November 2009


Fannie Mae: New Affordable Housing Options

Fannie Mae announced Tuesday, November 24th that it has launched several initiatives designed to stabilize neighborhoods and promote purchases by owner occupants and low-income buyers.

Fannie Mae’s “First Look” initiative offers buyers who intend to live in the home, particularly low-income buyers, an opportunity to make an offer during the first 15 days the property is on the market. Investors can only make an offer after the first 15 days have passed.

Other programs aimed at stabilizing neighborhoods include:

  • Deposit Waivers. Fannie Mae will waive the earnest money/deposit requirement for public entities using public funds to purchase a Fannie Mae-owned property. Individual home buyers who have qualified for public funds and want to purchase a Fannie Mae-owned property do not have to meet the usual earnest money/deposit requirement either. Deposits for these buyers can be as low as $500.
  • Reserved Contract Period. Upon receipt of an acceptable offer, buyers have the ability to renegotiate their offer after obtaining an appraisal.
  • Extra Time for Closing. Buyers receive up to 45 days to close – 15 days more than is usually permitted for purchases of Fannie Mae-owned properties.

 

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WASHINGTON — The top Republican on the House Financial Services Committee is demanding data on banks he suspects are being asked to take significant haircuts on loans they extended to subsidiaries of American International Group, now effectively a ward of the state.

“While foreign and domestic counterparties were made whole, AIG has been attempting to force many of its creditors that are U.S. banks to accept severe reductions in the debt owed to them,” Rep. Spencer Bachus (R., Ala.) wrote in a letter to Treasury Secretary Timothy Geithner this week.

At least 17 banks are being asked to accept less than what is owed to them, Mr. Bachus said in an interview, citing information he has received.

“It’s tremendously unfair. What is it about a [credit default swap] that makes it any more sacred?” Mr. Bachus asked. “The credit default swaps were a bet … gamble … a risk.”

In an earlier letter to Mr. Geithner, Mr. Bachus said one AIG subsidiary, AIG Baker, was demanding a 72% reduction in principal on a $45 million syndicated loan made by a trio of unnamed U.S. banks. AIG Baker is an Alabama-based developer of shopping centers with a presence in about 20 states.

Mr. Bachus now is requesting details on banks providing credit to AIG and any of its real estate subsidiaries that have received federal assistance. Further, he wants to know the amount of the banks’ exposure to AIG, the names of all AIG subsidiaries that had relationships with small regional banks and the extent to which AIG has met its obligations to U.S. bank creditors.

The Treasury on Tuesday declined to comment on Mr. Bachus’s request.

The Treasury has been facing growing anger on Capitol Hill in recent weeks after the emergence of an oversight report that confirms the government failed to negotiate the best possible deal for taxpayers in connection with its $180 billion bailout package for AIG.

The report, from a special inspector general overseeing the rescue of AIG and other firms, suggests the Treasury and the New York Fed — headed by Mr. Geithner at the time — could have pressed AIG counterparties harder to accept less than the full amount they were owed in connection with credit default swaps written by the firm.

The report showed the government negotiated with AIG counterparties for only two days, stressing that taking haircuts on their positions was voluntary.

AIG counterparties paid in full include Goldman Sachs, Societe Generale and Deutsche Bank.

“They could have paid the regional and community banks for the amount of money they gave to any one of those institutions,” Mr. Bachus said.

The seller grew up in the neighborhood and rebuilt every inch of the home. When a job relocation forced him to sell, no offer was going to be good enough.
 
 
 
 
 
 
 
A Listing Agents Story

 

Location: Santa Rosa, Calif.

Square footage: 2,300 square feet

Lot size: 1.27 acres

Bedrooms: 4

Bathrooms: 2

Year built: 1932

Extras: 40-foot deck and patio, 2,300-square-foot unfinished basement with a separate entrance, and detached garage with a dirt floor and corrugated sides that were “ready to fall over.”

