Complete Property Services is hosting an open house at 12736 N Bend Court, Rancho Cucamonga CA 91739
Schedule is as followed:
2010.6.26 2PM ~ 5PM (SATURDAY)
2010.6.27 2PM ~ 5PM (SUNDAY)
View Larger Map
Friday, June 25, 2010
Wednesday, June 16, 2010
The top 10 most desired home features and the percentage of respondents who ranked the feature as high priority
Source: ZipRealty.
1. 86.8% - Garage or parking space.
2. 78.9% - Master suite.
3. 72% - Ample storage space.
4. 66.5% - Large or walk-in closets.
5. 66.4% - Guest bedroom.
6. 64.3% - Outdoor entertainment area.
7. 60.6% - Gourmet or updated kitchen.
8. 55.8% - Breakfast room or eat-in kitchen.
9. 43.2% - Large yard:
10. 40.8% - Wood floors: 40.8 percent.
1. 86.8% - Garage or parking space.
2. 78.9% - Master suite.
3. 72% - Ample storage space.
4. 66.5% - Large or walk-in closets.
5. 66.4% - Guest bedroom.
6. 64.3% - Outdoor entertainment area.
7. 60.6% - Gourmet or updated kitchen.
8. 55.8% - Breakfast room or eat-in kitchen.
9. 43.2% - Large yard:
10. 40.8% - Wood floors: 40.8 percent.
Monday, June 14, 2010
Wasn't commercial real estate supposed to crash?
By Heidi N. Moore, contributorJune 8, 2010: 6:12 AM E
FORTUNE -- During the long years of the financial crisis, the American economy has been like a retelling of the Somerset Maugham story "Appointment in Samarra," in which a man unsuccessfully runs from city to city in attempts to avoid a run-in with Death -- who, of course, is one step ahead of him. Similarly, investors have now spent years dodging disaster in one area of the markets, only to find their investments coming to a bad end elsewhere.
Oddly, however, there is one sector that has been outrunning the reaper since 2007, and it's the last place you'd expect to have survived so long: commercial real estate. For much of 2008 and 2009 CRE was awash in red ink, and yet it hangs on. Richard LeFrak, chairman of the LeFrak Organization, said at the Milken Institute Global Conference in April, "The failure that we were all anticipating in the commercial real estate market, it kind of didn't happen. We blinked, it went away.
The only question now is how long it can keep up the sprint while the ghosts of boom-time leverage haunt the sector, and $1.4 trillion in loan maturities loom three years over the horizon.
To crash or not to crash: which side is right?
There is a sharp disagreement among experts in how things will play out. Some predict foreclosures, loan defaults and a national crisis of disastrous proportions. In that corner is Elizabeth Warren's Congressional Oversight Panel, which flatly predicted this year that commercial real estate loans are heading for a crash that will bring down small banks, destroy small-business lending and create "a downward spiral of economic contraction," in her ominous words.
On the other side, investors in commercial properties and buyers of commercial mortgage-backed securities believe that the commercial real estate market will continue to suffer until it hits a bottom, but it will never crash in the way that the residential market collapsed. They believe that commercial real estate will be an example of how a market can take the hits and keep on ticking, that not every spot of trouble results in a crisis, that an industry can actually, somehow, stop a crisis if it acts early enough and has enough support.
Peter Roberts, Chief Executive Officer of the Americas for property giant Jones Lang LaSalle (JLL), put it this way: "We're not going to see a 'crash'. We're going to see a long work-through." Roberts believes commercial property values are in the process of bottoming out and will get to the ground floor by early 2011.
He credits the government's support programs in capital markets with reversing the psychology of nervous markets in 2009: "The powers that be are very focused in making sure that we don't have a crash in the real estate market. That has infused the mindset of investors."
The Hilton Maneuver
Investors are making the most of their good luck while they can. There have already been deals of several different varieties that show us their plan for addressing the problem of high-water mark commercial mortgages coming due.
Of them, there's no better example of temporarily sidestepping the debt monster than Blackstone Group's clutch move with Hilton Hotels. The PE firm's $26 billion buyout of Hilton in 2007 -- with $20 billion of outstanding debt due by 2013 -- is a prime example of the sweaty palms that high leverage deals can cause even savvy investors.
But in April, Blackstone (BX) bought back $1.8 billion of Hilton's debt and restructured another $2.1 billion to turn it into preferred equity. Blackstone also pushed off the maturities of the remaining $16 billion until 2015, buying itself two whole years of breathing room. Hilton is still debt-laden, but it's not dead -- and hedge-fund investors speak approvingly of Blackstone's decisions to face its problems early.
The deal has kicked off a quiet trend of what one real-estate investor at a hedge fund calls "mini-Hiltons" -- a pending wave of real estate investors seeking to buy back and restructure their own debt to stay alive until the recovery.
