Credit Scores – What They Mean… How They Impact Your Cost of Living…

Posted on November 2, 2009 by admin

 

The Real Story …

News and commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

Credit Scores – What They Mean… How They Impact Your Cost of Living…

Are you as confused as most people when it comes time to understand what your credit score means? It can be a little difficult to figure out what the numbers mean, and more importantly, how the credit bureaus use these scores when you need credit.

Credit scores, or FICO scores as they are also known as, are numbers that are assigned to you based on your credit history. FICO is short for Fair Isaac and Company.  The information that is used in determining your FICO score comes from a variety of places including the major credit bureaus, credit card companies that have issued you a credit card, banks and other financial institutions where you have loans, and other data bases that have consumer data on them.  The numbers are added up / evaluated to develop a score that is as a major factor in determining  whether you qualify for low cost credit, higher risk credit, or no credit at all.

The way the scoring range works, the higher your numbers are, the better your credit is. This translates into lower interest rates on loans or other credit items. Likewise, if you have a low score you will pay higher interest rates, or possibly be turned down completely.

Generally speaking, FICO scores run from the 300 point range all the way up to 850 points. These points are then separated into six point groups as follows: Note: these ranges are not fixed in stone and have different break points for different lenders; however, the breakpoints do not vary significantly from the ranges indicated below.

720 – 850 Excellent Credit
700 – 719 Above Average Credit
675 – 699 Average Credit
620 – 674 Below Average Credit
560 – 619 Poor Credit
500 – 559 Very Poor Credit

A score below 500 will usually be declined credit, or be forced to pay extremely high interest rates. These six point groups are used by all the major credit card issuers, auto finance companies, and mortgage companies to determine if they will extend credit and how much they will charge for the privilege of credit.

As you would expect, the very best interest rates and prime lending goes to those in the top category. Although most consumers fall into the middle ranges, there is a lot of competition among credit card issuers, which means you can still get some very good deals. The recent bottom/minimum score for a home mortgage has been a FICO score of 620 with pressures moving that upward to 640 in the very near future. Correspondingly, the point at which credit is denied altogether is moving to higher levels.

But the impact of credit scores does not end with the interest rates on your mortgage, automobile loans and/or credit cards. Your credit scores are also used as a part of another score called a C.L.U.E. (Comprehensive Loss Underwriting Exchange) Report that determines how much you will pay for any type of properly casualty insurance… most notably: Homeowners / Hazard Insurance or Automobile Insurance.

Finally, you should be aware that increasingly your credit scores may be reviewed as a part of your application for a job. For years your credit rating has been an important factor in employment at almost any financial institution. However, now they are being considered for other positions as well. So the cost of bad credit can be far reaching.

In the coming weeks, I’ll review how credit scores are determined and what can be done to protect and improve your scores.

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Tax Credit Extension and Expansion

Posted on October 26, 2009 by admin

The Real Story…

News and commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

Tax Credit Extension & Expansion

The First-Time Home Buyers Tax Credit is set to expire November 30th. While the recent reports of fraud and abuse by some has given the tax credit a bit of a black eye, it’s overall impact on the housing and jobs market has been positive albeit insufficient to negate the other negative elements of the economy. Anyone wishing to take advantage of the existing $8000 tax credit that is not already under contract will have a most difficult time of closing a loan on a home in time to take advantage of the program.

There will be an important vote in the Senate this week on the housing tax credit provision. The “Dodd-Lieberman-Isakson” amendment would extend the existing First-Time Buyer Tax Credit to June 30, 2010. It would expand the credit to any homebuyer and raise the income limits to $150,000 ($300,000 for joint returns). The amount of the tax credit would remain at $8,000.

Under additional provisions in the Dodd-Lieberman-Isakson amendment, taxpayers would be able to claim the credit on purchases completed in 2010 on their 2009 income tax returns. The amendment maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Why it is needed:

• The housing market remains fragile. 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.

  • NAR research suggests that as many as 355,000 sales this year can be directly attributed to the availability of the credit.
  • One prominent economist attributes 400,000 sales to the availability of the credit.

• The tax credit stimulated market activity.

  • The volume of housing sales has improved steadily every month since the credit was enacted.
  • The credit pulled people from the sidelines and created some momentum that had been absent.

• Home sales continue to stimulate economic activity.

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.

Prospects for Passage: At this point the prospects are good for extension of the tax credit. There is real concern in the Administration about the strength of the economic recovery. Treasury Secretary Geithner was quoted in the November 2nd Business Week magazine stating: “we’re not going to make the mistake many countries made in the past of putting the brakes on too early and creating the risk of a weaker recovery with even higher levels of unemployment.”

On the negative side, the stories about fraud in the tax credit program (e.g. children and current homeowners receiving the tax credit) and concerns about the program cost obviously do not help.

