6 Common Housing Problems that Spook Buyers

Potential home buyers with lots of homes to choose from can be easily spooked by disclosures and the results of property inspections — even when the shortcomings are typical for homes of a certain age.

In a jittery market such as this one, it’s critical to give buyers tools and knowledge so they can decide which problems are serious.

Judi Seip, an associate with Coldwell Banker in Southern California, tells her clients to accompany the inspector so they can put the problems in perspective. Anything a handyman or an electrician could fix in a few hours isn’t worth worrying about, she says.

Here are six common issues that trouble buyers and some factors to weigh:

1. Water damage. Evidence of water damage frightens buyers, but all water damage isn’t serious. Minor leaks generally cost no more than a few hundred to repair. Get an estimate.

2. Missing permits. Ask the home inspector if the work was done well and meets code requirements, even though a permit wasn’t issued.

3. Code violations. How expensive is the repair? Ungrounded electrical outlets are common in old houses and easily fixed.

4. Cracks in the garage floor. Ask the inspector whether these cracks suggest other related problems. Generally these don’t affect the structure of a home.

5. Termites. Termites and termite damage are very common in many parts of the country. It’s important to get rid of them and to get a clear sense of how bad the damage is.

6. Foundation cracks and other foundation issues. Older homes often have cracks in the foundation. Get an expert to inspect the problem and estimate — what if anything — needs to be done.

Source: The Mercury News, Margaret Steen (10/19/07)

A House in Egypt or Indiana? They Cost the Same

Coldwell Banker's 2007 Home Price Comparison Index survey looked at the average sales prices of single-family four-bedroom homes with approximately 2,200 square feet of space in 77 markets outside the U.S.

The HPCI is meant to serve as a guide for employees facing transfers who are interested in how much a typical home will cost, but other people are increasingly interested, as well.

"More and more Americans are living abroad," says Jim Gillespie, chief executive officer of Coldwell Banker. "The baby boomers in particular are now looking internationally to buy second homes and retirement homes."

HiFX, a firm based outside London that provides foreign exchange services, estimates that there are more than 500,000 relocations of Americans to foreign countries per year, with the biggest concentrations of Americans residing in Mexico (approximately 1 million), Canada (700,00), and Britain (200,000).

Here are HPCI’s top 10 most affordable international markets, the 2007 average sales prices and how the average sales prices compares to a U.S. city:

1. Bogotá, Columbia: $140,100; compares with Canton, Ohio, $146,333

2. Sharm El Sheikh, Egypt: $144,896; compares with Muncie, Ind., $150,000

3. Charlottetown, Prince Edward Island, Canada: $157,630; compares with Eau Claire, Wis., $158,6504. Granada, Nicaragua: $190,000; compares with Memphis, $191,936

5. Panama City, Panama: $201,333; compares with Erie, Pa., $205,475

6. St. John's, Newfoundland, Canada: $209,000; compares with Florence, Ky., $209,579

7. Saskatoon, Saskatchewan, Canada: $211,666; compares with Huntsville, Ala., $212,183

8. Manama-Muharraq, Bahrain: $230,500; compares with Lawrence, Kan., $232,300

9. Aruba: $236,250; compares with Louisville, Ky., $238,000

10. Suzhou, China: $241,275; compares with Port Charlotte, Fla., $239,100Source:


BusinessWeek Online, Maya Roney (10/12/07)

RealtyTrac.com Identifies Best Foreclosure Deals

RealtyTrac.com, which supplies monthly mortgage statistics, also calculates the average discount-to-value by market — that is, how much foreclosed homes actually sold for compared to their estimated market value in their areas.

This information can help a bargain hunter get the best foreclosure deal.

Nationwide, in the three months from June through August, 68,426 foreclosed homes sold in 2007 vs. 54,886 in 2006. The average sales price dropped from $271,000 to $239,000.

