Evanston receives grant money to rebuild/rehab

Ahh, a subject near and dear to my heart.  The town of Evanston.  With 267 foreclosures in 2008, Evanston has one of the highest foreclosure numbers in the Illinois suburbs.  Because of this, legislators found out last week that they would receive $18 million to help address the issue.

Last year they filed an application with the Department of Housing and Urban Development (HUD) to receive funds as part of a neighborhood stimulation program.  They competed with other communities around the country to receive money out of a possible pool of $2 billion.

So what do they plan to do with the money?  They have it broken down into a few different areas:

1. Create a new neighborhood of 8 homes and 6 condos to sell to buyers

2. Create 86 rental units as part of an affordable housing program made available to those earning 60% or less than the median area income

3. Acquire and rehab foreclosed properties to resell

4. Focus on an area just north of Howard Street and south of Oakton and running from Asbury on the west to the rail tracks on the east to rehab foreclosures

Aldermen and reps from Evanston are ecstatic over the news and think it’s a great thing for the area.  They’re hoping to purchase vacant and foreclosed homes to resell them back at market value. 

But is this a good thing?  One comment from the newspaper article mentions that the city doesn’t know who the ultimate purchaser of the properties will be.  And what’s to keep this from happening all over again?  A new buyer buys the rehabbed home, defaults on their mortgage, and the property gets foreclosed on again … all to start a new cycle.  What can we do to prevent that?

I’d love to hear your comments on the subject.  Please leave me a comment or visit me online.

Tips for buying new construction

There are many advantages to buying a home that is new construction.  Most importantly is that you are the first owner and no one’s lived in it before.  You can generally pick out all the finishes you prefer, the flooring, colors of the walls, layout, etc.  However, it’s important to know a few things before you sign any paperwork.  Here are some tips if you’re going to purchase a new construction home.

1. Use a Realtor.  This way you’ll have someone protecting your interests.  When you buy direct from the builder, they will help you out but they’re still representing yourself.  By using a buyer’s agent (free for you), you can get someone to help you negotiate a price (they’re not set in stone) and work to represent you in case anything should go wrong. 

2.  Don’t automatically agree to use the builder’s lender.  Oftentimes, the builder will make it a stipulation that you have to use their lender to finance your mortgage.  This means a lot more money in their pocket and a lot more coming out of yours.  Plus, if you use their lender, they’ll be able to keep track of your progress as you get closer to closing.  Generally, your closing costs will be higher and you could end up with a higher interest rate.  Make sure you choose a lender that you are comfortable with.  Make sure it’s part of the deal that you are not required to use their lender if you don’t want to.

3. Be wary of upgrades.  Builders make most of their money by selling you the upgrades to the home.  Most new construction homes don’t come with central air conditioning.  That’s an upgrade you have to pay for.  Want a finished basement?  That, too.  Find out if you can get those items done by a contractor for a smaller price.  If you can, don’t pay for the builder to do it for you.  Although, you will want to remember that some upgrades are easier to do before construction is completed, such as security wiring inside walls.

4. Hire a home inspector.  I’ve had clients who thought that they didn’t need a home inspection because the home was new construction.  What could go wrong?  They moved into the home and found out the air conditioning didn’t work.  The water faucet was backwards and let out hot water when you turned it to cold and vice versa.  Builders are humans, too.  Everyone makes mistakes.  Just because it’s new construction doesn’t mean that it will be perfect when you move in.  Make sure your home inspector finds any problems before closing so you can get them fixed before you move in.

Always have an attorney look over any paperwork prior to signing it so you know what your rights are as a buyer.  You might also want to check out the builder’s reputation to make sure they’re known for building quality construction. 

If you need a Realtor to help you find your next home, please visit me online. I’m happy to help!

HUD flipping rules

In an earlier decision to limit the number of home flippers, HUD stated that you couldn’t sell your FHA-insured home in under 90 days.  They were doing this to obviously discourage people from flipping.  They’re just reneged on this ban in a hope to stabilize the market a little bit.

I’m trying to understand why they would want to discourage flippers at all.  Won’t this help eliminate a lot of the foreclosures out there by having them be remodeled and updated and drive up values for homes? 

They say they have lifted this ban just temporarily. They’re leaving it in effect for one year.  So now buyers can use FHA-insured financing to purchase HUD-owned homes, bank-owned homes, or through private sales.  They will let them be resold as soon as the buyer want it to.

HUD is imposing a few conditions.  They include:

1. The buyer and the seller cannot be related in any way.  This prevents a dishonest deal from occurring.

2. If the buyer will obtain a big profit by selling the house quickly (20% or more than what they bought it for in the past 90 days), an appraisal must be done to determine if improvements are enough to justify a higher sales price. 

More information can be found on HUD’s Web site here.