THE CHALLENGE: Listing Agent- Santa Rosa, Calif., says the house looked like a pink Kleenex box from the outside and lawn was home to about a dozen goats.

“Everybody asked if the goats came with the house, but they didn’t; the owners just liked the goats and let them stay because they kept the weeds down,” she says.

But the goats were not the real problem. The owner’s sentimental attachment to the house posed the biggest challenge to a successful sale.

“The husband had already physically moved to his new job in Reno, Nev., but his heart and soul were still in that house,”  “He had rebuilt the house and knew every inch of it.”

Because he put so much work into the home, he believed it was worth far more than the market would bear. No offer was good enough. “He also grew up down the street, where his parents still lived, so he had a big connection to the home and the area.”

The husband would only sign the listing extension for one month at a time, so the agent had to ask for a new listing agreement each month. “He was really attached,” she says.

The wife, who remained in the home to oversee the sale, became frustrated with the delays associated with her husband’s attachment to the property. “Her home had been on the market for 164 days with a different agent prior to me,” says the agent, who had the listing for 249 days. “She was sick of the whole thing.”

How did you overcome the challenge?

 

Agent: I encouraged the husband to lower the sale price, and he eventually complied. I also counseled the wife to minimize her frustration. I held lots of open houses and maintained constant communication to reassure her that things were moving along.

I really empathized with her because the selling process was quite drawn out, by anyone’s standards. The house had been on the market for more than a year, and was in escrow three times. The first one fell through because the buyer’s husband was too nervous about the mortgage payments. Another time, the deal was contingent on buyers’ other home selling, but they had all kinds of problems and had to take it off the market.

I continued to market the home even while in escrow and kept in touch with agents who had shown interest. I called them as soon as I thought it would be back on the market. Because of this, I was able to negotiate a new deal within a week of each canceled escrow.

What was the final selling price?

 

Agent: The original selling price was $945,000 when I got the listing April 30.  We reduced it to $899,000, and closed in January for $890,000. 

How did you get the listing?

 

Agent: The seller came to me as a referral from a friend.

How much did you spend marketing the home?

 

Agent: I spent around $500 on a professional photographer, as well as on print and Internet ads and food for the open houses.

How many times did you show the property?

 

Agent:  I held open houses every other weekend for 249 days.

How did you finally find a buyer?

 

Agent: The buyers’ agent’s sister bought the house. She planned to run a small business out of the basement and she loved the country feel and the backyard.

What do you attribute to closing the deal?

 

Agent:  Patience, tenacity, follow up, and consoling and supporting the clients.

How did you get started in real estate?

 

Agent:  I worked in the mortgage business for 10 years but there were too many layoffs. In 2004, I decided it was time to be the captain of my own ship and started selling real estate.

What lessons did you learn from this transaction?

 

Agent: I learned that patience and empathy are important in real estate, just as they are in life. Those are skills that I’ve honed as a mother of two boys who are disabled. My sons, now 25 and 28, have been legally blind from birth, and I think that has taught me how to work well with people who are feeling lost and overwhelmed.

 

Well-maintained trees can add value to a property, while poorly maintained ones can pose a liability. An arborist can help you ensure the trees remain a home’s valuable asset.
November 2009

Trees offer countless benefits. They enhance curb appeal, increase real estate values, provide fruit and flowers, curtail energy consumption, improve air quality, and camouflage unsightly views. But like any living, breathing organism, they should be selected properly and tended to regularly.

For example, if planted in the wrong size or spot, a tree may block views. If not cared for, they may become susceptible to disease, and hurt a property’s looks, damage a home’s structure, and even injure family members.

But when trees are properly cared for, they offer an important incentive: An increase in a home’s value by as much as 20 percent, says certified arborist Mark Chisolm, co-owner of Aspen Tree Expert Co. in Jackson, N.J.

Many buyers will take note of a listing with a tall, healthy tree boasting a green canopy of leaves or even those graceful, smaller trees lined up in a stately row. Unfortunately, they’ll also recall trees that look diseased—with dangling branches, rotted trunks, and few or no leaves—since those may signal major work and expense.