The discount-to-market ratio increased slightly from 76.42 percent to 77.68 percent. This is the actual foreclosure sales price compared to the perceived market value of the home. So 77.68 percent means, on average, you'd get just over a 22 percent savings or "discount" on a foreclosure purchase. That's down from just over 23 percent a year ago.

These are the states with largest discount, including price and its average percent of market value:

• Alabama: $133,834, 59.95 percent
• Pennsylvania: $110,936, 61.68 percent
• Indiana: $99,255, 63.5 percent
• Ohio: $90,300, 64.7 percent
• Missouri: $144,768, 67.25 percent

Here are the states with the smallest discounts:

• Hawaii: $657,211, 85.41 percent
• Washington: $288,397, 83.68 percent
• Virginia: $338,912, 83.48 percent
• Massachusetts: $290,835, 83.03 percent
• California: $437,813, 83 percent

Source: Dow Jones Business News, Jennifer Openshaw (10/16/07) /Realtor magazin

The Difference Between Advertising and Marketing

Real estate technology trends expert Matthew Ferrara of Matthew Ferrara & Co. underscores the difference between marketing and advertising properties.

If you place a picture and a list of a home's specifications in the newspaper or online, you are merely advertising, he explains. And that's not very effective, he says, citing a consumer survey by the NATIONAL ASSOCIATION OF REALTORS® that shows fewer than 5 percent of buyers thought newspapers were helpful in finding a home.

According to Ferrara, the biggest difference between advertising and marketing is that the former concentrates on a product, while the latter focuses on people and the opportunities available to them through the purchase of the product.

While home buyers may need a certain amount of bedrooms or a home feature such as a garage, Ferrara says most make a purchase based on the lifestyle associated with a particular property. But most real estate advertisements do not show people living in the home or enjoying the nearby amenities.

So how does this transfer to the Web? He says Web sites that allow buyers to search by their personal buying category, such as new buyers or retirees, are more useful than searches based on home price.

Ferrara believes homes targeting entry-level buyers should be marketed on YouTube or iTunes because many of today's buyers in this demographic generally are interested in videos and podcasts. Maintenance-free condominiums geared to empty nesters could be marketed on Web sites with guided video tours and allow prospective buyers to print high-quality brochures detailing the properties.

Source: Maryland REALTOR®, Matthew Ferrara (09/01/07)

The real estate business may be facing a softening in sales, but there are parts of the country where it makes sense to buy now. Forbes magazine examined current home sales patterns and sales projects in the country’s 40 largest real estate markets to identify these attractive markets.

Based on models that estimated 2008 housing inventory, sales rates, and turnover, the magazine compiled a list of markets that are experiencing price declines, but where buying looks attractive because there is likely to be an increase in sales in the near future.

Here are Forbes’ and Moody’s 10 most attractive markets, along with the median homes sales price and their price change from 2006.


1. Fort Worth, Texas: $156,500, 1.7 percent
2. Kansas City, Mo.: $157,700, -0.7 percent
3. Houston: $154,900, 1.4 percent
4. Cleveland: $128,700, -7.1 percent
5. Denver: $255,200, none
6. Long Island, N.Y.: $482,300, 1.7 percent
7. Washington, D.C.: $445,300, 0.3 percent
8. Orlando, Fla.: $265,100, -2.4 percent
9. Phoenix: $264,800, -2.7 percent
10. Las Vegas: $307,900, -3.6 percent


Source: Forbes, Matt Woolsey (10/08/07)/ Realtor magazin

Mortgage Rates Move Lower

Fixed mortgage rates declined over the last week, with the average conforming 30-year fixed mortgage rate falling to 6.42 percent.

According to Bankrate.com's weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.36 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing fell by a similar amount to 6.10 percent. The average jumbo 30-year fixed rate pulled back to 7.28 percent. Adjustable mortgage rates were lower as well, with the average one-year ARM slipping to 6.13 percent, and the average 5/1 ARM sliding to 6.26 percent.“

Another drop in pending home sales added to mounting housing concerns and helped pull mortgage rates lower,” Bankrate.com said in its report. “Worries about the economic fallout from housing enticed investors into the safety and security of long-term government bonds.”

