.

• Get a FREE low flow shower head from Centerpoint Energy (must be a customer)
• Install new low flow toilets if your toilets are from the 1980’s or earlier
• Have a lawn analysis and sprinkler head adjustment completed by a lawn irrigation company
• Raise the cutting height of your lawn mower – longer grass holds in more moisture
• Water your lawn deeply 1-2 times per week versus short watering 3-5 times a week

While increasing the cost of water for high-volume users will help curtail their consumption, we can all reduce water usage with the above tips and while it isn’t a huge financial windfall, over time the savings really do add up.

Suggestion to cities: why offer a partial rebate to homeowners (or businesses) that take any of the above actions?  The City of Austin gives its residents up to 3 FREE toilets!  While I don’t believe we need to go that far, these types of incentives will encourage far more conservation than simply taxing overly excessive usage.

While time will tell if Jim Cramer is right, on a local level I’m not ready to call a housing market bottom.  I do believe however that foreclosures have price-bottomed in our market.  Unfortunately I also believe that the typical Traditional Seller has further to fall.

In the last two weeks we’ve seen interest rates on 30 year fixed mortgages move from 4.5% to 5.5% (or higher) that’s a big OUCH.  This full interest rate point swing has meant that almost overnight, buyers lost well over 10% of their buying power.  Another way to look at it is housing just got 10% more expensive.

While everyone was thrilled to see 4.5% interest rates, myself included, from the very outset I had concern about what this means for housing long term.

The short term benefits are large and obvious:

• Huge surge in refinancing and purchases
• Large demand for housing has helped stabilize housing (to some extent)
• Housing affordability hit new highs
• Buyers and refinancers locked in phenomenal rates (and most did 30yr fixed mortgages)

The long term drawbacks are also large and ominous:

• We may have set an artificial price floor on housing: now that it is suddenly so much more “expensive” from a payment basis, will there be even further pressure on prices?
• Buyers who didn’t lock (I know several personally) got hit over the side of the head by the huge (and quick) run-up in rates
• A lot of buyers will sit on the fence hoping that rates fall down again (which they may or may not)
• Homeowners who locked in a 4.5% rate will never want to move. ever.  I predict that many of these homeowners will be far more hesitant to move in the future, thus lowering housing sales in the years to come.
• Sub-5% now becomes the magic number which buyers think they can get (or should get) since it was available for a few months.  This means historical rates in the 6% & 7% range will look horrible.  They won’t remember that these record low rates were during the worst economic downturn since the Great Depression… they’ll just remember that they were available.

Who knows what tomorrow will bring, but I will be interested to see what happens to our Pending Sales numbers in the weeks & months to come.

The RMLS of Minnesota recently revised their fields regarding foreclosures and short sales (after a year of much confusion over the old fields) and we now have separate fields for in foreclosure, short sale and “lender owned.”  This is great, but one place it really falls down is the 3rd option allowed for these fields… “not disclosed.”

In Foreclosure
To be honest, I don’t care if the house is in foreclosure if the seller can accept a full-price offer without getting approval from any 3rd party (bank).  Consequently that field doesn’t matter to me no matter how it is marked.

Potential Short Sale
This field is a lot more important as short sale homes are often Liar Listings.  If the list price is enough to pay off the mortgage and closing costs in full, then it is not a short sale and I don’t have an issue.  If the price is not enough to pay in full and the seller will need to get 3rd party approval (which 99% of the time has not been secured yet) then you should have to disclose that no matter what.  Not disclosing it in my opinion is not representing a true and accurate picture of the property and therefore the agent is breaking the Code of Ethics.

Lender Owned
Whether a property is lender owned or not isn’t absolutely critical to know since the listing is truly available for the price and terms listed on the MLS.  I don’t mind the Not Disclosed field.

What Does “Not Disclosed” Mean?
Given that the options are Yes, No and Not Disclosed, my assumption is that when Not Disclosed is the selection that it really means Yes.  If the answer for those questions was “no” most agents would select that since that is most likely the preferable situation.  Hence, Not Disclosed is like saying: “it is Yes, but I’m not allowed to disclose to you that it is Yes.”

