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Shocking Housing Market Reality

June 8th, 2011

The idea that the housing market has taken a steady decline has sunk in, and for most, is an acceptable reality. However, there are still areas that are being affected by the housing market crisis, and the visual reminder is in the value that is continually dropping in homes across the United States. While this may present a fantastic buyer’s market, it does mean that homes are no longer the high priority asset that most want, simply because they are not guaranteed to hold the value they once did.

Arizona Shocker

Arizona is home to beautiful lakes, tranquil desert settings, and some of the most opulent homes in the country. The Scottsdale, Tempe, Estonia, and surrounding areas are considered some of the most high end that the fine state of Arizona has to offer. Homes sold in these areas, pre 2008, for an average of $2.8 million for the higher echelon real estate. Today these homes sell for an average of $800,000.00.

The issue for many of the larger homes, not just in the case of Arizona, but of the entire U.S., is that rural areas are simply no longer sustainable for those that have to either commute via plane, or cannot find work close to home. The reality is that the cities are seeing much growth, comparatively speaking, while further outreaching suburbs are still seeing decline.

Way Back When…

There was a time when people would be able to support their homes through their work regardless of where they lived. If they had rural homes, they were farmers or produced some kind of product for independent sustainability. Today’s society is completely dependent on work of another kind, and when that work is no longer close to home, people will leave those areas. This is the case with Arizona.

Down Payment Basics

June 6th, 2011

There are a few different scenarios when deciding what size of a down payment to have for a new purchase or home loan. The first and most popular scenario is the 3% FHA loan program. This program allows buyers to have a reasonably small down payment, while still being able to qualify for their purchase. However, there is PMI, Private Mortgage Insurance, applied to loans with this percentage down, adding to monthly costs.

Down Payments That Save Money

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There are other options available for buyers, and their down payment options. Another popular option that is also a money saver is for those that can provide 10% down for their new loan. There are programs available that include a 5/1 ARM loan, or Adjustable Rate Mortgage. This means that the interest rate of the loan will change for the duration of the loan after five years has passed. The others include repayment terms such as 15, 30, and even 40 year loans. There is PMI assessed on the payments for this type of down payment.

The next option for borrowers is to provide 20% down. This amount allows buyers to have marginal credit scores of 650 or higher, there is no PMI assessed on the loan, and like the other two options, this group would qualify for all of the other benefits listed. Higher loan amounts are also considered for this amount down, making it easier for those who have higher down payments to purchase homes that are considered high volume or bulk loans.

Property Tax Rates

June 3rd, 2011

Property taxes are big topic of discussion for many states, including the highest property tax state of New Jersey. Governor Chris Christie has made controversial decisions in order to alleviate the strain for its residents, while other states have made radical changes like imposing cigarette taxes in order to take away some of the pressure that homeowners feel.

Rates by State

Image by agrilifetoday via Flickr

California is the lowest state of all in the nation as far as property taxes are concerned, but that money is made up in different ways with high taxes on sales, gas, and non-food items. The property taxes in states make up an average of 20% of all state revenue, and for those states that have higher property tax rates, they usually have lower or no sales tax, like in Delaware, Oregon, and New Jersey.

It is interesting to note that the states with the higher property tax rates seem to be floating with the recession, whereas states with lower rates are either in a complete tailspin, or have found themselves to be in a precarious situation. While taxes are unique in each state, they are highly noticeable for properties that are considered high value or a bulk property. Bulk simply means a dollar amount over $500,000.00, with the exception of New Jersey, whose rate for taxation is approximately 16%. The lowest is California at just over 4%.

Property taxes can make a difference when purchasing a home. If the loan is impounded, those taxes are added to the monthly payment, along with the homeowners insurance. This has made purchasing a home in some cases a non-option.

Today’s Shortcuts To Homeownership

June 1st, 2011

There has been a lot of talk about the horrific economy, and how it has essentially stolen the life out of the real estate market, including the options to qualify for lending. Well, the truth is that lending is still very much alive, and in some areas thriving. Granted those areas are few and far between, and others are still in decline, but the national qualification terms for lending remain constant.

What It Takes to Purchase a Home

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Today’s loan qualifications require buyers to have a much better credit rating than before; however, this does not require credit to be perfect. For instance, there are major banks that will qualify borrowers with a FICO score of 650. Before the collapse of the real estate bubble, that number was 565. The other factor is that the days of no income verification, no credit verification, or obtaining an immediate second to make the loan over 100% of the purchase price is a thing of the past.

Having 20% down, a FICO in the mid to high 600′s, and a job are the basic necessities for acquiring a home loan. The 20% down is not mandatory, but it will help with eliminating the Private Mortgage Insurance premium, or PMI that is attached to a loan payment for those that opt to only put down the minimum 3% for FHA loans.

Take a Look at Debt

Finally, look at your debt, and only count things that are mandatory as part of the overall debt calculation. This number will not include utilities, cell phones, or food bills. Things included are car payments, student loans, and credit cards. If the overall debt that is paid every month, including the new mortgage payment, is 43% or lower, then borrowers will be able to purchase the home they have been wanting.

