Category Archives: Real Estate

As a prerequisite to selling real estate, a person must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state by state basis, must be met. After receiving a real estate license, most agents go on to join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®, the world’s largest professional trade association. They can then call themselves REALTORS®.

The term “REALTOR®” is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics (which in many cases goes beyond state law). In most areas, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes.

Using an agent and the obligations that are owed to you
An agent is bound by certain legal obligations. Traditionally, these common-law obligations are to: Put the client’s interests above anyone else’s; Keep the client’s information confidential; Obey the client’s lawful instructions; Report to the client anything that would be useful; and Account to the client for any money involved.

NOTE: A REALTOR® is held to an even higher standard of conduct under the NAR’s Code of Ethics. In recent years, state laws have been passed setting up various duties for different types of agents. As you start working with a REALTOR®, ask for a clear explanation of your state’s current regulations, so that you will know where you stand on these important matters.

The difference between a buyer’s and a seller’s broker
Suppose you sign an offer to buy a home for $150,000. You really want the property and there’s a chance other offers are coming in, so you tell the broker that “We’ll go up to $160,000 if we have to. But of course don’t tell that to the seller.” If you’re dealing with a seller’s agent, he or she may be duty-bound to tell the seller that important fact. In most states, the seller’s agent doesn’t have any duty of confidentiality toward you. Honest treatment might require that the agent warn you that “I must convey to the seller anything that would be useful so don’t tell me anything you wouldn’t tell the seller.”

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TIP: If you’re dealing with seller’s agents, it’s a good idea to keep confidential information to yourself. These days many home buyers prefer instead to hire a buyer’s broker, one who owes the full range of duties, including confidentiality and obedience, to the buyer. A buyer’s broker is often paid by the seller, regardless of the agency relationship.

How to evaluate an agent
In making your decision to work with an agent, there are certain questions you should ask when evaluating a potential agent. The first question you should ask is whether the agent is a REALTOR® . You should then ask:

Does the agent have an active real estate license in good standing? To find this information, you can check with your state’s governing agency.
Does the agent belong to the Multiple Listing Service (MLS) and/or a reliable online home buyer’s search service? Multiple Listing Services are cooperative information networks of REALTORS® that provide descriptions of most of the houses for sale in a particular region.
Is real estate their full-time career?
What real estate designations does the agent hold?
Which party is he or she representing–you or the seller? This discussion is supposed to occur early on, at “first serious contact” with you. The agent should discuss your state’s particular definitions of agency, so you’ll know where you stand.
In exchange for your commitment, how will the agent help you accomplish your goals? Show you homes that meet your requirements and provide you with a list of the properties he or she is showing you?

The bad news for the housing market sometimes seems like it will never end. In the latest round of housing data, home prices continued to drop as did the number of home sales. Foreclosures remain a major weight dragging down everything, and then there’s the massive shadow inventory of distressed homes that will create more supply overflow as they are brought onto the market. Add up all of that, and suggesting now is a good time to buy a home is probably less popular than supporting Anthony Weiner. But along with all the bad news are in fact some compelling reasons for getting serious about buying right now. For example, home prices have come down so far in many markets it now makes the cost of buying a better financial deal than renting.

Crazy or Crazy Smart?

Of course, given what is still unfolding, waiting on the sidelines to make your move after the last of the ugliness is played out seems like a pretty smart strategy. But while you’re laser focused on the idea that home prices will be lower in the coming months — which you may well be right about –  the question is how much lower they are going, and what other important home-buying factors are going to be as advantageous a month or year from now.

Below are seven reasons why anyone who is pondering a home purchase might want to consider making a move sooner than later. Potential first-timers certainly have far easier logistics than current homeowners who need to sell to make a move. If you’re underwater on your loan, trading up might not be feasible. But there are indeed plenty of current homeowners sitting on ample equity. For them, and for potential first timers, here are seven reasons why now just might be a smart time to make your move.

(And here’s the rest of CBS MoneyWatch’s package on Why the Time to Buy Real Estate Is Now)

1. Renting isn’t such a great deal. This is all about Econ 101: Demand for rentals the past few years has increased  — a function of foreclosures and fewer existing renters making the decision to buy  –  and supply hasn’t kept up as there has been little new construction since the financial crisis hit. That’s pushing up rental prices. Mark Zandi, Moody’s Analytics chief economist expects rents to rise an average of about 5 percent over the next year.  Real estate firm Reis Inc. forecast 2011 rental hikes of more than 5 percent in markets including Fort Lauderdale, Fl.,  Fort Worth, TX, Washington, D.C.,  and Seattle.