HGTV’s hit TV series, House Hunters, is coming to the Twin Cities and surrounding areas this summer and we’re looking for homebuyers and real estate agents who want to appear on the show! House Hunters follows buyers and their agents on the hunt as they find just the right house for them – and every story is different. If you’re an energetic and outgoing homebuyer currently working with a real estate agent, we’d love to hear from you.

We are currently looking for homebuyers who are:
• Closing within the next 1-2 months, this includes buyers who are actively bidding on a home or newly under contract
• Fun, enthusiastic, and have a great story to tell
• Purchasing within a 90 minute drive of downtown Minneapolis – St. Paul

 
House Hunters airs weeknights at 9/8c on HGTV and is produced by High Noon Entertainment. To learn more about the show visit HGTV.com/HouseHunters

To apply contact Heather Domko, Associate Producer at (303)712-3209 or hdomko@highnoonentertainment.com

Betsysoderlund wants the emotional roller coaster that is the Minneapolis real estate market to be less like the cork screw and more like the flume. – @betsysoderlund

This Twitter post last night sums up what many people in the real estate market are feeling right now.  Things seem to be going up, down, left, right and twisting all at the same time.  This is a list of the items I currently see as affecting everyone’s psychological health in the real estate market today:

REO’s/REO Brokers

• I’ve talked at length about this here… ’nuff said

Appraisals/Appraisers

• Fewer appraisers today than in year’s past
• Large refinancing boom creating huge demand
• Appraisals can take 1-3 weeks to complete
• New appraisal rules add another layer of bureaucracy to the process
• Appraisers are required to be much more detailed and precise in their appraisals, causing them to take much longer.
• Some appraisals come in too low… often because the appraiser uses foreclosures and short sales as comps but makes very little adjustment for condition and sale distress, making apples and oranges look all like oranges on an appraisal.

Underwriters/Mortgage Companies

• Underwriters were also trimmed in recent years
• Underwriting guidelines continually are changing
• Underwriters look at everything with a fine toothed comb
• Underwriting can take a week longer than in the past
• Underwriters sometimes come up with more requests a few days (or hours) before the closing

Title Work/Title Companies

• Nearly all title companies reduced staff in the last 48 months to take into account the significantly lowered demand.  Now that closings are up 20% over last year, many find themselves overworked.
• Title companies that sprung up during the “boom years” didn’t always do a good job on the paperwork (filing payoffs, clearing title) and consequently the current title company has to clean up their mess.

Buyers/Sellers

• There seems to be more emotion on both sides of the table
• Buyers are stressed about rates & qualifying
• Buyers don’t want to “overpay” and are seeing/reading/hearing a lot of different things and can’t extract the gold from the ore

Competition

• On the sell side, there are so many different types of sellers with so many different motivations: traditional, short sale, foreclosure, relocation, investor, etc
• On the buy side, there’s increased competition for far fewer homes than last year
• The best priced houses get an offer in the first 60 days on market

Interest Rates

• Rates have been bouncing around like crazy in the last week or two.  I’ve seen quotes for 4.5% and 5.5% in the span of one week for the same loan type!

The Media

• We’ve got local numbers, national numbers, numbers tracking the same thing but reported differently by 2-3 groups
• Some say the bottom is here, some say the bottom is near, some say the bottom is far ahead… yet none of them agree on what a bottom is defined as.

It’s an interesting time in the real estate market today… don’t you think?

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can’t be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.

In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.

The first-time homebuyer tax credit was enacted last year–and improved upon earlier this year–to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven’t owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

Learn more about the credit, including how to apply for it this year even if you’ve already filed your taxes, at REALTOR.org.

Source: Robert Freedman, REALTOR® Magazine Online

I try to behave myself, I try to keep my emotions tempered so that my opinions can be read and understood without coming off so harsh that people click away before they finish reading.  Well today I just don’t care.  This is a list (though not comprehensive) of the reasons that I’m sick and tired of what SOME agents are doing:

