Inevitably, there is always a reason why we haven’t sent him this particular home to review online.  It’s not because we missed it.  We want to sell him a house as much as he wants to buy one.  Really!

If you are working with a real estate agent who is looking for homes for you, here is a list of possible reasons a home may not be suitable for you and won’t make it to the emails we send you:

• The property is priced over your range - in every neighborhood there are homes priced well above what their market value is.  Homes priced over your maximum don’t get sent to you.  If your max is $450K, a house that is listed at $575K is not going to be sent to you for review.
• The property is not listed -  this includes homes you may see that look vacant and may even have a lockbox on the door.  A foreclosure can take a long time to prepare to list.  The listing agent will get it listed as soon as it is possible to do so.  Sometimes it has issues with the title that need to be cleared up. If it is not in the MLS and there is a lockbox on the door, there is no way to know who is going to have it listed.  We simply have to wait until it is.  The good news is that the automatic search that is set up for you will pick it up immediately once it’s listed.  Lucky you.
• The property is a short sale that has not been approved - and you specifically let me know that you don’t want to waste your time on unapproved short sales.  Only approved short sales are being sent your way.
• The property needs extensive repairs - and you are buying with an FHA loan.  Yes, there is an FHA loan that takes repairs into account.  It’s called an FHA 203K loan.  But if you’re approved for $100K FHA, the house is listed for $100K and needs $25K in repairs, there’s no point in looking at that house.  You are not qualified for $125K (the amount of the loan including the repairs).  So this particular house will be filtered out by your agent when she reviews homes to show you.
• The seller has specified CASH offers only - Sellers usually do this because of the condition.  This is usually seen with bank-owned homes.  It’s not that they want to arbitrarily exclude a huge portion of buyers.  They’re just being realistic when they say that the house won’t qualify for financing.  It may need repairs well beyond the limit on an FHA 203K.  Or the seller may simply want a quick sale due to the horrible conditions of the house.  If it’s priced incredibly low, there’s always a reason.
• The house is pending sale - this means the seller has accepted an offer.  The sign will stay in front of the house until the property closes.  But they have changed the status to Pending Sale in the MLS and they are no longer looking for offers on this one.

The above is not meant to be an exhaustive list.  There may very well be other reasons why a home isn’t sent to you for your review.

But please do know that we are working really hard to find you one that you can call home.

What he did next will knock your socks off.

The guy then intentionally failed to pay of the previous liens, instead using the monies from the transaction to pay the previous mortgages monthly, as if the property had never been sold! Do you get that? He filed the documents that said that the previous lien holder had been cleared, and added the new lien(s) to the property. He then never paid off the previous liens, and instead PAID THE MONTHLY PAYMENTS. He never informed the seller’s lien holders that the property had been sold. So for each of these properties, there were two sets of lien holders, the previous owners mortgage holders, and the current owners mortgage holders, although he did cancel the previous ones at the town hall. So in effect, he stole the difference between the sale price and what had to be paid to the seller, if anything.

Of course, this has now come back to bite this guy, with the Sheriff showing up at his office and arresting him, charging mortgage fraud. This was only discovered because one of the properties he did this on was resold recently, and the lien holder from the previous seller was the same as the one financing the purchase to this second buyer of that property.

Are you amazed at this guy yet?

People, not only should you choose your Realtor carefully, but you should also choose the closing attorney just as carefully… I am not sure how one could know that this had been done since the town hall records would show only your current lien holders. Anyone have any ideas on this?

Sellers, be sure to check with your mortgage company to ensure that your loan has been cleared after the sale of your property. In instances like this, you are still on record for owing the money on your debt. You may of course discover this if you go to buy another house, but this guy got away with this for several years.

Now he will go to jail, very likely.

We now know that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though many seemed to believe so. The boom market was a bubble of inflated prices and irrational expectations of outlandish profits. Just as the stock market bubble that preceded the Great Depression created investors of doormen, maids, construction laborers, bartenders, and others seeking to capitalize on skyrocketing stock prices; the housing bubble created a wild frenzy of speculation and inflated home prices that was impossible to sustain.