That’s likely going to exacerbate an already interesting trend playing out in many markets. In a recent analysis by Trulia.com, the ratio of sales prices to rental prices means buying a home today makes more financial sense than renting in about 80 percent of regional markets included in the study. No surprise, Las Vegas and Phoenix, where home prices have cratered, offer the best buy-vs.-rent tradeoff.  But even in more stable housing markets such as Dallas, Philadelphia and Atlanta, buying offers strong relative value compared to renting. The needle will likely tilt even more toward home ownership in the coming year given the expectation that rental rates are heading higher in many areas, while home prices aren’t.

2. The worst of the price declines is likely over. From the market peak in 2006, the S&P/Case-Shiller index of 20 housing markets is down 32 percent. Ugly indeed. But what’s important is what comes next, not what we’ve just come through. And no one is suggesting we have another 30 percent to go. Zandi recently said that another 5 percent slide in home prices might be on tap. To be clear, no one is suggesting roaring price gains are on the horizon either. The takeaway is that we’re potentially at an important pivot point where we’re moving from steeply falling home prices to an extended period of stabilizing prices.

3. Mortgage rates are at historic lows. Right now the 4.6 percent interest rate on a 30-year fixed rate mortgage is beyond fire-sale cheap, as is the 3.78 percent interest rate for a 15-year mortgage. Assuming rates will stay where they are at, or even fall some more, seems a risky bet. Fannie Mae expects the 30-year fixed rate will hover around 5.2 percent by the fourth quarter of this year, then rise slightly throughout 2012 to 5.4 percent or so. The 2012 forecast is 5.7 percent, more than a full percentage point above where we’re at today.

If you take out a $300,000 30-year fixed rate loan today at 4.6 percent your monthly tab will be $1,537. But let’s say you instead decide to wait another year or more on the theory prices are heading lower. If during your wait the 30-year fixed rate rises to 5.7 percent you would need home prices to fall nearly 12 percent to come in at the same monthly mortgage cost as what you can get now. That’s more than double the price decline most market watchers are expecting.

4.  Mortgages for pricey homes are heading higher. Even if mortgage rates don’t budge between now and the fall, mortgages for expensive homes are still going to cost more. Right now lenders can write mortgages for as much as $729,750 in certain high-cost areas and still have that mortgage qualify as a “conforming” Fannie Mae or Freddie Mac loan. That’s a big deal to lenders who are typically eager to sell off their loans into the secondary market — and right now Fannie and Freddie are the secondary market. But come Oct. 1, the maximum loan amount for a conforming mortgage will fall back to $625,500. If you intend to borrow more than that you will be shut out of the conforming loan market, and will have to opt for a jumbo loan. Jumbos typically carry higher down payments and the mortgage rate can be 0.50 percent higher than the conforming loan rate.

5. Qualifying for a mortgage is likely to get harder, not easier. The goal of Washington in the coming years is to shift more of the mortgage market out of the hands of Fannie Mae and Freddie Mac and into the hands of the private market. It is admittedly too early to know when and what that transition might look like. But whether the government backing is scaled down or disappears all together, that means higher borrowing costs. Moreover, there’s already a new regulation being considered that would require banks that want to keep selling 100 percent of their mortgages to Fannie and Freddie to hold borrowers to tougher lending standards.

6. Scary national statistics are especially deceptive right now. RealtyTrac reported that 28 percent of home sales in the first quarter of 2011 were foreclosures, and the average foreclosure sale price was 27 percent less than what a non-distressed home went for. But peel back from that ominous headline statistic and there is a more nuanced story playing out that goes to the heart of the old maxim: All real estate is local.

While foreclosures dominate the hardest hit states of Nevada (53 percent of first quarter sales), Arizona (45 percent) and California (45 percent) at the other end of the seesaw are the likes of New York (7 percent), Texas (12 percent) and Pennsylvania (14 percent). If you live in a state (or neighborhood) teeming with foreclosures, I would be the last to tell you that this is the perfect time to buy. There’s likely a long slog ahead as your market works through its backlog in inventory. But if you’re in a market that is in fact a lot healthier, don’t let the broad national story scare you off right now. Foreclosures in Nevada are irrelevant if you’re thinking of buying in Texas.

7. Less competition. There may be plenty of lookey-loos at open houses these days, but the anemic sales pace is proof that there are fewer serious buyers looking to make a deal. That makes it less likely you’ll find yourself in a bidding war today. It also means you can negotiate more effectively with eager sellers.  Wait to dive in and you could find yourself in a more crowded pool of buyers. It’s just common sense that once there are clear signals of recovery, demand will pick up. Being a little early/ahead of the curve gives buyers more elbow room.

