Lets keep this housing party going!

There was a time when those who defaulted on their debt, especially mortgages, had to wait 3-5 years before they became eligible for any form of new credit, let alone a brand new mortgage. That, however, was in the Old Normal. In the New one things are different: so different, that for anyone who filed a bankruptcy on or before July 2012, we have good news for you - the FHA (subject to an explanation and several almost painless conditions) will be happy to provide you with a brand new mortgage.

From the recent FHA Mortgagee Letter 2013-26:

FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.

As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.

To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

• certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
• the borrower has demonstrated full recovery from the event; and,
• the borrower has completed housing counseling.

Housing counseling is an important resource for both first-time home buyers and repeat home owners. Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget, accessing reliable information and resources, avoiding scams, and being better prepared for future financial shocks, among other benefits to the borrower.

Well, we did say almost painless: it is only logical that after filing bankruptcy one should go to housing counseling. Surely that will 'learn' one to buy that 18 bedroom McMansion that the evil banker, gun against head, forced down one's throat.

Either way, once done with the grueling "counseling" sessions, and providing evidence one didn't blow it all in Vegas, the FHA makes one eligible for a new mortgage even with a prior recent bankruptcy, and not just any but Chapter 7 as well as 13, as follows:

D. Economic Event-Related Chapter 7 Bankruptcy

The lender must verify and document that:

• a minimum of twelve (12) months have elapsed since the date of discharge of the bankruptcy; and
• the bankruptcy was the result of the Economic Event.

E. Economic Event-Related Chapter 13 Bankruptcy

The lender must verify and document that:

• the Chapter 13 Bankruptcy was discharged prior to loan application and all required bankruptcy payments were made on-time, or a minimum of twelve (12) months of the pay-out period under the bankruptcy has elapsed and all required bankruptcy payments were made on time; and
• the bankruptcy was the result of the Economic Event.

But what if, gasp, the existing bankruptcy has not yet been discharged? Don't worry: the FHA's got you covered even then:

If the Chapter 13 Bankruptcy was not discharged prior to loan application, the lender must also verify and document that the borrower has received written permission from the Bankruptcy Court to enter into the subject mortgage transaction.

And so on. There are other conditions (the full FHA Mortgagee Letter can be found here) but if the only gate for a bankruptcy as a restraining factor is for 12 months to have gone by, one can imagine just how "strict" the other conditions have to be.

So…party on!

Thanks for reading…as always.

Steve Jackson

561.602.1258

Does it pay to sell?

Is the “smart money” starting to bail on real estate?

Here are 2 recent headlines relating to the hedge fund investing strategy that has gained popularity in the past few years:

 

• Is private equity and Wall Street planning their exit from the rental business- Lower yields, IPOs, and packaging deals to sell: The whispers about private equity exiting the rental market are now out in the open.  A few reports are highlighting that some private equity investors are testing the waters for an exit via IPOs.

• Housing Bubble II: Euphoria And Other Shenanigans: Private-equity funds have poured tens of billions into gobbling up vacant single-family homes in specific markets. And now some of them are planning IPOs as a way of dumping this stuff into funds that unsuspecting worker bees hold in their 401(k)s. It’s called an exit, and they have to do it before it blows up in their faces.

Personally, I just last week saw another agents deal that Blackstone (a very large hedge fund) tried to renegotiate at the last minute…then bailed out on. They had a 3 week to closing date contract on a single family home in Deerfield at $333k and on the final day of their 10 day due diligence period they asked the seller to reduce the price to $300k. Even though the seller had already contracted to purchase another home and packed most of their belongings they counter offered Blackstone at $325k..and Blackstone walked. Was this their normal M.O or are they getting a bit skittish about the rapidly rising home prices in South Florida? Time will tell I guess.

In the past few years institutional investors rushed to buy homes with the philosophy of buy cheap, renovate, and rent. But they might be in for a surprise. According to real estate research firm Trulia Inc., since 2005, there have been almost four million single-family homes added to the rental market. That supply has met the demand created during the crisis in the housing market. (Source: Trulia Inc., April 4, 2013.). Also those numbers do not include the huge rush into the building of multi-family/apartment rentals. With just a simple 15 minute drive around our area you can see hundreds and hundreds of new rental units being built…Cheap corporate money+lots of bad credit/unstable job families=A generation of renters. But the returns projected by these entities, are, in my opinion, much too high.