Homeowners who purchased anticipating great profit, as well as investors, flippers, real estate agents, mortgage brokers, and those who bought early enough to borrow against their profits, have seen their dreams of easy cash and growing equities vanish. More than two million of those homes have fallen to foreclosure, and millions more are doomed to follow.

Hindsight is great, and shows the error of such paths. We should have known better, but we didn’t want to miss what appeared the opportunity of a lifetime. Homes, however, are not a commodity to be traded like soybeans, pork bellies, or precious metals. Homes are just that, a place to live, raise a family, create memories, and find solace at the end of day.

So, has housing reached a turning point or a point of no return? Perhaps it’s done both. Perhaps we’ve learned a valuable lesson—some of our most important ones come at a great price—and though the cost for many has been unbearable, the lessons remain. The bursting of the housing bubble may ultimately restore order to both housing and the financial markets; and the artificial market is doubtful to return until some future time when its memory has been erased.

With that in mind, should anyone buy a home today? Of course, those who need one. However, some of those motivated solely by profit may find disappointment. Will home prices increase? Without question. But there is a question of time, and how  much will be required before prices increase. History tells us that the prices of those homes bought with careful consideration of both location and value will increase at a rate above the rate of inflation. If we do better, that’s great. If we don’t, we mustn’t lament, for we bought a home; and that can be worth far more than money in the end.

It is at this time of year we sit down and take stock of what has transpired over the course of the previous year, and work to set our goals and methods for achieving them. For certain, the last year has been a challenging one for the real estate industry, and especially for the market in Rhode Island. Never the less we have had a record year in terms of the number of transactions, and close to a record in terms of revenues to the company and to our investors. We are planning the coming year with the idea that we can do at least as well, if not better, despite continued pressure on the market.

We plan to bring this same purpose and methodology to our clients and investors in the coming year.

We hope that you have a very prosperous 2010, that you and yours remain or gain in health and joy, and that the new year proves to be among the best you have had.

Thank you for your continued support. Have a very wondrous holiday season, and a very good new year!

Dodd-Lieberman-Isakson Amendment
$8,000 Homebuyer Tax Credit

The Issue:
• Ask your Senator to support the DoddLiebermanIsakson amendment by extending the
$8,000 firsttime homebuyer tax credit.
The DoddLiebermanIsakson amendment would:
• Extend the tax credit to June 30, 2010.
• Expand the credit by removing the firsttime homebuyer requirement.
• Raise the income limits to $150,000 ($300,000 for joint returns).
• For purchases made in 2010, taxpayers are able to claim the credit on their 2009 income tax return.
• Maintains that homebuyers do not have to repay the credit, provided the home remains their main residence for 36 months after the purchase date.
• The 36 month recapture provision is waived for a member of the Armed Forces on active duty who has to move because of a military order.

Why it is needed:
• The housing market remains fragile.
o The market has improved and prices have stabilized in many areas, but the market has not fully corrected. Retaining the credit sustains that recovery.
• The tax credit has been effective.
o NAR research suggests that as many as 355,000 sales this year can be directly attributed to the availability of the credit.
o One prominent economist attributes 400,000 sales to the availability of the credit.
• The tax credit stimulated market activity.
o The volume of housing sales has improved steadily every month since the credit was
enacted.
o The credit pulled people from the sidelines and created some momentum that had been
absent.
• Home sales continue to stimulate economic activity.
o The economy will never fully recover until housing markets fully recover. Thus, the
stimulus the credit provides is still needed. NAR estimates that every sale generates
approximately $60,000 of additional economic activity.

NAR Regional Vice President Joseph L. Canfora also told the panel that a major stumbling block for consumers has been the implementation of appraisal processes spurred by the Home Valuation Code of Conduct (HVCC), which is causing delays in closings. That delay, Canfora said, led to artificially low existing-home sales numbers for August because consumers cancelled sales.

“The credit is working,” Canfora said, pointing out that 355,000 to 400,000 transactions directly attributable to the credit made a significant dent in the housing inventory and will help to stabilize home prices. In addition, the credit has provided a huge indirect benefit to local governments, shoring up property tax bases in particularly hard-hit areas.

Further, NAR has estimated that every home purchase pumps into the recovering economy about $63,000 – the equivalent of one new job added to the employment figures.