In another pattern, auctions for distressed assets are becoming more and more competitive, giving troubled assets quick homes. One of the most notable was the acquisition of Corus Bankshare's $4.5 billion real estate portfolio, sold for a mere 60 cents on the dollar in an FDIC auction to a group of real estate investors and hedge funds including Barry Sternlicht of Starwood, TPG Capital, WLR LeFrak and Perry Capital. The FDIC kept the majority of the portfolio, but gave the buyers zero-percent financing -- a sweet deal for any investor.
Unhinged loans
Since properties have become so hard to buy, many investors have turned with voraciousness to the bundles of securitized loans known as commercial mortgage-backed securities, or CMBS. If anything in commercial real estate stands ready for a reckoning, it is these securities.
Despite CMBS hurtling toward higher default rates, however, investors who have faith in them are practicing some serious compartmentalization. They say that there are only some CMBS -- and some tranches of CMBS -- that will be hurt. They believe that the highest-rated tranches, rated triple-A, are in no danger.
They also say that CMBS could never create as much havoc as their residential cousins because of their structure: they are made of whole loans that haven't been chopped up as much in the Wall Street sausage factory, and are based on stronger assets.
The tranches most likely to be hurt, of course, are those with the worst ratings - the triple Bs. These were the biggest victims of lax underwriting standards. According to Commercial Mortgage Alert, the boom years of 2005 through 2007 saw a total of $602 billion in CMBS issuance. (The CMBS written during those three years, by the way, account for a whopping 49% of all CMBS written over the past 20 years.) Those are likely to be the problematic securities. The CMBS written before and after don't have as much leverage put on them, say investors.
CMBS, however, accounts for only about 20% of the total loan market, according to Jones Lang LaSalle's Roberts. The bigger danger to the capital markets -- and to banks -- are speculative commercial loans, like those in construction and land loans. Those aren't backed by firm assets and are a key part of the reason that many smaller banks have failed in recent years. It is these loans, in particular, that worry Warren and others, and could yet bring a reckoning to CRE.
There is a lot riding on the outcome of commercial real estate's do-it-yourself salvation. If the sector can escape the same kind of crash that took down residential real estate, then we have a case study in how investors and government can prevent a crash before it happens. If it doesn't work, however, the economy could be hit again at a moment when it is least able to bear the punch.
FORTUNE -- During the long years of the financial crisis, the American economy has been like a retelling of the Somerset Maugham story "Appointment in Samarra," in which a man unsuccessfully runs from city to city in attempts to avoid a run-in with Death -- who, of course, is one step ahead of him. Similarly, investors have now spent years dodging disaster in one area of the markets, only to find their investments coming to a bad end elsewhere.
Oddly, however, there is one sector that has been outrunning the reaper since 2007, and it's the last place you'd expect to have survived so long: commercial real estate. For much of 2008 and 2009 CRE was awash in red ink, and yet it hangs on. Richard LeFrak, chairman of the LeFrak Organization, said at the Milken Institute Global Conference in April, "The failure that we were all anticipating in the commercial real estate market, it kind of didn't happen. We blinked, it went away.
The only question now is how long it can keep up the sprint while the ghosts of boom-time leverage haunt the sector, and $1.4 trillion in loan maturities loom three years over the horizon.
To crash or not to crash: which side is right?
There is a sharp disagreement among experts in how things will play out. Some predict foreclosures, loan defaults and a national crisis of disastrous proportions. In that corner is Elizabeth Warren's Congressional Oversight Panel, which flatly predicted this year that commercial real estate loans are heading for a crash that will bring down small banks, destroy small-business lending and create "a downward spiral of economic contraction," in her ominous words.
On the other side, investors in commercial properties and buyers of commercial mortgage-backed securities believe that the commercial real estate market will continue to suffer until it hits a bottom, but it will never crash in the way that the residential market collapsed. They believe that commercial real estate will be an example of how a market can take the hits and keep on ticking, that not every spot of trouble results in a crisis, that an industry can actually, somehow, stop a crisis if it acts early enough and has enough support.
Peter Roberts, Chief Executive Officer of the Americas for property giant Jones Lang LaSalle (JLL), put it this way: "We're not going to see a 'crash'. We're going to see a long work-through." Roberts believes commercial property values are in the process of bottoming out and will get to the ground floor by early 2011.
He credits the government's support programs in capital markets with reversing the psychology of nervous markets in 2009: "The powers that be are very focused in making sure that we don't have a crash in the real estate market. That has infused the mindset of investors."
The Hilton Maneuver
Investors are making the most of their good luck while they can. There have already been deals of several different varieties that show us their plan for addressing the problem of high-water mark commercial mortgages coming due.
