Real Estate

There are a few simple tips you can follow to have a perfect open house.  Shortly before the potential home buyers are to show up open up all the drapes and blinds.  Turn on all the lights in the home, even in the daytime.  Get rid of noise such as the TV and put some soft music on at a low volume.  Make sure the  temperature is not too hot or too cold, adjust accordingly.  Children should be sent to a friends house or to the neighborhood park (if possible).  They should stay out of the way completely. Also if you have dogs they should also go somewhere.  People don’t like to walk into rooms with barking dogs and the sight of animals can give a bad impression of the home. Of course make sure the home is tidy and clean.  Make the beds freshen the air and bake some cookies.  Give the people space to look around without feeling pressured and be available in case they have any questions. If they show serious interest, don’t be afraid to suggest that they buy it!

Interesting Report from National Mortgage News OnlineNo one can be terribly surprised that the other shoe has finally fallen.  According to a June 22nd report from National Mortgage News Online : Commercial Real Estate Prices Fall 8.6% in April Commercial real estate prices as measured by Moody’s/REAL Commercial Property Price Indices decreased 8.6% in April, leaving the index at 25.3% below its level a year ago and 29.5% below the peak in prices measured in October 2007. According to Moody’s, the large negative return for April likely reflects that deals closed during that month were negotiated at the end of 2008 and in the first quarter of 2009, when securities markets and overall sentiment were plunging. "The size of April’s decline, following a 5.5% decline in January, also suggests that sellers are beginning to capitulate to the realities of commercial real estate markets," says Moody’s managing director Nick Levidy. The South has been the worst performing region over the last year, with an annual decline of more than 20%. Commercial real estate has performed worse in Southern California than in the Western region as a whole. In Southern California, the office market has been the worst performer, with prices dropping 22.2% in the last year.

If you’re nearing retirement — or just like to plan ahead — what you’ll do with the house you own is an important topic for discussion with your spouse or partner. Yes, that sounds obvious. But an astonishing number of couples haven’t had that basic conversation, as pointed out by USA TODAY’s Sandra Block, in her column entitled ” 80% of couples disagree when it comes to retirement planning .” Among the statistics she points to, provided by Fidelity Investments: 60% of couples disagree about when to retire, 44% disagree about whether to work in retirement, 42% disagree about their retirement lifestyle, and 44% disagree about whether they’ll need to sell real estate to fund their retirement. This isn’t a conversation that should wait until the last minute. For example, perhaps you’re thinking about a bathroom remodel.  If you know you’ll want to stay in this house during retirement, now might be a great time to take some measurements and make sure it’s wheelchair accessible, just in case. But if you know you want to sell the house and move, your focus should be on what changes to the bathroom will add the most to your selling price. What makes a house suitable for retirement, anyway? Look for features like: accessibility to public transport and shops, in case the time comes when you shouldn’t really be driving minimal challenges to a person with limited mobility — single-level homes with few stairways are best, and easy-to-grip handles and knobs, plus safety railings (these probably aren’t there now, but make sure they won’t be a problem to add later). For more on evaluating your house’s retirement potential, see Buying a Second Home: Income, Getaway, or Retirement , by Craig Venezia.

Just Learned an Interesting New Term of Art – Lien ClearingAs a hard money commercial lender, Blackburne & Brown has to foreclose on about ten to fifteen commercial properties every year.  Contrary to what you may think, we never make money when we foreclose on property – never.  I wish we didn’t have to do it, but it’s a necessary evil in this industry. After foreclosing on ten to fifteen properties every year for the past twenty-five years, I have noticed an interesting fact.  Hardly no one ever bids at commercial foreclosure sales.   We have sold a commercial property at a foreclosure sale just once in twenty-five years. Therefore, if you are the holder of a junior lien on a commercial property that goes to a foreclosure sale by the first mortgage … well, you’re toast.  No one is going to over-bid the amount of the first mortgage.  You will almost surely be wiped out by the foreclosure. This week we foreclosed on an office in the foothills of the Sierras.  It’s a beautiful building.  There was a $2 million second mortgage behind our $3.3 million first mortgage, and this second mortgage loan was completely wiped out. We also wiped out a $350,000 mechanics lien that was junior to our loan. As we prepared for the foreclosure, one of our attorneys used an interesting term:  lien-clearing .  Our successful foreclosure cleared off the title to the property and left us owning the property free and clear of any competing claims for the property. The junior lienholders, in my opinion, made a fatal error when they failed to cure our senior loan.  The second mortgage holder and the mechanics lien holder should have banded together and each chipped in enough dough to payoff our first mortgage. Instead, they went to the foreclosure sale hoping that someone would over-bid our first mortgage.  In real life, this never happens.

