Tuesday, April 24, 2007

Don't let your ARM break you

See that adjustable-rate mortgage pain coming and plan accordingly

By Jennifer Openshaw
Last Update: 7:49 PM ET Apr 24, 2007

LOS ANGELES (MarketWatch) -- You went a little large with that 2005 home purchase. It felt good. You bit off a lot in the form of a large adjustable-rate mortgage to get there, but you made it happen. The low 3.75% intro rate really helped. You knew it would eventually go higher, but hey -- home prices would go higher, and so would your income.

The problem is, it didn't happen.

Well, your income did rise, but so did your expenses: higher energy costs, growing family, rising taxes. Now about those home prices -- you know the rest of that story. See how home prices are flagging.

Now what? The honeymoon is about to end, and you're bracing yourself and your family for the inevitable. Your mortgage payment is about to go up, maybe by hundreds of dollars. And now is not a good time to join the stampede of foreclosures, preforeclosures, short sales and other forms of dire and unintended consequences.

What do you do?

Coverage of home buying and selling, housing prices, mortgage information and home improvement.

Panic? Probably not. Sure, it's a financial setback to see any cost go up a lot. But the secret to weathering any storm is to see it coming -- and plan accordingly. A lot of energy has recently gone into helping underwater homeowners avoid or deal with impending foreclosures.

Foreclosures? I'm guessing many of you will feel the pain or rising payments, but aren't in foreclosure land. You're not a subprime borrower. With a little planning and some modest sacrifices, you'll get over the hump. Here's how:

Know where you stand

The first step is to pick up the phone (or go in person) to your lender for exact figures. How big is the adjustment, when is it coming, and what will the next one be? Don't be reluctant. Human nature tells us to stick our heads in the sand when something bad happens financially. But know that lenders want you to plan and may even help.

Also, understand the full impact. Worst case, you might be looking at an extra $500 in interest payments after the reset. But for most it's tax deductible; the "net" impact is less.

If you plan far enough in advance, you may be able to save enough to get you over the hump. A $500/month adjustment is $6,000 a year. Not chump change, but not and an enormous sum, especially after tax effects are considered (in a 30% federal/state bracket, that $6,000 only costs you $4,200). If you could save enough to buy the home in the first place, you can probably save a good part of that $4,200 if you put your mind to it.

Find additional income sources

Obviously, if your costs go up, one solution to the problem is to expand your income. One way is to rent a room to a friend, relative, or insider. Not forever -- just until you can get your budget balanced again.

Or, find a small second job. Even a part-time retail job can pull $500 a month for about 15 hours a week. That goes a long way towards the reset, and you'll get a nice store discount besides (but don't spend it all!)


I'm normally not a big advocate of bill consolidation loans, mainly because once smaller debts are wiped clean they have a way of reappearing. But consolidation can be a good way to offset a reset.

Why? Because reduced interest costs on credit-card and other high-cost debt can cancel out the increase in ARM interest, keeping your total interest costs relatively unchanged. This approach has risk, but makes sense with discipline.

The best idea, according to Eric Margolias, CEO of mortgage broker Source4HomeLoans, is to refinance into a fixed loan if at all possible. Fixed rates have stayed relatively constant, and with the ARM you remain exposed to rate increases. Prepare by fixing your credit, shopping at places like LendingTree.com and keep in mind that the percentage of fixed-rate applications being rejected is on the rise.

But for peace of mind -- and future financial prosperity -- "fixed" is probably where you should be anyway. Get there if you can.

Keep it in perspective

Margolias is adamant about looking at the bright side. Don't look at your ARM as a loan that got more expensive, but rather one that gave you a healthy discount in the beginning. You saved $6,000 a year initially on that $300,000 loan.

Tax implications aside, that's a big number -- where else can you get a discount large enough to buy a late model used car? It probably helped you get the home in the first place.

And finally, even if you don't successfully escape your ARM, history shows you're still in great shape. Two decades ago any mortgage under 10% seemed like a bargain. Today's interest rates -- even at the high end -- are among the lowest in history.