Read more: http://moneywatch.bnet.com/economic-news/blog/daily-money/7-reasons-why-nos-a-good-time-to-buy-a-home/2834/#ixzz1S4wxX1rn

Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor’s Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.
Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody’s Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer’s market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.

Such conditions might not last long. Moody’s Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn’t likely to get much worse. Meanwhile, demographic indicators such as “household formation”—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.

Lending

As rates hover near historic lows, experts expect banks to ease borrowing standards over time.

Psychology

If prices stabilize, it could tip the balance away from fear and pull more buyers back into the market.

In several markets, it’s becoming cheaper to own than to rent.

Demographics

The rate of “household formation” is expected to climb .

Employment

The strength of the housing recovery depends on job growth.

Journal Community

Discuss: Is home ownership a good investment?
The upshot: “While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound,” says Anthony Sanders, a real-estate finance professor at George Mason University.

The short-term outlook isn’t encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.

But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.

So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.

Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn’t battered by foreclosures, you may be close to a bottom already.

“The regular marketplace is hanging tough,” says CoreLogic chief economist Mark Fleming.

Here is a look at five key factors that will govern local markets over the next several years:

Demographics
Household formation fell during the economic downturn as a weak economy led some people to stay in school, double up with roommates or move in with family members. According to Moody’s Analytics, the number of new households renting or owning a home dropped to 578,000 in 2008 from nearly 2 million in 2005, just before the peak of the housing boom.

But household formation increased to nearly 950,000 last year, says Moody’s, and should average 1.2 million over the next decade.

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That, combined with increased obsolescence and higher demand for second homes, should begin sopping up excess inventory in much of the country over the next two years, Moody’s says.

“Whatever the excess supply of housing is, it is shrinking pretty fast,” says Thomas Lawler, an independent housing economist.

Some of the uptick in household formation is likely to come from the leading edge of the echo baby boomers, who have been waiting for the economy to recover before striking out on their own, says William Frey, a demographer with the Brookings Institution. That is likely to fuel an increase in demand for both rental apartments and starter homes.

The portion of people moving across the country has fallen to the lowest level since World War II, he adds. That is a sign that many people have put their lives on hold because of the weak economy.

“When things do pick up, there will be this pent-up demand for everything involved with starting a household,” Mr. Frey says.

Of course, when prices in healthier regions begin to rise, many would-be sellers who have sat on the sidelines could begin putting homes on the market, muting the price gains at first, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School. Even so, she expects home prices to stabilize and begin to strengthen over the next two or three years.

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There also are some powerful demographic cross-currents worth considering. The first baby boomers turned 65 in January, an age when demand for new homes falls and many begin to think about downsizing. “The baby-boom generation pushed prices up as they got older,” says Dowell Myers, a professor of urban planning and demography at the University of Southern California. But in the coming years, “boomers will start flooding the market on the supply side” with larger homes, while fueling new demand for smaller properties with more services and amenities.

Affordability
Rising home prices made renting cheaper than buying in many parts of the country. But that dynamic has begun to change: Housing affordability, as measured by the ratio of median home prices to median household incomes, has fallen below pre-housing bubble levels in just over two-thirds of the country, according to an analysis of more than 380 metro areas by Moody’s Analytics.

Renting is still cheaper than buying in most markets, but rising rents and falling house prices mean that, in some areas, this won’t be the case for long. Buying a home is already cheaper than renting in Chicago, Cleveland, Detroit and Orlando, Fla., according to Moody’s Analytics. In other markets, including Dallas, Las Vegas and Sacramento, Cailf., the equation is likely to soon turn in favor of homeownership if current trends persist, the firm says.

In Ann Arbor, Mich., where home prices fell 11.2% between 2007 and 2010, according to Fiserv Case-Shiller, housing affordability has risen well above historical levels, according to Moody’s Analytics.

That is good news for home buyers such as Steven Upton, a 42-year-old photographer, who in June will close on four-bedroom brick house on 10 acres in an upscale community in Ann Arbor. Mr. Upton paid $400,000 for the home, which previously listed for $600,000. “It’s a tremendous deal,” he says.

Before buying a house, it is wise to compare rental prices for similar properties. To be ultraconservative, wait until the monthly outlays, including taxes and insurance, are equal. You also could factor in the tax savings of owning, which would make buying more attractive even if the gross monthly outlay is slightly higher.

Employment
The strength of the housing market depends largely on the economy. Rising incomes and increased employment tend to give more would-be buyers confidence and buying power. For now, job growth remains sluggish: On Friday the Labor Department reported that just 54,000 jobs were created in May, far below expectations.