As a result, the rental rates that institutional investors were banking on (they were working off projections of up to 5% annual rental rate increases) are actually compressing. Recent reports have shown that rental rates are down 1.2% on average in Dade/Broward/Palm Beach counties year over year.

Interest rates have recently spiked to over 4%, which is still historically low, but every tic higher changes the yield for a leveraged investor and reduces the amount any that any buyers who needs a mortgage can qualify for.

Be careful out there.

 

Thanks for reading…Steve Jackson, 561.602.1258

For Memorial Day…The Pledge of Allegiance

Thank You to all of the veterans who have served, sacrificed and protected our freedom…

Don’t “sell your listing” when trying to sell your home

All recent indicators point to it being a strong sellers market…super low inventory, historically low interest rates, lot’s of cash on the sidelines too. It is the strongest sellers market I have seen since 2005.

But…be careful when pricing your home for sale lest you may miss this selling opportunity. It is always tempting to hire the agent that tells you the highest price. Unscrupulous agents are well aware of this typical seller tendency and often try to take advantage of it as follows:

Case in point: Earlier this year I met with a prospective seller to interview for the job of assisting them with the sale of their home. All went well EXCEPT for the portion of our meeting where we discussed the most likely selling price range. These sellers were of the opinion that their home would sell for about 20% more than my assessment. Shortly thereafter, their home showed up on the market with another well-known local franchise agent/team at the price they told me they thought it was worth. Now, not to be an “I told you so”…but after 3 price reductions and 5 months on the market, their home sold $8,000 below where I recommended it be priced initially. Buyers quickly become very astute in determining a homes value…there is sooo much information readily available that you’re not going to fool anyone into overpaying. And if you do,  then you have to convince the buyers appraiser of the higher value too!

What is your home really worth?

In a way, that's a trick question. What your home is worth to you, considering the new paint and the children's park across the street, could be very different from what the home is worth to a couple who doesn’t like your taste in color schemes and whose kids are grown. So before you put a price tag on your home, read this:

CMA (comparative/competitive market analysis) : an objective point of view

Your home's "fair market value" is the price a buyer agrees to pay and you agree to accept. All homes ultimately sell at this price.

Instead of using subjective measures, the housing market uses a "Comparative Market Analysis" or CMA. It's the most important factor in determining what your home's fair market value is. A CMA compares your home to comparable homes, or "comps," in your neighborhood that are presently on the market, currently under contract and that have sold recently. Adjustments are made to account for differences in location, size, condition, upgrades, etc...

For $300 or so you can also pay for a professional appraisal of your home to get a state certified appraisers opinion of your home's fair market value.

When Your Realtor Suggests a High Selling Price, Beware!

Meeting With Realtors

· You’ve decided to sell your home and have a fairly good idea of what you think it is worth. Being a sensible home seller, you schedule appointments with a few local agents who’ve been mailing you cards. Each Realtor comes prepared with a "Competitive Market Analysis" and they each recommend a price.

· One of the Realtors has come up with a price that is lower than you expected and although they back up their recommendations with recent sales and current market data, you remain convinced your house is worth more.

· When you interview the next agent, they are much more in line with your own hoped-for value, or maybe even higher. Suddenly, you are a happy and excited home seller, already counting the money.

A Dangerous Sales Practice Called "Buying a Listing"

· If you’re like many people who don’t buy or sell a lot of homes, you pick Realtor number two. This is an agent who seems willing to listen to your input and work with you. This is an agent that cares about putting the most money in your pocket. This is an agent that really sees the value in your home.

· The truth is that you may have just met an agent engaging in a questionable and all too common sales practice called "buying a listing."  He "bought" the listing by suggesting you might be able to get a higher sales price than the other agent recommended. Most likely, he is quite doubtful that your home will actually sell at that price. The intention from the beginning is to eventually talk you into lowering the price to where he knows it should be. (Or it could be that the agent is NOT being underhanded but that they are just new/inexperienced or plainly not very good).