While the industry trade associations, such as The National Association of Home Builders (NAHB) and the National Association of Realtors (NAR), are making a major push for the expansion of the tax credit to all homeowners, it appears unlikely that it will be expanded beyond first-time homebuyers.

I will keep you apprised of its progress.

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The New Hazard … Chinese Sheetrock…

Posted on October 5, 2009 by admin

 

The Real Story …

News and commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

The New Hazard … Chinese Sheetrock…

Seems there’s a never ending stream of alerts and alarms for homeowners. If your home was built between 2003 and 2007, the letter is in the mail… The hazard du jour: Chinese Sheetrock.

Used extensively in rebuilding following the hurricanes of 2005 and during the housing boom, Chinese-made drywall was an alternative to the U.S. product, which was in short supply. However, it appears from some sources that the problem could go back to 2000.

The Problem:

It’s believed that the Chinese Sheetrock emits a foul-smelling sulfuric gas when exposed to heat and humidity. Those gases are also suspected as the cause of corroding wires, pipes, home fixtures and even jewelry. Air condition problems and malfunctions are one of the common problems associated with Chinese Sheetrock. While not yet proven, there is serious concern over possible health effects particularly respiratory problems associated with the presence of Chinese sheetrock.

 
 
Problems Associated with Chinese Drywall

• Discoloration of metals

• Repeated air-conditioning failures

• Corrosion of exposed wiring

• Corrosion of plumbing components

• Blackening of jewelry, ornaments, mirrors, and other metal items

• Failure of electronic devices

• Sulfur-like or vinegar-odor

• Sinus or respiratory problems

Chinese drywall is friable, which means it is in a state where small particles can easily become dislodged with very little friction, thus enabling them to easily enter our lungs.  For this reason, even after Chinese drywall is removed from your home, the toxic particulate will likely remain unless properly removed. To date, however, there is no State or Federal Government mandated remediation protocol and, therefore, exercise extreme caution before remediating a home with Chinese drywall.

As a result of these issues and the lack of approved remediation methods/procedures, there is serious concern on the impact that the presence of Chinese sheetrock will have on property values of effected properties and the ability to resell the home.


Background Information:

Often referred to as sheetrock or drywall, the technical term for the widely used construction material is gypsum wall board. As a result of cost and short domestic supplies of sheetrock, during recent years the import of Chinese sheetrock has occurred to fill the demand. This sheetrock has been used during new construction. Some hurricane damaged homes and businesses in the southern United States have been repaired with Chinese sheetrock.

Reportedly, Chinese sheetrock has been imported in at least forty-one (41) states.

It has come to light that that some of the imported sheetrock has impurities in the raw material used in the manufacturing process that contains sulfur. It has been reported that under the right environmental conditions sulfur containing gas can be released from this sheetrock. Over time these conditions can corrode exposed metal surfaces. This may include copper plumbing pipes and fixtures, copper heating and air conditioning systems, and electrical wiring. Often an odor can be associated with the gases emitted.

There are several suspected sulfur compounds including iron disulfide, sulfur dioxide, and hydrogen sulfide to name a few. Some moderate respiratory problems have been reported. As of early 2009 there were no known reported significant health risks. Likely the concentrations encountered are relatively low limiting the health effects. However, in high enough concentrations some of these compounds can result in more serious health problems.

But how did the sulfur get in the sheetrock? Gypsum, the primary raw material for manufacturing sheetrock, is mined from the ground. It can naturally contain sulfur. It is logical to expect the level of sulfur would vary depending on the region where it is mined. However a waste byproduct from coal fired power plants called fly ash is used by some sheetrock manufacturers in the process.

This practice is not just limited to Chinese manufacturers. Fly ash usually contains sulfur especially when from a lignite coal plant. The sulfur content alone is not the problem. For a chemical reaction to occur and emit the suspect gas or gases, moisture and heat are needed. Therefore humid or wet conditions are needed. Warm moist conditions are prevalent along the coast

Determining if your home is impacted:

Does your home smell like rotten eggs or ammonia (sometimes a sweetish smell)? Is it more noticeable
when entering your home and then seems to dissipate? The level of odor varies greatly in each home as
does each person’s ability to detect the odor. Of course, the strength of the odor also depends on how much drywall was used in the home. Significantly, some homeowners report no smell, but their home clearly has Chinese drywall. In short, do not rely on your nose alone, particularly since many develop olfactory fatigue after being exposed to Chinese drywall.
Chinese drywall corrodes electrical wiring.  Check the electrical receptacles in your walls to see if the wires are blackened.  Pull off the electrical plate and look inside.  Obviously, do not touch anything – you could get shocked.   There should be a copper wire inside.  If the exposed portion of the copper wire is blackening, this is a positive indicator for the presence of Chinese sheetrock. The breaker panel should also be checked.

