Category: Uncategorized

Pricing Your Home To Sell

Correctly pricing your home to sell in any market can be a challenge. In a declining market it becomes more difficult and in the current market it can be impossible to define Fair Market Value! Here’s why. Fair market value is defined by a willing, knowledgeable Buyer that in unpressured to purchase from a willing, knowledgeable Seller that is unpressured to accept a Fair Market Price. With the cumulative pressure  of roughly 30% of  homes for sale being HUD homes, Foreclosures, Deed in lieu, REO’s, Short Sales and sellers with financial distress this does not qualify as unpressured Sellers. Reality is that there is No Fair Market Value only Market Value.

Unless someone is buying cash the value of a home will be determined to a large extent by the Lenders willingness to finance a given property as determined by the appraisal. The appraiser will need a minimum of 3 similar homes as close to the subject property that have sold recently. If 2 of the comparable homes happen to be foreclosures you may have a value issue or basically a dead transaction. Buyer an Seller may both agree that the value is not fair yet it is still the market value. Even the lender may realize that foreclosures in the area sell for 15% below market but unfortunatle the appraisal is the value that will determine the financing!

Forget what you think your home is worth. Forget what the neighbor sold his home for a year and a half ago. Forget what you paid and forget what you owe. These have nothing to do with your value today. You do need to look at all the comparable sold data and your current competition and honestly come up with a range of value that is realistic. Once you set your price and it is tested for say 1-2 weeks and you have no traffic you are probably too high and need to reduce quickly espescially if the area is still declining. The drop needs to be significant enough to get ahead of the market and be noticed. Buyers are looking for the deal and a home that is in top salable condition at the right price will still have competing of

Next you want to look at where you want to be. Remember that now you are the Buyer! It is quite possible that you will be able to gain more on your purchase than you lost on your sale and at the end of the day you very well may have come out ahead. Be open minded and flexible. Look at creative financing and possible seller assist as a way to help close the gap.

Looking for more info check out these sources:

“Price vs. Value”

“Appraisal”

By Bill Frantz

Avoiding PMI with a Split Mortgage

PMI or Private Mortgage Insurance can significantly increase your monthly payment and the cost of home ownership. Let’s face it without PMI many conforming home buyers would simply be locked out of the market unable to make the required 20% down payment necessary to avoid PMI. Not all PMI is equal and there are many programs available that are great alternatives to the standard monthly BPMI that we will discuss in the future. I would just like to inform buyers of an option that does still exist called a split loan. Here’s how it works. On a 1st mortgage there is no PMI required at a max LTV (loan to value) ratio of 80% (20% down). You may add a 2nd mortgage on top of the first that will not trigger the need for PMI. These may also known as a Piggy Back loan. They would be expressed as 80/5/15,  80/10/10,  80/15/5,  80/20 and may also be structured various ways to fit your needs such as 75/15/10 etc. The  numbers represent:  1st mortgage/2nd mortgage/down payment. There are many options of 1st and 2nd mortgages that can be combined to create a custom financing option to meet your specific needs.

Another great use of a split loan is to extend your purchasing power by maintaining a conforming first loan of $417,000 and adding a 2nd to avoid the increased pricing of Jumbo financing.

By Bill Frantz

PaFhaMortgage.com

The Obama administration is laying out three broad options for overhauling the mortgage lending system, but will let Congress make the final decision.

The Treasury Department says in a report released Friday that the government should withdraw its support for the mortgage market slowly, over five years or more. The report describes a path for winding down the troubled mortgage giants Fannie Mae and Freddie Mac.

The three options are: end the government’s role in guaranteeing most mortgages; support the mortgage market only in times of stress; or provide a government guarantee for mortgage investments created by private companies.

Under any scenario, the private sector will assume a greater role in housing finance as the government scales back its involvement. The government currently owns or guarantees more than 90% of U.S. mortgages.

The bailouts of Fannie and Freddie, which were created by Congress but became public, stockholder-owned companies, have cost taxpayers nearly $150 billion.

The report comes after years of debate about how to end the government’s role in housing. The options have been discussed for years.

By handing the decision to Congress, the administration sidesteps one of the most complex and politically explosive questions facing the financial system. Any of the three options will almost certain force mortgage rates to rise.

Republicans have called for Fannie and Freddie to be abolished. But there is a growing recognition that drastic action would upend the housing finance system, threatening the broader economy.

A near-complete withdrawal by the government could end the popular 30-year fixed rate mortgage or, at least, make it more expensive. Banks would prefer adjustable-rate mortgages that would fluctuate with market interest rates.

Treasury Secretary Tim Geithner says mortgages would be “modestly” more expensive as government withdraws.

However, all three options maintain some level of government support, either through guarantees or through existing agencies,such as the Federal Housing Administration.

Administration officials say the proposals will end the hybrid model of public-private companies that left the public on the hook for billions when Fannie and Freddie failed.

“Under any of the scenarios there’s going to need to be more private capital in the housing system,” said Michael Barr, who recently left his post as assistant treasury secretary to return to teaching at Michigan University Law School. “That’s going to mean more pressure on interest rates.”

The greater the government involvement, the milder the impact on borrowing costs. But more government involvement also places more taxpayer money at risk.

Republicans complained that the administration is stepping back from one of the most consequential, and politically explosive, questions for the financial system.

“It’s disappointing that the administration is abdicating an opportunity to lead and is instead opting to punt,” said Kurt Bardella, spokesman for Darrell Issa, R-Calif., a vocal critic of Fannie and Freddie and chairman of the House Committee on Oversight and Government Reform.

“It’s mind-boggling how the administration is not acting with more urgency to put forward a plan given the multibillion dollars taxpayers have at stake,” he said.

But Republicans, who control the House of Representatives, have offered no specific plan of their own. And even conservative scholars concede that the remedy is less about urgency than it is about stepping away from the reliance on Fannie and Freddie at a moderate pace.

A report prepared by scholars at the conservative American Enterprise Institute, which the Treasury report is expected to allude to, also calls for gradual withdrawal of Fannie and Freddie from the housing finance market over a period of five years.

Mark Zandi, an economist who has advised Democrats and Republicans, proposed the middle-of-the-road option of giving the government a role that insures mortgages only in catastrophic market conditions.

That type of insurance would be paid for by homeowners, he said, and it “would keep rates measurably lower, allow mortgage credit and would preserve the 30-year fixed rate mortgage.”

The report comes as Republicans and Democrats struggle to find a way to find a way to repair the financing system for the nation’s $11 trillion housing market. By offering options and spelling out the advantages and disadvantages of each, the report is designed to have a soft landing on Capitol Hill.

Recognizing that the changes in the system will be gradual, the administration is in no hurry to demand a quick fix.

At a House hearing Wednesday, neither Republicans nor Democrats displayed a desire to push specific plans or timetables for overhauling Fannie Mae and Freddie Mac. Republicans, however, have long argued the two mortgage lenders were central players in the 2008 financial meltdown and have called for their demise.

The report also is expected to call for the gradual reduction of Fannie’s and Freddie’s combined $1.5 trillion portfolios. The administration would like to reduce the government’s mortgage support to somewhere below 50% within five to seven years.

It also would support trimming the maximum size of mortgages they can purchase from the current high of $729,750 to $625,000. Congress set the higher limit in 2008 and it expires in September.

By: Justin Vaught, Alan Fram, and Daniel Wagner
Found at: www.activerain.com