But, Canfora said, the threat of more foreclosures coming to the market caused by mortgage rate resets, job losses, and by lenders’ unburdening themselves of additional properties to take advantage of today’s more stabilized prices could disrupt the fragile recovery.

In a “normal” market, optimal housing inventory is about six to seven months, he said. When the tax credit was enacted in February, inventory was 9.1 months. Because of the spurt in homes sales since then due to the tax credit, inventory declined to 8.2 months in August, closer to “normal” than at any time since 2007.

“The more robust the credit and the greater its duration, the greater the chance that the housing market can perform its traditional role of helping the economy move out of a recession,” Canfora said.

“But problems arising from the implementation of the HVCC may reverse the market’s positive momentum at a time when the real estate industry is just starting to show signs of a rebound in many markets,” Canfora added. According to an NAR survey of its members, approximately 40 percent of Realtors report losing at least one sale since May 1 because of appraisal problems due to the HVCC rules. Twenty percent say they have lost more than one sale.

The culprit, Canfora said, was that appraisal management companies, which have gained prominence because of the HVCC, have assigned appraisers to areas where they lack geographic competence. That has resulted in unreliable appraisals. It’s not uncommon that second and third appraisals have to be done to ascertain fair market value. Appraisal fees have also risen and are being passed on to consumers.

Both Fannie Mae and Freddie Mac have issued guidance on appraisals, but NAR is calling upon the mortgage giants and the Federal Housing Administration (FHA) to issue consolidated guidance codified and incorporated into existing policy so that information on appraisals is available to the real estate industry.

FHA Commissioner David H. Stevens has asked FHA staff to explore that recommendation with Fannie and Freddie. Last month, Stevens reaffirmed FHA appraisal policy, taking into consideration the unintended consequences that have burdened Fannie and Freddie, and issued two Mortgagee Letters focusing on appraisal changes. The policy reaffirms appraiser independence and geographic competence.

The FHA announcement also included timely steps to protect taxpayers: implementing credit policy changes to enhance risk management; hiring a chief risk officer for the first time in the agency’s history; and shifting responsibility for mortgage brokers away from taxpayers to the lenders who use mortgage brokers.

Canfora told the committee that FHA has performed remarkably well through the housing crisis compared to Fannie and Freddie. “That’s because FHA has never strayed from the sound underwriting and appropriate appraisals that have traditionally backed up their loans. The reason the FHA capital reserve ratio fell below 2 percent had nothing to do with FHA’s current business activities. It is simply a reflection of falling housing values in their portfolio.”

Canfora cited an FHA announcement that a 2009 audit will show that even if FHA does nothing, the cap reserves are expected to rise back to that required level within a few years.

WASHINGTON – Oct. 1, 2009 – Nearly one in three borrowers who applied for a mortgage last year was denied as lenders kept their standards tight as the mortgage crisis accelerated, the government reported Wednesday.

In its annual look at mortgage practices among lending institutions, Federal Reserve said the denial rate for all home loans was about 32 percent last year – about the same as in 2007, but up from 29 percent in 2006. The denial rates for blacks and Hispanics were more than twice as high as the rate for white borrowers.

The report highlights massive changes in the lending industry after the housing market bust. Overall loan applications were down by a third from a year earlier, and were half the level in 2006.

Loans backed by the Federal Housing Administration soared to 21 percent of all loans made last year from less than 5 percent in both 2005 and 2006.

For black borrowers, more than half of all loans were FHA-insured, more than triple a year earlier. For Hispanics, that number shot up to 45 percent, more than four times as high as in 2007. That was troubling news for consumer advocates.

“I’m hard-pressed to believe that many of those borrowers couldn’t have been served by the private sector,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington. “It implies that the industry has shut down in serving this population.”

High-priced loans with rates at least 3 percentage points above the rate for prime loans shrunk to nearly 12 percent of the market from a high of 29 percent in 2006. But that figure mainly reflects unusually low interest rates during the recession, the report said, and understates the disappearance from the market of high-priced subprime loans made to borrowers with poor credit.

Last year, about 17 percent of blacks and 15 percent of Hispanics got high-priced loans, compared with about 7 percent of whites. Even controlling for factors that might widen that discrepancy, there is still a gap of almost 8 percentage points between the number of blacks and whites who got high-cost loans.