Of them, there's no better example of temporarily sidestepping the debt monster than Blackstone Group's clutch move with Hilton Hotels. The PE firm's $26 billion buyout of Hilton in 2007 -- with $20 billion of outstanding debt due by 2013 -- is a prime example of the sweaty palms that high leverage deals can cause even savvy investors.
But in April, Blackstone (BX) bought back $1.8 billion of Hilton's debt and restructured another $2.1 billion to turn it into preferred equity. Blackstone also pushed off the maturities of the remaining $16 billion until 2015, buying itself two whole years of breathing room. Hilton is still debt-laden, but it's not dead -- and hedge-fund investors speak approvingly of Blackstone's decisions to face its problems early.
The deal has kicked off a quiet trend of what one real-estate investor at a hedge fund calls "mini-Hiltons" -- a pending wave of real estate investors seeking to buy back and restructure their own debt to stay alive until the recovery.
In another pattern, auctions for distressed assets are becoming more and more competitive, giving troubled assets quick homes. One of the most notable was the acquisition of Corus Bankshare's $4.5 billion real estate portfolio, sold for a mere 60 cents on the dollar in an FDIC auction to a group of real estate investors and hedge funds including Barry Sternlicht of Starwood, TPG Capital, WLR LeFrak and Perry Capital. The FDIC kept the majority of the portfolio, but gave the buyers zero-percent financing -- a sweet deal for any investor.
Unhinged loans
Since properties have become so hard to buy, many investors have turned with voraciousness to the bundles of securitized loans known as commercial mortgage-backed securities, or CMBS. If anything in commercial real estate stands ready for a reckoning, it is these securities.
Despite CMBS hurtling toward higher default rates, however, investors who have faith in them are practicing some serious compartmentalization. They say that there are only some CMBS -- and some tranches of CMBS -- that will be hurt. They believe that the highest-rated tranches, rated triple-A, are in no danger.
They also say that CMBS could never create as much havoc as their residential cousins because of their structure: they are made of whole loans that haven't been chopped up as much in the Wall Street sausage factory, and are based on stronger assets.
The tranches most likely to be hurt, of course, are those with the worst ratings - the triple Bs. These were the biggest victims of lax underwriting standards. According to Commercial Mortgage Alert, the boom years of 2005 through 2007 saw a total of $602 billion in CMBS issuance. (The CMBS written during those three years, by the way, account for a whopping 49% of all CMBS written over the past 20 years.) Those are likely to be the problematic securities. The CMBS written before and after don't have as much leverage put on them, say investors.
CMBS, however, accounts for only about 20% of the total loan market, according to Jones Lang LaSalle's Roberts. The bigger danger to the capital markets -- and to banks -- are speculative commercial loans, like those in construction and land loans. Those aren't backed by firm assets and are a key part of the reason that many smaller banks have failed in recent years. It is these loans, in particular, that worry Warren and others, and could yet bring a reckoning to CRE.
There is a lot riding on the outcome of commercial real estate's do-it-yourself salvation. If the sector can escape the same kind of crash that took down residential real estate, then we have a case study in how investors and government can prevent a crash before it happens. If it doesn't work, however, the economy could be hit again at a moment when it is least able to bear the punch.
Tuesday, June 8, 2010
How Dangerous is Buying a Foreclosure?
June 7th, 2010, 6:00 am • posted by Marilyn Kalfus, real estate reporter
http://mortgage.freedomblogging.com/2010/06/07/how-dangerous-is-buying-a-foreclosure/32309/
Here’s more from a recent survey by Trulia.com and RealtyTrac on how people view buying a foreclosure.
I think some of the confusion stems from the fact that the term foreclosure is used in different ways. When some people say foreclosure they mean a home in default on the loan and going through the foreclosure process but not yet sold at auction or reverted to the lender. Others mean a home that has already been foreclosed and now is owned by the bank.
At any rate, the 2 Websites have come up with what they’re calling the Top 10 Myths about buying foreclosures, along with their reality checks:
1. Foreclosures need a huge amount of work.
Reality check: “Although stories of foreclosures missing plumbing and every electrical fixture are very memorable, many foreclosed homes need only the (relatively inexpensive) cosmetics that many new homeowners want to customize no matter what kind of home they’re buying: paint, carpet, etc.
2. Foreclosures sell at massive discounts compared to other homes. 36% expected to receive a bargain basement discount of 50% or more.
Reality check: “While foreclosures might be discounted massively from what the former owner paid or owed, their discounts are much more modest when compared to their value on today’s market and the prices of similar homes.”
3. Buying a foreclosure is risky.
Reality check: “Yes – buying a foreclosure at the auction on the county courthouse steps can have risks, including the risk the new owner will take on the former’s owner’s liens and other loans. But most buyers looking for foreclosures are looking at bank-owned properties, which are listed on the open market with other, ‘regular’ homes. Buying these homes is really no more risky than buying a non-foreclosed home.”
