Northern Maryland Real Estate

When will be a good time to begin investing in real estate again? Part 2 of 2

2012-05-21T16:50:00.000-04:00

    Last week I discussed the possibility of purchasing investment properties with the intent of "flipping" them, or improving them and selling them in a short period of time. This week I want to discuss the goal of purchasing a property for the purpose of holding it for an extended period of time and renting it. This option can be a very lucrative adventure. If done properly, your rental income can raise your net worth and cash flow substantially. This article on Time Magazine's website suggested that all indications point to the beginning of a housing recovery. Interest rates are at "once-in-a-lifetime" lows. For investors, there are plenty of distressed(foreclosure and short sale) properties available at prices well below their improved values.

   Not only are home prices down and interest rates low, but the guidelines used to qualify buyers are still rather strict. Higher credit scores and higher down payments are required, making it difficult to impossible for some people to get a mortgage and buy. What do people in this place do? They RENT! This makes holding onto a property to rent it much more attractive. In my market, Baltimore/Harford County, MD, rental properties are moving quicker than resale properties and rent prices are rising. This creates the perfect environment to purchase a property inexpensively, fix it up and rent it.

   There are things to consider when taking this approach to real estate investment. The approach to rehabbing or fixing up the property has to be looked at differently. You cannot put the finest of all materials into a home that is going to rented out. What if you get tenants that don't call you when they notice a leak under the kitchen sink and now 2 months later you have a ruined kitchen floor? What happens when the AC unit stops blowing cold air and the tenant thinks it's a good idea to put in a window unit and screws/duct tapes it into your beautiful trim work around the window? How about the tenant with the "very well behaved" St. Bernard? All of these things are very realistic possibilities when renting. When pursuing real estate investing for rental purposes, you have to look at all aspects. The type of materials you use and the amount of capital you put into a rental property has to be equivalent to the amount of the monthly rental amount. Don't install granite counters and Brazilian cherry floors into a property bringing in $500/month in rent. Sometimes, those rental a very inexpensive property don't take the best care of them. There are exceptions, but you have to consider all scenarios.
www.facebook.com/timmontoyarealtor

   I found this calculator which allows you to plug in all of your info to see what your return on your rental could be. One thing not available to calculate is the toll being a landlord can take. It can be a very rewarding job, but it can also be very frustrating.

   As with all investments, contact a tax professional to check on how an increase in your income will effect your tax liability. For more info on rentals or a list of available properties, visit my website at www.allhomes4me.com

   Also, for up to date real estate news and properties, like my facebook page.

When will be a good time to begin investing in real estate again? Part 1 of 2

2012-05-17T13:47:00.004-04:00

I've talked to several agents, friends and clients and they have either asked this questions or have discussed it with others. So, when will be a safe/good time to begin investing in real estate again? The answer to this depends on your idea of investing and how much capital you have. Do you plan to rent the property and hold onto it? Do you plan to rehab the property and sell it for a quick profit? I will first discuss the goal of buying with a quick sale, or "flip" in mind.

"Flipping"

When investing to "flip" a home, or sell it quickly after repairs/improvements are made, the first thing to do is to look at the sales statistics in the neighborhood or area you are interested in. The stats to the left are the April sales statistics for the Baltimore Metro area. The most important stats are obviously "Avg Sold Price", but also the "Avg Days on Market" and "Avg Sold to Orig List Ratio". The sales price for the homes in the area, comparable(comps), will tell you what the upper and lower prices homes are selling for. You must determine what budget you have for purchasing the home, improving it, carrying it while you attempt to sell it and closing costs(Realtor fees, transfer and recordation taxes and any seller concessions). Once you figure your budget You are now ready to determine a good purchase price. THIS IS WHERE YOUR PROFIT IS MADE! If you pay too much for a property, your profit will be where you lose. Purchasing a home at the right price is the most important part of real estate investing. If you buy a home at an appropriate price, you will have two things on your side:

You will have flex room built into the transaction to address surprises in the construction/rehab process.
You will have $$$ available to accommodate a buyer's request for cash contributions towards their closing costs or $$$ available for a price adjustment, if needed.

   So, you made a smart purchase and now you're ready to rip out some walls and slap down some granite counters. Hold on there, cowboy. Let's make sure you are choosing the right improvements and upgrades. Consult your Realtor to find out how many baths the surrounding homes have, what types of kitchens are int he houses around you, how many bedrooms the other homes have and do they have a finished basement. You'll want to choose things that will set your property apart from the others in the area. If everyone else has 1 1/2 baths, then turn the 1/2 bath you have into a full bath with a shower. If the other kitchens are small "galley" type kitchens, then open up a wall and combine the kitchen and dining room to make an open feeling and better flow. If you indeed did buy the property at a good price, then these slight improvements should be within budget and will net you more dollars and possibly a quicker sale when the property is listed.

