Real Estate Investing

I live in a major metropolitan area - not big like New York or San Francisco or Chicago, but the metropolitan area is at 1.5 million.  I’ve recently been on a quest to find a buyer a home and we’ve definitely been on a roller-coaster ride.  I don’t like roller-coasters because they make me think my head is going to explode when the migraine sets in after being jerked, rolled, and having had my stomach fly up to my throat.  Just no.  

Fortunately, the roller coaster Aunt B. and I have ridden hasn’t been that drastic, but some of the results have at least warranted an upset stomach for me.   The problems we’ve encountered in the hunt for her home begs the questions B. asks,

And it just leads me to continue to wonder–when we talk about there being a lot of affordable housing in Nashville, is that really the case?  Right now, for instance, there are 695 houses on the market under $125,000, which makes it seem as if there’s a lot of housing stock for working class people.  But if sixty percent of those are pits that need major help before you can get into them, are they really real possibilities for folks?  Because, even if you can rehab them–if you have the skills–if you don’t have the money, is that house really feasible?

This observation led to another’s comment that really sums up a silent problem our nation is having:

But more generally, the loss of affordable housing stock for the lower 50th percentile of folks is the unmentioned scandal of U.S. cities.

Are there affordable homes available in our U.S. cities?  If they are affordable, are they liveable?  Do they require tens of thousands of dollars in renovations before someone can move in?  Will the pipes need to be replaced to gain a strong water flow free of potential lead poisoning.  Is the roof ready to cave in?  Are there vines growing out from outlets?  I’ve seen all of these problems in the last year - most in the past month.

Forbes magazine recently published an article about the most affordable places to live.  Included are Atlanta, Cincinnati, and Minneapolis… a city for every climate!

From personal and professional experience, I can tell you that although home prices are dropping daily and meeting qualifications of FHA loans may become more difficult, it doesn’t mean buyers will have an easy time finding a home that meets their needs.

People looking for affordable homes often need to have easily accessible public transportation, need to be able to purchase food nearby, should live in an area with plentiful jobs, and the cost of utilities shouldn’t be crazy expensive.  Are there really places like this out there?

An always fabulous agent I work with told me recently about one of her closings.  She found a home for her buyer that had first been on the market for $145,000.  Following the market downward, it was reduced after several months to $130,000 in order to remain competitive.

Her buyer wanted this home, so they wrote a contract.  In the contract, they asked for 3% ($3900) in down payment assistance and 3% ($3900) in closing costs.  They also asked for a home warranty, a $1000 repair limit, termite inspection (we’ll say $75, but could be up to $800 depending on whether termites were found), and for the seller to pay for title expenses (another $1200).

This once $145,000 home was being purchased for

… drumroll …

$119,925 after the seller paid all of the concessions on behalf of the buyer.

That was $25,075 less than the original list price.  BUT because the market sets the price - and in fairness - the number would be $10,075 off the list price.  So the buyer made a full price offer on paper, and yet it was not a full price offer.

It got back to my friend the agent that the buyer’s father fussed at everyone he met because the agent didn’t get her son a “good enough” deal in a buyers market.  I beg to differ.  That she saved his son over $10,000 dollars from the list price was a pretty fabulous deal.

Yet there are always people who argue that it wasn’t enough.

Another friend of mine wrote a comment to me about full price offers saying, “No one should ever pay full asking price for anything that lends itself for negotiation possibilities…..there is always someone willing to wiggle….keep looking.”  I respectfully disagreed with her given the scenario outlined above.

I believe people need to always remember that just because you see something on paper, it doesn’t tell the whole story.  A full price offer may appear to be full price, but when a seller walks away with over $10,000 less than expected, they are not receiving full price.

Of course, you can also ask yourself how badly you want a house.  Even in a strong buyers’ market, homes in your price range in safe neighborhoods may not be available, so you do what you have to do.

I urge buyers and agents to never let the naysayers convince you that you made a mistake because only you know and have the complete picture of what your needs are.

Photo by Kathy T. and her blackjackii phone. Special guest: the calculator.

The Federal Housing Administration (FHA) is changing rules that will hopefully ease the inventory of homes currently on the market.  At this time, for a buyer to get a loan through FHA they can only buy homes that have been on the market for more than 90 days. 

According to the Portland Oregon real estate blog named re:PDX,

Since 2003, properties financed with FHA programs could not be resold within the first 90 days of the loan term–a guard against predatory lending and flips with cursory rehabs. FHA is removing that anti-flip rule for a one-year period. Other conforming loan programs (Fannie Mae and Freddie Mac) never did adopt similar rules.

Real Estate Webmasters report,

Federal Housing Commissioner Brian Montgomery said “The action we take today will allow home buyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country”…  

I’ve been reading mixed messages about how effective the move will be in helping the housing market recover, but according to CSBJ Daily reports, “The temporary policy is designed to help stabilize neighborhoods that have high foreclosure rates, by reducing the inventory of unsold properties.”  They further state that “The vacant properties can be problematic for neighbors because they attract vandalism that can deplete nearby home values.”

PamJoanna highlights how FHA loans are making a strong comeback thanks in part to the availability of low down payments (3%), allowed gift money, and overall credit is reviewed rather than just FICO.  Idaho lender Lisa Kratz is also pleased with FHA’s new rules, but warns,

FHA loans aren’t for everyone. While a borrowers’ credit does not have to be great, it does need to be decent. There are also qualifications that need to be met regarding debt-to-income ratio, and other limitations apply.

In my own world, three of four buyers I work with go with FHA loans so I appreciate the rules allowing them to buy the homes they love.