4. You can’t get inspections on the property when you buy a foreclosed home.
Reality check: “County auction foreclosures don’t often offer the ability for buyers to have the homes inspected. But virtually all bank-owned properties for sale on the open market not only allow, but encourage buyers to obtain every inspection they deem necessary. This is because almost every bank sells their foreclosed homes as-is, and they want to avoid later liability. It’s in everyone’s best interests to make sure that the buyer has full information about the property’s condition before they close the deal.”
5. There are hidden costs to watch out for when buying a foreclosed home. 68% of respondents who felt there is a negative stigma to buying a foreclosure worried about the danger of hidden costs.
Reality check: “At some foreclosure auctions, there are buyer’s premiums and other hefty fees that can really add up and take a chunk out of the effective savings the buyer stood to realize. However, when you buy a bank-owned property that is listed for sale with a real estate agent, the closing costs are the same as they would be if you bought a non-foreclosed home. Overdue property taxes, HOA dues and other bills left behind by the defaulting homeowner are cleared by the bank that owns a foreclosed home before it is sold on the market, though these items should be watched out for if you buy a home at the county foreclosure auction.”
6. Foreclosures are more likely to lose their value than “regular” homes. Some 35% of respondents believing there are downsides to buying a foreclosure expressed this concern.
Reality check: ”In fact, because foreclosures often offer a discount from the home’s current market value, they may offer some degree of insulation from further depreciation. Whether a home loses its value or not has to do with the dynamics of the local market, including the area’s supply of homes, demand for homes, interest rates and the health of the employment market – not with whether the home was or was not a foreclosure at the time it was purchased.”
7. Most foreclosures happen when homeowners just walk away. Among homeowners with a mortgage, just 1% said walking away from their home would be their first choice if they were unable to pay the loan. 59% of mortgage-holders said they wouldn’t walk away no matter how upside down they were.
Reality check: “Most foreclosures happen when the owners lose their jobs or their mortgage adjusts to the point where they absolutely cannot pay the mortgage, no matter how hard they try. Voluntary walk-away’s are simply not as popular as many people think.”
8. When you buy a foreclosure, you should lowball the bank – they are desperate to get these homes off their books.
Reality check: “Stories about in the press abound about the large numbers of foreclosed homes the banks have on their books. We’ve all heard the adage that banks have no interest in owning these properties. But the real deal is that they’re simply not desperate enough to give these places away. Also, the banks mostly service the defaulted loans – they don’t own them. Various groups of investors do, and they hold the banks accountable to selling the bank-owned property at as high a price as possible, helping them cut their losses. Many banks won’t even consider lowball offers.”
9. You need to be able to pay in cash in order to buy a foreclosure.
Reality check: “Again, if you buy a foreclosed home on the county courthouse steps, you might need to bring a cashier’s check and be ready to pay for the place on the spot. By contrast, bank-owned homes are bought through a more normal real estate transaction, which means buyers can obtain a mortgage to finance the home just like they would if the home weren’t a foreclosure. It is true, though, that in some markets, banks prefer offers from cash buyers, but this tends to be in situations where the property’s condition is pretty dire, and the bank knows this may make it hard for a buyer to obtain financing.”
10. It’s easier to buy a foreclosure with bad credit if you get a mortgage with the same bank that owns the property.
Reality check: “Think about it: why would the bank want to end up with the same property as a foreclosure, again? In reality, many banks do offer incentives like lower fees or closing cost credits for buyers who use their bank for their mortgage. But the buyers must meet the same credit, income and other qualification standards as anyone else would to seal the deal.”
Here’s more from a recent survey by Trulia.com and RealtyTrac on how people view buying a foreclosure.
I think some of the confusion stems from the fact that the term foreclosure is used in different ways. When some people say foreclosure they mean a home in default on the loan and going through the foreclosure process but not yet sold at auction or reverted to the lender. Others mean a home that has already been foreclosed and now is owned by the bank.
At any rate, the 2 Websites have come up with what they’re calling the Top 10 Myths about buying foreclosures, along with their reality checks:
1. Foreclosures need a huge amount of work.
Reality check: “Although stories of foreclosures missing plumbing and every electrical fixture are very memorable, many foreclosed homes need only the (relatively inexpensive) cosmetics that many new homeowners want to customize no matter what kind of home they’re buying: paint, carpet, etc.
2. Foreclosures sell at massive discounts compared to other homes. 36% expected to receive a bargain basement discount of 50% or more.
Reality check: “While foreclosures might be discounted massively from what the former owner paid or owed, their discounts are much more modest when compared to their value on today’s market and the prices of similar homes.”