Fixed mortgage rates are closely related to yields on ten-year Treasury notes. The path of mortgage rates in the next week is very likely to hinge on the outcome of the employment report to be released Oct. 5.

If job growth does not appear as bad as initially thought, this could give the Federal Open Market Committee latitude to pause at the next meeting. But more troubling signs from the job market might compel the Fed to cut interest rates again. The Fed remains coy about plans for the Oct. 30-31 meeting.

Fixed mortgage rates remain the most attractive option for borrowers. Just three months ago, the average 30-year fixed mortgage rate was 6.74 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,295.87. Now that the average conforming 30-year fixed rate is 6.42 percent, the same $200,000 loan carries a monthly payment of $1,253.63.

Bankrate.com's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

Source: Bankrate.com

For Most Buyers, the Mortgage Market Is Healthy

The widespread notion that the entire mortgage market is in crisis is just plain wrong, say lenders in various parts of the country.

The majority of mortgage products have been unaffected by troubles in the subprime segment. Interest rates for 30-year, fixed-rated loans remain in the low 6 percent range for people with reasonably good, though not necessarily perfect, credit records, according Kenneth R. Harney, managing director of the National Real Estate Development Center and syndicated columnist.

While there is plenty of money to lend, Harney says underwriting standards are more strict than they were a year ago. Jumbo loans, for example, often require two appraisals – one by an appraiser selected by the lender and the other by one working for the investor.

Similarly, FICO credit-score standards generally are higher than a year ago, stated-income mortgages with no verifications are hard to find and lenders are especially wary of excessive "layering of risk" – combining low down payments with marginal credit scores and high debt-to-income ratios – in markets where prices are trending lower.

Source: The Washington Post Writers Group, Kenneth R. Harney (09/29/07)/Realtor magazin

Self-Employed Workers Struggle to Get a Mortgage

It is growing increasingly difficult for the self-employed to get a mortgage.

Some lenders that specialized in home loans to self-employed workers and small-business owners have gone out of business. And many lenders that still offer such loans have tightened their standards, making it harder for self-employed borrowers to qualify.

Here's what self-employed borrowers need in order to qualify for a mortgage in this new environment, according to Marc Savitt, president of the National Association of Mortgage Brokers.

• More documentation. Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements, and proof that they've been in business for at least two years. A letter from their accountant probably won’t be good enough.
  
• Fewer tax deductions. Savitt says self-employed workers who plan to buy a home in the next year or two might want to forgo some deductions. "Make sure you can show as much income as possible," he says.
  
• Larger down payments. An old-fashioned 20 percent down is very persuasive.
  Excellent credit. A credit score of 720 or higher will give self-employed borrowers some choices.
  
• Patience. Even for well-off business owners, qualifying for a mortgage is "not that smooth, easy no-brainer like it used to be," Savitt says. "If you want it to be quick, you're paying a higher price."

Source: USA Today, Sandra Block (10/02/07)/Realtor magazine online

FHA Reform passes House and Senate Banking Committee

In the month of September, both the House of Representatives and the Senate Banking Committee passed versions of an FHA reform package that NAR has been strongly supporting for several months. The House version, entitled “Expanding American Homeownership Act of 2007” passed with a strong majority of 348-72, and includes provisions that would eliminate the 3% down payment requirement, increase the loan limits, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The House bill also includes provisions for a National Affordable Housing Trust fund, and provisions allowing risk based pricing on FHA insured loans. A similar, but not as far reaching, bill passed the Senate Banking committee but has yet to be considered by the full Senate, although it is expected to be brought to the floor in October. After it is passed, it will be sent to a conference committee where the two versions of the bill will be reconciled. NAR staff created a comparison document that outlines the differences between current law, the bill that passed the House, and the bill that passed the Senate banking committee.