Have you been turned down for refinancing because you lacked PMI coverage? Are you confused as to why this happened? If so, this article may shed some light on the subject. Here’s why some homeowners need PMI in order to refinance their mortgage loans. I recently received the following email question from a reader: “I have tried to refinance my home with Citi mortgage under the Gov. Mortgage Assistance Program but was told after they did an appraisal that I don’t qualify because I am not paying PMI. The seller paid PMI when I purchased the home. Is this true? The home appraised at 273,00 and I owe 257,000.” So why would a lender require PMI for a refinance loan? To answer this question, we need to start with a quick refresher on what PMI is in the first place, and why it’s a requirement on certain loans. Here’s a quick definition to start things off: Private mortgage insurance (PMI) refers to any insurance coverage that protects the mortgage lender against loss if the borrower defaults on the loan. In other words, PMI is designed to protect the lender — not the borrower. But the borrower incurs the cost of the coverage. There are two common scenarios where home buyers or homeowners must pay for PMI coverage: If a home buyer gets a mortgage loan and puts less than 20% down, they’ll have to pay for a PMI policy. In the case of refinancing, a homeowner with less than 20% equity will typically have to pay PMI as well. So if the amount you are seeking from the lender is greater than 80% of the home’s current appraised value … you’re probably looking at PMI. You’ve probably heard that it’s harder to qualify for mortgage loans and refinance loans these days. This is true. But it’s also harder to get PMI coverage, and for the very same reasons. Nobody on the financial sector is willing to take big risks right now. Remember AIG? They were the 800-pound gorilla in the PMI business, and they insured a lot of bad loans. That’s why AIG needed a bailout to save itself (which is another article entirely). Let’s get back to the topic at hand — why you need PMI to refinance your mortgage loan. PMI for Refinancing Using the loan-to-value numbers provided by this reader, we can see that he currently has 6% equity in the home. The loan balance is 94% of the home’s appraised value. This falls short of the 20% rule, which means PMI is going to come into play. Remember, any time you borrow more than 80% of your home’s value (wether it’s for the initial purchase or to refinance the home), you will most likely have to pay for PMI coverage. Of course, you can eventually cancel the PMI policy when you have 20% equity in the home. This happens when your home value rises, when you pay down your balance, or through a combination of the two.

I love “best” lists, because they’re usually: 1) short and snappy. 2) based on a decent amount of research, and 3) give you a sense (maybe artificial) that the world can be ranked in an orderly way. And this seems to be the season for best lists. For example, Forbes magazine has named its ten best retirement spots . Yes, Florida is on there, but not in the first three, which include: 1) Montgomery County, Pennsylvania 2) Nassau County, New York, and 3) Pima County, Arizona. U.S. News & World Report magazine has named its 2009 ten best places to live in the U.S. based on factors like strong economies, low costs of living, access to healthcare and education, and recreation. Its top three are: 1) Albuquerque, New Mexico 2) Auburn, Alabama, and 3) Austin, Texas. (Apparently, use of the letter “A” in the name was a criterion as well.) And not to be outdone, Kiplinger’s magazine has named the ten top U.S. cities for stable employment and new career opportunities. Start packing your bags for: 1) Huntsville, Alabama 2) Albuquerque, New Mexico, or 3) Washington, D.C. Hey, Albuquerque made two out of the three lists! Maybe I should start packing.

The economy has been scraping along for over a year now.  We have seen the effects of the subprime loans on the housing market and everyone has been waiting, hoping, to find the bottom with hopes of recovering.  Yet again we get bad news, news that says the subprime issue will be light compared to what is about to come.  Apparently millions of adjustable rate mortgages are about to change and the foreclosure rate is getting ready to spike again.  Top that with high unemployment nationwide you are looking at a continuing the housing crisis for many more months.  China isn’t going to lend us billions of more dollars and we would be crazy to take it.  You would think the people running our country could see these types of things happening and be a bit proactive…  I am sure all this falls into somebodies master plan.  The rich get richer while the poor get poorer.