3. Buying a foreclosure is risky.
Reality check: “Yes – buying a foreclosure at the auction on the county courthouse steps can have risks, including the risk the new owner will take on the former’s owner’s liens and other loans. But most buyers looking for foreclosures are looking at bank-owned properties, which are listed on the open market with other, ‘regular’ homes. Buying these homes is really no more risky than buying a non-foreclosed home.”
4. You can’t get inspections on the property when you buy a foreclosed home.
Reality check: “County auction foreclosures don’t often offer the ability for buyers to have the homes inspected. But virtually all bank-owned properties for sale on the open market not only allow, but encourage buyers to obtain every inspection they deem necessary. This is because almost every bank sells their foreclosed homes as-is, and they want to avoid later liability. It’s in everyone’s best interests to make sure that the buyer has full information about the property’s condition before they close the deal.”
5. There are hidden costs to watch out for when buying a foreclosed home. 68% of respondents who felt there is a negative stigma to buying a foreclosure worried about the danger of hidden costs.
Reality check: “At some foreclosure auctions, there are buyer’s premiums and other hefty fees that can really add up and take a chunk out of the effective savings the buyer stood to realize. However, when you buy a bank-owned property that is listed for sale with a real estate agent, the closing costs are the same as they would be if you bought a non-foreclosed home. Overdue property taxes, HOA dues and other bills left behind by the defaulting homeowner are cleared by the bank that owns a foreclosed home before it is sold on the market, though these items should be watched out for if you buy a home at the county foreclosure auction.”
6. Foreclosures are more likely to lose their value than “regular” homes. Some 35% of respondents believing there are downsides to buying a foreclosure expressed this concern.
Reality check: ”In fact, because foreclosures often offer a discount from the home’s current market value, they may offer some degree of insulation from further depreciation. Whether a home loses its value or not has to do with the dynamics of the local market, including the area’s supply of homes, demand for homes, interest rates and the health of the employment market – not with whether the home was or was not a foreclosure at the time it was purchased.”
7. Most foreclosures happen when homeowners just walk away. Among homeowners with a mortgage, just 1% said walking away from their home would be their first choice if they were unable to pay the loan. 59% of mortgage-holders said they wouldn’t walk away no matter how upside down they were.
Reality check: “Most foreclosures happen when the owners lose their jobs or their mortgage adjusts to the point where they absolutely cannot pay the mortgage, no matter how hard they try. Voluntary walk-away’s are simply not as popular as many people think.”
8. When you buy a foreclosure, you should lowball the bank – they are desperate to get these homes off their books.
Reality check: “Stories about in the press abound about the large numbers of foreclosed homes the banks have on their books. We’ve all heard the adage that banks have no interest in owning these properties. But the real deal is that they’re simply not desperate enough to give these places away. Also, the banks mostly service the defaulted loans – they don’t own them. Various groups of investors do, and they hold the banks accountable to selling the bank-owned property at as high a price as possible, helping them cut their losses. Many banks won’t even consider lowball offers.”
9. You need to be able to pay in cash in order to buy a foreclosure.
Reality check: “Again, if you buy a foreclosed home on the county courthouse steps, you might need to bring a cashier’s check and be ready to pay for the place on the spot. By contrast, bank-owned homes are bought through a more normal real estate transaction, which means buyers can obtain a mortgage to finance the home just like they would if the home weren’t a foreclosure. It is true, though, that in some markets, banks prefer offers from cash buyers, but this tends to be in situations where the property’s condition is pretty dire, and the bank knows this may make it hard for a buyer to obtain financing.”
10. It’s easier to buy a foreclosure with bad credit if you get a mortgage with the same bank that owns the property.
Reality check: “Think about it: why would the bank want to end up with the same property as a foreclosure, again? In reality, many banks do offer incentives like lower fees or closing cost credits for buyers who use their bank for their mortgage. But the buyers must meet the same credit, income and other qualification standards as anyone else would to seal the deal.”
Friday, May 28, 2010
6 Biggest Mistakes Homebuyers Make
Article From CNN
http://money.cnn.com/galleries/2010/autos/1004/gallery.Costly_homebuying_mistakes/index.html
1. Not knowing your credit score
If you're even toying with the idea of buying a home, you must find out exactly what your FICO score is. If you find it is less than ideal, wage a systematic campaign to raise it. Too many borrowers ignore this step and get surprised when they get interest rate quotes. Once you've pored over your credit history and corrected any errors, your next step is to pay down revolving debt balances to no more than 30% usage. That will help raise your score significantly.
Why does it matter?
The lower your score, the higher your costs of borrowing. Fannie Mae and Freddie Mac, for example, charge higher up-front fees to borrowers with credit scores below 740.