As I said earlier, I think lifting this ban will mean good things for the economy in terms of raising house values, letting fewer foreclosures linger for too long on the market, and getting people buying houses again.  What are your thoughts?  Do you agree or disagree?  Please leave me a comment or visit me online.

Are the banks involved in more short sale fraud?

I came across a very interesting article on CNBC’s Web site.  Writer Diana Olick was alerted that some big banks were taking bribes to get short sales closed.  The lenders were asking for cash “under the table” from buyers of short sales and/or their Realtors.

How it’s working is if there’s two loans on the property, the second lienholder has to drop the lien for the short sale to go through.  If they don’t, the house goes into foreclosure and it’s owned by the first lienholder.  If that happens, the second lienholder doesn’t get any money from the deal.  Some banks/lenders are negotiating with the second lienholders to drop the lien by offering them some partial payment.  This whole process is completely legal.

What’s not legal is that they are now requesting money under the table to drop that lien since they are generally getting nothing or very little from the first lienholder.  If you’ve bought a house before, you’re familiar with the HUD-1 statement or RESPA that you get at the end of closing that details what the buyer is paying in fees, what the seller is paying in fees, and who ends up with what.  Everything needs to be reported on the RESPA.  So the second lienholders are asking for money that doesn’t show up on the RESPA to allow the short sale to go through. 

Olick’s source said he’s heard from over 200 agents that have requested this illegal deal from representatives at Bank of America, JP Morgan Chase, and Citi Mortgage.  When confronted with these accusations, JP Morgan Chase had no comment.

 Bank of America said, “Bank of America enforces a policy that all disbursements are documented on the settlement statement for short sales. When we are servicing a first mortgage with a second lien held by another investor, if the second lien holder asks for off-HUD payments, we will not approve the transaction (if we have knowledge of it). It is also against Bank of America’s policy to accept off-HUD payments on its second liens.“

Citi Mortgage said, “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”

Olick writes, “I contacted the Treasury Department, HUD, FINCEN (Financial Crimes Enforcement Network) and the Federal Trade Commission, and none of their representatives could tell me of any active investigation into this. The folks at HUD said they’d be very interested to see my story.

So now the lenders want bribes to get rid of homes?  They haven’t gotten in enough trouble by approving loans for borrowers that didn’t have the money to pay them in the past?  That’s how we got into this mess in the first place.  We’re stuck with all these short sales because the lenders got greedy.  This is going to create a whole slew of problems.  Realtors could lose their licenses over it.  Buyers could end up having to bring even more money to the table to close. 

What is the solution?  How can we prevent this from happening?  Is it something we should consider making legal?  Let me know your thoughts.  Leave me a comment or visit me online.

Energy conscious homeowners get rewarded

You may all remember the famous Cash for Clunkers program offered by the government last year.  Well, Obama wants to do for homeowners what he did for car owners and that is offer a similar program called Cash for Caulkers.  He’s proposing a bill where homeowners can earn tax credits and receive money back for purchasing energy-efficient appliances.  Up to $12,000 per home!

Congress is currently working on drafting a bill that would be twofold.  First, homeowners would receive reimbursement for energy-efficient equipment and insulation.  Second, the government would reward small businesses and companies.

Included would be appliances such as refrigerators, washing machines, dryers, and even air conditioning, heaters, windows, and insulation.  They’re currently looking at reimbursing homeowners 50% of the purchase price PLUS installation.  So without an income cap, you could spend up to $24,000 to get $12,000 back.  Congress is still working out the kinks as to how the money would get returned.  It’s possible that it would come in the form of a tax credit (there is a current tax credit for energy-efficient appliances already, but not this much) or they might set it up where you can fill out information for a rebate and receive a check.  The government is looking at a cost of about $10 billion to fund this.

They’re trying to model it similar to New York State’s energy efficiency program.  How that program works is homeowner’s contact a contractor who is licensed to perform an energy audit from the State’s Web site of a toll free number.  The contractor arrives to determine how much energy is wasted in that specific home.  It costs the homeowner several hundred dollars.  When the contractor generates a list of what could be replaced, the cost, and how much energy could be saved, the homeowner chooses what he wants done and negotiates a price.  The contractor gets paid directly, submits paperwork to the state, and the homeowner receives about 10% back in the form of a check.

So do you think it is another program that could invite fraud?  Will homeowners take advantage of it?  Is the government wasting $10 billion that could be spent elsewhere?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.

More information on the program can be found here, here, and here.

Up and coming design trends

Happy New Year, everyone!!  Can’t believe the first decade of the 21st Century is already behind us.  How time flies.  Since I wrote last week on some 2010 predictions for the year in real estate, I thought it would be interesting to write about some new trends in home design.  What do experts expect to see going forward?