Curbing Troublesome Tenants

May 30th, 2011

The thought of a troublesome tenant is something that can scare any property owner. Some states that are considered tenant friendly like California or Arizona, and that makes it much more difficult for property owners to deal with unreasonable tenants. One of the best ways to curb an incident from a tenant, like lack of rent, or damage to the property, is to protect themselves through clearly defined lease terms. More often than not a lease is put together by a landlord or real estate professional, and the basic rental forms are used. These forms can be added to, so that there are additional regulations and stipulations present.

Some Tips for the Lease

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One the biggest complaints by a property owner is that tenants are always late with the rent. Placing specific wording in the lease to affect of:

1. Eviction processes will begin on the first day after the grace period that rent has not been received. This is a great motivator to keep tenants on time.

2. Tenant shall pay (choose a percentage) of the total monthly rent in late fees after the grace period has ended for that month. This will remind them that the payment will begin to grow if not paid on time.

As a property owner, it is vital to not only protect yourself, but also to protect the investment interest. Rentals today are, more often than not, homes that could not sell, and owners could not afford to remain in the home. In fact, more homeowners are renting while they themselves rent out their own homes to tenants.

Constructing a Good Contract

If there is a stipulation listed within a lease agreement, and the tenants/renters agree and sign that agreement, then all that is listed within becomes binding. This is a great way to ensure that tenants will not take advantage of the property owner.

The Change With Government Backed Loans

May 27th, 2011

When the bubble burst in late 2008, the real estate market took a dive for the worst. As an effort to keep the market ?alive the government decided to lower interest rates, as well as back loans through FHA for high cost properties. The efforts of this move can be seen in many areas all throughout California, Florida, and other states that have many high end residential communities where the average property value is over $800,000.00.

Making Changes in FHA Loans

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The adjustments made with FHA mortgages is that instead of the government backing loans up to $850,000.00, it will now only take care of loans in the high $400,000.00′s. This is a huge drop and many property owners are concerned that it will hurt what little value they have left in their properties. For buyers this means that loans will not be offered in what is considered bulk amounts through FHA. Without the government backing these high priced loans, buyers will need to put out more money on a down payment, somewhere around 35%.

The Results of Change

The final results in these changes essentially mean that buyers will be deterred from looking for properties in expensive areas because they cannot afford the 35% down payment, whereas FHA allowed for a 3% down payment. While there is a ripple moving across the real estate channels regarding the backlash of this new policy, it should be pointed out that before the bubble blew the government backed loans cap was in the low $400,000.00s.

Overall, this should not be a huge shock to buyers or sellers in today’s market. Rather this is a growing pain moment while the consumer market is weaned off government guarantees. Since the policy implementation in early 2011, there has not been a spike, nor decline, in high priced areas.

Holding Onto Purchases

May 25th, 2011

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The school of thought for many investors was that a home is purchased that needs some TLC, or extremely low, then turn right around and sell it. In today’s market with pricing being so low, many investors are seeing deals that they just cannot pass up. The problem is that flipping and reselling right away are no longer an option. However, what is an option is sitting on the property, and allow the market to work its magic.

Making That Purchase Work

Holding onto a purchase is a great way to develop an overall net worth, have a series of income properties, and then begin to wait until the market begins its climb back. This is how many investors made their millions during times of economic strain. There are a couple of schools of thought on this type of strategy.

The first is that the rental market is at nearly full occupancy rates. This means that a home will not sit vacant for much time.?The sad reality is that people are losing their homes, so renting is their only option.

As far as investing is concerned, there is also a new trend where buyers can purchase the home that a family lives in, then allow the family to remain in the home as a rental. When the market comes back to life, the family can then have the option to re-purchase the home. This is another idea that has allowed people to stay in their homes, while allowing investors to capitalize on the slow market.

Good Timing for All

There is negativity surrounding the housing market today, and for good reason; it is slow, unproductive, and has a diminishing return. The idea of holding on to a purchase suggests that the high-risk reward factor is tamed. Taking advantage of, and maintaining, properties is something that will reward in years to come.

Do Royals Have Property Managers?

May 24th, 2011

Practically anyone who owns a lot of land can benefit from a property manager. When you consider the massive amounts of land and buildings that royal families own, it’s easy to see why they often have special arrangements to manage their properties.

Heavy is the Crown Estate

England’s Royal Family has a rather confusing arrangement with the parliamentary government, which sometimes blurs the line between public and private land. Ask British citizens who owns a popular building such as Buckingham Palace, and you.re likely to get several answers, some of which aren’t family friendly.

The confusion primarily arises from the arrangement between Parliament and the Royal Family. The Crown Estate, for instance, is a portfolio of properties “owned” by the Crown.

The word owned comes in quotations because the Royal Family cannot sell the property, nor does any revenue created by the property go directly to the Royal Family. That’s not exactly the type of ownership people think of first.

The Crown Estate basically acts as a property management corporation that oversees the lands and buildings in the portfolio. The portfolio earns 210 million pounds a year. That money does not go to the Royal Family, but rather to Her Majesty’s Treasury.