   Another area that lots of investors forget to take into account are the taxes due from any profit. Make sure to consult a tax professional to see how you will report your earnings and what will be the ramifications of your flip. Take the info you gain from your research into account when calculating your return on the transaction.

   Here is a newly released article by CNN Money. It actually gives some credit to my conclusion.

   Well, to answer the question as to "When will be a good time to invest in real estate again?" , actually, for a flip project, now is a very good time. On a scale of 1-10, I would give the current market an 8 for flipping. Labor costs are down, property prices are down and there is a lack of good, well priced homes ready for occupancy. A lot of the homes available are in need of work due to the fact that they are foreclosures, short sales or the owners have not had the means to keep up with them.

   Here is a USA Today article from a few years ago, but it is still very relevant.

   INVESTORS!!! Here are links to custom search results for properties under $100,000. If anything interests you, give me a call.

Baltimore City

Baltimore County

Harford County

Next week I will discuss the mentality of investing with the goal of having rental income.

Who are you to believe?

2012-05-15T14:12:00.000-04:00

I am sure everyone is hearing the new of the recovering economy, right? I see articles written on a daily basis stating that "Housing prices on the rise!", or "Housing market rebounding!". So where is all the evidence of the improvement in the housing market? Well, here is just one article that actually gives some statistics. There have been some encouraging signs of a potential improvement, but what constitutes a "recovery"? Are increasing prices the only thing that indicate a recovery? Here is a sample of the performance in Baltimore County. The numbers are encouraging, but like the early season success of the Baltimore Orioles, I am optomistically cautious to say that the clouds are lifting and the sun is once again shining on the real estate market in Maryland.

If you would like complete statistics for all areas of Maryland, visit my website, www.allhomes4me.com, or follow my Facebook page, www.facebook.com/timmontoyarealtor.

Are Home Inspections Necessary?

2012-05-11T13:48:00.000-04:00

     I recently came across this article in the Washington Times regarding home inspections in the DC real estate market. I was not surprised to hear that more and more transactions are dealing with listings being sold "as-is". The majority of foreclosures and short sales are listed as an "as-is" sale, and for good reason. Most banks will not make repairs to a property. They are already losing money and normally the buyer is getting the property far below market value. There are exceptions to this, so it is always worth a try to get the bank to commit funds for a repair or to have the issue corrected.

     As far as the title of this blog is concerned, I have never and will never recommend to my clients to forgo a property inspection. I think to do so would be dangerous for me as a professional and may lead someone to have a false sense of security in a property that may or may not be founded.

     I think nothing bad can come from a licensed home inspector examining a home you are preparing to purchase, even new construction! I'm not saying that an inspector will find every last defect in a property or that he can see through walls, but a second or third set of eyes can always be beneficial. Also, an inspection report can come in handy if you need to renegotiate some aspects of the purchase or use it as an excuse to back out of the deal.

    What do you think? Have you purchased a home with or without getting an inspection? Would you do it differently the next time? Visit my website, www.allhomes4me.com, for buyer and seller tips and access to my resource of recommended inspectors and other professionals.

Belcamp Townhouse for Sale!

2012-05-02T23:10:00.001-04:00

Affordable, move in condition and updated. Can I get you anything else? Oh, I forgot, this is also an end-of-group unit. Price to impress and sell quick. Don't wait. Call Tim @443-463-3592 to make an appointment today!

www.1245independencect.com

Visit www.allhomes4me.com for an all inclusive property search and information on many more listings.

Also, visit our Facebook page for up to date real estate information.

Do I qualify for a short sale?

2012-05-02T14:38:00.000-04:00

If you are like many home owners in the U.S., your home has lost thousands of dollars in value and with it, some of your equity. Well, what if you want or need to sell your home and you now owe more than what a sale would net you or the bank? The answer to this is to attempt a short sale.

In short, no pun intended, a short sale occurs when an owner sells a property and the net proceeds of the sale do not satisfy the note on the property. I would say that short sales make up roughly 40% of the home sales in Harford County during the past 12 months. How do you complete a short sale? What is the short sale process? These are very common questions and can have both direct and simple answers, but sometimes can have very difficult and drawn out resolutions. There are several lenders in the U.S. who have borrowers asking for short sales and each lender can have a slightly different process.

