front- and back-end ratios, while FHA loans will have higher limits.

The front-end ratio, also called the housing expense ratio, is the percentage of your gross income that will go to paying off your mortgage payments each month. While conservative lenders will look to make sure their borrowers don’t pay more than 28 percent of their monthly gross income toward their mortgage, other lenders might be willing to push this threshold up to 30 percent and beyond.

So if you earn $5,000 per month and your mortgage lender has a maximum front-end ratio threshold of 28 percent, they would probably be willing to handle a mortgage that requires you to pay no more than $1,400 ($5,000 x 0.28) per month.

What’s in the back-end ratio?

The back-end ratio, also called the debt-to-income ratio, is the percentage of your gross monthly income that will go  toward paying off all of your debt obligations. This includes your mortgage, credit card payments, student loan payments, car payments, child support, etc. Conservative lenders likely will want no more than 36 percent of your monthly gross income going toward your debt obligations, while others may be willing to push this up to 40 percent or more.

So, for example, if you earn $5,000 per month and your monthly non-mortgage debt payments equal $400 (8 percent of your gross monthly income), that’s added to your $1,400 in mortgage payments each month, making your debt to income ratio 36 percent ($1,400 + $400 / $5,000). Since this meets the conservative 36-percent threshold, you would probably be a strong candidate for a mortgage.

What works now

While the bursting of the housing bubble has reduced some questionably high debt to income ratios acceptable to riskier lenders, it doesn’t mean that those ratios are no longer accepted. Still, for buyers, the importance of DTI has never been clearer. If your front-end ratio shows you can’t make the payments for that dream home, it’s time to stop and rethink whether you’re ready for something that big. And if your back-end debt to income ratio is rising over 40 percent – it’s time to get your debt under control.

Debt to income ratios can be a harsh master, but understanding the full implications can make all the difference in the world to a homebuyer.

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California legislators revamp state law on short sales

By Jim Droz

Under a new state law in California, any lender who agrees to a short sale — which by definition will yield insufficient funds to cover the outstanding loans on a property — must accept it as payment in full for all loan balances. That is a good thing for upside-down homeowners who need to sell, says the California Association of Realtors.

In a prepared statement applauding Gov. Jerry Brown for signing SB 458 into law, the association observed that previously a first mortgage holder could accept an agreed-upon short sale payment as full payment for the first mortgage but a junior lien holder could still hound the seller for the full amount owned on the junior lien.

“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said association president Beth L. Peerce.

“SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lien holders — those in first position and in junior positions — will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property,” she added.

Those shopping for a home in the $500,000 to $1 million price range should not tarry. That is because they will probably face higher interest rates and more strict underwriting standards and will need to make a larger down payment later this year when conforming loan limits increase, Peerce said.

“Would-be buyers on the fence need to act well before Sept. 30, when the conforming loan limit is set to be lowered, to avoid a higher cost of homeownership,” Peerce said in a prepared statement.

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Contract cancellations hampering existing home sales

By Jim Droz

Existing-home sales fell in June amidst contract cancellations, according to the National Association of Realtors.

NAR president Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said home sales should be higher.

“With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales,” he said. “Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal, safe standards in the not-too-distant future, but the tardiness of this process is holding back the recovery.”

Existing-home sales did rise marginally in the Midwest and South, but all regions are down from the same time last year. The Midwest is now a staggering 14 percent below June 2010. The South is down 5.6 percent.

The region that has the most ground the recover is the Northeast, which fell another 5.2 percent in June and is now down 17 percent from June 2010. The West is the closest region to breaking even, down only 2.6 percent from a year ago.

“Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” said Lawrence Yun, NAR’s chief economist. “The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.”

Builder confidence is up, however, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

“The improvement in builder confidence in July is a positive sign that the outlook perhaps isn’t quite as bleak as was feared in June,” said Bob Nielsen, chairman of the National Association of Home Builders and a home builder from Reno, Nev. “While builders continue to confront serious challenges with regard to competition from foreclosed properties that are priced below replacement cost, inaccurate appraisals of new homes, and a very restrictive lending environment for new home construction, select markets are showing gradual improvement as consumers begin to take advantage of very favorable buying conditions.”

Going hand in hand with builder confidence, nationwide housing starts rose 14.6 percent in June, according to the U.S. Commerce Department.

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Agent goes the extra mile – and then some – for ailing client

By Jaime Westman

A confluence of dismal economic news the past few years has created what many consider a nightmare situation for the housing industry. But every once in a while a story comes along that shows that owning a home can still be considered the American Dream.

 Matt Swanson, an agent with Trans-Action Realty in Reno, NV, made a life-changing transaction for him and two clients in late June. The fact that the final price for the modest house in the suburb of Sparks was $148,000 was irrelevant.