The mortgage industry says lenders are not discriminating by race, and are making adjustments based on borrowers’ risk profile – such as their credit score and the size of their down payments.

“You still have a certain degree of risk-based pricing in the market,” said Jay Brinkmann, the Mortgage Bankers Association’s chief economist.

Lenders also scaled back dramatically on the amount of so-called “piggyback” mortgages, in which borrowers used second mortgages to avoid making a 20 percent down payment. Those loans have virtually disappeared from the market: Only 98,000 were made last year, down from 1.3 million annually in 2006.

Housing prices ticked up 1.6 percent from June, according to the Standard & Poor’s/Case-Shiller home price index, which tracks 20 large cities. Low mortgage rates and bargains on foreclosed homes are attracting buyers.

Home prices rose for the first time in three years in May. And after falling 12 percent from October through April, prices climbed 3.6 percent from May to June.

“I think we’ve made the turn,” says Joel Naroff of Naroff Economic Advisors.

Values rose in 18 of the 20 cities, with only Las Vegas and Seattle posting monthly declines, of 1.1 percent and 0.1 percent, respectively. Thirteen cities have had at least three consecutive monthly gains.

The residential real estate market is still weak. Home values in the 20 cities are off 13.3 percent from July 2008 and 33.5 percent from their 2006 peak. Prices are now about where they were in fall 2003. But the year-over-year declines have been steadily shrinking in each of the past six months.

In some cities, the housing market is almost stable year-over-year, with prices in Cleveland, Dallas and Denver dipping 1.3 percent, 1.6 percent and 2.9 percent, respectively.

Yet some economists say the recent run-up is a brief reprieve, and home prices have yet to hit bottom. Patrick Newport of IHS Global Insight says the market will swoon again after housing inventories are fattened by a new wave of foreclosures and an $8,000 tax credit for first-time home buyers expires Nov. 30. Newport says prices will likely fall 6 percent before mounting a more sustainable rebound in mid-2010.

David Blitzer, chairman of Standard & Poor’s index committee, says, “The numbers are very encouraging, but it will probably take some time before we have convincing data that we’re past the bottom.”

Meanwhile, a closely watched consumer confidence index dipped to 53.1 in September from 54.5 in August, the Conference Board said. Analysts expected it to rise to 57.

Ian Shepherdson of High Frequency Economics noted most of the drop stemmed from consumer attitudes about current conditions, which reflects high unemployment. The more critical “expectations index” was stable, sliding to 73.3 from 73.8. The overall index is up from a record low of about 25 in February.

Still, “With the holiday season quickly approaching, this is not very encouraging news,” says Lynn Franco, head of the board’s consumer research center. The Dow Jones industrial average closed down 47 points at 9742.

With regard to new construction, there have been some notable innovations in green building designs and the use of these should be encouraged in new homes.

However, according to a recent article, the proposed code has a provision which would mandate that all housing transactions be required to undergo and pass an environmental inspection.  In older home sales this could be significant.  Windows that are not airtight and appliances that are not Energy Star certified would have to be replaced before the sale could happen.

The fear is that this bill could possibly affect the sales of “fixer-upper” homes; however, I cannot honestly see the government moving in with these types of restrictions at this point which would severely impact the sale of the huge inventory of foreclosure properties now sitting on the block with millions more expected.

Currently, sellers in Massachusetts and many other states are mandated to have smoke and carbon monoxide detectors as a requirement before any property can be transferred.  Also, owners with private septic systems must have a Title V inspection and it fails, they are required to remedy the problem by installing a new septic system.

Most people are onboard with these items since they have a huge impact on safety and protecting the environment.  However, if home sellers have to repair every problem prior to a sale, it could significantly drive up the cost of selling a home.

At a time when the country is spending countless sums of money to shore up the housing market with a first-time tax credit and the possibility of extending and expanding this program, it seems contradictory to come up with legislation that could sabotage these efforts.

I will be on the lookout for more clarification of this bill in the coming weeks and hope that the stir about it is more smoke than fire.

With the housing market still in a depressed state, it is hard to imagine that the government would choose this time to make housing sales more difficult.