• “I haven’t seen the property so I cannot help you.”
  • If you haven’t seen the property, know nothing about it, and are not offering to help me find someone who has seen the house to help me, how can you possibly be representing the seller?
• “I have so many listings that I cannot do X, or Y, or Z”
  • Your lack of staffing to handle workload or your inability to say “no” to too many listings is not an excuse for being unprofessional and arrogant.
  • This means you are too busy to act professional, which means that you are not a profession, which means you shouldn’t be a REALTOR since we are a trade organization of professionals.  Try selling a house without being a REALTOR and see how it goes.
• Total lack of due diligence on anything related to the property
  • City inspections (that are required) are often forgotten or ignored till pressed by buyer’s agent
  • “Buyer and Buyer Agent to verify everything” – that’s code for I’m too damn lazy to do anything so a trained monkey would have done more checking on this property than I did.
  • The SMELL oh my god the SMELL. Why don’t you deodorize the home (or at least try) before you make me walk in and come out coughing and ready to vomit?
• Responses from REO agents during offer submission can take days (even to confirm that the offer was submitted)
  • Apparently since they get multiple offers on most everything, they can provide no customer service because someone will patient to stick around.
• Listing foreclosures at prices 15%+ under market value to garner multiple offers (10+ often)
  • This brings a lot of people through a house that they simply cannot afford because they can pay the list price but not the selling price.
  • Many times the agents do not respond to inquiries on status or questions regarding property/offer submission rules/etc. for days or sometimes they never respond at all.
  • An argument can be made that the listing is not a “true and accurate depiction of the property” as the list price is never intended to be honored.
• Only one photo of the property and often it is out of focus, at night, or shows very little of the property.
  • Some times there are more photos of the outside, but none of the inside.
  • Sometimes the photos of the inside are shot so all you see is a floor.
  • Sometimes the photos show a great upstairs only to find a mold-infested basement.
• House is a teardown or major renovation project but they say nothing of this is the MLS remarks.
  • It’s a total waste of time for my buyer and I to even see this house.
• House could qualify for an FHA or VA loan (appraisal would be fine) and the seller will consider an FHA or VA offer but it isn’t listed as an Acceptable Term under the MLS.
  • I would have shown your house had I known it would have worked for my buyer.
• FHA or VA is listed as an acceptable term but the house is so far beyond repair that it isn’t likely to work.
  • Thanks for wasting my buyer and my time (AGAIN) on a house we cannot purchase.
• An utter lack of information inputted into the MLS listing
  • Why would they bother giving me and my clients information on room descriptions & dimensions, finished square footage, condition, features, etc when they can let 1/2 the buyers skip the property completely and the other 1/2 waste their time seeing a house that doesn’t fit their needs.
• Little to no effort is made to check on the status of the title work before closing.
  • If there’s a problem with title work and the house doesn’t close on time a buyer may be homeless but there’s no concern shown from the listing agent.

Now this is not to say that all REO agents are doing this poor of a job and most of the time it is only a few of these issues on each house – still, the utter lack of professionalism and accountability of a few agents tarnishes the whole business since they represent a sizable portion of the total foreclosure MLS inventory.  I LOVE good competition and there are some GREAT foreclosure agents out there that do a fabulous job.

I was attending a sales meeting at Edina Realty Champlin this week and the loan officer asked how many agents had been in multiple offers in the last month.  I believe almost every hand in the room went up… 25-30 agents in total.  Compare this with last year when 1-2 hands might have come up.  For homes in the under-$300k market that are well-priced, this feels like 2004 or 2005.

Now some may look at these remarks and say that most of the houses that are “well priced” are distressed sales and “don’t count.”  Well you’re right and you’re wrong.  In a market with substantial numbers of distressed sales these sales do impact the market around them and to think that they don’t is to stick your head in the sand.  In the last 60 days I’ve been in multiple offers on scores of foreclosures but also had multiples on two relocating sellers and one estate seller.  I know that there are occassionally multiple offers on “traditional seller” properties but many of these sellers are still holding out for prices they simply will not receive.

While the multiple offer phenomenon is largely focused on the foreclosure market, the fact that multiple offers exist at all in today’s market is a great sign.  It says that the market has found price levels and financial conditions favorable enough to draw many bidders for each home.  This will help put a floor in house prices in this category and lead to dramatic inventory reductions as these homes are snapped up quickly.

I now have multiple buyers that are becoming frustrated with the market because they’ve lost out on multiple offers over the last couple months.  These experiences though will push them to become more decisive with their options (so that they write offers as soon as the homes are available) and will push them to either raise the price they’re willing to pay for a house or reduce their expectations of what they can get for the price they want.  It’s funny how quickly this momentum has changed and it will be interesting to see how long this trend lasts.