For a buyer with a credit score between 680 and 700, the fee comes to 1.5% of the mortgage principal. On a $200,000 mortgage, that adds up to $3,000. Someone with a 740 score pays nothing.
Lower-score borrowers also get saddled with higher interest rates, about 0.4 percentage point more for the below 700 borrower. That costs an extra $62 a month -- $744 a year -- on a $200,000, 30-year, fixed rate loan.
2. Buying a car before a house
Anytime consumers open new credit accounts -- credit card, auto loan, etc. -- their FICO score could drop, according to Craig Watts, a spokesman for Fair Isaac, the creator of FICO scores."Hence the admonition to not open other new accounts while your mortgage application is in process," he said.
A big purchase would use up a considerable proportion of a borrower's total credit limit, which results in a drop in the score. Lenders often continue to check credit scores in the weeks before closing.
"The lender will likely slam on the brakes if the applicant's credit scores have suddenly dropped below the minimum required for the requested loan rate," Watts said.
3. Skimping on home inspection
Buying a pig in a poke can cost buyers big bucks -- just when they can least afford it. So It's vital to find all the costly flaws before you buy. Many homes on the market today are distressed properties -- foreclosures and short sales -- and that only increases the importance of good inspections, according to David Tamny, president of the American Society of Home Inspectors.
"The owners usually didn't have the money to keep up these homes," he said. "There's a lot of deferred maintenance."
A home inspection can find problems with the foundation, electrical, plumbing, roof, attic insulation, and heating and air conditioning. In some states, separate licensed inspectors offer mold or termite inspections.
Often homebuyers, who may be strapped for cash, stint on inspections and look for the cheapest way to go. That can lead to disaster.
4. No lawyer ( No escrow )
Nearly everyone involved in a real estate transaction -- the seller, the buyer's real estate agent, the seller's agent and the mortgage broker -- has a vested interest in getting the deal done because they only get paid when the house is sold. So they may push a deal even if it's not in the best interest of the buyer.
One of the best defenses against making am expensive purchase you'll regret is to hire a real estate attorney -- even in cities where it's not standard practice. These professionals charge flat fees and their advice is objective. It's nice to have someone on your side.
5. No contingencies
When signing a sales contract, buyers usually have to put up 1% to 3% in "earnest money," which they don't get back if they pull out of the deal except under certain conditions spelled out in the contract. Sellers try to limit the grounds for canceling, and inexperienced buyers may sign contracts that don't include common exceptions, such as uncovering major problems during the home inspection, failing to obtain financing and failure of the house to appraise.
Failure to obtain financing is common these days because lenders have become very picky; underwriting is very strict.
Even if your mortgage company is still willing to finance your purchase, the house itself may be worth less than you've contracted to pay for it, and the lender will pull its approval.
With residential real estate markets still slow, sellers usually accept contingency clauses, but if they resist, it may be better to rethink the deal. Losing a deposit of $2,000 to $6,000 on a $200,000 home hurts.
6. Not budgeting for insurance
Don't underestimate insurance costs and fail to budget for them.
Many homebuyers don't understand just what is -- and what is not -- covered. Standard policies pay for theft and wind, fire, lightning, hail and explosion damage. Not covered is flooding, earthquake damage or problems caused by neglect of routine maintenance, according to Jeanne Salvatore, spokeswoman for the Insurance Information Institute, an industry-sponsored educational group.
"The most important thing is before you buy a home, find out what it will cost to insure it," she said. "Insurance needs to be calculated into the cost of owning a home. Unlike a mortgage, which you can pay off, you'll be responsible for the insurance costs forever."
For flood insurance, most buyers use the National Flood Insurance Program. Earthquake coverage may be available through a state authority or some private companies.
Depending on location, flood insurance can run into a lot of money. The cost of $250,000 worth of government flood coverage on the building and $100,000 of its contents can go as high as $5,714 in high-risk, coastal areas.
http://money.cnn.com/galleries/2010/autos/1004/gallery.Costly_homebuying_mistakes/index.html
1. Not knowing your credit score
If you're even toying with the idea of buying a home, you must find out exactly what your FICO score is. If you find it is less than ideal, wage a systematic campaign to raise it. Too many borrowers ignore this step and get surprised when they get interest rate quotes. Once you've pored over your credit history and corrected any errors, your next step is to pay down revolving debt balances to no more than 30% usage. That will help raise your score significantly.
Why does it matter?
The lower your score, the higher your costs of borrowing. Fannie Mae and Freddie Mac, for example, charge higher up-front fees to borrowers with credit scores below 740.
For a buyer with a credit score between 680 and 700, the fee comes to 1.5% of the mortgage principal. On a $200,000 mortgage, that adds up to $3,000. Someone with a 740 score pays nothing.
