With inventory being in such short supply, anything put on the market is likely to sell easily. Two years ago when there were far more properties for sale than buyers who wanted them, professional marketing and broad exposure was necessary to attract a buyer’s attention. Not so today. This fact is prompting many to try to eliminate at least half the real estate commission and list the properties themselves.
Going for-sale-by-owner or FSBO is not without its drawbacks. First, the presentation of FSBO properties on Craigslist or the MLS is often dismal. Go to Redfin and see for yourself. Second, if the seller is unwilling to pay a buy-side commission, buyer’s agents often won’t show the property, or they will only do so if the buyer insists on it. Why would they? If their buyer chooses to deal directly with the seller, the agent won’t make any money. Third, most people don’t understand the nuances and complexities of a purchase and sale agreement and the numerous contingencies and requirements of the sale. Despite these hurdles, the lure of saving 3% to 6% on the sale entices many to give it a try.
The Cost of Recovery: FSBOs are BAAAACK
Written by: Steve Cook Mon, March 11, 2013
In the hottest markets around the nation, “for sale by owner” signs are popping up in yards as penurious owners try their hands at selling their own homes. It’s another sign of recovery that’s raising echoes of the real estate boom seven years ago.
“In Silicon Valley we have returned to the market conditions where nearly everything sells as soon as it hits the MLS. This seems to cause two things to happen; the return of “quick buck agents” and FSBOs. The “quick buck agents” are those who get their license in a hot market hoping to make a few dollars off friends and family. They’re the ones who come and go with every boom market. The bigger concern is the FSBO,” blogged Los Altos broker Bryan Robertson on the Active Rain site two days ago.
We don’t have many “quick buck” agents operating in Orange County right now. With so little supply, the dealflow isn’t so great that part-timers can make a go of it.
Within hours several dozen Realtors chimed in.
“We are seeing a new wave of FSBO signs in 2013. With the return of the strong seller’s market, it’s just a fact. It’s just something new to work with again, when they had virtually disappeared in the past few years,” agreed Realtor Michelle Francis of Buckhead Atlanta.
“FSBO’s have made a comeback here in the Phoenix metro area, especially in the lower priced home market. When homes were bought at the bottom of the market and now want to be sold, some people can only sell for a small margin. Our market has not recovered in some areas enough to pay all the real estate costs for the seller. Therefore, he does a FSBO,” reports Associate Broker Barb Merrill. …
Many sellers are just emerging from being underwater. Their loan modification terms are set to increase their payment, and with collateral value backing the loan, lenders are unlikely to extend the favorable terms further. This puts pressure on many to sell when they finally can. This leaves little or no margin to pay an agent, so many try to sell on their own.
“It is much easier to sell a home on your own now…at one time Realtors pre-qualified the buyer now banks give them a letter of prequalification….with homes selling fast you can anticipate more and more FSBOs Of course once the negotiating starts the sellers lose their stomach for it in many cases, ” said Edward Gilmartin of Boston Homes.
Not everyone can successfully negotiate the sale of their own homes. Most often people have irrational attachments and an inflated sense of what their house is worth. Everyone can justify in their own minds that their house must certainly be worth 10% more than other comparables due to the wonderful improvements they made. Getting over these attachments and unrealistic values is an obstacle many FSBOs cannot overcome.
“Had a FSBO call me today saying he was using the comps I GAVE HIM and go it alone. But.. Understand he would pay me 3% if I brought him a buyer. Imagine that……” said John McCormack.
It’s easy to imagine. Was taking 20 minutes to pull some comps really worth 3% of the purchase price? realtors have no sense of the value of the services they provide.
Realtors report their strongest defense against sellers who go it alone are legal requirements that sellers disclose problems with their homes in writing or risk liability. “The number one thing sellers forget to do is provide proper disclosures. Even with all the advice out there, it’s unlikely a seller will prepare the documents to cover all the disclosures necessary. They might even be hiding something. This is one of many reasons why you need an agent,” said one. ” If you get sued for not disclosing something, you’re likely to lose out on any savings you might have achieved. It’s not worth the risk,” agreed another.