“It felt like a million-dollar sale to me,” said Swanson, whose first closed sale from a HouseHunt lead will be one he never forgets.

When Pat and Salve Carmac enlisted his help, Swanson wasn’t sure what to expect. Pat was a paraplegic. He fell in love with Salve, his former caretaker who had come to the United States from the Philippines, and the two married and were living in an apartment. A house was very much on their wish list.

“This was a really great couple,” said Swanson, who has been with HouseHunt since Jan. 31. “I just figured I was going to do whatever I could to help them.”

To say Swanson went the extra mile would be an understatement. He compiled a list of houses the couple might be interested in and the three drove around the Reno area in Pat’s specialized van to check them out. After seeing about a dozen options, the Carmacs made their choice and Swanson submitted an offer for the bank-owned property.

About a week after having the offer accepted, Pat was forced to go to the hospital because of respiratory problems, something that is common for quadriplegics. Swanson visited him at the medical center and Pat had only one request.

“He really wanted to close on this house as soon as possible,” Swanson said. “I told him I’d tried to expedite the process as much as I could.”

A week later Swanson called and heard a sobbing Salve tell him that her husband was back in the hospital with a severe case of pneumonia and that both of his lungs had collapsed. The medical staff performed a tracheotomy and put him on a ventilator system, but Pat didn’t have much longer to live.

“It was just heartbreaking, so I did what I could to try to get this house closed as soon as possible,” Swanson said. “I was worried that he wasn’t going to make it to see the house that he wanted so badly to spend his last couple of breaths in … Each day I woke up thinking, ‘What can I do to make this deal go a little faster.'”

Swanson worked closely with financial officials and was able to trim some time off the occasionally cumbersome process. The house closed on June 22, and Swanson went back to the hospital to tell the Carmacs the good news.

“I got scrubbed up, went into his room and handed him the keys,” Swanson said about his emotional transaction with Pat. “At that point he was really weak, but I could still see that smile and tell that he really enjoyed being able to buy a house for his wife, knowing that she would be situated and comfortable and safe for the rest of her life.”

Pat spent a few more days in the hospital until the house was ready for him and Salve to move in. Pat died a few days later, on July 1, and Swanson was at his memorial the following day.

“Every deal is unique in some ways,” Swanson said, “but not all are as inspirational as this one was. It was something that I’m never going to forget. Without the help of HouseHunt I would have never met such a remarkable man and couple.”

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Atlanta agent says HouseHunt a key to his success

By Jaime Westman

Last year was a banner year for Dan Lind at Keller Williams Realty in suburban Atlanta. And even though numbers this year are a little down as far as big-ticket sales are concerned, he appreciates the support and help he gets from HouseHunt to make it through these slower-than-normal times.

“I’ve been very pleased with HouseHunt,” Lind said. “I’d say at least 60 percent of my business, as far as actual sales are concerned, have come from HouseHunt leads.”

Living in the northern metropolitan area of Johns Creek has helped, he said, because of the good schools and quality environment. That has brought a number of lookers to the HouseHunt site and to the area, where the price point of habitable homes is above the average in Atlanta and Georgia as a whole.

“Last year we had bigger sales, but this year people are buying up lower-priced homes,” said Lind, who has been with HouseHunt for five years. “It’s very competitive, and the difficulty of people being able to get loans has hurt business as well. But having HouseHunt gives me an edge and keeps me excited about the job.”

Lind, who says that the success and failure of home sales “is pretty much up to the agent,” is looking forward to a long and prosperous partnership with HouseHunt.

“I’ve spent thousands and thousands and thousands of dollars on everything you can think of, but you people, in my opinion, have lived up to and exceeded everything that you’ve promised,” he said. “I have recommended HouseHunt to every person who has ever asked. I get a lot of promises and under delivery from other companies, so now my outside money is spent on HouseHunt and nobody else. I do appreciate people who deliver what they say they’ll do.”

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Home foreclosures fall, prompting Feds to consider rent options

By Jim Droz

With the real estate markets continuing to struggle, federal officials are seeking ideas from public and private sources about ways to rent some of the nearly 250,000 foreclosed homes owned by government-controlled entities such as Fannie Mae.

A sharp slowdown in the pace of home foreclosures might help ease the financial burden on bankers, they figure, by helping them unload a glut of repossessed homes more slowly and delay booking losses from the sale of distressed properties.

But it will do little to help millions of Americans families at risk of being tossed from their homes in the next few years.

Lenders are moving fewer U.S. homes into the foreclosure pipeline and have curtailed new seizures, according to foreclosure listing firm RealtyTrac. In July, fewer than 60,000 homes received an initial default notice, down 7 percent from June and down 39 percent from July 2010.
The slowdown follows a wave of legal challenges by homeowners that has all but shut down the machinery of bank repossession in some states.