Lower-score borrowers also get saddled with higher interest rates, about 0.4 percentage point more for the below 700 borrower. That costs an extra $62 a month -- $744 a year -- on a $200,000, 30-year, fixed rate loan.
2. Buying a car before a house
Anytime consumers open new credit accounts -- credit card, auto loan, etc. -- their FICO score could drop, according to Craig Watts, a spokesman for Fair Isaac, the creator of FICO scores."Hence the admonition to not open other new accounts while your mortgage application is in process," he said.
A big purchase would use up a considerable proportion of a borrower's total credit limit, which results in a drop in the score. Lenders often continue to check credit scores in the weeks before closing.
"The lender will likely slam on the brakes if the applicant's credit scores have suddenly dropped below the minimum required for the requested loan rate," Watts said.
3. Skimping on home inspection
Buying a pig in a poke can cost buyers big bucks -- just when they can least afford it. So It's vital to find all the costly flaws before you buy. Many homes on the market today are distressed properties -- foreclosures and short sales -- and that only increases the importance of good inspections, according to David Tamny, president of the American Society of Home Inspectors.
"The owners usually didn't have the money to keep up these homes," he said. "There's a lot of deferred maintenance."
A home inspection can find problems with the foundation, electrical, plumbing, roof, attic insulation, and heating and air conditioning. In some states, separate licensed inspectors offer mold or termite inspections.
Often homebuyers, who may be strapped for cash, stint on inspections and look for the cheapest way to go. That can lead to disaster.
4. No lawyer ( No escrow )
Nearly everyone involved in a real estate transaction -- the seller, the buyer's real estate agent, the seller's agent and the mortgage broker -- has a vested interest in getting the deal done because they only get paid when the house is sold. So they may push a deal even if it's not in the best interest of the buyer.
One of the best defenses against making am expensive purchase you'll regret is to hire a real estate attorney -- even in cities where it's not standard practice. These professionals charge flat fees and their advice is objective. It's nice to have someone on your side.
5. No contingencies
When signing a sales contract, buyers usually have to put up 1% to 3% in "earnest money," which they don't get back if they pull out of the deal except under certain conditions spelled out in the contract. Sellers try to limit the grounds for canceling, and inexperienced buyers may sign contracts that don't include common exceptions, such as uncovering major problems during the home inspection, failing to obtain financing and failure of the house to appraise.
Failure to obtain financing is common these days because lenders have become very picky; underwriting is very strict.
Even if your mortgage company is still willing to finance your purchase, the house itself may be worth less than you've contracted to pay for it, and the lender will pull its approval.
With residential real estate markets still slow, sellers usually accept contingency clauses, but if they resist, it may be better to rethink the deal. Losing a deposit of $2,000 to $6,000 on a $200,000 home hurts.
6. Not budgeting for insurance
Don't underestimate insurance costs and fail to budget for them.
Many homebuyers don't understand just what is -- and what is not -- covered. Standard policies pay for theft and wind, fire, lightning, hail and explosion damage. Not covered is flooding, earthquake damage or problems caused by neglect of routine maintenance, according to Jeanne Salvatore, spokeswoman for the Insurance Information Institute, an industry-sponsored educational group.
"The most important thing is before you buy a home, find out what it will cost to insure it," she said. "Insurance needs to be calculated into the cost of owning a home. Unlike a mortgage, which you can pay off, you'll be responsible for the insurance costs forever."
For flood insurance, most buyers use the National Flood Insurance Program. Earthquake coverage may be available through a state authority or some private companies.
Depending on location, flood insurance can run into a lot of money. The cost of $250,000 worth of government flood coverage on the building and $100,000 of its contents can go as high as $5,714 in high-risk, coastal areas.
Friday, May 21, 2010
How Foreclosure Impacts Your Credit Score
By Les Christie, staff writerApril 22, 2010: 4:44 PM ET
NEW YORK (CNNMoney.com)
NEW YORK (CNNMoney.com)
http://money.cnn.com/2010/04/22/real_estate/foreclosure_credit_score/index.htm
If you're delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?
Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.
Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.
Here are the average hit your credit will take:
30 days late: 40 - 110 points
90 days late: 70 - 135 points
Foreclosure, short sale or deed-in-lieu: 85 - 160
Bankruptcy: 130 - 240
To come to these figures, Fair Isaac created two hypothetical consumers, one who starts out with a fair-to-middling score of 680 and the other with a very good one of 780. (FICO scores range from 300 to 850.)
If you're delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?
Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.
Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.
Here are the average hit your credit will take:
30 days late: 40 - 110 points
90 days late: 70 - 135 points
Foreclosure, short sale or deed-in-lieu: 85 - 160
Bankruptcy: 130 - 240
To come to these figures, Fair Isaac created two hypothetical consumers, one who starts out with a fair-to-middling score of 680 and the other with a very good one of 780. (FICO scores range from 300 to 850.)