So what is the process? Well, the first step of any home owner looking at the potential of needing a short sale approval is to contact a licensed and experience short sale real estate agent. An agent experienced with successfully completing short sales is your most important resource. Look for either a Short sale and Foreclosure Resource (SFR) agent or a Certified Distressed Property Expert (CDPE). I recommend the later certification because it is a more thorough and intensive certification process and offers an ongoing resource to the agent, which can aid the agent in staying up to date with the changing guidelines. Make sure the agent you choose is has completed several short sales and you will not be this agent's guinea pig seller.

The agent you choose will interview you and determine your chances of qualifying for a short sale and will also show you information which will allow you both to determine the market value of your home. During this process, ignore the difference in your homes current value and your loan balance. The disparity of these numbers does not impact the approach to selling your home. Your Realtor will also ask you questions about you reason for selling. This part of the process is usually difficult for you, the home owner, because you may be asked to rehash the events leading to your financial hardship. Even though this may or may not be difficult for you, it is one of the more important steps because the agent needs to insure that there is a good reason or a need to attempt a short sale. Banks typically require some type of hardship in order to agree to allow a short sale. This hardship may be a loss of employment, under employment, medical emergencies or complications resulting in loss of job or delinquency. A relocation, which if not agreed to, may result in loss of job or maybe the impending layoff from your job. You do not have to be behind on payments or have a current financial hardship, but the proof of a future hardship can be sufficient.

There are several situations where a short sale is allowed and the banks will certainly consider any unique situation that you may not think qualify, so don't hesitate to contact a Realtor and investigate your options.

The second step to getting a short sale approved is to list and market your home. Your agent will recommend the list price to you. This price will typically be slightly lower than the actual market value. The reason for this is that there has to be a concession made for the "defect" in your property, or more accurately, the "defect" in the process for a buyer to purchase your property. The short sale process can be a very long and drawn out process. With this in mind, you have to entice buyers to commit to such a long and emotionally draining purchase. I have had the privilege of participating in short sales that were completed in 30 days or less. I have also been cursed with transactions that have taken over 12 months to complete! Although the time it takes to complete a short sale can vary greatly, the average time is 90-120 days.

The third step, in the process of selling your home utilizing the short sale option, is to accept a buyer's offer. This is, to me, the easiest of all of the steps involved. Keep in mind when reviewing offers, that you want to insure that the buyer is aware of the fact that you are applying for a short sale. Your agent should be able to point out any aspects of the offer that may not allow for a short sale. The buyer should be made aware that the lender may or may not approve the proposed sale price and all the other financial aspects of the buyers offer. I have seen banks remove any seller contributions towards buyer's closing costs, ask for an increase in the sales price and even reduce the real estate commission. Just make all parties involved aware that the bank has the final say, and to be patient and be flexible. Along with getting a signed contract and estimated HUD-1 document, the bank will require some or all of the following documents from you, the seller:

-Last two (2) years federal tax returns

-Two (2) most recent bank statements

-Two (2) most recent payroll stubs

-A complete financial statement outlining your monthly expenses

-A signed and dated hardship statement/letter

An experienced short sale real estate agent can easily assist you in composing the financial statement and hardship letter. These items are non-negotiable. Every bank requires these docs and some require more. This is the most important part of the process. Neglecting to submit one or several of these documents can lead to delays and ultimately to a buyer walking away or a bank closing a file.

The final step in completing a short sale is to complete the purchase side of the deal. The buyer will follow through with their promise to apply and complete their financing, conduct their inspections, if any, and have a title company research the history of the property and order a survey. This step usually consumes the final 30-40 days of the transaction, which is typical.

All in all, a short sale is not a difficult thing to complete as long as all parties are educated on the process, informed of any changes and updates and cooperate with all parties involved to work to a resolution to any hiccups that may occur.

If you think a short sale is right for you, give me a call and I will be happy to walk you through the process and answer any questions you may have.

Tim Montoya

443-463-3592 mobile

www.allhomes4me.com

358 Enfield Rd Joppa, MD 21085

2012-03-20T20:58:00.002-04:00

Great home for sale in newer neighborhood. Check out the custom website for this property or contact me for a private showing. www.358enfieldrd.com

Is it a great time to buy?

2012-03-20T14:28:00.002-04:00

Check out this article in Forbes. While the market is slow and rates are still at all time lows, now IS a great time to buy a home. This article may be coming up on a year old, but it is even more true today. Statistics are showing a slow down in the drop in housing prices and a reduction in housing inventory. This is a prime time to make a move. Visit www.allhomes4me.com for an easy to use search tool or call me at anytime to make an appointment to see acvailable homes.

