Lilburn, GA

A few days ago I wrote about how the purchase offering process is having issues… issues that are especially apparent on Bank-Owned Properties (we call them REOs).

Banks are often requiring that ALL offers be accompanied by pre-qualification letters from specific approved lenders (perhaps even from their own loan department). In other cases, the brokers representing the properties are interjecting this “requirement” on their own.

This morning, local (and nationally syndicated) radio talk show host, Clark Howard mentioned one of the reasons that these things chap my hide. The specific reason he doesn’t like them is that the “credit pulls” for the pre-qualifications can actually damage the credit of the offeror (buyer). It isn’t one or two credit pulls that will likely be a problem (unless one is marginal to begin with)… but rather repeated pulls after multiple attempts to buy properties.

I have worked with buyers that offered on 7 or 8 properties prior to having an offer accepted. There is a tremendous amount of competition for these properties in some instances. A buyer might get lucky and get a house right out of the gate… or they might have to go through multiple offers on properties and several pre-qualifications before getting an offer accepted.

There is also the fact that the buyer has to deal with the inconvenience of going through pre-qualification over and over. My buyers have already been pre-approved by their own chosen lender, so the pre-qualification is unnecessary.

And there is yet another issue here… The reason for the requirement is that it gives the specified lender an opportunity to get the loan business. That would be good, except that on more than one occasion, the specified lender has been nothing but a delay; in some cases unable to follow through on promised rates, and in other cases not being able to match the timelines of the seller that their own lender could meet… resulting in the loss of earnest money (we ended up finding a better house and saving WAY more than the lost earnest money).

I’d love to see this practice stopped… The problem is that consumers can’t control it. The properties are good deals, and if someone passes on the deal because they don’t want to have their credit penalized, there will be a line behind them willing to take the risk.

from LaneBailey.com

The First Time Home Buyer Tax Credit isn't just for First Time Home Buyers anymore.

Previously the credit only applied to purchasers that hadn't owned a home during the previous 36 months, and that restriction still applies for crediting the full $8000. Here is a little bit about the old credit.

The new credit was expanded:

• It is still 10% of the purchase price, up to $8000 for first time buyer and up to $6500 for move-up buyers.
• The income limits have been raised from $75,000 up to $125,000 for singles or $225,000 for couples.
• The deadline is now April 30th, 2010 to be under contract, with closing to be completed by June 30th.
• Purchase price must be under $800,000.

That might seem like a long time, but lending guildelines have become a bit more snug, and even with the additional five months, short sales aren't certain to be completed on time. And in the Atlanta area, spring is usually prime buying time, so there will be more competition for good entry level homes.

from LaneBailey.com

Clark Howard was talking about this a couple of days ago, and Fox News is talking about it today. And it doesn't involve a pole...

Foreclosure Stripping...

In effect, some folks that are losing their homes are "fighting back" in their own little way. Prior to departure, these folks are looking to get as much cash from the house as they can before they are out. They are removing items from the home and selling them via Craigslist and other means:

• Appliances
• Countertops
• Cabinetry
• Flooring
• Light fixtures
• Wiring
• Plumbing... including copper pipes
• Wood from the deck

Most of us in real estate have been in a house like this. The refrigerator, dishwasher, stove and a bunch of light fixtures are gone. In some cases it might be legal... in other cases, the home owner might be committing a crime.

Items that aren't built in, like clothes washers and dryers, refrigerators and window air conditioning units belong to the home owner as personal property. In effect, they have the right to sell them at any time. They aren't part of the property.

But, items that are built in are part of the property. Things get a little murkier here. Some sources are saying that BEFORE actual foreclosure proceedings, the home owner has the right to sell them. Other sources are saying that they are part of the home, and therefore are part of the security of the mortgage and the homeowner can't remove them unless he is replacing them with similar items.

After the home has been foreclosed, the (now former) home owner definately doesn't have the right to sell attached items.

Obviously, people that come into a foreclosed home and strip the wiring and copper plumbing out of the walls are breaking the law.

