May

31

Real Estate Market: Home Values - “Yikes!”

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Three words describe the housing market (and economy in general), “This is nuts!” The downturn of the housing market continues on and doesn’t appear to be coming to an end anytime soon. According to Chief Executive Officer of JP Morgan Chase & Co., Jamie Dimon, home prices will drop as much as 9 percent this year. In Suffolk/Nassau County, the expectations are worse, with declines of 12.7% in 2008. This trend is expected to continue through 2009 at a rate of 8.9% according to the Long Island Board Of Realtors.
The chief U.S. economist for Goldman Sachs, Jan Hatzius, projects prices to fall another 10% before stabilizing in late 2009.
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One of the dark horses throughout all of this is the effect foreclosures will have on the market. We have not seen the full impact of foreclosures on the market (the average immediate loss of equity for a neighboring home of a foreclosure is approximately $8000). The Long Island Board of Realtors hasn’t run numbers yet, but with all the short sales (homeowners negotiating with respective lenders to sell their property for less than what is owed) creeping into the market and not selling, one can only guess at what is going to happen to a good portion of these homes and unfortunately, the families caught in the middle.
I realize for any homeowner reading this right now, especially ones that would like to sell, this news isn’t good. It’s not good for me as a real estate agent either. I don’t like lowering the prices of homes! I always want to get the most money for my clients. But, there is hope.
Right now, there is a price that a buyer will rush out of their closet to sell. I see it everyday. Many homeowners think there are “no buyers”. On the contrary, there are numerous buyers - they just wait to see the price adjust to the right price, then they buy. The problem is, homeowners, even ones that are in a great equity position who stand to walk with over $100,000 in their pocket after all is said and done, think the price to sell at is like “giving it away.” This is the new mantra of homeowners across Long Island. “I don’t want to give it away.”
In the next 30 days, if I price your home correctly, I will sell it. If not, take the price I give you, as the value of your home and minus 20%. Yesterday I priced a homeowners property at $370,000. I told him if I priced it at $370,000, using the power of Coldwell Banker marketing services (yes, there’s still a value in the brand buyers trust!), I could sell his property within 30 days. I know this based on what I know a about values in the area and what buyers are paying. I don’t base my offering prices on what a homeowner wants - that’s useless.
The homeowner in this case had his home priced at $419,000. Unbelievably over priced. He had expired off the market and hated real estate agents - blaming his last agent for “doing nothing”. I pointed out the fact that his previous agent probably cost him $40,000 because they overpriced him in 2007. Of course, all the agent did was price the home at the price the homeowner wanted. No good. In this market, you simply can’t afford to “go with your gut.”
Numbers are simple, emotions are not.
So where does this leave my homeowner? I tried desparately to tell him that by 2009, his home will be worth $300,000. And then I told him that most likely, the market will level out and begin a steady national average incline in home appreciation (we’re not going to get 2003, 2004, 2005 repeat with 30% appreciation annually). And how did I come up with $300,000? I simply took what Goldman Sachs, National Association of Realtors, Yahoo Finance, CNNmoney.com, Business Week, and various CEO’s of major companies are saying about the housing market and applied it to his current value. I could sell his home now for $370,000. I then took that number and deducted 20% roughly.
Yeah, ouch!
Now for buyers who read this article, please note that the time to buy is now. Do you plan on buying and selling next year? If so, yes, don’t buy. But if you plan to buy and live in the home or manage the investment property for years to come, then now is definitely, without any doubt, the time to buy. Low interest rates of around 6% cannot be looked at lightly. I will be posting about interest rates again, and discussing their true value.
In closing I’d like to leave my selling readers with this article on my website about what’s positive about selling now. Don’t forget, when you sell, you also buy! Don’t let fear dictate your life or your decisions. If the quality of your life would be better if you sold, then move on. You don’t take money with you after this life is gone, so live it. Just call me first and let me help you price your home correctly, market it successfully and help close the deal to put the most money in your pocket now!
7 days a week - 1-877-SOLD-123, ext. 51.