“I’ve been in situations where I’ve pointed out that [home owners] might have to spend $10,000 immediately or I’ve had to tell them their trees may have suffered from prior construction work that the average eye won’t spot for years,” says certified arborist Ed Milhous, president of Trees Please in Haymarket, Va., who’s also president of the American Society of Consulting Arborists, an association based in Rockville, Md.  

So how can you ensure a home’s trees hold value and don’t hamper it?

What to Look for in a Tree Specialist

A tree specialist—or arborist—can help revive your trees and keep them in good condition. Arborists can help advise home owners on how much food, water, and mulch the trees need, when and where to prune, what lighting to add for safety and decoration, how to protect trees during construction or whether transplanting them is possible, and what new trees are best to plant and where in a yard.

Consider the following when hiring an arborist.

1.      Are they certified? While many landscape designers, architects and tree-service companies can offer tree care recommendations, a certified arborist has field experience and has passed an examination that covers everything from tree biology to tree bracing and transplanting. Arborists can be found through recommendations from nurseries and landscape professionals and by going online to the main association Web sites: www.tcia.org (The Tree Care Industry Association); www.treesaregood.com (International Society of Arboriculture); and www.asca-consultants.org (the American Society of Consulting Arborists).

2.      Do they have insurance? Ask to see copies of the company’s certificate of insurance to prove they’re adequately covered for any personal and property damages. Also, request to see their workmen’s compensation insurance. Home owners can be held responsible for damages or injuries caused by uninsured tree companies.

3.      What services will they provide? Find out how the arborist plans to get the job done, if he has the right equipment to do it, and how they will clean up the property afterwards. You might also want to ask about specific chemicals they plan to use and any potential impact on the environment.

4.      Do they have strong references? Visit past jobs the arborist did to view the quality of the work. You might also want to contact references to ask if the arborist completed the job on time and also whether he did any damage to the house, wires or lawn while completing the job.

5.      How much will it cost? Make sure you ask for them to provide a written estimate so you know how much it will cost. Prices vary, depending on the area of the country, number of trees, and their condition. Generally, home owners should expect to pay between $100 and $300 an hour for an assessment, says Chisholm R.J. Laverne, manager of training and education at The Davey Tree Expert Co. in Kent, Ohio. It’s not unheard of to spend $10,000 to remove a tree if it’s located in a difficult-to-access spot and if a crane will be needed to remove tree parts over the top of a house, he adds.

Get it all in writing: Before they start working, you’ll want to have a written proposal or contract from the arborist that includes details of what the work will entail, a timeline for completion, and the cost of the work.

The Right Time for Tree Interventions

While an arborist can help home owners maintain healthy trees at any time, sellers and buyers particularly might want to seek one out during or before a real estate transaction.

Before a house is even listed, sellers might want to consult an arborist to maximize curb appeal.

“A tree is either a liability or asset,” says Laverne. “If it’s a liability, you want to remove it before people see the house. If it’s an asset, you want to spend a little bit to increase its value, possibly by removing dead or broken branches that don’t look good or might hurt someone.”

And buyers who have fallen in love with a property may also want to hire an arborist before signing on the dotted line. Hiring an arborist before they make an offer may help them gain leverage with the sales price and get a better handle on future expenses involved with the property.

“It’s no different from hiring a home inspector to be sure the foundation, wiring, and plumbing are sound,” says certified arborist James Tuttle, president of Christmas Décor by Tree Loving Care.

In general, home owners may want to hire an arborist to prune and check for defects every three to four years; once a year is considered excessive unless problems develop or natural disasters cause damage.

“Worse than not maintaining a tree may be maintaining it improperly,” says Milhous. “Topping a tree—cutting off limbs indiscriminately—doesn’t make it safer but shortens its life expectancy.” (Read more: Tree Care Tips Dos and Don’ts)

As such, home owners should keep watchful eyes on their trees, noting any changes such as the size or color of foliage on deciduous trees. “If leaves turn color earlier than what’s expected—in June rather than October—that could indicate the tree is stressed, possibly from construction,” Laverne says.