1119 JADE DR, BEL AIR, MD 21014

2010-11-18T18:05:00.000-05:00

1119 JADE DR, BEL AIR, MD 21014

2010-09-01T11:36:00.001-04:00

1119 JADE DR, BEL AIR, MD 21014

5101 HOLDER AVE, BALTIMORE, MD 21214

2010-09-01T11:36:00.000-04:00

5101 HOLDER AVE, BALTIMORE, MD 21214

430 HARDIN DR, JOPPA, MD 21085

2010-09-01T11:35:00.000-04:00

430 HARDIN DR, JOPPA, MD 21085

Buying a Home with a VA Loan in Maryland

2010-08-26T13:36:00.002-04:00

The average cost of a home in Maryland is higher than in most areas of the United States. Homes in Maryland average around $250,000 with homes priced higher than $500,000 not being uncommon. To the prospective homebuyer in Maryland, trying to find financing to secure a higher priced home can seem like a daunting task, but if you are a veteran, active duty member, or an eligible spouse, securing financing for your home in Maryland is easy with the VA home loan program.
What is a VA Home Loan?
Since 1944, the VA has provided millions of veterans and active duty service members the chance to achieve homeownership through the VA home loan program. The VA partially insures each loan which allows the VA loan program to provide excellent benefits to service members that they wouldn't be able to find with regular lending programs. Some of the VA programs more popular benefits are competitive interest rates, flexible eligibility requirements, and lenient loan terms, but also include:
• Zero down payment required
• No mortgage insurance required
• Flexible debt-to-income ratios allowed
• Regulated closing costs

Who is Eligible for a VA Home Loan?
The VA home loan program is dedicated to helping veterans and active duty service members purchase homes. Because of the nature of the real estate economy across the country, it is becoming harder and harder to finance homes (or refinance existing home loans) in the conventional manner. Nearly 80% of all veterans and active duty service members who obtain financing through the VA loan program would not have been able to do so through a conventional loan program. To initially meet eligibility requirements for a VA home loan, borrowers must obtain a Certificate of Eligibility and:
• Have served 181 days on active duty or 3 months during war time
• Or have served 6 years in the National Guard or Reserves
• Or be the spouse of a service member who was killed during active duty

Although the eligibility requirements to secure financing through the VA home loan program are limited, most VA-approved lenders will require a mid-range credit score of at least 620 to qualify a borrower. Even those who are skeptical of their eligibility are still encouraged to apply for a VA loan as even those with an imperfect credit history have been approved.

Thanks to James Kelley of vabenefitblog.com for this useful info.

1809 DARRICH DR, PARKVILLE, MD 21234

2010-08-10T22:47:00.001-04:00

1809 DARRICH DR, PARKVILLE, MD 21234

FHA to Implement Policy Changes

2010-08-10T14:12:00.005-04:00

Congress passed H.R. 5981 a few days ago. This bill allows FHA to change some policies and guideline in regards to issuing loans to home buyers. The main changes are as follows:

1. The upfrom mortgage insurance premium will be REDUCED from 2.25% to 1.0%. This is great news, right. Well hold on for a minute....

2. The monthly paid MIP rate which currently has a cap of .55% of the loan amount divided by 12 months, will now have a cap of up to 1.55%. This is where the impact come in.

Most home buyers using an FHA loan have little cash at hand. The typical buyer can come up with the required 3.5% downpayment and not much else. Usually the buyer asks the seller for "help" with their closing cost and right now the seller is allowed to "help" up to 6% of the purchase price. This may seem like a lot, but Maryland's fees and taxes for purchasing a home are some of the highest in the US. The upfront MIP is allowed to be rolled into the loan amount, so the buyer has never had to tackle this expense right out of their pocket with cash, it has always just increased their monthly payment marginally.

Now, however, the monthly MIP will be increasing the monthly payment for all buyers. These changes are set to effect FHA case numbers issued after September 7th, 2010. For an example of how this would effect a buyer, go to : http://www.allhomes4me.com/ and click on current real estate news.

Housing Prices Up!!!!

2010-07-27T10:30:00.007-04:00

Well, looks like we are in the clear! Housing prices are on the rise so all should be good, right? Are you as skeptical as I am about all of the local reports of "Housing prices up 5% in June" or "Home sales on the rise!"? Being a Realtor, I feel like the public perception of the current state of our economy, and more specific the real estate market, is like an empty bottle out at sea. It gets tossed back and forth and if a good sized wave comes along, it goes under, only to resurface and bob around a little more. As professionals, Realtors need to be honest and direct with those we come in contact with. The media plays up or down current events, or doesn't cover them at all.

How can the general public know what to make of buying or selling a property at any given time? My suggestion is to contact someone who sees homes being bought and sold everyday.