There are chemical test that can be performed by trained and certified experts in the field to determine definitively the presence of Chinese Sheetrock.

Recourse:

Regrettably, there is no effective recourse other than legal action available to homeowners at the present. In the opening of this article, I made mention of the letter in the mail … That is a letter from a law firm or associated organization asking you to join in a Chinese Sheetrock class action law suit. The major benefactors of this action will be the lawyers. Homeowner payments are unlikely to see much more than a small fraction of the cost to them for remediation (once a remediation method has been decided upon and approved) or a small fraction their financial losses.

There is some isolated talk about possible government relief. But that is still very embryonic at this point. Bringing these issues to the attention of congress may be the most effective recourse for homeowners.

On a go forward basis, purchasers should take extra precautions to assure themselves that their new home does not have a Chinese sheetrock issue. This is best accomplished through professional home inspection and drywall testing.

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Mold & Mildew…

Posted on September 28, 2009 by admin

The Real Story …

News and commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

Mold & Mildew…

With the abundance of wet weather recently, it may be a good time to talk about the issue of mold. Mold and mildew can be hard to tell apart for many people. Both mold and mildew are fungi, but they are different kinds of fungi that prefer different environments in which to grow. While different, I will for the purpose of this discussion use the term mold to refer to both.

While there is some debate in the scientific community as to the level of harmful effects of mold on humans, there is no doubt that many people are extremely sensitive to molds of various types. For the purpose of this article, we will assume the more cautious point of view that generally classifies mold as a health and safety issue or a habitability issue.

There are many types of mold, and none of them will grow without water or moisture.

While mold spores are constantly present in the air, their rapid growth is most commonly attributed to the presence of excessive moisture over prolonged periods of time. As these colonies grow they become visible although they do not have to be visible to impact the health and/or comfort of persons more sensitive to mold / fungi spores.

Visible mold will usually first appear as black, gray, green, red or white stains. As the colonies grow these stains may become more textured as they accumulate and take on a powdery/sooty or a fuzzy/wooly texture.

Molds produce allergens (substances that can cause allergic reactions), irritants, and in some cases, potentially toxic substances (mycotoxins).  Inhaling or touching mold or mold spores may cause allergic reactions in sensitive individuals.  Allergic responses include hay fever-type symptoms, such as sneezing, runny nose, red eyes, and skin rash (dermatitis).

Allergic reactions to mold are common.  They can be immediate or delayed.  Molds can also cause asthma attacks in people with asthma who are allergic to mold. In addition, mold exposure can irritate the eyes, skin, nose, throat, and lungs of both mold-allergic and non-allergic people.  Symptoms other than the allergic and irritant types are not commonly reported as a result of inhaling mold.  Research on mold and health effects is ongoing. 

Molds are not always harmful; the antibiotic penicillin was created from the mold of the same name. Of course there are some persons who are so sensitive to mold that even the beneficial effects of Penicillin does not exist for them.

It is impossible to get rid of all mold and mold spores indoors; some mold spores will be found floating through the air and in house dust.  The mold spores will not grow if moisture is not present.  Indoor mold growth can and should be prevented or controlled by controlling moisture indoors.  If there is mold growth in your home, you must clean up the mold and fix the water problem.  If you clean up the mold, but don’t fix the water problem, then, most likely, the mold problem will come back.

In an effort to increase energy efficiency, home builders in recent years have built homes more tightly and allowed for much less air leakage around doors and windows. From an energy standpoint, this is a good practice. But from an air quality standpoint, such a tight house prevents the natural dilution of spores that might build up in a mold infested house.
So if a tightly built home experienced a prolonged water intrusion, such as a roof leak or a shower pan leak, and large areas of mold and/or mildew grew in the home, any person living inside this house might expose themselves to elevated levels of mold or mildew spores.

Air circulation or rather a lack of air circulation is another contributing factor infrequently mentioned as a contributing factor to mold growth. This is especially true in houses that have been closed up for a while. An important example being some of the many foreclosures that a currently on the market.

Mold Prevention & Remediation (Clean-Up):

Keeping molds and mildews from flourishing in your home can be a chore, but it is possible. Places where they grow, such as basements and bathtubs, must be kept as clean as possible. Since both thrive on moisture it is imperative to keep the home dry, with air conditioners and dehumidifiers having the ability to keep the environment inside the home at a level where molds and mildews cannot grow.

In most cases, molds and mildew are found where it is damp and moist. Bathrooms and basements are popular spots for mildew to form, as you can find it on shower curtains, bathtubs and under sinks.

Moisture absorbing chemicals can be used in closets to protect fabrics from mildew; silica gel and activated alumina are two that work and do not harm clothes. Remove molds and mildews from clothes, paper, mattresses, tiles and other surfaces as soon as you find them, using a variety of cleaning products made for such a purpose. Serious or severe mold infestations may require professional mold remediation services to eliminate the problem.