This is a compelling argument, but it doesn’t require a full-commission agent to provide that advice either.
For sale by owner transactions, or FSBSs, reached an all-time low of 9 percent last year and in more than half of those, the seller already knew the buyer so a great deal of marketing was not necessary. In the seven year buyer’s market since the real estate crash in 2007, FSBOs have dropped like a rock, from a high of 14 percent of all transactions in 2004. Now however, reports from the across the nation suggest that there may be more FSBO yards displayed this spring buying season than in nearly a decade.
One way sellers can save on commissions today is to use a flat fee broker, who charges by the service provided rather than a percentage of the transaction.
According to the National Association of Realtors (NAR), more sellers are choosing to discounted agent services. The percentage of homes sold on a flat-fee basis rather than a commission grew from one to three percent. For the past few years, 20 percent of homes were sold by agencies that provided limited services such as listing on the MLS. The growth in flat-fee listings is coming from sellers need to go through brokers who are members of multiple listing services to get listed, but want to save on commissions by doing their own marketing.
It’s important for potential FSBOs to understand how the deep discount listing services make their money. Many of these services will list a property for as little as $300, but sellers soon realize they need help processing the paperwork, and that’s when the fees balloon to thousands of dollars.
On RealtyTrac last week, OurBroker Columnist Peter Miller argues that brokers are more important now than ever, even for the buy side of a transaction.
“When I first started in real estate, do-it-yourself transactions actually made some sense. Contract agreements ran one or two pages and real estate brokers did not have much training beyond what a reasonably informed member of the public might have. In fact, when I first began looking into real estate, I found it was possible to get a six-month temporary brokerage license, meaning you could buy and sell property for others with no training and no testing at all.
“Long ago the idea of buying and selling without a broker was both attractive and doable. That’s just not the recommendation I would make today. I now tell owners to list houses with successful professionals and I tell purchasers to find an experienced buyer broker as well as a good home inspector. With something as important as a home purchase getting such help in today’s world simply makes sense,” he wrote.
Do you need a listing agent? Some people do, and some people don’t. Many people lack either the time or the expertise to market and sell their own home. For those people, a listing agent is a necessary evil. For some selling their own home and keeping at listing side of the commission is an attainable goal. If you think you might be one of those people, sign up for our free guide to selling a home without a realtor today.
How many more Ponzis are still out there?
Here we are seven years after the market peaked, and a year after the engineered bottom was put in place, and lenders are still working to weed out the Ponzis. With so many loan modifications kicking the can, there are fewer foreclosures, but when the banks do process one, the borrow is often a Ponzi. The former owners of today’s featured property paid $207,000 back in 1994. Their original loan balance is not available, but suffice to say, it was likely less than $200,000. They refinanced a number of times during the housing bubble culminating with a $533,000 Option ARM on 8/3/2007. They hung on for almost five years, but the bank started foreclosure proceedings last June, and they were booted out in February. We know they pissed away at least $333,000 living the Ponzi lifestyle. How many more are out there. Will I ever run out of former Ponzis to profile?
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
26 Poplar Drive, Aliso Viejo, CA 92656 (MLS # NP13038529)
(all data current as of 5/23/2013)
| Price | $560,000 |
|---|---|
| Beds | 3 |
| Baths | 2 full, 1 half |
| Home size | 1,850 sq ft |
| Lot Size | 2,691 sq ft |
| Days on Market | 55; |
Welcome home to the city of Aliso Viejo, and to the enclave of Pacific Grove. The city is proud of the city slogan: ?Aliso Viejo-Experience it all.? The residence is a three bedroom, plus Bonus room, two and one half bathroom home that may be just the right size for your active lifestyle. The property is situated on a preferred location within the community. Best of all, we think you will agree that the property condition is ready for your decorating skills to create the residence that you can call home. You should enjoy the backyard as it stands ready for you to create a Lanai influenced retreat from which you can entertain guests with confidence. The location is fantastic; you are close to the 73 Toll Road, parks, recreation, shopping, and dining. Best of all, the beaches of Orange County and all that they offer are a short drive away. So come home to Aliso Viejo and start to enjoy the best of Orange County lifestyle today.