The reports of home values being "up" are fine if you report the facts. The fact is, unless you compare what a specific house sold for 4 years ago to that same home selling now, then you can't really claim that values are up. Just like the loved term "median sales price". What does that mean, median? Who cares what the median sales price is? All median sales price refers to is the price of the house that is between the higher and lower half of homes that sold. So, if 3 homes sold ( $25,000 , $200,000 and $800,000), then $200,000 would be the median price. What does that tell you? The average sales price would have been $341,xxx. The median sales price really doesn't convey anything other than the price of a house that sold in the middle of a group or other sales.

I get frustrated when I hear polarizing information in the news about the economy. Why is there need to toy with the public perception? Why not report that home sales were rolling right along until the home buyer's tax credit expired, then they slowed down slightly? Also, consider that were are in the middle of the prime selling/buying time period in our market. I anticipate new contracts of sale to settle down in mid-September and crawl to a snails pace by November, but guess what, this happens every year. September will probably be a good month for property closings, so be prepared to hear the media report high property sale numbers at that time.

If you'd like a complete list of current sales in your neighborhood, city or county, feel free to contact me and I would be happy to send it to you.

Improving Real Estate Market

2010-04-21T16:13:00.003-04:00

Market Classification Changes!

Recently, as of April 19, 2010 , the classification for the real estate market in Maryland has changed from "severely distressed/class 4" to "soft/class 2". What does this mean? While this doesn't mean that we are back to "normal", it is a move in the right direction. With the recent reclassification, banks are now able to offer some more attractive loan options for home buyers. In a class 2 market, buyers with a credit score of 700 or better will now qualify for a conventional 5% down loan! Keep in mind FHA just increased their MIP and are soon to increase their required down payment. When comparing apples to apples, cash to close on a property may be slightly higher with the conventional 5% down loan, but the overall loan amount will be lower. If you would like to know what type of homes are available or what type of loan / loan amount you qualify for, feel free to contact me. Thanks!

Another Real Estate Slump?

2010-03-30T23:43:00.009-04:00

Well, we're on the cusp of the Home Buyer's Tax Credit Expiration, again. Last year when the 1st expiration date approached, market activity slowed and slumped for roughly 2 months. Was this just because buyer's we're throwing in the towel and giving up on the tax credit or was this due to other factors( weather, time of year...)?

This time around, interest rates are poised to rise slightly and FHA has decided now is a good time to increase the cost of buying a home (MIP increase). Will this mean another slump or will the annual spring warm-up keep us from creeping to a halt?

I think this is a time of opportunity. As a seller, you have buyers who are nervous to miss out on the potential $8,000/$6,500 credit and they are feverishly searching for a home, now is the time to strike a deal. Also, as a buyer you have a slight pyscological advantage. Sellers are worried that after April 30th, buyers will give up searching and pack in their efforts to find a home.

As with any real estate market, there are chances to capitalize. Both for buyers and sellers, now is as good a time as any in recent history. I am experiencing increased optomism in both buyers and sellers and overall activity is up over this time last year. With the ample supply of short sale listings, REO properties, foreclosed homes and traditional resale listings, buyers have more than enough to choose from and property owners are vying for your business.

Overall, this real estate market takes knowing your surroundings. Know what you are looking for and what you can look for. If you need to take possession within 45 days, then a short sale may not be your best option. If you can't make repairs, then an REO or foreclosed home may not be a smart choice. If you do find yourself open to looking for a distressed property, make sure you choose a Realtor with sufficent experience/training to walk you through the process.

If you have questions or need my help advice for your real estate questions, feel free to visit my website http://www.allhomes4me.com/ or contact me.

FHA Property Flip Waiver Renewed!!!!

2010-01-17T14:32:00.003-05:00

Previously there has been a "waiting" period, for a buyer using an FHA insured loan, to buy a home......

"Green" Real Estate?

2009-04-10T18:43:00.006-04:00

"Green" real estate, this is a catch phrase being throw around more and more everyday. Before I start off putting ecologically minded individuals on the defense, I want to say that I believe that we all need to weigh the costs involved in owning a home, building a new home, driving our cars and other activities that have an impact on our environment, but I think we all need to use some common sense. I can appreciate the care and consideration put into deciding to "go green", but I think we need to look at the reason we each come to the conclusion that "green" is the way to go.