The purpose of a repair is to correct deficiencies which may affect the health of the occupants and the continued marketability of the property.  Knowing the most common issues upfront can prevent costly and stressful delays later.

1. If the home was built prior to 1978, chipping, peeling paint must be scraped and painted.  This includes interior, exterior, garages, sheds, fences, etc.
2.  Roofs should have 2-3 years of useful life remaining and no more than 2 layers of shingles.  If the house is over 10 years old, the snow must be removed from a large portion of the roof for inspection by the appraiser. 
3.  Broken windows should be replaced. 
4. The cause of wet basements should be cured (i.e., improve drainage away from house, gutters, etc.) 
5. Electric service must be 60 amp or greater.  Electric certification may be required if 60 amp appears to be overloaded (i.e., larger than 1,000 square feet with more than 2 major appliances). 
6. Abandon inoperable wells must be capped and sealed by a licensed well sealing contractor with certification. 
7. Safety handrails should be installed in open stairwells of three or more stairs, both inside and outside. 
8. Infestation of any kind should be exterminated (i.e., insects, mice, bats, etc.). 
9. Damaged or inoperable plumbing, electric and heating systems should be repaired.  The appraiser checks these areas. 
10. Structural or foundation problems must be repaired. 
11. Flammable storage tanks must be removed and filler cap sealed from the inside (i.e., buried oil tank). 
12. If there is a crawl space, it will be the home owner’s responsibility to make this area accessible so that it can be thoroughly inspected.
13.  Attic space should be made accessible so the appraiser can visually inspect.

Nicci Brown
Mortgage Consultant
Homeservices Lending, LLC dba Edina Realty Mortgage

763.569.5610 Tel
www.niccibrown.com

Foreclosed/Bank Owned
What is it?	Vacant home. The prior home owner lost the home through the foreclosure process or gave the keys back to the back in what’s called a “deed in lieu.” Seller is now the bank who filed the foreclosure action.  The price listed on the MLS is a price the seller will accept, though it may  require additional approvals.
Condition of Property	Vacant properties-remaining personal property & garbage has been removed. Home is left in last known condition & has been winterized to prevent pipes from freezing/water damage & mold, though some foreclosures are damaged prior to the bank’s possession.
Disclosures & Warranties	No disclosures/property history available. Buyers must sign “As-is” Addendum as part of Purchase Agreement releasing Seller/Bank from liability on non-disclosed issues. Seller/Bank would have no known prior knowledge of defects since they have not lived in the home-many Banks have not ever seen the property they are selling.
City Inspections (if required)	City inspections usually completed as required by city code, however, Buyer is required to assume & escrow for the repairs—Many cities require Buyer to escrow 1.5x the cost of the item at closing.
Purchase Agreement Response Timeline	Listing agents can get offers submitted to banks (during business hours) and Buyer usually gets a response within 24-72 hours.
Financing Options	Some are in good condition but the majority have some  issues that make FHA & VA financing difficult- each property must be evaluated separately.
Closing	Seller/Bank will presign all docs and send them to title company for closing. They will require the final HUD-1 settlement statement to be sent to them 72 hours prior to closing for review… sometimes the Seller takes extra hours or days to sign and closing is delayed.
After Closing	Home is de-winterized, home may or may not have all of the personal property/appliances as seen at the home prior to closing. Seller’s “As-Is” addendum covers Seller/bank in the event something goes missing prior to closing.

Inventory is Falling

(image courtesy MAAR)
From February 1, 2009 to April 1, 2009 the inventory of lender mediated (short sale and bank owned) listings has fallen by 1200+ units… a drop of over 13% in just two months.  Indications through the first half of April suggest this trend will continue and I’m predicting we’ll be down another 600-700 of these lender-mediated listings once we close out April’s books.  While this data includes both bank owned AND short sales, I think the trend is most prevalent in the bank owned homes… see below.

New Listing Activity Appears to be Peaking

(image courtesy MAAR)
Q3 2008, Q4 2008 and Q1 2009 show a peaking of new lender mediated listings coming on the MLS… while no one can say with certainty what will come in the future the fact that this trend has so dramatically broken past trend is a great sign.  Yes the numbers of new listings coming on are still high but the demand is swallowing this new supply faster than it is coming on.