Property Type(s): Single Family, Residential
| Last Updated | 5/1/2013 | Tract | Pacific Grove (pg) (Pacific Grove (PG)) |
|---|---|---|---|
| Year Built | 1993 | Community | Aliso Viejo |
| Garage Spaces | 2.0 | County | Orange |
| Total Parking | 4 |
Listing information deemed reliable but not guaranteed. Read full disclaimer.
(view all details for MLS #NP13038529)
Proprietary OC Housing News home purchase analysis
26 POPLAR Dr Aliso Viejo, CA 92656
$560,000 …….. Asking Price
$207,000 ………. Purchase Price
10/28/1994 ………. Purchase Date
$353,000 ………. Gross Gain (Loss)
($44,800) ………… Commissions and Costs at 8%
============================================
$308,200 ………. Net Gain (Loss)
============================================
170.5% ………. Gross Percent Change
148.9% ………. Net Percent Change
5.4% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$560,000 …….. Asking Price
$112,000 ………… 20% Down Conventional
3.56% …………. Mortgage Interest Rate
30 ……………… Number of Years
$448,000 …….. Mortgage
$106,765 ………. Income Requirement
$2,027 ………… Monthly Mortgage Payment
$485 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$140 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$106 ………… Homeowners Association Fees
============================================
$2,758 ………. Monthly Cash Outlays
($318) ………. Tax Savings
($698) ………. Equity Hidden in Payment
$128 ………….. Lost Income to Down Payment
$90 ………….. Maintenance and Replacement Reserves
============================================
$1,961 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$7,100 ………… Furnishing and Move In at 1% + $1,500
$7,100 ………… Closing Costs at 1% + $1,500
$4,480 ………… Interest Points
$112,000 ………… Down Payment
============================================
$130,680 ………. Total Cash Costs
$30,000 ………. Emergency Cash Reserves
============================================
$160,680 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
OC Housing News FREE Guides!
Click on the book cover for more information.
Nearby Foreclosures
Gain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."
33 Responses to “With low supply and limited equity, many sellers are escewing listing agents”
Sorry, the comment form is closed at this time.
When you sell your house and get 10 offers on your open it’s pretty easy. It’s when it’s sitting on the market for 4 months is when it’s tricky. Also disclose, disclose, disclose if your a FSBO seller or you might get sued and the state of CA will probably side with the buyers.
This study is flawed and biased. In their selection criteria they basically sorted out nicer newer neighborhoods from older crappy ones and try to claim the difference is conservation areas.
Buyers Pay More for Homes in ‘Conservation Developments’
Home prices in neighborhoods that incorporate conservation development are 20 to 29 percent higher than in neighborhoods without designated protected space, according to a recent study from Colorado State University.
The study defined conservation development as “an approach to the design, construction, and stewardship of a development that protects natural resources while also providing social and economic benefits to people.”
Researchers surveyed more than 200 neighborhood developments in Colorado’s Chaffee, Douglas, Larimer, Mesa, and Routt counties, comparing home prices in neighborhoods with conservation projects with home prices in neighborhoods without conservation projects.
On average, home prices were about 20 to 29 percent higher in neighborhoods with conservation projects. However, prices did vary from county to county with protected space in some counties correlating with about 9 percent hikes in prices and in other counties about 51 percent hikes.
“Our study shows that people are willing to pay more to live in subdivisions that incorporate conservation elements,” said Sarah Reed, co-author of the study.
Reed suggests this new evidence “may provide an extra incentive for developers, real estate professionals, and lending institutions to market this type of development.”
Not only did the study find price increased in neighborhoods with protected land, but it also observed higher sales volumes overall in these neighborhoods, illustrating that higher prices are not a deterrent for these developments.
The study, which was funded by the National Association of Realtors and Colorado State University’s School of Global Environmental Sustainability, observed sales that took place between 1998 and 2011.