And that, as I see it, is the real bargain.

Jennifer Openshaw, author of the upcoming book, "The Millionaire Zone," is CEO of winningadvice.com. She is also host of ABC Radio's "Winning Advice with Jennifer Openshaw" and appears frequently on such shows as the CBS Early Show and Good Morning America. E-mail her at Openshaw@winningadvice.com.

Article courtesy of MarketWatch 04.24.07

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Thursday, April 19, 2007

Spruce Up Your Home To Sell

By Mary Dalrymple
April 19, 2007

This article is part of our Subprime Survival Guide.

With housing sales slumping in many parts of the country, anyone forced to move at this less-than-opportune moment faces a challenge -- how do you get the best price for your humble abode when buyers can afford to be pickier than a diva in a shoe store?

One trick to making your home seem more attractive than all the rest is to, well, make it more attractive than all the rest. The experts call this staging. You can hire a professional to do the job for you, or you can do much of the work yourself.

Start with some criticism

If you have a few opinionated friends (and who doesn't) and a couple of free weekends, you can make major improvements without shelling out a lot of money. It could be just like one of those home and garden television shows, but without the chummy banter among the thin, well-dressed designers. Start by asking your opinionated friends to come over and walk through the house as though they were potential buyers. Ask them to point out anything that might turn off a home shopper. Don't take their comments personally. Everyone who comes to look at your home will walk through a critic. Better to hear the bad news now than suffer the consequences by settling for a lower price, or by watching your house sit on the market too long.

With your friends' list of complaints in hand, tackle the job. Next, get rid of clutter. We all have it, and we get used to looking at it. It's time to banish it. Think in terms of making your home look like the picture-perfect rooms in those glossy magazines. What makes them so alluring? To begin with, your husband's shoes aren't strewn all over the floor, and the dining room's not piled high with junk mail and dusty knick-knacks.

Empty it out

Remove things that overwhelm visitors with your personality. We know your collection of porcelain dalmatian dogs is charming, but it may interfere with buyers trying to imagine themselves living in the house. Along these lines, experts recommend you remove all your family photos. It's my humble opinion that one or two well-placed snapshots give the warm impression that your home made your family happy and can do the same for others.

Consider removing some furniture if your house is stuffed to the gills. To keep costs low, resist the urge to put everything in self-storage. Give away or sell anything you know you won't use in your new home. Don't pile it all into the basement or into a closet. Buyers will look in your closets, your kitchen cabinets, your garage, your basement, and probably even your underwear drawer. Almost nothing's off limits.


Then, clean. Clean like you've never cleaned before. Pretend Martha Stewart and your mother-in-law will stop by at the same time to inspect for cobwebs in the corners, dust on the mini-blinds, and streaks on the windows. Your potential buyers will consider your house well maintained if it looks sparkling. Even old kitchens and bathrooms can look newer if they're scrubbed to a shine.

Also, go through your home with a bloodhound's nose. Now is the time to eliminate the musty odor in the bathroom and eradicate any scent suggesting that Misty the cat likes to hang out in the basement. I recently found myself charmed by a house for sale in my neighborhood for no other good reason than the scent of freshly baked chocolate chip cookies hanging in the air.

Freshen it up

If you've been to many local open houses, you've probably realized that first impressions count, and that means your front yard and front door should be inviting. Even if you're not a green thumb, planting a few colorful annuals can cheer up an entrance. (Just pull them out if you can't keep them looking healthy.)

Anything, including the front door, can look fresher with a new coat of paint. Even urbane city dwellers who know a screwdriver only as a drink with orange juice can usually manage to paint. If you're not that handy, this can be one of the less expensive jobs for a professional. Make your priority any room that has decor you can date. Take note if your opinionated friends say something like, "That's so mid-1980s country kitchen."

Now is also the time to fix all the "quirks" that make your house your home. Fix the leaky faucets and running toilets, the broken stair rail, the loose doorknobs, and all the other little things that buyers won't want to do themselves.