Summary: Where can first-time home buyers find down payment assistance in the current economy. In this article, we will talk about the different programs and options that are available in 2009. So, you’ve decided to enter the housing market and buy your first home. You’re excited about finding a place of your own, so you start talking to mortgage lenders. It doesn’t take long to realize they’re all saying the same thing — you need to make a down payment on the house to qualify for a loan. The only problem is, you haven’t been saving up for a down payment. What do you do? Well, you have a few options. And that’s what we are going to talk about in this lesson. Let’s start with current events. Here’s the latest information about the government tax credit / down payment assistance program: Using the Home Buyer Tax Credit as Down Payment Editor’s Note: There is much confusion about this subject, mainly because the government keeps changing the rules. We will continue to update this blog post as needed. Here’s the background information on the tax credit being used as down payment assistance — or not. Currently, there’s a government program in place that gives a tax credit to first-time home buyers. The credit could be up to $8,000, and a “first-time” buyer is defined as anyone who has not owned a home within the last three years. Recently, this program was modified to include a form of down payment assistance for home buyers. Basically, the tax credit can now be obtained up front (in the form of a bridge loan) and put toward the down payment on a house. Update (6/18/09) : People who use FHA loans to pay for their homes can put the home buyer tax credit toward their closing costs, but not toward their 3.5% down payments. If your down payment exceeds 3.5%, then you can monetize your tax credit to pay the extra amount. But you must come up with the 3.5% out of pocket. You are also allowed to get down payment assistance from friends, family, non-profits, to help you cover the 3.5% portion. This is according to recent guidelines issued by the Department of Housing and Urban Development (HUD). Other Forms of Down Payment Assistance In a perfect world, buyers would be able to cover their mortgage down payments out of their own pockets. That’s what I recommend, because it puts you in a positive equity situation right from the start (without having to pay people back). Studies have also shown that people who pay their own down payment, without any form of government assistance, are much less likely to default on their loans and face foreclosure. On the other hand, people who use government-subsidized down payments are twice as likely to default on their mortgage loans down the road. But we don’t live in a perfect world. We live in a world where people often need down payment assistance to help cover the costs of a mortgage loan. So here are some other strategies for buying a home with less money down: Buy a less-expensive home . Let’s be real here. If you can’t afford the down payment on that $250,000 home, then you can’t afford the home. Period. I don’t know why people are so inclined to buy more than they can afford these days. By downsizing the houses you are considering, you will also downsize the mortgage amount. And “magically,” the down payment amount shrinks as well. Imagine that. Consider FHA loans . The primary benefit of getting an FHA-insured mortgage loan is the smaller down payment that comes with it. For a conventional loan (that is not backed by the government), most lenders will require 20% down. But with an FHA loan, you can put as little as 3.5% down. If the down payment on the FHA loan exceeds 3.5%, you use your tax credit to cover the excess amount (see the June update to this article above). Get help from your family . This is an acceptable form of down payment assistance on most loans, and you can’t be the “rates” when you borrow money from family members. Look into state programs . Your state may have programs in place designed to help home buyers, particularly first-time buyers. There are other government entities that offer similar programs to buyers who meet certain requirements. I would start by doing a Google search for “down payment assistance” or “home buying grant” followed by your state’s name. Check out your state’s department of housing as well. I did a Google search like this for the state where I live, and I found several programs. We are researching this topic further to provide additional information. I will update this blog post with any new programs I come across.

Just Bought a Discounted Note That Was Originated By an Investment BankWhen the secondary market for commercial loans suddenly disappeared in late 2007, a great many banks, investment banks, and mortgage bankers were caught with unsold commercial mortgage loans on their lines of credit.  Many of these commercial lenders are now anxious to get the commercial loans off their books. Blackburne & Brown , our hard money commercial lending company, just syndicated today a group of private investors to buy a commercial mortgage note at a discount.  The loan was originally made at 7.35%, and we bought it to yield approximately 12.75%.  We sold it out to our hungry network of private investors in just one afternoon. Would you please let me know if your bank or your commercial mortgage company has any commercial first mortgage loans for sale at a discount?  You can reach me, George Blackburne, at 574-360-2486 or at george@blackburne.com

Thanks go to Money magazine’s annual “Best List” for mentioning this website in its “Best Way Not to Sell Your House” category: Lovelylisting.com . My coworkers have probably wondering why I’ve been giggling at my desk for the last ten minutes, and this is it. The website collects listing photos that would cause most home buyers to run in the other direction; you’ll see photos dedicated to showing off giant cracks in the flooring, cleaning equipment seemingly tumbling down a steep staircase, obviously Photoshopped giant tulips in an otherwise drab yard, and more. There were times when I was writing our recent book, Selling Your House in a Tough Market , that I worried our advice about making the place look good was too obvious to merit space on the page… but I’ve just put those fears to rest.