Never Underestimate a Tree’s Value

Trees can add a potential legacy to a property that can make them a treasure of a home.

“They’re something that can still be there when home owners have children and grandchildren,” Tuttle says. “You don’t become attached to your shrubs or grass the same way you grow to love your trees.”

More buyers are being lured to the simplicity and affordability that small homes bring. Plus, these smaller homes are often situated within walking distance to restaurants, stores, and shops.
December 2009

After Sarah Susanka published The Not So Big House (The Taunton Press) 11 years ago, a groundswell of interest emerged about small home living. Tiny prefab homes began popping up on urban lots and prairie pastures alike. There was also renewed interest in downsizing the size of one’s home for the sake of simplicity.

 

Now, with an economic slowdown and a desire to live very close to jobs and other services, the trend is just as hot now as it was then.

 

“I call it the cappuccino factor. They want the cappuccino to be within walking distance,” says BJ Droubi, a Coldwell Banker broker in San Francisco. Homes in Noe Valley—an area she specializes in—are between 900 and 1,100 square feet.

 

For buyers trying to play it safe in the softening housing market, a smaller home may be the way to go. Smaller homes tend to not only be more affordable but more energy efficient.

 

“‘Not so big’ has almost become chic. Conspicuous consumption is no longer cool,” says Susanka, who defines a small home as a third less space than the buyer needs. “It doesn’t mean ‘less than.'”

 

Maximizing Square Footage in a Smaller Home

As an architect, Susanka became frustrated when discussions with clients always began with square footage. “I really tried to change the discussions away from size into the things that really matter,” she says.

 

Genevieve Ferraro shares a 1,800-square-foot house in Evanston, Ill., with her husband, two children, and a dog. “Long story short, my husband refused to move to a larger house and I couldn’t find a professional decorator who could help me design the house,” she says.

 

Ferraro launched a business, The Jewel Box Home, two years ago where she helps owners of small homes address storage, child-rearing, landscaping, and color choices. She works with various budgets and sometimes all it takes is just a simple rearranging of furniture to make a small space appear bigger and more cozy.

 

“A smaller space needs a certain type of flow,” Ferraro says. “There’s this conventional wisdom that bigger is always better and we have all sort of bought into that. There’s a stigma that small homes are second-rate.”

 

With a small home, you don’t have to sacrifice design or functionality. For example, Ferraro offers some of the following tips for making a small home feel not so small:

 

  • Decide on the room’s primary function and let that guide your decorating.
  • Keep color, furniture, lighting, and accessories in proportion. In other words, no large-scale pieces should be in a small room. Keep all the furnishings small and it will enlarge the space.
  • Rearrange furniture so that the legs show on all of your upholstered pieces. This creates a feeling of space and light and allows the eye to travel across the room and see “through” furnishings.
  • Keep tabletop accessories to a minimum. Have no more than three coffee tables and side tables. If you have a large collection of accessories, display them in rotating groups.

 

The Convenience Factor

In the historic districts and city centers of Maricopa County, Ariz., which includes Phoenix, smaller homes have only recently became affordable. A big part of their attraction is being within a short walk to restaurants, bars, shops, and other services.

 

“People can pick up foreclosures or flips and can spend their money on furnishings and fixtures … making it a luxury property on a better budget,” says Heather Wagenhals of HQ Real Estate and Investment in Phoenix. “You can create your own paradise within four walls, and it doesn’t have to be 10,000 square feet. We’re seeing some really gentrified areas turning into charming places to live.”

 

Tony Frantis specializes in selling homes in the Sugar House neighborhood of Salt Lake City, near the University of Utah, the state’s largest employer. Homes here—built between 1890 and 1950 and a mix of classic bungalows and Federal/Victorian style—range somewhere between 800 and 1,100 square feet and sell for $190,000 to $300,000.