Watch your budget

Like many household improvements, this one can get expensive quickly if you let it. Before you know it, you could be thinking about buying that new sofa you've been eying and upgrading all your kitchen appliances.

But remember -- you don't want to give all your extra home profits to Lowe's (NYSE: LOW) or Home Depot (NYSE: HD). Don't get carried away if you don't want to spend a lot of money on this project. Put some elbow grease into the job -- by cleaning and getting rid of clutter -- before you start the projects that cost you money. Then set a budget and do whatever gives you the most bang for your buck. Put repair jobs for obvious problems and paint at the top of the list. Flip through some of those glossy magazines for inspiration, and if you need some help, visit the Fools on the Building & Maintaining a Home discussion board. You can also learn to Be a Smart Owner from the Home and Mortgage center.

If you're contemplating more extensive repairs or renovations, check out these other Foolish articles:

Fool contributor Mary Dalrymple hopes to avoid all that cleaning by never moving, and she welcomes your feedback. Home Depot is an Inside Value recommendation. The Motley Fool has a disclosure policy.

Wednesday, April 18, 2007

Columbus - March 2007 Home Sale Statistics from the Columbus Board of Realtors

March 2007 Home Sales

Finally, home prices inching up

(April 18, 2007) After nine consecutive months of negative home price appreciation, central Ohio home prices are again headed in the right direction. The average price of a home sold in March was $168,586, up 2.3 percent from one year ago according to the Columbus Board of REALTORS®.

"The average price of a home was up 2.0 percent in February and now 2.3% in March," said Brad Bennett, President of the Columbus Board of REALTORS®. "As 2006 was the only year on record where the average home price appreciation fell, the turnaround is a welcome relief to all home owners."

Although January home sales were up 12.2 percent, February sales fell almost two percent and March sales followed up with a drop of 16.1 percent from last year. Year to date, there have been 5,101 home sales in the first quarter, down 4.6 percent from 2006.

"We anticipated the drop in closings for March," says Bennett. "It's a direct reflection of the record low temperatures and snow emergencies we experienced back in January and early February which kept most of us indoors as much as possible. As a result, home showing activity and consequently offers to purchase homes dropped significantly."

There were 5,200 homes listed in March, up almost one percent from last year. This puts the number of residential homes for sale at 17,699 which is 10.7 percent higher than were on the market at the end of first quarter 2006.

According to Bennett, "we added over 52 percent more homes to the market in March as compared to February. This is partly due to the traditional 'coming out' season, but also due again to the weather in February which put the chill on listing activity as well."

"Now is definitely a great time to buy a home. There is an excellent selection of homes to choose from and interest rates are still very competitive. And real estate is unquestionably the best long term investment," adds Bennett.

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Friday, April 13, 2007

Featured Listing

Featured Listing

Scratch-free hardwood floors possible

Tips on sanding, staining, applying finish
Friday, April 13, 2007 By Paul Bianchina Inman News

Q: I have older hardwood floors, and I want to remove scratches and lighten the color. I would also like to redo the paneling in my den. Do you have any ideas on how to do this? --Marsha H., via e-mail.

A: Removing the scratches and changing the color of your hardwood floor will require that the floors be sanded and refinished. The basic process is as follows: All of the furniture is removed; the floors are sanded down far enough to remove the scratches and the original stain color; the sanded wood is thoroughly vacuumed and wiped to remove dust; new stain is applied and allowed to dry (the wood can also be left its natural color, with no stain); then two to three coats of clear finish are built up, allowing each coat to dry before applying the next one.

For the least hassle and the best overall results, I would recommend that you have a pro come and do the refinishing. However, if you're patient and ambitious, you can certainly do the work yourself. All of the sanding equipment you need can be rented at any rental center, and the stain and finish materials are available from any good paint store or home center. If you want to take a shot at this yourself, I would suggest that you check out your local bookstore or library for a book containing complete, step-by-step instructions.