The researchers intend to determine next whether conservation developments accomplish their proclaimed environmental goals.
We already know “conservation investment” is a luxury good. It isn’t struggling McDonald’s assistant managers who are buying Priuses and Teslas, putting solar panels on their roofs, buying carbon offsets, or signing up for conservation tours of African wildlife. These are the kinds of things people with lots of extra spending money do. So it’s hardly surprising that developers who cater to the high end get a good return on putting in “conservation” development, and it’s no surprise that when you deal with people who have extra money, you can wring out extra profit by catering to their lifestyle preferences and need to see themselves a certain way.
One of the repulsive aspects of this 21st century ethos is that it dresses up conspicuous and lavish consumption as puritanically virtuous concern for others. You patronize daily your drive-in Starbucks, let us say, helping sustain a massive chain of lavish luxury consumption — nobody needs freshly brewed exquisitely crafted hot coffee every morning — a chain of resource consumption that extends from the coffee growers (who are not growing staple crops) to the napkin suppliers (who need to build and run factories to make bits of folder paper to wipe up your messes), and production and consumption of industrial cleaning supplies (to keep the espresso machine sparkling), and the crowd of minimum-wage servitors to run it all — you are clearly indulging your own whimsical taste, and using your wealth to do so, no less than a Rockefeller buying art for his 5th Avenue brownstone foyer.
But because Starbucks tells you they’ll serve your double cappocino fronte boofa vente in a cup made of 22% post-consumer recycled paper, you are going to tell yourself you’re completely different from the Rockefeller. He’s just indulging his wealth. You’re saving the planet!
I don’t mind the materialism. Life is meant to be enjoyed. The whole purpose of wealth, generally speaking, is to consume most of it and enjoy your brief trip through existence. But dressing luxury consumption up as some kind of public-spirited virtue, so that the rest of us toilers and scrappers are expected to be grateful to you for it, is nauseating.
I always enjoy your point of view. I also find it amusing to watch as people try to save the world with consumption. The two impulses are mutually exclusive.
Fed Governor Laments Excluding Borrowers Who Won’t Repay Loans
As the industry prepares to implement the Consumer Financial Protection Bureau’s (CFPB) new ability-to-repay rules, Federal Reserve Governor Elizabeth Duke warns new consumer protections may come at a cost to the industry as lower-quality-credit borrowers are precluded from the housing market.
“It will be up to policymakers to find the right balance between consumer safety and financial stability, on the one hand, and availability and cost of credit, on the other,” Duke said during a speaking engagement at the Mortgage Bankers Association’s Mid-Winter Housing Finance Conference.
Loans that do not fall under the CFPB’s qualified mortgage (QM) standards may soon pose more costs to lenders, according to Duke.
Non-QM loans are open to more potential litigation, which poses new costs to lenders. If securitized, lenders must maintain part of the risk for these loans—another potential for increased costs. Lastly, Duke pointed out “investors may be wary of investing in securities collateralized by non-QM loans because it is difficult to gauge the risks.”
Increased costs may deter lenders from making non-QM loans to lower-credit-quality buyers.
Attempting to cover these added costs by charging higher interest rates or points and fees may have a hard time doing so.
Lenders who charge higher interest rates may not hold as strong of a defense against a lawsuit alleging violation of the ability-to-repay rule, according to Duke.
Additionally, QM rules prohibit points and fees that exceed 3 percent of the loan amount, Duke points out. While conceding this stipulation does protect consumers from being “overcharged or defrauded,” the rule, Duke says leaving lenders without a way to account for the added risk and costs of lending to lower-quality borrowers may lead lenders to stop making these loans at all.
… and is any of that bad?
In the past a sub prime borrower than to do a lease option and probably in area they really didn’t want to live to get their foot in the door. Now there is still this idea that everyone most have a loan. This line of thinking as a contributing factor to the real estate bubble. That’s why I believe in the 20% down payment rule. If they government is going to guarantee loans of crappy borrowers then 20% down payment requirement (with a crappy credit MI program), so the losses to the Fed are zero. If not, we will have another bailout in the future.