The media and other information outlets has really taken hold of the ecologically friendly concept of using energy efficient appliances, recycled materials, products manufactured from renewable or long lasting synthetic elements. I think we need to look behind the reason for this. Naturally there is the very obvious point of protecting the planet we live on for future generations, but I want to pose a point of view. I think "green" is bringing in a lot of green. I've read in several places that the "green" revolution is a trillion dollar industry. I don't want to be a conspiracy theorist, but there are always ulterior motives for many, many approaches to different situations. The "green" revolution is another in a long list of counter cultural directions. Remember the whole "say no to drugs" that Nancy Reagan was spear-heading? How about the slogan locally, "Baltimore, the city that reads." which Mayor Schmoke was the originator? One soapbox that has been around for as long as I can remember is this one, "Help control the pet population, have your pet spayed or neutered." All of these statements were most definitely born out of a genuine concern to prevent something bad from happening or preventing harm to someone or something.

My only concern is that if the whole reason of going "green" is to conserve, then shouldn't all of the most ecologically friendly options be presented? In fact, I think that going "green" is actually not very green at all! Compact fluorescent light bulbs are definitely a huge energy saver, but have you looked at their prices? How about geo-thermal HVAC systems? They certainly can save a ton of expense on your heating or cooling bills, but their cost to install is triple to quadruple the cost of a conventional system. How much are you saving if you are spending double to triple the expense just to feel good about "doing your part"? Also, frequently when people decide to purchase "green" energy products, they don't change their habits at all. Actually, they feel a sense of freedom and end up using more energy. Kind of like eating twice as many reduced calorie cookies.

To me, the best way to go "green" is to buy an existing home for sale or to repair the one you have. Building a new house on land previously used to farm corn or support cattle just takes another piece of our planet and turns it into a tax producing, carbon producing lot. Wouldn't our economy be better off if the 10-18 month inventory of homes we currently see across the country, were reduced to 6 months ? New home builders would have to be more competitive with their prices and those who couldn't compete could supplement their business by remodelling or rehabbing properties. I know there are situations where this might not be feasible, but I think that as Americans we are a society that thinks dispose first, repair second.

My point of writing this is not to bash those who have a genuine concern for the environment, I honestly appreciate the time that is put into thought and actions to help keep our planet as healthy as possible. My only concern is that "green" has become the next Starbucks, Snapple, or Calvin Klein. The concept of green should extend into every aspect of your life. If this were to happen, not only would our planet be healthier, but so would our economy, our bodies and our government.

Bailing Out Corporate America!

2008-09-26T14:54:00.004-04:00

I'm sure, by now, everyone has heard of the proposed plan to "right" our countries economic slump/recession/DEPRESSION. The President is proposing that the US government purchase the spoiled investments of some large corporations. While I think the President/congress want us to think that this is i the best interest of the tax-paying American public, I'm not sure that I agree. I recently received and email that suggested that the President give the billions to every tax paying American citizen over the age of 18. This would have figured out to be a very large sum of money to each person. The impact of this many people having this much cash would rectify the whole economic situation that we're in. While this is a novel idea, the reality is that this will never happen.

On the other hand, I myself am an independent contractor (self-employed), and right now with the real estate market the way it is, I may find myself upside down in a few financial situations. Do you think the government would listen to an email or letter sent from me asking for a freebie? I would have better luck getting my dogs to dig up gold in my back yard. The thought of rescuing a corporation from the poor decision making or their investors or multi-millionaire CEO's is ridiculous. The whole concept of our economy is the idea that companies or individuals who make poor choices or bad decisions will fall away and that will leave an opening for the next entity to fill the spot. Artificially preventing this could have long term effects that no one can predict, not to mention that there is no guarantee that the investments that the government is going to "babysit" will ever be worth what they pay for them.

The thought of all of this happening is really very depressing. There are thousands of people who are retired or close to retirement that have the bleak outlook of having their hard earned 401K plans or investments turn into nothing more than a write off. This proposed plan will do nothing for them or for you and I.

I think the whole idea should be voted on by those who will be footing the expense for this, the tax paying public. We have an election coming up in less than 45 days, this would be the best time to count our voices.

FHA & DAP Changes

2008-08-07T12:15:00.001-04:00

I wanted to update any buyer or seller who may be thinking of making a purchase or selling a house in the very near future. Over the past several months there has been much debate over the use of non-profit organizations contributing funds to a buyer’s closing expenses. There two thoughts that are shared on the use of these programs to get buyers additional funds to make a purchase. One thought is that it is a great tool and gives those, who might not otherwise been able to buy, the chance to buy a home. The other side of the argument is that the process of having the seller contribute funds to the non-profit and then the non-profit gifting them to the buyer is merely money laundering. While I see both sides, it doesn't take away from the fact that this is a legal method of getting buyers, who qualify for a purchase but just don't have the cash needed for closing costs/down payments, the resources to buy a home. Effective Oct. 1, 2008 the several down payment assistance programs that have been used for many, many years (much more frequently in the past 18 months) will be no longer allowed.