For those of you who bought your home insisting on stainless steel appliances, you might be shocked to find out that big name appliances companies like Amana and Viking are introducing color.  And no, this is not your avocado green oven anymore, folks.  They’re looking at bold, bright colors like royal blue, deep purple, even orange.  Expect to see a lot of bright colors in kitchens moving forward.  Think about what a statement these would make with white walls, dark granite counters and wood floors.  Can we expect to see patterns next?  Can you imagine zebra print or leopard print refrigerators??  Experts also say that more comfortable seating in the kitchen like benches and sofas could be the next trend for sitting around a table.

Home builders will definitely be building more “green.”  What’s interesting is that now in our local MLS, there are options to include what design features, fixtures, and appliances are considered “green.”  Appliance companies will start to phase out those that used up a ton of electricity and water.  Imagine shower heads with less water flow.  Maybe we’ll see appliances that auto shut off when not in use to conserve energy.  And think of the tax savings!

Also this year, the stats show that 1 in 4 homeowners will be aged 55 and older.  Easy-to-use products will be more readily available to make life easier.  Designers have created touchless faucets, pullout drawers, and even non-slip bathroom floors.  And those ugly grab bars will get a makeover, too, to match the rest of the decor. 

What new design features would you like to see?  I’d love to hear your comments.  For other expert opinions, read this article.  Please be sure to visit my Web site.

2010 real estate predictions

I hope everybody had a nice holiday.  I can’t believe that the first decade of the 2000s is already coming to a close.  We definitely had some real estate “ups,” but more recently, some mega “downs.”  I figured this would be the perfect week to talk about some of the predictions for real estate for next year, as well as what some experts predict.

CNBC is predicting a lot more foreclosures than what was previously expected.  They think that homeowners will continue to struggle with mortgage payments and the banks will end up owning the property.  While that can cause a delay in getting approval for a buyer to come in and buy the property, hopefully Obama’s new short sale reform proposal should give us timely responses. 

CNBC also doesn’t think there will be any super low interest rates for borrowers to finance a mortgage.  They’re not thinking they’ll be through the roof, either.  Most likely, they say, they’ll level off around 6%.  This is still reasonably low, considering that in the ’80s the rates were around 20% or higher.

About.com is predicting that home prices will stabilize.  They think that prices will remain steady, with a few cities having some appreciation and some more depreciation, but that prices and the market shouldn’t completely bottom out. 

Similar to CNBC, they think that mortgage refinancing will take a big dip in 2010.  With interest rates on the rise and people losing equity in their homes, it will be hard to make a refinance worthwhile to many homeowners.  However, if you are on an ARM, interest-only loan, or have a rate higher than 6.5%, it’s definitely worth talking to a broker about your refinancing options, especially if your ARM is coming due or you’re not paying any principal on a monthly basis.

Since lenders are requiring better credit scores and are very particular about financing options, it is more likely that move-up buyers will indeed move up.  A lot will stay put when they realize it will be hard to come up with a significant down payment on a new home.  This could clear the inventory out a little, if it’s not bombarded with more and more short sales and foreclosures.

What do you see happening in 2010?  Do you think housing prices will slowly work their way up?  Do you expect Obama’s short sale proposal to come into effect?  I’d love to hear your thoughts.  And if you are thinking about buying, don’t forget that the $8,000 tax credit expires April 30th.  So the first quarter of the year is your best chance to buy.  Please leave me a comment or visit me online.

Have a very safe and Happy New Year.  See you in 2010!!

Should you try to pay your mortgage off early?

Even in this economy, people are struggling with how to get rid of their accumulating debt.  If they have extra money at the end of the month, they’re wondering if they should try to pay down their mortgage debt.  The biggest bonus to paying down your mortgage faster is to get peace of mind.  No moe huge monthly payments.  They tell you that with interest, by the end of the 30 years (or whatever term you’ve agreed to with your lender) you can end up paying 3x what you paid for your house, just because of the huge monthly interest.  How nice would it be to be done with the biggest debt of them all?

Don’t go grabbing your checkbook yet.  If you’ve been struggling with mortgage payments and are on the verge of foreclosure, don’t go putting any extra money toward your mortgage.  The lender could choose to foreclose on you anyway, and you won’t get that money back.  If you are underwater and you have some extra money laying around, your best bet is to put it away in a savings account or a money market – somewhere you can have it available at the snap of a finger should you need it for an emergency.

If you’re not underwater on your loan, but still have extra money, you will want to start tackling debt.  However, look at the debt that has the highest interest rate.  This is usually credit cards.  You’ll want to contribute extra money each month toward credit card debt first.  Do you have car loans?  Student loans?  Personal loans?  When you think about it, mortgage loans generally have some of the lowest interest rates – usually under 7%. 