Whether you’re a home owner or a prospective buyer, mold and mildew issues should not be taken lightly and should be addressed immediately.

For more information about mold and mildew visit: epa.gov/mold/moldguide.html

 

 
 
Ten Things You Should Know About Mold

  1. Potential health effects and symptoms associated with mold exposures include allergic reactions, asthma, and other respiratory complaints. 
  2. There is no practical way to eliminate all mold and mold spores in the indoor environment; the way to control indoor mold growth is to control moisture.
  3. If mold is a problem in your home, you must clean up the mold and eliminate sources of moisture.
  4. Fix the source of the water problem or leak to prevent mold growth.
  5. Reduce indoor humidity (to 30-60% ) to decrease mold growth by: venting bathrooms, dryers, and other moisture-generating sources to the outside; using air conditioners and de-humidifiers; increasing ventilation; and using exhaust fans whenever cooking, dishwashing, and cleaning.
  6. Clean and dry any damp or wet building materials and furnishings within 24-48 hours to prevent mold growth.
  7. Clean mold off hard surfaces with water and detergent, and dry completely. Absorbent materials such as ceiling tiles, that are moldy, may need to be replaced.
  8. Prevent condensation: Reduce the potential for condensation on cold surfaces (i.e., windows, piping, exterior walls, roof, or floors) by adding insulation.
  9. In areas where there is a perpetual moisture problem, do not install carpeting.
  10. Molds can be found almost anywhere; they can grow on virtually any substance, providing moisture is present. There are molds that can grow on wood, paper, carpet, and foods

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What adds value…

Posted on September 21, 2009 by admin

The Real Story …

News & commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

 

What adds value…

When it comes time to sell, owners will often look at items for which they may have spent sizable amounts of money as items that add value to the home. It is common to hear things like: “well we just replaced the roof, the air conditioner is only two years old, we have a new water heater, we have a pool, replaced the driveway last year … as items for which the owner/seller expects reimbursement in the sales price of a property. Regrettably, such expenditures do not always add value.

Maintenance vs. Improvement:

The first concept that any homeowner (myself included) has to come to grips with is that owning a home carries with it the obligation to maintain the home… failure to do so reduces property value and if ignored long enough can even fully eliminate property value. So money spent on maintenance items such as replacing the roof, air conditioner, water heater and any one of literally hundreds of other items is done so to maintain property value or perhaps better described as a means to reduce the depreciation of property value or more simply put to protect your investment.

Another way to look at such expenditures is to consider what happens if you don’t spend that time and money on maintenance. The aging roof that goes un-replaced may lead to leaks that damage ceilings, floors, interior belongings and indeed if left long enough the structural components of the house as well.

The fact of the matter is that when someone/anyone buys a home there are certain things that they absolutely expect: A roof that doesn’t leak and won’t have to be replaced for several years, working plumbing including hot water, in our part of the country air conditioning is no longer considered a luxury but a necessity, floors that don’t creak, carpets that aren’t worn or stained, and the list goes on.

So What Does Add Value…

First and foremost it is important to understand that what adds value is ultimately decided by the market … In this case the persons considering the purchase of a home in your price range and/or neighborhood. First and most important of all considerations of course is location … Hope you considered that when making your purchase. There’s not much that can be done to change the location. So let’s look at some items that can be changed or improved upon.

As any avid watcher of HGTV by now knows, updated kitchens and bathrooms are the target spot for most improvements and the improvements most likely to have a higher yield or return. Professional upgrades of this sort (and by this I mean those high quality upgrades performed by someone other than the homeowner) will usually yield somewhere between 75 and 90% return on investment. Yea … that’s right … not likely you’ll get a a full return on your investment. So, you will usually only do these kind of improvements well in advance of selling so that you get to enjoy them a bit yourself, as well. However, if your home is the only home in the neighborhood that doesn’t have an upgraded kitchen or bath, you could get forced into these upgrades just to stay in the market.

There is if course the DIY (Do It Yourself) improvement project, which “can” lower the costs of the improvement enough to yield a return. WARNING: Unprofessional quality can result in an outcome that not only doesn’t yield a positive return on investment but actually detracts from value.

Then there is the issue of “improvements” that aren’t viewed as improvement! First thing that pops to mind is the swimming pool! Sort of like boats and airplanes, the happiest days in your life is when you get them and when you get rid of them. No doubt there is a dream that many homeowners have of relaxing around their own pool. However, there is an even larger contingent that doesn’t want the hassle and see the pool as a $10,000 liability… that is the cost to fill it in! Hey don’t shoot me … I’m just the messenger!

Frankly, most improvements other than kitchen and bath updates have an even lower return on investment. So your best bet is usually to address past neglected maintenance items that are more obvious in nature and to address curb appeal issues.