Now, FHA loan changes. The tightening guidelines of conventional loans and the increasing down payment requirement has allowed the lower required cash to close of the FHA program to become a great alternative. Well, as of Oct. 1, 2008 FHA loans will now require a 3.5% buyer investment into the purchase of a property; the previous amount was 3%. While this doesn't sound like a huge change, you must also consider that the way a lot of buyers were getting their cash for closing costs and down payment was from the non-profit grant programs. While this is not the best news for buyers, it is also not good for sellers who are looking to sell their homes.

There is still time to make a purchase and get into a home under the existing parameters; it just has to be underwritten by the lender by Sept. 30, 2008. So, if you have been thinking of buying or you have a house to sell, give me a call and I'd be happy to help you use this window of opportunity to maximize your buying or selling power.

Another Low Offer!

2008-06-06T13:52:00.007-04:00

It sure is getting hot these days. Summer weather is officially here. The temperature is rising daily as is seller's blood pressure. The current market sees many homes still available, but homes are selling. What gives? Well, from my experience, the homes that are selling are the properly priced homes, whether newly listed or reduced prices. The homes that were over-priced to give the seller negotiating room are sitting. These sellers are not seeing the traffic that the newly listed and competitively priced home are seeing. What's the lesson here? Listen to your realtor and price your home to be competitive with the surrounding listings. An over-priced home will not draw the attention that a competitively priced home does and will become stagnant after a few weeks. Additionally, there are more points to negotiate over than just price. Ask your Realtor what you may have that could be used or become a point of negotiations. A colleague recently had a property under contract and the buyers requested a handful of repairs well after the deadline specified in the home inspection addenda. Not wanting to lose the deal for sticking to the agreed contract, the sellers offered to leave a swingset that was currently in the rear yard. The buyers were excited when they heard this and decided to drop the requested repairs. The swingset may have had a value of $300, while the repairs would have costed $500-$700 and would have taken time and effort to have them done. Oh, by the way, the sellers never intended to take the swingset anyway! While price is a main point of interest for buyers, there are several other areas where a compromise can be made. Don't just think because someone makes an offer that is lower than your asking price that the offer is horrible. Take the time to weigh all of your options and maybe even ask the buyer's agent what the buyer's other needs are. Maybe there is something that is of value to the buyer that you wouldn't mind negotiating on.

New Loan Trends

2008-06-04T17:01:00.000-04:00

So, you're scared that your home will get foreclosed on? What if your mortgage company goes belly up, does that mean you'll lose your home? I've had clients ask me these things and it might sound silly, but these are things that sometimes prevent people from buying or selling a home. Let me say this, if you're a financially responsible person and you stay current on your mortgage payments, then you don't have to worry. Most of the foreclosures that are plaguing the current real estate market are because of two things: 1. Buyers over extended themselves when they purchased and now cannot afford the payments or 2. The loan program that the buyer chose, or was offered by the lender, has "adjusted" and now the payments are out of reach for the home owner. Either situation is very disheartening and pointing the finger doesn't change the circumstances.

There really isn't any point in going over the numerous loan programs that were created to get under-qualified buyers into over-priced homes. Sounds blunt, but that is the reality. The best thing to do is to consult with a trusted, reputable lender. Now lenders have come down from the euphoria of the not so distant market of 4% interest rates and 100% interest only loans and buyers are much more conservative when considering the amount they'd like to mortgage. Currently lenders are facing stricter guideline by the underwriters and investors who approve the loans and buyers who are applying for them. Conventional loans have recently required buyers to put 10% down on a property purchased! Wow, that's much different to the $0 down days of the last 2-4 years. With the average price of a home in Harford County being at $350,000, this means that a buyer would need $35,000 plus closing costs. That could push the total cash required to $45,000-$50,000! That's a lot of cash for a buyer to have on hand. Now, a first time buyer will more than likely be looking at a less expensive townhouse or condo($200K+), but that is still a lot of money, especially for a person who is more than likely just finishing school or just starting a family. Luckily there are alternative to conventional loans.

FHA is a very reasonable alternative to the conventional mortgage. FHA, or Federal Housing Administration, is a government entity that provides backing/insurance to FHA approved lenders. Also, the guidelines for FHA loans are less restrictive than those of other types of loans. There is much more flexibility in calculating a potential buyers household income or payment ratios. Most importantly, FHA requires much less than 10% down to close a loan. They only require 3% down.! Now, on a $350,000 home, which sounds easier, having $45,000 or $27,500? I still know what you're thinking, that is much better, but $27,000 is still a lot of money. Yes, I know, it still is a lot of cash, but think about it from the banks point of view. Why would a bank lend you close to a half of a million dollars if you haven't invested hard earned income into a property?