Why do some agents "buy" listings this way? There are 3 reasons:

· The first one being that the agent realizes that you have to sell and they will eventually get you to reduce your asking price to where it should have been initially, even though it may be $10,000, $20,000, $50,000 or even $100,000 less then they told you they could get you on the day you signed up!

· The second one is so that they can do a neighborhood mailing and in that way get another listing “priced correctly” that they believe they have a chance of selling.

· The third reason is that they hope to get a buyer to call off of your sign or ad and that buyer will purchase some other (properly priced) house and the agent eventually gets a paycheck that way.

A seller who choose an agent based on which estimate is highest is the ultimate loser.

Selecting an agent by essentially “auctioning” your listing is a sure way to waste your time and miss out on a real buyer for your home.

Conclusion: Choose your agent based on honesty, reputation, ethics, experience, competence and marketing, and don't chase after those tossing around pie-in-the-sky numbers.

As always, thanks for reading,

Steve Jackson: 561.602.1258

Interesting Perspective

A guy whose videos I get a few times a week recently did a short video with an interesting perspective on the current market conditions.

Thanks for reading…Steve Jackson

561.602.1258

Making Moving Easier for Children

From a great parenting blog, Little Hearts/Gentle Parenting, that I read whenever I can, comes this post on kids and moving

Transitions are hard on everyone, and when the whole family is affected such as in a big move to a new home, parents often get so caught up in the logistics of the move and their own stresses that helping their children cope with the move can get lost in the chaos. Here are a few things you can do to ease the transition for your little people without adding more stress to yourself:

1. With small children, it can be tempting to build up the move beforehand to make it seem like an exciting adventure, but over excitement can be just as stressful and overwhelming to small children (and big ones!) as anxiety can be. Instead, try to keep things as low-key as possible. Wait until it’s close to time to actually start packing before discussing the move with your little one, and then use simple, age-appropriate language to tell them that you are all moving together (emphasize together so there’s no misunderstanding!) to a new house.
2. Show them pictures of the new house, the new yard, their new room, the kitchen, bathroom, living room, etc. Ask them where they’d like to put their bed and draw it on the picture with a marker. Do the same with their toy box, toothbrush, high chair, sandbox, and anything they ask about to reassure them that their things are coming along on the move and to begin to familiarize them with their new space. Give them a marker and another set of pictures of the new house to draw on so they can begin to make it their own.
3. Put boxes in their room a few days before the move and let them begin to pack their own things in their own time. You can go back and repack the boxes when they’re asleep or playing elsewhere if needed. Giving them some control over the move will help tremendously with their feelings of being taken away from their familiar home.
4. Keep a few familiar toys out for the actual move to help your little one see that their things are coming with them. If possible, let them help with loading the boxes from their room onto the truck, too. Knowing that their toys and clothes and bed are coming with them on the move is very comforting.
5. Pack a travel bag with new toys and activities and healthy, familiar snacks for moving day. The novelty of the new toys will help them to travel more happily, and the familiar snacks will keep their tummies settled and hunger at bay making for a calmer trip for all.
6. At the new house, unpack your little one’s things first if at all possible so that they can see for themselves that they made the trip and can begin settling in right away. Take the time to play with them, too. It’s amazing how a few minutes of playing together can settle a small child when they’re stressed!
7. Don’t be surprised if your little one is clingy and whiney for a few days after the move. After unpacking their things, don’t try to rush to unpack everything else all at once. Give your child all of the time and attention they need to help ease the transition for them.
8. Nighttime can be the hardest for children in a new home, so be prepared for lots of cuddling and possibly a night visitor in your bed for a while. Being there for your little one at night is as important as being there for them in the day!
9. Involve them in unpacking and putting away everything from kitchen utensils to books to linens to clothes. Children are very tactile, and actually touching all of the places and putting familiar things from their old home away in the new home can help them to begin to feel at home themselves.
10. Stick to familiar routines such as bedtime, naptime, etc. But don’t be rigid about schedules. Your little one has been through a huge change and needs extra attention and understanding from their source of comfort and security…you!
11. Introduce new things like playgroups, pediatricians, babysitters, churches, etc. slowly, spread out over as long a period of time as possible. The move itself is overwhelming enough in its newness without adding in a ton of other unfamiliar things right away.
12. Find some things near your new home that are familiar to your little one from your previous home such as a chain grocery store, toy store, restaurant, etc. Seeing and visiting familiar places is vastly reassuring for small children because they can see for themselves that you can still buy them food and other necessities even though you’ve moved.