Following is my list of items to consider:

  • Pressure wash and re-paint the exterior as required (be aware of issues with masonite siding of EFIS/Dryvit)
  • Paint the front door a contrasting (but tastefully bold) color
  • Remove dead plants from the landscape & Trim shrubs
  • Keep lawn neatly mowed and trimmed
  • Add pots of color (flowers) near entrance
  • Remove wall paper and re-paint as required using neutral to earth-tone colors (beige/khaki better than white)
  • Clean-clean-clean — Windows in particular should sparkle!
  • Professionally clean carpets and work on removing any stains
  • De-clutter… de-clutter… de-clutter (if you don’t need it now, sell it, give it away or pack it)
  • Check out major systems to know about possible issues ahead of time … Think about having a Pre-Sale Home Inspection performed and providing this information to the potential buyers
  • Offer a Home Warranty to the Buyer

So why do maintenance now?

If maintenance items don’t add value why would you want to do them for the purchaser … Why not let the purchaser address those items and reflect the cost to do so in your purchase price? Experience shows that unaddressed maintenance items will generally detract from the final negotiated price by a factor of 2 to 1. That is the purchaser will want to deduct about twice the costs of the maintenance items as it would cost you the homeowner to do them ahead of marketing the property. The larger the list of items that need addressing, regardless of how minor they may seem, the larger this discount ratio grows. Enough unaddressed maintenance items and you will loose the part of the market willing to make you the better offers and be left to deal with only those folks wanting the “Deal!” Or even, worse have a home that doesn’t sell!

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FHA Loans…

Posted on September 14, 2009 by admin

The Real Story…

News & commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

FHA Loans…

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It wasn’t too long ago that FHA Loans had a bit of a bad rep … No more. Gone are the days of the hard to close, difficult inspections, petty issues which made sellers and even buyers avoid them. The new FHA Loan is perhaps the best deal out there for most buyers… great rates, low down payment requirements and other considerations as well.

FHA loans are the easiest type of real estate mortgage loan to qualify for. The FHA guidelines for loan qualification are the most flexible of all mortgage loans that require less than 5% down payment. FHA Loans require 3.5% down.

What makes the FHA Program unique is the variety of benefits it offers to borrowers, particularly First Time Home Buyers. When compared to a conventional loan, FHA becomes a much better deal for borrowers.

Key FHA Benefits

  • 3.5% Down Payment
  • Low monthly mortgage insurance
  • Low, government-capped closing costs
  • Relaxed credit score requirements
  • Quicker qualify post-bankruptcy
  • No minimum or maximum income requirements

FHA Allows for a Blemished Credit History

In today’s tight lending environment, an FHA loan is often the best choice for borrowers with past credit issues. Many borrowers find it much easier to qualify for an FHA Loan. Borrowers can have lower FICO scores, some blemishes on credit and don’t need to put as much money down.

  • Lower FICO Scores OK – FICO scores can be lower for FHA than they can with a conventional loan.
  • Bankruptcy – The FHA only requires a 2 year waiting period after a bankruptcy. Just 1/2 of the 4 year waiting period for a conventional loan.
  • Foreclosure History – FHA required a 3 year waiting period after a foreclosure compared to the 4 year waiting period for a conventional loan.

Following are the basic FHA loan qualification guidelines:

  • Two Years of steady employment, preferably with same employer.
  • Last two years Income should be the same or increasing.
  • Credit report should typically have less than two thirty day lates in last two years with a minimum credit score of 580 or higher or no credit score at all.
  • Bankruptcies must be at least two years old, with perfect credit since discharge.
  • Foreclosures must be at least three years old, with perfect credit since.
  • Your new mortgage payment should be approximately 30% of your gross (before taxes) income.

These are some of the most basic of FHA guidelines for qualifying for a FHA loan. If you have answered yes to most of these statements, you probably qualify for a FHA mortgage loan.

With FHA Loan Limits in Jefferson, Shelby & St Clair Counties set at $271,050.00, FHA is an ideal vehicle for many people to take advantage of the current low interest rates and highest housing affordability index in the past 30 years.

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Avoid common home buyer mistakes…

Posted on September 7, 2009 by admin

The Real Story …

News and commentary about the real estate market and related topics.
ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

Avoid common home buyer mistakes…

Buying a home, whether it’s your first or your next, is an exciting process … filled with the anticipation of life in your own space and perhaps the realization of other long held dreams. For most of us, it is probably the largest single financial transaction we have ever made… But it does not have to be difficult, stressful or even risky. However, you do need to do your homework and follow some simple rules and steps before committing to buy.

Skipping even one step or bending one rule makes the process of buying real estate riskier than it needs to be. Almost all the nightmare stories you hear include the fact that at least one of these steps were skipped or taken incorrectly.