“The process has more or less ground to a halt in a lot of states that do foreclosures through the court system,” said Rick Sharga, a senior vice president at RealtyTrac.

The slowdown has left millions of American households in legal limbo, prolonged the housing market’s four-year recession and delayed hopes for a broader economic recovery. The foreclosure pipeline has also been clogged by the sluggish demand for housing, prompting bankers to slow the pace of new foreclosures to match that pace.

“What we’re seeing is a saturation of distressed properties already on the market and not enough buying interest to motivate the banks to proceed with new foreclosures,” Sharga said. “So they’re just replenishing the pipeline. As they’re able to sell off what they’ve already repossessed, they repossess a new batch, put those on the market and start foreclosure proceedings on the next batch.”

The lending industry points to falling delinquency rates as a sign that it might finally be slogging through the last of the foreclosure morass. Mortgage delinquencies in the second quarter improved by nearly 6 percent, the biggest gain since 2009, according to data released by consumer credit rating agency TransUnion.

Part of the reason overall delinquencies are falling is that lending standards tightened abruptly in 2008 after the bursting housing bubble shut down nearly a decade of manic mortgage lending. Those newer mortgages, approved for only the most creditworthy borrowers after 2008, are performing much better than loans written during the freewheeling mid-2000s, when lender profits trumped underwriting standards.

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5 Extreme Marketing Tactics in Real Estate

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Agents should always feel encouraged to go above and beyond with their self promotion. So much of working in real estate has to do with advertising your business. Some of the more extreme marketing tactics, however, may be considered too over-the-top.

Let’s count down the 5 most ridiculous marketing strategies the world of real estate has ever seen:

Extreme Marketing

5. Include a Psychic

Actually, this particular open house – hosted by an innovative Boston agent – also included champagne on ice, a harpist, and more. The most absurd element, however, has to go to the psychic. She was brought it to evaluate the aura of the estate, wish well on the possible owners, and foresee the future of the property.

The property had no offers by the end of the open house.

extreme marketing tactics
ABC News

 

4. Strip Down

Sex sells. It can sell beer and burgers… why not real estate? Pictured is Kieren Gray, a agent in Australia, who wanted to breathe new life into an old listing he was struggling to move.

The listing sold quickly after the video went viral. For another example of how a lack of clothing sells real estate, check out this post on ActiveRain.

extreme marketing tactics
Buzzfeed

 

3. Host a Carnival

 

Are you highlighting the open lawn space available at a listing? Want to show how kid-friendly a neighborhood is? Well then obviously you should host an entire carnival in place of a regular open house. That’s exactly what one agent in New York did for her broker preview. Balloon animal artists, bounce houses, face painters, and more filled this space with free family activities and one not-so-free luxury listing.

extreme marketing tactics
ABC News

 

2. Create Your Own Card Game

 

If you haven’t heard of Cards Against Humanity, it’s an adult (and by adult, we mean inappropriate) version of Apples to Apples. A Toronto-based real estate company, Buzz Buzz Home, took it upon themselves to make a (still very adult) real estate themed version of the game. The NSFW deck can provide entertainment for cynical agents and customers alike. And since each card features the company logo and information, the benefits of this unique advertising are evident.

extreme marketing tactics
88Creative

 

1. Build a Roller Coaster

 

Easily taking the #1 spot for the most extreme marketing in real estate is Huizen Promotion Agency, who built a roller coaster through his listing as a guided tour. The listing was in The Netherlands, because obviously this would never fly in lawsuit-happy America.

extreme marketing tactics
Buzzfeed

 

Have you ever seen extreme marketing tactics more ridiculous than those featured on this list? Or, better yet, have you ever been responsible for something even more ludicrous? We’d love to hear about it in the comments below!


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Fourth Quarter 2010 Shows All Signs Lead to Slowdown of Home Sales in 2011

By Jim Droz

Despite record low interest rates and a temporary slowdown in bank foreclosures it appears the housing market struggled in the fourth quarter of 2010 and will continue to struggle in 2011. It is expected that banks will accelerate the foreclosure process and interest rates will rise, which will negatively impact prices. Home buyers continue to struggle to obtain financing because of higher down payment requirements and tougher qualification standards.

Specifically, the fourth quarter 2010 saw a strong decline in first-time home buyers due to the elimination of the first-time homebuyer tax credit and an increase in repeat buyers who are purchasing second homes and investment properties.

According to agents polled in the United States by HouseHunt.com, 61% percent reported that there are more sellers than buyers in their respective local markets. This is the largest percentage reported in over three years and is almost 20% higher than in January of 2010. Only 32% of the agents reported a predominantly buyer-heavy market during the fourth quarter of 2010. Seven percent of agents reported a good balance between the number of buyers and sellers in their real estate market.

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