Multiple Offers are the Norm

As recently as January and February it was rare to see multiple offers on many foreclosures but since March 1 the multiple offer has become almost as common as the foreclosures themselves!  Homes are being priced much better by the banks than they have been in the past and with the dramatic drop in interest rates since last year and the HUGE financial incentives for buyers we’re really seeing the fire sale I was discussing a few months ago come into play.

Hennepin & Dakota County Sheriff Sales Well off Peak

(image courtesy MAAR)
Everyone is talking about a “2nd wave” of foreclosures coming but we’re not seeing any signs of that yet at the local level.  In fact, new Sheriff Sales have been substantially down from their highs for many months.  While the temporary moratoriums of Fannie Mae and Freddie Mac between Thanksgiving and Valentine’s Day and many other lenders in early 2009 holding their foreclosures until the new housing initiatives came out in March have contributed to the lower numbers in recent months the trend down started before the lenders made those adjustments.  In March 2009 Hennepin County reported 284 Sheriff Sales and only 169 through April 16, 2009, which means we’re on track for approximately 340 sales this month… 1/2 of our monthly peak back in July 2008!  Any future surges in foreclosures should show up in the county data first and will take approximately 6-7 months to show up on the MLS as bank-owned homes.

Months of Supply has Dropped Dramatically

(image courtesy MAAR)
The huge increase in demand coupled with the decrease of supply has meant that in the last 12 months we’ve dropped from XX months’ supply to only XX months’ supply.  If trends continue as they have, we should see a further drop for April’s figures and into May before potentially flattening out by July as typical seasonal buyer activity starts to wane.

Lender Mediated Sales Prices Have Fallen Steeply

(image courtesy MAAR)
We’ve seen huge price drops on lender-mediated properties in the last 3 years and that price decrease has brought these homes down to a fundamental value that people clearly recognize and has thus brought many home buyers and investors back into the market after years on the sidelines.

This past week I’ve been in many different foreclosures with my clients.  Some bank owned homes are in turn-key (aka mint) condition and are wonderful.  Others are…. how do I say this…. crap.  Many are simple run down and need repairs, cleaning and updating.  Many more though are safety hazards in their current form.  I’ve seen frozen houses (pipes burst creating icy stairs, floors, etc.) mold houses (where a wall of mold spores hits you when you step into a room) loose electrical wires, broken steps, rotted/loose flooring, and more.

From the moment I walk out of the car to the second I open the front door I am looking at general condition and evaluating the shoes on/shoes off policy… in houses in good condition with clean flooring we take shoes off, in houses where the condition and cleanliness are not good, we keep shoes on.  Often the house appears relatively clean but the stink is so bad that you are gagging through much of the house. Sometimes I’m tricked into thinking the house is good until we get part way into the home and I step on something nasty or we see something we need to get at in a dirty area and go back for the shoes.

I still do not understand why banks won’t do more basic repairs to the house.  I think that in some cases the banks don’t know enough about the condition or have not been counseled on making repairs.  In most cases the bank has not seen the property and is relying on the advice of others (or their fancy spreadsheets that give them all the answers using formulas that have nothing to do with reality).  Often new carpet and paint will go a long way… and in other cases that isn’t nearly enough.

Today I’d say 90% of 1st time buyers are using FHA or VA financing, which both have higher property condition standards than Conventional, though the gap in requirements in continuing to decrease.  I estimate about 1/3 of the foreclosures out there are so bad that they either require Cash or Rehab Financing to purchase…. which dramatically reduces the potential buyer pool and in the case of Rehab Financing (FHA 203k is an example), it can substantially increase the borrowing costs due to the higher interest rate on these products.

Due to these issues, many foreclosures are selling for far less than they could with basic to moderate repairs… obviously the banks don’t want to start projects that could become a Money Pit but in many cases they are taking 2x – 3x the financial hit to sell it “as-is” versus making the repairs.  As my friend and fellow Realtor blogger Teresa Boardman says: “Banks can’t sell real estate.”

So if you are touring bank owned homes, PLEASE WATCH YOUR STEP!