It’s only a matter of time before the statistics prove, that mortgages are predominantly being given to very qualified borrowers. The poorly qualified borrowers not receiving mortgages will prove to be disproportionately non-white/Asian, and then the Left will start demanding answers and changes to regulations.
See that’s why I’m in favor of regulation like 20% down etc., instead of a guarantee. A guarantee allows the politicians to get over involved and start giving handouts by using other peoples money. Mortgage qualifications should be color and gender blind.
“Mortgage qualifications should be color and gender blind.”
The left clearly does not agree with that statement.
Elimating HMDA reporting would make things colorblind, but Dodd-Frank actually expanded HMDA by requiring reporting on borrower’s ages. Apparently, age discrimination will now also be a target for “fair lending” advocates.
I remember all those emails from agents stating 10 or 20 reasons why we are not in a bubble.
Economist assures housing bubble is not happening
3/13/13 10:16am
Rapidly rising home prices in certain markets have sparked fears of another housing bubble, but Diane Swonk, chief economists and senior managing director for Mesirow Financial, says don’t go there just yet.
“In economics, price is the ultimate equalizer. Prices rise when something is scarce, and fall when something if plentiful,” Swonk said in a recent housing report.
In 2007 and 2008, home prices fell as supply grew. Now, five years later, tight credit market conditions, fewer distressed sales and reluctance by would-be sellers to list their homes have brought inventory to an eight-year low, according to Swonk.
“Prices have risen but not enough to persuade owners who are still unsure to get off the fence and list their homes for sale,” Swonk wrote in the report.
Despite recent increases, home prices remain about 30% shy of their 2006 peak. So, many potential sellers are choosing to renovate their homes and hope to eventually see a return-on-investment once home values increase.
In 2013, housing starts are expected to rise 33% to slightly over one million units. This will mark the first time that one million new homes have been built since 2007. But the even bigger news is the “return of the single-family market, which has been much more constrained than multi-family starts,” noted Swonk.
Additionally, home sales are expected to rise between 6% and 8% from December 2012 to December 2013, according to the report. Swonk says new home sales are predicted to outperform existing home sales because inventories are likely to remain more limited in the existing markets, while housing starts are forecasted to improve, as previously noted.
While some worry a bubble is forming, Swonk reassured them that we still have a long way to go to meet pent up demand, let alone any level considered “normal.”
wow, 5 years on an option arm, and they didn’t accumulate any neg-am balance?
i guess they didn’t get the “good option-ARM”!!!
I don’t know what their final account balance was. They probably did just make the minimum payment and watch their balance go up. My guess is the loan recast because they hit the loan balance trigger, and with the larger payment, they couldn’t afford it — not that they ever could.
In this environment, add 6% to your desired selling price and use an agent. Even at a WTF price, it will likely get snapped up quickly.
It doesn’t seem like there is any limit to the asking prices today, does it?
The townhomes in my neighborhood are flying onto and off of the market and all new listings are coming in above $300 per sq ft. The latest listing is asking $328 per.
They would be flying off the shelf in the complex where my condo is located, but nothing is hitting the market. The mailers from motivated buyers’ agents are coming to my mailbox every week now.
I think the assumption by many bears has been that nearly every underwater borrower will eventually default. This market is proving otherwise. Many people are stubborn like me and are willing to wait as long as it takes to recoup their costs, and maybe even profit eventually.
There is also an assumption that rising prices will lead to more inventory hitting the market, but perversely, that may not be the case. As underwater borrowers see the attainment of equity in sight, many will forgo short sales and just hold on longer to avoid the credit hit, guilt, shame, etc. Rising prices may actually lead to LESS inventory in the short term because of shifting perceptions.
“Rising prices may actually lead to LESS inventory in the short term because of shifting perceptions.”
That’s exactly what’s happening right now in OC.
We were just barely underwater a couple years ago. Last year we “made” $100K in equity.
Selling for $150K – $200K profit and renting for a couple years sounds good to me. Timing when to sell is the tricky part.