Americans probably think that sounds an awful lot like money going to the Queen. The HM Treasury, however, is actually a part of the federal government that deals with economic policy and public finance.

Other complications arise when one considers that the Royal Family definitely owns certain properties (Buckingham Palace being one famous example), yet does not have any legal connection to other properties that seem linked to the Royals (the Royal Family, for example, does not own the Tower of London).

It’s a complicated mess that confuses British citizens and court systems. Don’t feel bad if you don’t understand the arrangement. People have been confused since the 1700s, when the monarchy first handed over a sizeable chunk of its property to Parliament.

Al Nahyan’s Property Management in Brazil

When you?re the royal family in an exuberantly wealthy location such as Abu Dhabi, you have enough money to invest in property around the world. Recently, the Al Nahyan family started investing in Brazilian real estate through the property management company Bracor.

The Al Nahyan family does their business through a company called Royal Group. They not only spend billions of dollars on property, but also media, technology, and international trade.

Other companies partnering with Bracor include Morgan Stanley Real Estate, Olayan Group, and W. R. Berdley Corporation. These major players in world property development, so you know that they have access to information that common people would drool over.

The Kennedy Compound

The Kennedy family has a history of political involvement and humanitarian action that makes it the closest thing that the U.S. will ever have to a royal family. The Kennedy Compound is a six acre property on Cape Cod’s waterfront, and has a main house with two guest houses.

The Kennedy grounds hold a swimming pool, boat house, tennis court, and other amenities that make most luxury hotels look like tenements. What kind of property management companies manage the Kennedy Compound? ?That’s another way that the Kennedys resemble a royal family: it’s incredibly difficult to find information about them.

Rumor has it that the estate is owned by several individuals. Currently, no one has permanent residence at the Kennedy Compound. Ted Kennedy and his wife were the last official residents, until his death in 2009. There has been talk of turning the Kennedy Compound into a museum or educational center. Currently, the compound is listed as a historic site by the National Park Service.

CONCLUSION

The richest family in your town probably doesn’t have enough money to compete with these royal (and semi-royal) families. Unless, of course, one of these families lives in your city.

The typical property management company, therefore, doesn’t usually deal with billions of dollars in assets for a single group. They certainly don’t have a quasi-public, quasi-private arrangement like the Crown Estate.

Considering the complicated issues that can arise from owning endless acres of property, perhaps average people, the non-royals, should consider themselves lucky. Even when you have companies handle the business end of property for you, who wants to think about cutting all of that grass?

Negotiating In Today?s Real Estate Market

May 23rd, 2011

There is always a business strategy involved when making a home purchase. For those that are savvy enough to finagle great deals on a new home, they understand what it takes to get the absolutely best deal possible. For the rest of the group of buyers they enlist the help of real estate agents, a project manager, or another entity that can help steer the sale or purchase of a home. There are some key types of negotiating tactics that these professionals use to help get the best overall price for their clients, and they are simple concepts that make a big difference.

Buy Low, Sell High

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The theory behind investments is to always buy at the cheapest possible rate, and then sell at the highest possible time. This is how many have made their millions. When it comes to the purchase of a home in today’s real estate market, the idea of buying low is an absolute. The housing prices are the lowest they have been in nearly 30 years, thus making this the ultimate buyer?s market. The key is driving down the price until the buyer feels confident about their purchase. Some of the ways to do this include:

Bidding
Placing an offer twice as low as what is realistic, knowing that the seller will counter offer
Submitting offers with banks on potential short sales

Buyers Are Winning

With the housing market taking the slump that is has, many banks are holding onto foreclosed properties that are not selling. This means that the property taxes, and lack of repayment are sitting on the bank?s books. This means that sellers, especially banks, are desperate to clear properties off of their list. Buyers can take full advantage of this allowing them to submit ridiculous bids for homes, and being awarded them.

The Link Between Politics and Real Estate

May 20th, 2011

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The link between politics and real estate is undeniable. In fact, when Greenspan was working during the Clinton administration in the?1990′s he made mention that the economy was heading for a major fallout. Within that year the stock market slowed down, real estate growth was its lowest since coming out of the recession, and Greenspan was a buzzword. Today is not much different. The events that happen in politics have significant impacts on real estate, not because the housing market is keyed into the government, but because it affects buyer confidence.

A Feel Good Purchase

Feeling good about a home purchase is more than the home. If there are children present, then feeling good could include the nearby schools, the other children that may be present in the neighborhood, and the sustainability for work. In the recent events that Americans have experienced with the Great Recession, confidence is more important than ever. An example of this is with the highly publicized death of Osama bin Laden, which has brought about a sense of confidence, and the real estate market has responded with a slight spike in sales.

Morale: The Possible Cure

The burst of the bubble rattled the American people. The political events that have taken place have prevented people from wanting to dive into a purchase that could destroy them. The morale in the consumer market has been low, and increasing this is the key to forming a solid business structure, because this could be the link between feeling good about the purchase, and being confident about the purchase. With regards to the housing market, this principle is absolutely imperative. The political strategies to bring the housing market back to life have begun to take effect. Morale is boosted with tax credits, lower interest rates, and great pricing on homes.