Buyer mistakes generally fall into three areas:

  • Paying too much
  • Losing a dream home to another buyer
  • Buying the wrong home

Have a systematic plan before you shop so you can avoid these costly mistakes. Here are some tips for making the most of your home purchase.

Get help… Let’s face it buying a home is not something you do everyday and even if you have bought a home before, it is a complex and ever changing process for which previous home buying experience is generally inadequate to assure a smooth and successful outcome. It should be no surprise that whenever you are doing something you don’t do everyday, it’s always a good idea to get help. But, what kind of help?

You will want the help of a full-time Realtor ® to represent your interests in the process; often referred to as a Buyer’s Broker. This will be real estate agent that will sign an agreement to work in your best interest. A good and ethical agent will do this, even at the cost of their own commission. It is important to understand that the Listing Agent (the agent who has a property for sale) is the agent of the Seller as has a contractual obligation to work for the Seller’s best interests.

Beginning the process with the guidance of your own representative is the surest way of being sure that you don’t miss any of the important steps in the process.

Get Pre-Approved… Most new home buyers don’t understand the difference between being pre-qualified vs. pre-approved. A pre-qualification is just a mathematical formula that mortgage companies use that serve as guide to how much home you can afford. It is in no way a commitment that you can actually get that amount of money. Where a pre-approval is just that, a commitment from the mortgage company that they will loan you the money. Being pre-approved will not only allow you to focus on the homes you can actually afford and are approved for, but can often give you more negotiating power as well. It’s similar to purchasing a car and bringing cash with you. If nothing else, it let’s the seller know they have a capable buyer … one not to be ignored or taken lightly.

Begin with the end in mind… Even before you look at your first house… take the time to define what it is you’re looking for. Make a list of everything you want … Then for each item on the list decide if it’s a “need” or a “want”. A need is any item that would cause you to immediately disqualify a home if it didn’t have it; whereas, a “want” is a desirable item that you would love to have but you don’t have to have.

Think about resale now… I know it’s difficult to think about right now, but you will sell your home someday. Given this is your first home, statistics show you’ll sell it in about 4-5 years which isn’t long. Make sure you don’t fall in love with what you think to be the perfect house, only to turn around a few years from now and be upside down on the value. Consider the potential resale value of your home in 5 years and make sure you’ll either break even, or better yet profit from the sale. This will enable you to purchase an even nicer home next time. Again, a good real estate agent can help you determine the potential resale value.

Become familiar with the neighborhoods… Once you’ve narrowed your focus to two or three neighborhoods, go there and walk around. Are homes tidy and well maintained? Are streets quiet? How does it feel? Pick a warm day if you can and chat with people working or playing outside. Visit at various times of the day and during weekends to get a better feel for the neighborhood, traffic, and other items of importance to you.

Get the facts on the home selected… Ask your agent to prepare a price analysis for the home and neighborhood selected including any information in the public record.

Don’t Skip the home inspection… Regardless of whether the house you intend to purchase is new or used, have it inspected by an independent and licensed inspector. Again, your real estate agent can recommend several from which you can choose. While it’s yet another expense, it’s worth its weight in gold to be able to assure yourself that your dream home is not a lemon. While no home is perfect, you want to be aware of any significant items (especially health & safety issues) that you want addressed before moving in. While the seller is not required to address items disclosed, the cost of addressing these issues may be negotiated with the seller.

Obviously, you have a lot of questions about these important topics and many others as well… Don’t be afraid to ask them … Rely on your agent to help you through the process and guide you home.

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Market Update

Posted on August 31, 2009 by admin

The Real Story …

News and commentary about the real estate market and related topics. Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

It’s rare that a day goes by that someone doesn’t ask me the question “So, how’s the market?” So it seems appropriate to occasionally take some time here to review the condition of the market.

Above all, my answer always begins with “Well that depends on which market you’re referring to?” You’ve heard it many times: all markets are local and local can be as specific as a single street or neighborhood. While this is still true and a rule that must be followed when trying to evaluate market values for a specific home or your specific circumstance, there are occasions, such as this one, when a wider look at the market does provide some useful information.

So let’s look at some recent national news.

July was the 4th month in a row for home sales to increase and new home inventories to fall.

New Home Sales

•New Home Sales increased 5.2% in the second quarter of 2009 (in July 2009 New Homes Sales increased 9.6%) and the NAHB expects to see a steady increase back to pre-boom levels by the end of 2011.

•Sales of newly built U.S. single-family homes rose for a fourth straight month in July to set their fastest pace since last September, while the inventory of unsold (new) homes fell to a 16-year low.

•Single Family Housing Starts——–There is a sign of recovery here, with starts perceived as “bottoming out” in the first quarter of 2009.

Existing Home Sales

•July 24, 2009 – Existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June, according to the National Association of Realtors®.

•Existing-home sales-including single-family, town homes, condominiums and co-ops-increased 3.6% to a seasonally adjusted annual rate of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2% lower than the 4.90 million-unit level in June 2008.