If you have no other debt and have an emergency fund of at least 6 months (enough savings to cover the cost of living for 6 months should you or a spouse lose a job), then do you consider paying down your mortgage?  You can … however, there is at least one benefit to having a mortgage on your house.  It can be a great tax deduction.  Mortgage interest you pay every year is tax deductible. 

Make sure you have adequate life insurance policies, especially if you have others depending on you (aged parents, spouse, children).  If you have children that haven’t reached college age yet, start putting money away for school.  Do you have any money saved for retirement?  You won’t want to be working in order to feed yourself when you’re in your retirement years.  Make sure you’re contributing money toward a retirement fund.

If you have all of those categories satisfied, you might consider putting a little extra toward your mortgage each month.  If you’re only doing it for the peace of mind, though, it’s probably not worth it.  It’s best to consult with a certified financial advisor about how best to use your money.  Some other great ideas can be found in this MSN article.

 Have a wonderful holiday and be sure to visit me online.

Government proposal to help with short sales

If you’ve been a buyer looking to purchase a home and put an offer in on a short sale, you know that the paperwork and the wait times can be excruciating.  I’ve seen cases where buyers have had to wait months – as many as 6 – to hear from the lender about whether the short sale has been approved.  The Obama administration is working on a new proposal that would help streamline the short sale process and hopes to roll it out over the next few months.

As a reminder, a short sale is when the lender is willing to accept a less amount of money for the property than what is currently owed.  The lender needs to determine if they will make more money this way than if the home went into foreclosure by the homeowner no longer making payments and then being able to resell it.  This is what can lead to extremely long wait times. 

So what the government is proposing is quicker turnaround times.  They haven’t named a figure yet, but hopefully it will be a maximum of X number of days to get a response from the lender.  They’re also proposing uniform documents required by everyone.  No more specific paperwork for each lender that makes each short sale request different.  They’re proposing to pre-approved short sale terms.  This has the potential to mean that it will be accepted no matter what if it meets a certain percentage back to the lender or if the buyer has a certain amount of financing covered.  That’s still up in the air.

The proposal also includes financial incentives for everyone who takes part.  This includes $1,500 back to the homeowners to help out with relocation costs and having to move.  So a benefit to having to short sale your house will help a lot of people out.  Especially if they need to rent right away and don’t have any money at their fingertips.

Mortgage servicers would earn $1,000.  Investors purchasing the home would get $1,000.  That can help with a lot of remodeling costs, if they’re needed.  Even real estate agents wouldn’t be forced to cut their commission if the bank asked them to.  We’re still waiting to see all the details related to the plan, but the news seems positive thus far.  A streamlined process and money for all involved … what’s the negative?

I’d love to hear your thoughts on this.  Please leave me a comment or visit me online.  More info can be found here.

How to choose between hardwood and laminate floors

I’m working with clients who have severe allergies but the house they love is covered in carpet.  Because it’s such a good deal, they want to make an offer.  However, they plan on replacing all the carpet with either laminate or wood flooring before they move in.  They’re torn about what to buy.  So I figured this would be a great reason to list the pros and cons of both hardwood and laminate flooring to help others out there with the same decision.

Let’s start with laminate.  You may often here the term “Pergo,” which is a brand of laminate flooring.  Designed to look like wood, these floors can save you a lot of money.  They’re a lot less expensive than traditional hardwood.  Another bonus to save money with laminate is that you can install it yourself.  A lot of laminate comes in snap and lock pieces, so you don’t have to absorb the cost of paying a professional.  This flooring is extremely easy to clean and doesn’t dent or scratch like hardwood can.

Of course, the negatives have it not being as durable as hardwood.  Since it’s a fairly new product, we don’t know how it stands the test of time in the long run.  It can warp when exposed to water and moisture over a long period of time.   So it’s not so great in the bathroom.  It’s not as sound absorbent as hardwood.  And a lot of people don’t feel it’s as “cozy” as hardwood flooring is.

Hardwood floors can look great in any home and there’s a variety of finishes and styles to match any room.  Generally, hardwood floors can increase the value of your home.  They’re very durable and easy to clean.  And it acts as an insulator, meant to hold in heat.  If you walk barefoot, you can feel the difference between a real hardwood and  laminate.

Of course, there’s some downsides, too.  They can dent and scratch easily.  If you have pets with claws, this might not be the best option.  Don’t move furniture around without something to protect the floors.  You really can’t pull the scratches out.  You’ll have to refinish the floors.  And if they’re not sound-insulated, they can be noisier than laminate.  Plus they’re generally a lot more expensive.

If you do choose real hardwood, you’ll need to choose between pine, maple, birch, bamboo, oak, mahogany, and a handful of others.  Your best bet is to talk to someone in the flooring department at your local hardware store.  You can also find a great set of resources online, including here and here.

Please visit me online for assistance in buying or selling a home.