Good deals or big trouble?

So, if you are looking for a deal on lightly used appliances or fixtures, you need to be careful. What you don't want to be involved in is buying stolen property. You could lose both the item you bought AND the money you bought it with. It is possible that you could even be charged with possession of stolen property.

Lose-Lose-Lose

This is a losing issue for neighboring home owners. Removing the fixtures from the home lowers the price it will sell for, depressing values in the neighborhood.

Obviously it is a loser for the banks and investors that owned the mortgage. They see a larger loss on the loan than they would see otherwise. It also likely means that the property is on the market longer.

It is a loser for buyers. The reduction in price often doesn't make up for the damage done by the removal of the fixtures. And since the fixtures generally need to be replaced before the home can be occupied, many buyers are locked out of purchasing the home. Often, cash is needed up front to rehab the property and stretched buyers can't afford to come out of pocket even more at purchase.

And actually it is a loser for the home owner. They may take a bad situation and make it worse. Not only are they losing their home, but they might also end up facing criminal charges...

I feel bad for everyone in the situation... except the banks. As a home owner, I have watched prices pushed down in my own neighborhood. As a buyer's agent, I have seen people really want a home, but not be able to buy it because the deal couldn't be structured. In some cases an FHA 203k might be the solution, but not always. And my heart goes out to the home owners facing foreclosure. In addition to the tragedy of losing their home, they are usually facing other things like job loss or health issues that are underlying causes.

But the bank issue is deeper. I have a hard time mustering pity for an industry that has sucked almost a trillion dollars in taxpayer money to fix problems they haven't seemed to address yet. HOWEVER, the final effect of increasing the cost of the bad loans is that they will push rates higher and they will make qualifications tighter for lending. That means that good people with good credit will NOT be able to buy homes. That means that everyone loses even more!

Be careful out there...

I'm making some modifications to another one of my websites... This is when it would be really nice to have a staff like the AR folks to design scripts to convert terms and so forth with the theme change.

But the end product will be worth it.

And yes, this is a tease... Here are some of the ingredients...

• I am ready to make a change on my WordPress site...
• Brad and Bobby Carroll (Dakno Marketing) have made a very good point that sites need to carry a brand identity...
• I have a LOT of content and I would like for more of it to be "caught" by site visitors...

Posterous. WordPress. Joomla. RocketTheme.

Flickr. Twitter. YouTube. FaceBook.

Are you curious? I am...

AgainWell, yes, you can.

The question is "Should you?"

There are a few things to keep in mind as you decide about timing on purchases using the First Time Home Buyers Tax Credit (up to $8000)... and Move Up Buyers Tax Credit( up to $6500).

• How is the inventory in your local market? Will it be going up or down over the next several months?
  

Here in the Atlanta area, inventories generally increase in the spring and decrease around the holidays. This means that there are more homes to choose from during the spring and early summer.

• What about buyer competition? Will there be more buyers competing for the available properties in the future?

Suppy and demand has two variables. Demand is the other one. Here in the Atlanta area, there are generally more buyers in the market during early spring until mid-summer. The buyers in the market around the holidays are generally more serious...

• Will interest rates move up or down?
  

That is always a tough call. Many experts have been expecting increases for the last several months. So far they have been wrong, but the basics of why they are expecting increases is still valid. There is increasing competition for the available capital because of increased governmental borrowing. Also, low rates often cause currency devaluation, so there is an expectation that rates will need to be increased at the federal funds target level.

• What about prices?

Again, with the Atlanta market, prices tend to be stronger during the spring and summer and weaker during the fall and winter.

Of course, each year and each market can be radically different. But...

• Does it matter if there are more homes on the market if you find one you REALLY like?
• If you are buying when there are fewer buyers, you have more power.
• Can interest rates go much farther down?
  
• Do you really expect prices to move down? Keep in mind that on many attractively priced properties there are multiple offers.

You need to make your own decision. I think it is a good time to buy, but I'm not the one signing the contract... So, do your own research. When you are done, feel free to give me a call.