As far as the paneling is concerned, you have several options. You can remove the old material and replace it with new paneling; you can lightly sand the old paneling, then prime and paint it; you can apply new paneling or new drywall directly over the old paneling; or you can cover the old paneling with a base sheet and then wallpaper over it. A lot depends on the condition of the old paneling, how it was installed, lights, outlets, windows and other obstacles that need to be worked around, and what the final result is you want to achieve.

Q: I bought a newly built home in 2003 that has central heating and cooling, with all of the ducts in the attic. In the winter, it is hot upstairs and cold downstairs, while in the summer the upper story does not get cool while the downstairs is freezing. The builder said there are baffles in the ducts so the warm and cold air could be proportionately distributed, but I have been unable to locate these baffles. I currently have to open and close different registers depending on the season. Do you have any other suggestions for balancing the system? --Karen L., via e-mail.

A: Warm air will naturally rise and cold air will naturally fall, so having all of the ducts located in the attic can cause the problems you're referring to. As warm air is produced, it will want to naturally stay in the upper floor, leaving the lower floor colder. The opposite is true when cold air is produced. For that reason, a better configuration is to have a balance of ducts in both the attic and under the floor.

You mentioned that you have spoken to the builder. I would call him again and ask that he come over and show you exactly where these baffles are and how to operate them. You might also ask who the original HVAC contractor was, and have them come out, explain the baffles and rebalance the system for you. Other factors that might help would be relocating the thermostat and/or the return air duct, but both of those might be difficult to do at this point.

If rebalancing the system doesn't help -- and given the configuration of the ducts, it probably won't -- I would suggest that you install one or more reversible, ceiling-mounted paddle fans.

The fans will help with air circulation, pushing warm air down from upstairs and, when reversed, pulling cold air up from below.

Q: What exactly is HVAC? I have heard the term a lot, but I don't really know what it means. --Wyndye F., via e-mail.

A: HVAC is an acronym for Heating, Ventilating and Air Conditioning. It refers to the systems that handle all of the building's heating needs, including the furnace and duct work; air conditioning, including all of the air conditioning equipment and related ducts; ventilation, including fans, kitchen ventilation and ducts; and all of the related exhaust vents for any equipment that requires them. An HVAC contractor is one who installs, services, or otherwise works with any or all of these systems.

Remodeling and repair questions? E-mail Paul at paul2887@hughes.net.

Saturday, April 07, 2007

When to Call a Listing Agent

If you’ve ever bought or sold a home, you know that being a successful real estate agent is a full-time job — and then some.

In fact, between the preliminary research, evening and weekend showings, and post-sale paperwork, some agents are essentially on call 24/7.

Most real estate agents would probably suggest you call as soon as you’ve decided to sell your home. That way they can offer advice about pricing, home improvements, and other pertinent matters. And, for some home sellers, that may be the best way to go.

DIY to a Point - However, it is possible to make some decisions before you dial — especially if you’re thinking of doing some of the work yourself. Depending on your skills and sense of adventure, here are some of the tasks you might consider doing in advance of contacting an agent:

Preparation: Are you handy or do you know someone who is? Cleaning, de-cluttering, and simple touch-ups can add new shine to even the oldest homes. (Your agent won't really help with this — it's your elbow grease!)

Valuation: Check out your Zestimate and compare it to the listing prices of other homes for sale in your neighborhood.

Exploration: Real estate types call it " pre-marketing," and it refers to gauging the interest in your home before you list it. Mention you’re selling at parties or the local grocery store. You never know who might be looking. If you find a buyer this way, you might save money in agent commissions.

Presentation: Are you willing to show the house yourself or would you rather someone else handled it?

Negotiation: If you’re comfortable dealing with offers, counter-offers, etc., you may only need assistance once you’ve accepted an offer.

Then there’s probably the most important question of all: How much time are you willing (and able) to spend on the above? Some sellers have both the time and the inclination to do a lot of the work themselves; some have one but not the other; and others would rather pay somebody else to do it all.