 

“When people are looking for small homes, they’re gravitating toward areas that are neighborhood-rich,” says Frantis. “Most of these people could walk to anything they need.”

 

Some new-development communities also think smaller is better. Diane Balciar sells homes in Westhaven, a development in Franklin, Tenn.

 

“It’s like a Rockwell scene,” she says, referring to beautiful streetscapes (along with a dedicated person who visits homes to help with gardening), monthly concerts, a town center with shopping and dining, and a 15,000-square-foot clubhouse with a fitness center. An elementary school is on the horizon. Home sizes start at 2,000 square feet (the average is 3,200 square feet), beginning at $280,000 for a two-bedroom property. But the most popular home purchase are the smaller houses, she says.

 

An Economic Decision

How home buyers arrive at the decision to live in a small home varies, of course. Kerri Campbell and her husband never thought they’d end up living year-round in a 480-square-foot house they built four years ago as a vacation getaway. In 2007 they sold their sizeable house in Kansas City and relocated to this rustic abode deep in the Ozark Mountains, an hour from Branson, Mo.

 

“We were ready for a change. Our intention was to either build onto the house or build another house,” she says. They hadn’t counted on building costs to double and being forced to accept a lower asking price on their Kansas City house. So they decided to make the small house theirs.

 

With the tighter corridors, they have less space to spread out.

 

“It’s renewed our relationship and made us like each other again,” says Campbell, who is writing a memoir about small-house living.

 

Indeed, many people are looking for a simpler life and a small home equates to that, says Gregory Paul Johnson, co-founder of Small House Society, which gets 25,000 visitors a month to its Web site.

 

He points to the New Urbanism movement (which promotes walkable neighborhoods) and that more people are using cafes as their living room. Plus, appliances—especially televisions—are smaller than they once were and no longer compromise space.

 

“People are getting stressed out and overwhelmed, and the economy’s just part of that,” Johnson says. “The bigger the house, the bigger the headache.”

Declining Dollar Brings Foreign Investors

Falling prices for real estate and the declining value of the dollar are luring investors from all over the world to purchase properties for as little as half what they might have paid four years ago.

“This could be a once-in-a-generation opportunity for real estate investment,” says Arthur Wong, whose Calgary, Alberta-based U.S. Real Estate Fund has invested $5 million in properties in the U.S. Southwest and plans to buy millions more.

Buyers from countries like Brazil, Canada, France, and the Netherlands, whose currencies are particularly strong against the dollar, are spending millions on luxury condos in New York City, Las Vegas, and Miami. Foreign buyers also find the warm climates of California, Texas, and Arizona attractive.

Peter Zalewski, a principal with Miami-based Condo Vultures, says he has sold foreign condo buyers seven bulk deals in downtown Miami alone, with investors coming from Argentina, Canada, Colombia, Italy, Norway, and Venezuela.

The Wall Street Journal Reports: One in Four Borrowers Are Underwater

More than 23 percent of people with mortgages owe more on their properties than they are worth, according to a report released Tuesday by research firm First American CoreLogic.

Another 2.3 million homeowners are within 5 percent of being underwater, bringing the total of those who are upside down or close to it to about 28 percent.

About 5.3 million U.S. households have mortgages that are at least 20 percent higher than their home’s value, the First American report says. Borrowers owing more than 120 percent of their home’s value are the most likely to default, First American calculates.

The majority of underwater mortgages are in the following states:

  1. Nevada: 65 percent of home owners are underwater
  2. Arizona: 48 percent
  3. Florida: 45 percent
  4. Michigan: 37 percent
  5. California: 35 percent

The report also notes that most U.S. homeowners have home equity, and nearly 24 million owner-occupied homes don’t have any mortgage at all, according to the U.S. Census Bureau.

Source: The Wall Street Journal, Ruth Simon and James R. Hagerty (11/24/2009)

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