(c) Copyright 2008, wwwtommcgiveron.com

By Tom McGiveron

May

29

Mortgage Matters: Mortgage Pre-Payments Strategy?

Filed Under Buyers, Mortgage Matters, Sellers, Sellers & Buyers | Leave a Comment

Many clients that we sit down with are of the belief that pre-paying their mortgage (either by additional principal payments, bi-weekly plans, etc.) is a sound financial approach; however, that “conventional wisdom” isn’t very wise. In reality, what the pre-payer is saying is this, “Here’s an extra $1000, Mr. Banker. Please don’t pay me any interest on this money, and if I need it back, I will pay you fees, borrow it on your terms and prove to you all over again that I qualify.” Money you give the bank is money you will never see again until you sell the home or go through the expense of a refinance.

We have already proven that Home Equity Has A Zero Percent Rate of Return. There is no logic to put your cash into an investment that has no rate of return; and further, it is an investment that is not liquid or safe. You are actually better off burying that $1000 in your backyard because at least, in that scenario, your cash is liquid and safe.

At the same time, handing your lender $1000 today that they weren’t expecting for 30 years is a windfall for THEM.

Click Here To Read The Rest Of Tony’s Article!

May

24

Tips To Increase Value

Filed Under Sellers | Leave a Comment

Who ever said marketing a home was easy? Of course, it can be very easy - just like anything else in this world. If you don’t put effort into something of course it’s going to be “easy”, but will it be effective?
In a market like this, every bit of tender loving care (TLC) goes a long way. But the days of buying a home one month, fixing it up with a new bath and kitchen and touching up the floors and painting, then selling it a year later are over. In this market, price is definitely king, but always, at the end of the day, the home still must show well and be marketed appropriately.
Enter the Virtual Tour. Now in this market, if a seller wants this feature included in their listing, they must be willing to follow certain instructions or it just doesn’t make sense to have a virtual tour. The link below will take you to a web page with 8 helpful tips to spruce up the scenes in your home.
Click here for Virtual Tour Home Tips

If you’re thinking of selling your home, these tips will be implemented to enhance your home’s online appeal. Call me for an appointment! If you’re selling on your own, please feel free to contact me as well. I’d be glad to come to your home and provide you with a hands-on approach to applying these home tips. I also offer free for sale by owner websites. Call and ask me about them!
[Why do I offer free tips? Simple - If you don’t sell your house on your own and decide to use a professional real estate agent, I would ask that you give me an opportunity to be interviewed for the job.]

May

11

Real Estate Buyers: FHA To The Rescue

Filed Under Buyers, Mortgage Matters, Sellers, Sellers & Buyers | Leave a Comment

In this market, many buyers are struggling with the idea that they just don’t have enough money to put down in order to purchase a home. One of the most important things a buyer must establish is their threshold for monthly affordability (the ability to pay the mortgage payment). The more you put down, the less the monthly payment will be - obviously. However, with a monthly income high enough to handle “X” dollars per month in payment and other bills, you can obviously own real estate. It’s a matter of moving from a blanket thought of “I can’t afford it” to question of “How can I afford it?”

Enter FHA - Federal Housing Authority. FHA is not some government give-away. It’s not a “program” for low income homes. It is how the federal government helps banks to provide loans to certain home buyers with low money down, low credit scores or a combination of both. You can also have great credit scores and not a lot of money to put down. You can also have lots of money but choose not to put it down on the home and opt for an FHA loan product. FHA loans are simply guaranteed by the government.

A bank lends money and the FHA allows them guidelines to follow so that in the event the borrower defaults (doesn’t pay their loan) - the lender is paid back up to 80% of the loan. Fannie-Mae and Freddie-Mac are government sponsored enterprises (GSE’s) that provide mortgage backing for lenders. Lenders analyze risk when providing a loan to someone to purchase property. With real property (real estate), Fannie-Mae and Freddie-Mac allow banks to lend money with the sense of security that the loan will be paid back. However FHA loans are considered “good loans” because the application process is intense and the borrower is generally analyzed to be a low-risk candidate for a loan given certain different factors.