There are no right or wrong answers, of course, and the idea isn’t necessarily to bypass real estate agents. Rather, it’s to determine the point at which you’d be better off having one. Depending on how you respond, you may want to call an agent from the get-go, somewhere down the line, or not at all.

(Article courtesy of Zillow)

Friday, April 06, 2007

The Facts About FSBO's

"A close look at "For-Sale-By-Owner" (FSBO) data from NAR's 2006 Profile of Home Buyers and Sellers.

Each year a small army of home sellers throw caution to the wind and “go it alone” — without the assistance of a licensed real estate professional. This ever-decreasing band of risk-takers, ventures into the land of pricing, marketing, screening, scheduling, showing and paperwork, with the goal of saving some money. It's often an experience they find less than rewarding.

The numbers (if not the sellers) tell the story. In 2006, just 12 percent of sellers chose the FSBO (“For Sale By Owner”) route, down from 13 percent the previous year, according to NAR’s 2006 Profile of Home Buyers and Sellers. This is down from about 20 percent in 1987. But more telling than the decline in FSBOs is the fact that 40 percent of all FSBOs sold their homes to someone they knew prior to the transaction. This means that only 7 percent of all home sales are open market FSBO transactions. The rest are simply unrepresented sellers in private transactions.

From NAR's 2006 Profile of Home Buyers and Sellers

Eighteen percent of FSBO sellers indicated that preparing the home for sale was the most difficult task when selling without the assistance of an agent, followed closely by understanding and performing paperwork (16 percent) and selling within their desired time frame (15 percent). As for profit — after all is said and done, FSBOs don’t always come out with fatter wallets.

Again, the numbers tell the truth. Homes sold with the help of a real estate professional in 2006 sold on average for 32 percent more than FSBO sales. The median FSBO selling price in 2006 was $187,200, compared with $247,000 for agent-assisted transactions. "

If you currently have your home for sale, on a For Sale By Owner basis (FSBO), or are considering doing so, please call me for a no obligation discussion on how our marketing system can help to sell your home faster while potentially saving you thousands versus a standard 6% real estate transaction.

The best of both worlds: Lower costs and a faster property sale. We maximize your ability to retain and liquidate the equity in your property. Help-U-Sell real estate and marketing professionals get the job done.

Vito Boscaino
Help-U-Sell North High Realty
Owner / Realtor / MBA

Wednesday, April 04, 2007

Why home-ownership shortcuts will lead to longer recovery

The following article includes what I believe are some very valid concepts that help to explain why the current sub-prime mortgage mess will lead to a significant increase in foreclosure activity, and why this will also cause a much slower recovery in the housing market, than what many "experts", including the National Association of Realtors, would like consumers to believe.

For those of us in Central Ohio, the ultimate impact will be far more dire than many would like to admit. With low to non-existent new job creation in the state, coupled with the continued loss of existing manufacturing jobs related to the automotive industry, capped with excessive sub-prime loan origination over the past several years, I would posit that Ohio can expect of wave of foreclosures of "tsunami like proportions" over the next two to three years. This will undermine property valuations in every community in the state. It will not be a question of how much can I expect my property to appreciate over the next several years? But the exact contra of that, in that the question will be how much will the property values depreciate and for how long?

This will in the near term trigger a cyclical series of movements by home owners who will not have considered selling otherwise, but well might consider selling "now" in order to cap the downside risk of diminishing property values over the next three to five years. This "added" inventory will further soften the market. The only realistic way out of this impending disaster is for the government to reduce the tax burden on businesses and consumers and to create incentives for existing businesses to move into the state, or for entrepreneurs to start companies. Unfortunately, the new governor has already started trying to raise taxes which will only further fuel the number of jobs that are fleeing the state.