But signs of how a stronger job market could fuel housing demand are evident in the Dallas metro area, which added 83,100 new jobs in the 12 months ending in April—the largest gain in the nation, according to the Bureau of Labor Statistics. Dallas never had a big housing boom or bust and has benefited from trade with Mexico, a strong telecommunications sector and a central location.

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The opportunities for a job with more responsibility drew Duane and Linda Elmer to Dallas from Des Moines, Iowa, where Mr. Elmer was a banker for nine years. The couple has agreed to pay $415,000 for a four-bedroom, four-bath house with a Jacuzzi and pool. Their Des Moines home, purchased nine years ago for $410,000, is on the market for $390,000. “We are willing to take the loss for the opportunity to live in a more diverse community and to take a job with greater breadth of responsibilities,” Mr. Elmer says.

Borrowers like the Elmers who are relocating for job opportunities are a big driver of home sales in nearby Plano, Texas, says Harry Ridge, a real-estate agent. He says such sales accounted for 20% of his business last year.

A similar influx of job seekers is fueling housing demand in the Washington area, where 25,700 new jobs were added in the 12 months since April 2010. Washington was the only one of the 20 cities tracked by Standard & Poor’s and Case-Shiller that saw home prices rise both on a month-to-month and year-over-year basis.

Credit
Mortgage financing remains plentiful for borrowers with good credit scores and solid employment histories. But for borrowers who don’t fit traditional lending standards, getting a loan can still be nearly impossible. In the first quarter, about 10% of banks tightened standards for nontraditional loans, according to the Federal Reserve. Meanwhile, higher down-payment standards are locking some would-be buyers out of the market. Just 35% of renters have the minimum 3.5% down payment needed for an FHA loan on the median-priced home in their market, according to a recent survey by Zelman Associates.

Credit is likely to remain tight for at least the next six months, says Clifford Rossi, a former Citigroup Inc. consumer-lending executive who teaches at the University of Maryland.

But conditions should improve over time, he says: “There’s no question that it will gradually get easier.”

That will be welcome news to borrowers like Greg Silver. The 50-year-old real-estate developer would like to buy a second home, but hasn’t been able to secure a jumbo mortgage because his income consists of capital gains from sales of the properties he develops. Mr. Silver closed three sales in the past 12 months, netting him a total of more than $25 million, but didn’t record any capital gains in 2008 and 2009. Sure, he could use some of that cash to buy a home outright, but he would prefer to mortgage it, get the tax deduction and keep his cash free for business purposes.

“It’s a little devastating,” says Mr. Silver, who is living in Greenwich, Conn.

Psychology
The long-term case for buying over renting remains in force. Yet nowadays, “People are simply scared,” says Aaron Galvin, chief executive of Luxury Living Chicago, which finds rental apartments for wealthy clients.

Mr. Galvin says he has seen a 30% increase in business in the last year, driven by would-be home buyers who can afford to purchase a property but are choosing not to do so.

The portion of Americans who believe homeownership is a safe investment dropped to 66% in the first quarter from 83% in 2006, according to Fannie Mae, the government-controlled mortgage company.

But it isn’t clear whether the fear will result in a prolonged change in attitudes, as during the Great Depression, or have little long-term impact, as was the case for the housing bust that shook California and the Northeast in the late 1980s and early 1990s. Eighty-seven percent of people surveyed by Fannie Mae said they preferred owning to renting, though access to schools, control over one’s environment and other quality-of-life issues now are seen as the key benefits of homeownership, with building wealth and other financial factors viewed as less important. In addition, 67% of renters surveyed by Zelman Associates said they planned to buy a home in the next five years.

Jeffrey Connor may be a bellwether for the future of the housing market. The 40-year-old finance director at a corporate law firm says he thought briefly about buying a house when he moved to Chicago from Washington in October. But he opted instead to rent a luxury two-story apartment in downtown Chicago for $3,559 a month. Mr. Connor says it will take substantial job growth and a sharp drop in foreclosures to convince him to buy.

“The market is clearly soft,” he says, “especially when we consider it good news that the unemployment rate is hovering around 9% instead of 10%.” Mr. Connor says he isn’t worried about missing out on today’s low interest rates and will consider buying once unemployment falls to 6%.

Other buyers are showing less willingness to wait for the absolute perfect time to buy. Douglas C. Yearley Jr., chief executive of luxury builder Toll Brothers Inc., told investors in May that “some of our clients, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates and, most important, the desire to take the next step in their lives. The family with elementary-school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog weighs 80 pounds.”