There is yet one more option to those who still can't seem to get the funds they need to purchase. FHA limits the amount of "help" a seller can contribute to a buyers purchase to 3% of the purchase price, so even if a buyer gave the maximum allowable contribution, the buyer would still have several thousand dollars of closing costs due. Well, there is a loophole of sorts available. There are two programs, that I know of, which allow the seller to contribute much more than the standard 3%. These programs are the NEHEMIAH PROGRAM and GENESIS PROGRAM. Both of these programs allow sellers to contribute either a percentage of the sales price or a flat dollar limit. Not only are these programs great for buyers, but advertising a sellers willingness to participate might just get a property to sell quicker! As always, check first with a trusted lender for full details of any loan program. And lastly, if it sounds too good to be true........

Harford County Real Estate Down, BUT....

2008-06-04T11:55:00.000-04:00

I don't have to tell you that the real estate market in Bel Air, Forest Hill, Abingdon or any other town in Harford County is down from the trends we saw in the past few years. Wow, what a surprise, right? Did anyone really think that the incredible appreciation that sellers benefited from could continue? I don't think anyone who had any time in the market actually thought that the trend of 10-50% gains in a 12 month period would realistically continue. We all were fooling ourselves. It was great for some, but for others it really was the starting point of a downward spiral. Lots of home owners began to depend on the increasing values as a way to supplement their incomes. Does this seem right to you? As you can imagine this hasn't panned out for a large number of households. The banks and any other entities in the real estate business just rode the wave. Well, unfortunately, earlier this year that wave came crashing down. Home prices across the county are lower than a year or two ago, BUT prices are still up over the past 5 years. Hmmmm, so what this tells me is that home owners who have actually lived in their properties for 3-5 years shouldn't be as effected as the investor who wanted to make a quick dollar or the home owner who has grown tired of his house after 18 months. Surprise!

I'm saying all of this to get to my point. Yes, there are circumstances where families or individuals have to buy/sell in a short period of time, but this has historically been the exception. Historically people have purchased properties to live in them. How many homes have your grandparents lived in? The average real estate market can absorb the military relocation or the estate sale or the many other cases where a home is bought and sold sooner than expected, but when thousands begin to follow suit and it becomes the rule rather than the exception, then there will be consequences.

The banks that provided the "exotic" mortgages, that got buyers into homes they knew they shouldn't be able to afford, or that got an investor a property and that investor would walk away from settlement with thousands of dollars in his pocket, were just capitalizing on the current situation. Were they right in doing it? Well, when you're faced with the option of a customer using your services or that customer going down the street, or on the Internet, and getting the same services from someone else, you'd probably choose have the business rather than handing it off to someone else.

Where does this leave all of us? Are we all going to continue to feel the pain of a multitude of bad decisions? I don't think so. Right now, homes are selling. Everyday someone is looking for their first home, or down-sizing, or relocating. This is what makes the market go 'round. Right now, interest rates available are still at 30 year lows and responsible buyers are able to get reasonable loans.

In Harford County there is about a 10-12 month supply of properties available for buyers to choose from. Is that bad? No! If you recall that in '05 buyers were putting offers in on properties and bidding 5%, 10% and sometimes 20% over the asking price because there were multiple parties interested in the same property. When making one of the most important purchases in your adult life, you shouldn't have to settle for what you were the first to stumble upon. Yes, as a seller it is frustrating having buyers offer prices well below what you're wanting to get for your home, but you don't have to take it. Also, if you're not being transferred, expanding your family or dealing with a situation that dictates that you sell, then DON'T SELL! But, if you are in a situation where selling your home is necessary, then a properly priced and marketed home is still selling in a reasonable amount of time.

Here in Harford County we have reasons to feel a little safer than some other areas. First off, we have neighbors, Baltimore City, Philadelphia, New York City and DC, that help with business and contribute to our economy. Next, we are one of the few local areas that offer affordable housing. That's right, affordable. Try Anne Arundle,Montgomery or Howard Counties and see what $350,000 gets you. Also, I'm sure you've heard of BRAC(Base Closure and Realignment Commission). BRAC is reportedly going to bring thousands of jobs to our area in the next 2-5 years. While I don't expect BRAC to be the shot in the arm that the local market needs, I do believe that it will help work through some of the inventory we have stockpiled and help get us back into a more stable local real estate market.

The real estate market is one that is cyclical in nature. There are ups, downs and flat times, but one thing is for sure, there are buyers and sellers in every market. Make sure you have a professional who is in tune with the local conditions and knows the current inventory.