•(CNNMoney.com) — Sales of existing homes rose in July for the fourth consecutive month, lending support to economists who argue a recovery is near.

•Sales of previously owned single-family homes were up 7.2% compared with June and 5% from July 2008. The monthly gain was the largest on record for existing-home sales, which NAR has tracked since 1999.

Overall Sales & Inventory Improvements

•”The housing market has decisively turned for the better,” said Lawrence Yun, NAR’s chief economist. “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”

•July home sales hit an annualized rate of 5.24 million proprieties, marking the first breach of the 5 million annualized rate mark since last September, when they hit 5.1 million. Since then, they have stayed in a very narrow range, bouncing between January’s low of 4.49 million and October’s high of 4.94 million.

•The July performance far exceeded expectations: A consensus of real estate experts had forecast sales of 5 million.

•Low prices – Of course, homes should be selling. Prices have fallen more than 32% from their peaks, set in the summer of 2006. Plus, mortgage rates near historic lows makes the cost of purchasing a home lower than they’ve been in nearly 20 years.

•”In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun said.

•Overall though, the national inventory rose by more than 7% to 4.09 million units. That will continue to keep prices low, according to Mike Larson, a housing analyst with Weiss Research.

•”There’s a bifurcation of the market,” he said. “There’s excess supply putting downward pressure on prices and people respond to the lower prices by buying homes.”

•Housing is its most affordable in many years, he pointed out. “Falling prices is not part of the problem, they’re part of the solution,” he said.

•Hurting home sales have been stubborn increases in job losses. More than 6.7 million jobs have been lost since the beginning of 2008. That’s one reason why Robert Dye, a senior economist for PNC Financial Services (PNC, Fortune 500), is keeping his optimism in check.

•”I wouldn’t go overboard on this number,” he said. “The economy is still healing and will continue to run into some bumps. But it does bode very well for the future and shows buyer confidence is increasing.”

•There is one potential bump, however: The looming end of the first-time homebuyers credit. The credit gave first-time homebuyers an up to $8,000 refund on their taxes if they close on a deal before Dec. 1. That credit has been motivating buyers, and when it expires, demand could dry up.

•Where homes are selling Regionally, the strongest market was the Northeast, where sales soared by 13.4% to an annualized rate of 930,000. That was 3.3% higher than last July. The median price of homes sold during the month was $236,700, off 15% from last year.

•Midwest sales rose 10.9% to a 1.22 million rate, 8% higher year-over-year. Prices there have sunk 5.9% over the past 12 months to a median of $157,200.

•In the South, sales were up 7.1% from June and 5.4% from last July to a rate of 1.95 million. Price have dropped 7.1% to $164,500 over the past 12 months.

•The only region reporting a slip in sales was the West, where they fell 1.7% to a rate of 1.13 million. That was ahead of last July, however, by 1.8%. The median price there was $202,300, a whopping 28% below what is was a year ago.

Local Market Conditions

The Birmingham Metro Market remains a comparatively strong market. Most housing forecasts predict Birmingham to be in the top 10 recovery markets due in large part to our community’s relative economic stability and the fact that this market never experienced the lows experienced in much of the nation.

Locally, inventory levels are dropping. There are currently 13139 homes on the market representing an 11.4 month inventory. Average sales price as a percentage of  final list price has increased from the November low of 92.23% to 95.27%. While still a strong Buyer’s Market, the Birmingham market is inching its way back to normalcy. With shrinking inventories especially in the New Home category, prices have stabilized considerably with signs that this sector may well see rising prices by next spring.

With the First-Time Home Buyer’s Tax Credit set to expire this December 1st, some buyer incentive may be removed from the market. However, with rising interest rates combined with the current low prices and a strengthening housing market, there remain strong incentives to act now.

Now back to my standard opening line … How is the market? “Well that depends on which market you’re referring to?” Every market is different. Generally, the market is improving … The American Dream lives. As always, get the advice of a trusted Realtor about your specific market and circumstance.

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USDA Financing

Posted on August 25, 2009 by admin

The Real Story…

News and commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

100% Financing, No monthly MI? 620 minimum score. Does the home you’re looking for qualify?

Imagine getting into a house for nothing down AND getting $8,000 back from the First-Time Buyer Tax Credit … Now that’s a WOW!

I know that sounds like a headline from the boom days, but it’s real and it’s been around for a long time.  It’s been called Rural Housing or USDA financing provided by United States Department of Agriculture under the auspices of the USDA Rural Development Program.

Sometimes good credit and a steady income are not enough to qualify for a home loan at a commercial lending institution, such as a bank or mortgage company. More families and individuals may be eligible to become homeowners with the help of a USDA guaranteed home loan. When the federal government agrees to guarantee a loan, lending institutions can help buyers while incurring less risk. Through USDA’s Guaranteed Rural Housing Loan Program, low- and moderate-income people can qualify for mortgages even without a down payment.