The hypothetical person with the 780 FICO has 10 credit accounts versus six for the 580, plus a longer credit history, lower utilization of total credit limit and no missed payments on any account. The other consumer has two slightly damaged accounts. Neither have any accounts in collection or adverse public records.
See the chart above to see how each scenario affected each borrower.
Notice that for both borrowers a single one-time black mark results in steep drops, but it is when they fall further behind that things get really harsh, according to Craig Watts, a spokesman for Fair Isaac.
One reason credit companies were so closed-mouthed is that they often can't definitively state how much each delinquencies will affect scores because there are too many variables.
Some borrowers will fall much more steeply than others for the same payment problem, according to Maxine Sweet, vice president for public education at Experian, one of the nation's main credit bureaus.
"If you picture someone who has just one mortgage and one other credit account versus a mature credit user like me with 15 accounts, if they miss one payment that would impact their scores a lot more," she said. "For me, one missed payment would just be a blip."
The point loss also depends on the borrower's starting point: People with very high credit scores have more to lose than low-score borrowers; the impact of a single blemish on an 800 score is more than on a 500.
Of course, it just gets worse when you face foreclosure.
Mortgage borrowers can lose their homes three basic ways: a foreclosure; a short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference; or a deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.
Sweet said credit bureaus generally slash scores equally for those three resolutions to someone losing their home. The important factor, she said, is that "it's reported that you paid less on a settled account."
Some borrowers may think that because they never missed a payment, they can "walk away" from their homes with relatively little impact on scores. Not true. "When a deed-in-lieu or short sale is reported as a partial payment, it's treated as a serious delinquency," Watts said, "just like a foreclosure."
Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.
Mortgage debt, combined with other financial problems, can send borrowers into bankruptcy, the worst thing that can happen to your credit score.
The effects are long-lasting, according to Sweet. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.
It's gonna cost you
Absorbing a big credit-score hit can make many transactions more costly. It's not just paying more for credit card debt and auto loans, insurance can cost more as well.
The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of
the Insurance Information Institute.
A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters.
Despite the problems a poor credit score can cause, Experian's Sweet recommends that people who are in financial dead ends, like totally unaffordable mortgages, it's better to recognize that and cut your losses quickly; don't prolong the problem.
"You need to do what you need to do to get your finances back in order," she said. "Don't worry about your credit score."
Thursday, May 13, 2010
More U.S. residents on the move
46% of movers cite desire to own home, live in better neighborhood
By Inman News, Wednesday, May 12, 2010.
Inman News
By Inman News, Wednesday, May 12, 2010.
Inman News
The percentage of U.S. residents who moved between 2008 and 2009 jumped to 12.5 percent (37.1 million people), according to a report by the U.S. Census Bureau. That increase comes after a record-low move rate between 2007 and 2008: 11.9 percent, or 35.2 million people.
The bureau's data comes from the 2009 Current Population Survey conducted between February and April every year at about 100,000 U.S. addresses. It includes residents who are at least 1 year old.
Renters were far more likely to move in 2009 than homeowners (29.2 percent vs. 5.2 percent). At the same time, movers seemed to shun main cities within metropolitan areas, which lost a net 2.1 million movers, while the suburbs gained a net 2.4 million movers.
"Most often, people cited housing-related reasons as their main reason for moving," the report said.
"About 17 million movers (45.9 percent) said they wanted to own a home or live in a better neighborhood.
Other reasons for moving included family concerns (26.3 percent), employment needs (17.9 percent) and other (9.8 percent)."
Poverty and unemployment were also factors in the move rate.
More than a fifth (20.9 percent) of those unemployed had moved in the past year compared with 12.5 percent of employed persons, the report said.
People with incomes below the poverty line were also more likely to have moved in the past year than those with incomes between 100 and 149 percent of the poverty line (23.6 percent vs. 17.5 percent), the report said.
Non-Hispanic whites had the lowest move rate (10.7 percent), followed by Asians (13.8 percent) and Hispanics (15.8 percent), while blacks had the highest rate (16.7 percent), the report said.
More than two-thirds of movers (67.3 percent) stayed within the same county, rising to 2.4 million movers from 2.1 million the year before. The next-highest share of movers (17.2 percent) relocated to a different county in the same state. The remainder either moved from a different state (12.6 percent) or moved to the U.S. from another country (2.9 percent), the report said.Regionally, only the West saw a significant increase in its move rate, to 14.8 percent from 13.2 percent the year before -- the highest rate among the four U.S. regions. The Northeast saw the smallest share of its population relocate (8.1 percent), followed by the Midwest (11.6 percent) and then the South (13.7 percent), the report said.
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