Giving your child the reassurance that some things will remain the same even when so many things have changed helps to stabilize and assure them that their needs will still be met and life will still go on in many of the same patterns and routines they are used to. Remaining calm and available for your little one, even in the midst of your own stresses over the move, is key. But take care of yourself, too. Change is hard on everyone, so cut yourself some slack and don’t try to do everything at once. Remember, slow and steady wins the race!

 

Thanks for reading…Steve Jackson…561.602.1258

Lantana investor special

I am sure that all of you investors know how difficult it is to find (and successfully get under contract) decent single family properties in the ‘under $150,000’ market.

I now have access to a package of 10 single family homes in east Lantana…fully leased…NO HOA…owner stated rental income of $106,200/yr..

They are not, and will not be listed on the MLS and are sold as 1 complete package.

The price is $1,050,000

Call me quickly at 561.602.1258 or email me at Investors@thejacksonteam.com (please include your proof of funds with your email).

Steve Jackson

How Santa refuels his sleigh

Z.I.R.P. and mortgage rates

Below is an excerpt from a recent article by Barry Habib of MBS Highway

Quite possibly you have heard of the Federal Reserves ZIRP or Zero Interest Rate Policy…below is a good explanation of how it works and the tangential effect on mortgage rates.

Imagine that you are a Money Manager, managing a $100 Million Dollar portfolio. You can borrow at very low rates that are close to the Fed Funds Rate. Call it a 0 .5% cost to borrow. You can buy mortgage bonds that pay 3% . It looks like a nice profit spread of 2 .5% . But the real magic happens when you use leverage. You can buy those bonds with only 10% cash . So you can take your $100 Million and buy $1 Billion worth of bonds, by borrowing the other $900 Million at a cost of only 0 .5% . The 2 .5% profit on the $1Billion is equal to a whopping 25% on your $100 Million dollar portfolio...making you a great money manager, and a heck of a lot of fees. This is called "The Carry Trade". But one sure way to lose money on this trade is to have your borrowing cost rise. So, as the data begins to approach the Fed's targets, managers will be less willing to buy mortgage bonds and begin to unwind their holdings. This selling of mortgage bonds will cause mortgage rates to rise, and perhaps at a surprising pace. We will need to be on guard about this in the months ahead.

The above is important to buyers and sellers alike…for buyers, it is quite obvious how interest rates have an effect on the purchase of a home. an increase in rates from 4% to 5% has the following effect on a $250,000 loan.

Principal and interest payment of $250,000 at 4% is $1,194/mon

Principal and interest payment on $250,000 at 5% is $1,342/mon…that is a 12% increase in payment and can have a significant effect on the size of the loan you can qualify for.

If the rates go to 6% you would be at almost $1,500/mon

So, if you are a buyer, you have try to predict the future of interest rates and home prices (we’re here to help you with that!). Should you buy now at the lowest rates in history, or gamble that home prices will fall if interest rates rise? Can you chart out the ‘rates vs. price’ so you are aware of the optimum rate/price relationship?

And, as a seller, are you up for the gamble? Are you on the side of the “we’ve hit bottom” and it’s all up from here crowd or, after reading the above, do you think that now may be an opportune time to “get while the getting is good”?

 

We are not your typical real estate agents. We’ll help you decipher all of the ‘noise’ relating to the housing market and what decision is in YOUR best interests. You won’t get ‘objection handling techniques’, you won’t get ‘memorized dialogs’…in short, you won’t get a salesman that tries to influence and steer you in one direction or another. You’ll get honest advice tailored to your specific needs, goals and situation.

Call me directly at 561.602.1258 if you’d like to discuss anything real estate related.

And, as always, thanks for reading