With an FHA loan, in black and white, the borrower must meet certain minimum requirements. FHA applicants are generally people with good documented work history. Credit scores do not have to be perfect. In fact, credit scores can be ultimately very low. FHA loans are not credit driven, although that has changed somewhat in recent months. Nevertheless, a credit score as low as 580 with again good documented work history, will most likely help the applicant to qualify for an FHA loan.

Why is FHA coming to the rescue?

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So to clarify this slide - a “subprime” or “alt-a” borrower is someone with weak credit and/or low money to put down. These are not “sub prime loans”. These terms are being used to describe the applicant. Applicants who were “subprime” candidates were simply lumped into subprime loans a few years ago. The problem with these loans is that they also hit a slowing economy with completely out of control energy prices. Combine those factors with an abuse by speculators, investors and mortgage companies and you have the gigantic mess that is the result of the “subprime” lending practices.

Through the years of 2004 to 2006, the mortgage market was dominated by subprime loans. See the next graph.
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What we’re seeing now is a stablization of the mortgage markets, thanks to FHA loans once again becoming the product of choice for borrowers. Investors really cannot use FHA loans because they are for owner-occupied properties. The people who will qualify for FHA loans will mostly be qualified people who will pay their mortgage. This is a good thing mainly because if you can afford the mortgage payment without having to put down 20% (especially here on Long Island), you’re accomplishing a few good things. One, you’re buying real estate that you own. Two, you’re using optimal amounts of leverage (other peoples money) to create an actual networth. You’re using other peoples money to achieve homeownership and wealth.

I don’t want to go beyond the scope of this article but I must include this here. America is mostly a financially illiterate country. I graduated high school without ever learning about credit, credit cards, money management, creating wealth, or investing. And since my parents were blue-color, they never received that education either. So it was not passed on to me. I woke up one day at the age of 33 and started learning about M O N E Y. And I’m still learning and will always be learning. My point within this article is, if you have questions, ask them!

Now, getting back to the article at hand here; The next graph comments on how the FHA is coming to the rescue.
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In making the process of application more streamlined and “normal”, the FHA has made it possible for people to actually get an FHA loan in a more user-friendly manner. Interested in finding out more? Call me and I will introduce you to experts in the FHA mortgage market.

Lastly, the final graph shows how FHA is becoming more widely used throughout the industry. This is such a good thing too because FHA loans represent solid lending practices. Fixed loans to applicants that have proven on documented paper, that they can afford their loan. Period.
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Homeownership cannot be looked at as a “risky investment”. Our founding fathers did not come here to rent! They came here to live free and own property. Of course, our government (especially locally) has created an environment where taxation without “good” representation is becoming increasingly apparent. However, that said, real estate ownership is and will remain a quality investment for families, for communities, states and for our country.

To find out more about FHA loans, please feel free to contact me at 1-631-587-1700, ext. 51.

May

7

Home Equity Is A Prudent Investment?

Filed Under Mortgage Matters | Leave a Comment

We need to begin by defining a “prudent investment” because any investment that involves the serious money surrounding home equity has to be prudent. Ultimately, for an investment to be considered prudent, it must have three elements:

1. Liquidity- Can you get access to the cash deposited into your investment when you want/need to?
2. Safety- Is the principal invested safe, guaranteed and/or insured?
3. Rate of Return- Is the investment going to grow at an acceptable rate?

With a prudent investment defined, let’s look at “cash buried in your backyard” as an investment. Is it liquid? Yes (as long as you remember where you buried it.) Is it safe? Yes (as long as no one else knows where you buried it.) Does it have a Rate of Return? Most people answer No, but the real answer is Yes (because of inflation, cash actually has a negative rate of return.)

Click Here To Read The Rest Of The Article!