Don’t be fooled by its “rural” name… there are many subdivisions that qualify! Although there are only a few areas of Jefferson County that qualify, almost all of St Clair County qualifies.

Here are the basics:  620 minimum score, no monthly MI (but there is up front “guarantee fee” of 2% that can be rolled into the loan). You can actually finance up to 102% of APPRAISED value (not purchase price), so it could actually be the purchase price plus closing costs depending on how an offer is negotiated!

You do not have to have PRESTINE credit, but you are expected to have a 620 score and 12 months of “clean credit.”

USDA does require that the property be located in a less populated area.  It does not need to be a farm – but it can’t be located downtown either. You can check the eligibility of an address via the USDA web site to see if the property you’re interested in qualifies: http://eligibility.sc.egov.usda.gov/

Interest rates are just a slightly higher than an FHA rate, but without the monthly MI or 3.5% down!

While there is no official “loan limit,” the borrower needs to be UNDER a certain income level…

But don’t be discouraged… the income limits are much higher than you might expect!  Talk to a knowledgeable mortgage broker or a REALTOR® right away to take advantage of the combining of opportunities currently available to the Home Buyer.

You do not have to be a first-time home buyer to take advantage of the USDA Rural Housing Program.

Guaranteed Rural Housing Loans

To be eligible, applicants must:

¨ Have an adequate and dependable income;

¨ Be a U.S. Citizen, qualified alien, or be legally admitted to the United States for permanent residence;

¨ Have an adjusted annual household income that does not exceed the moderate income limit established for the area. A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household. Applicants may be eligible to make certain adjustments to gross income— such as annual child care expenses and $480 for each minor child—in order to qualify. USDA Rural Development field offices can provide information on the moderate income limits for the areas that fall within their jurisdiction and can provide further guidance on calculating household income. The contact for the Alabama field office is:

CONTACT

PHONE #

FAX #

E-MAIL ADDRESS

Al Butler

(256)532-1677

(256)532-1931

al.butler@al.usda.gov

¨ Have a credit history that indicates a reasonable willingness to meet obligations as they become due;

¨ Have repayment ability based on the following ratios: Principle, Interest, Taxes, and Insurance (PITI) divided by gross monthly income must be equal to or less than 29 percent. Total debt divided by gross monthly income must be equal to, or less than, 41 percent.

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First-Time Homebuyer Tax Credit… You may qualify

Posted on August 19, 2009 by admin

The Real Story …

News and commentary about the real estate market and related topics.
Dave Parrish, ABR ®, CRSA, CSP, GRI, ePRO ®, REALTOR ®, RealtySouth

For an archive of The Real Story visit:
http://www.DavidParrishRealtor.com/myblog

First-Time Homebuyer Tax Credit…
You may qualify

The clock is ticking away toward the end of the most phenomenal incentive ever for the First-Time Home Buyer. Think you DON’T qualify… Wait… You may be eligible even if you have previously owned a home. The government’s definition of a first-time home buyer is anyone that has not owned a home in the past three years (thirty-six months).

In one of the more meaningful attempts to stimulate the economy, the federal government has created a program that impacts one of the largest economic sectors, puts people back to work and makes homes even more affordable for that group that they define as first-time homebuyers.

Tax Credit Provides Outstanding Opportunity for Home Buyers

In a nut shell the American Recovery and Reinvestment Act of 2009 provides the following: A refundable tax credit of up to $8,000 is available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Program Highlights:

  • The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
  • The tax credit does not have to be repaid if the purchaser remains in the home for at least thirty-six months.
  • The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
  • The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009. Note: The effective dates apply to the date the transaction is completed, that is the date of the closing.
  • Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Tax payers with incomes above these levels are eligible for a reduced benefit based on their Modified Adjusted Gross Income (MAGI). The phase-out range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

A reminder this is a refundable tax credit not a tax deduction. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes rather than a percentage based on your individual tax rate. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.


The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even the entire amount of the refundable tax credit.

Now I must caution you that there are many other details and finer points to this program … much-to-much detail for our limited space; and as always, you should consult your tax professional to see how the tax credit works in your specific case.

This is a truly advantageous program for the first-time home buyer that when combined with the great selection of homes available today, lower home prices and near record low interest rates creates an unparalleled opportunity for those who wish to become homeowners.

Get the full story at the following web site (a service of the National Association of Home Builders / NAHB):

http://www.federalhousingtaxcredit.com

or from the IRS site accessed via the following url:

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

For those of you interested in more details on the tax credit and other issues of importance to First-Time Home Buyers, you may want to attend a FREE First-Time Home Buyer Seminar being held at the new Trussville Civic Center this Thursday, August 20th at 6:30 PM or contact a Realtor.

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