As an added downward risk, unless government, at all levels, takes significant "cost" our of the bureaucratic infrastructure, many government entitities will find themselves loosing significant revenues from property taxes as the assessed value bases will decline, and those in foreclosure, when not paying mortgages, will most certainly not be paying taxes as well. Of course, the government, at all levels will have an initial knee-jerk reaction to fill the gap by increasing taxes on the rest of us. This will only further increase the exodus of jobs and constitutents to more tax friendly environments.

While this appears to be an "overly dark" assessment of the near-term real estate and economic climate in the State of Ohio, I firmly believe that what we can expect to see down the road will look more like this scenario, rather than less.

Vito Boscaino
Owner/ Realtor / MBA
Help-U-Sell North High Realty

"Guest perspective: An insider's view on the subprime mess
Wednesday, April 04, 2007By Steven Krystofiak

Editor's note: Steven Krystofiak offers an insider's take on what's been unfolding in the subprime mortgage industry. But he is no industry apologist. Stay tuned for a series of articles from Krystofiak on Inman News in coming weeks.

Every year there is a natural progression of future first-time home buyers, usually consisting of people in their late 20s to mid-30s. These people have obtained financial stability with savings and steady employment, which is a healthy precursor to buying a first home.

In recent years far too many people took popular shortcuts to obtain their homes. These shortcuts are in stark contrast to healthy real estate practices that have a long, traditional, proven track record.

In many cases, these new highly popular loan products were the only way for first-time home buyers to obtain a home. These shortcuts were misnamed "affordability products" and would have been better described as "obtain-ability products." Long-term affordability, which should be a goal for both consumer and lender, is not associated with these toxic shortcuts.

The home-obtainer-ship shortcuts included "stated-income loans" (which encouraged consumers to lie about their income on mortgage applications), zero down payments, negatively amortized loans, interest-only loans, and short-term suicide loans where the fixed loan period is only two or three years commonly tacked on with an equally long prepayment penalty. Many times the menu of these options would be coupled together.

People who took shortcuts should have waited, and were only able to obtain a home because of the risky loans that will be the culprit of their foreclosures in the coming months and years to follow. Many people facing foreclosure should have waited one, two or even three years before starting the home-buying process.

Communities, the media and industry insiders built up the courage to the would-be home buyers with such rhetoric as, "If you don't buy now you will be priced out forever," and "Real estate prices only go up," and "You can't afford not to buy a home," and "If you buy one property you can make $50K a year, so why not buy two, three or four more properties and
make even more?"

Lastly, I end with my favorite quote that came from a winner in a real estate game show: "This (market) is not a bubble; bubbles are for bathtubs."

The hype and hysteria we have seen for the past few years gave comfort to people wanting to take out these loans. But with foreclosures sure to happen in droves just around the corner, these people otherwise would have been the ones helping us get out of the future impending home debacle we will continue to experience in 2008, 2009 and 2010.

With these recently foreclosed people now out of the real estate market in 2009, where will that natural progression of home buyers come from? With foreclosure or bankruptcy on their records there will be a lack of qualified candidates to become first-time home buyers in the future. This will cause the future recovery to take longer than in previous real estate corrective cycles.

First-time home buyers are the key to a good real estate market. An old rule of thumb is that with every first-time home buyer entering the market there is a filtering up, which creates three more transactions. A large reason the real estate cycle of the last five years has been so successful is because banks have been able to provide toxic mortgages to first-time home buyers. This has kept the succession of real estate sales going and going like the Energizer bunny.

But as many of you are now thinking, "I haven't seen that bunny on TV for years." There lies the problem -- this market can't keep going.

The market needs more first-time home buyers for it to be successful. Without them, in coming years the real estate market will go the way of the Energizer bunny. In the future, you will think back just like with that commercial and say to yourself, "Oh yeah, I haven't seen home-price appreciation in years."

Steven Krystofiak is a mortgage broker based in California. He is president of the Mortgage Broker Association for Responsible Lending, an advocacy group.

(Read Krystofiak's previous articles, "What is a subprime loan? It depends on whom you ask," and "High-risk loans enable buyers to obtain, not afford homes.")"