Another sign of a bull/bubble Irvine housing market – There is an open house today, a Wednesday, for a townhouse in my neighborhood!
We’re considering selling (and then renting) if we could get $340+ per sq ft. The irony is, selling isn’t as attractive now that we have a 3% 15-year refi with $2,100+ of our $4k PITIA going to principal. Our home’s value could decrease 5% annually and our principal would still keep pace (going downward).
Perspective,
If you listed right now you would be listing during a time where it looks there is no else on the market. It has to be a 70 year low of active listings.
I was thinking about it too…I think we hit the peak already.
Same position we are in (15 year with 1/2 the payment going to principal).
Selling makes sense if you think the market will tank and you can buy back in at a discount, or if you are leaving the area.
With the velocity of price increases we are seeing, there “has to be” some sort of correction on the horizon. The million dollar question is when.
My guess is that prices will continue to rise rapidly until we hit the limits of affordability or about six months after interest rates begin to rise. That could still be a few years off.
I don’t think nominal prices will ever come back down again. You are just going to see aggressive inflation that shoves the prices of everything else (except wages, alas) up until $500k for a 1600 sq ft 3BR condo seems quite cheap. And it will be.
I also think the current price spike is driven at least in part by demand from people who fear inflation like a demon from the Pit — they may be nearing retirement, say, and are freaked about how fast inflation can turn a comfortable retirement kitty into chicken feed. Real estate is the traditional inflation edge, and there isn’t much else out there that looks good. (Gold is already overpriced — that ship sailed five years ago — bonds are returning peanuts and the “full faith and credit” of the State of California, the County of Riverside, and even the US Treasury are looking less Gibraltar-like then they used to.)
So if inflation fears were to subside, somehow, that might moderate demand even in interest rates do not rise. Conversely, if inflation starts to show up more unmistakably — if even the government is forced to acknowledge its existence — that might make things even worse.
I heard some thirtysomething commentator on CNBC or Fox, I forget, shaking her head dismissively when Peter Schiff or someone like that said that all this printing of money could drive an inflation firestorm that would beggar us all. She didn’t even address the point, she just rolled her eyes like who is this fossil?
As well she might: she was either unborn or still in diapers the last time the nation was ravaged by stagflation. She thinks Reagan beat Carter just because of the hostages in Iran.
The most chilling part of this? She was a former assistant secretary of the Treasury. These are the fools who are actually designing monetary and fiscal policy at the national level. They think fears of monetary debasement are just old wives’ tales from centuries ago, or boogiemen conjured up by fogies who don’t get our new Facebook Age, when clever computer algorithms can let you Ponzi your way to prosperity without any reckoning ever.
Fannie Mae now buying 3% down payment loans. There is a new low down payment lender in town.
No Money? No Worries. Home Lenders Ease Up Rules
Published: Wednesday, 13 Mar 2013 | 8:41 AM ET By: Diana Olick
As housing heads into the critical spring market, credit is finally beginning to thaw. Lenders are increasingly approving low down payment loans, and government sponsored mortgage giant Fannie Mae is buying more of them.
It is a noticeable shift from the last four years, when 20 percent down on a home purchase loan was the only game in the neighborhood.
“In general lenders have been willing to do more than they may have been willing to do in the past,” said John Forlines, chief credit officer for Fannie Mae’s single family business. “Our requirements have not changed significantly, but other parties taking risk, the lenders and mortgage insurance companies in particular, have been more flexible than they may have been in the past.”
Fannie Mae will buy loans with as little as 3 percent down payment, but these loans require private mortgage insurance. During the worst of the housing crash, when the private insurers were sinking under billions of dollars in claims on defaulted loans, that insurance was tough to get.
The only low down payment loan left was through the Federal Housing Administration (FHA)—the government’s loan insurer. The FHA took on a huge share of the market, far more than it was ever meant to, and while that helped prop up the mortgage market in the short term, it was not sustainable, and the FHA took on huge losses.
Now, facing a $16 billion shortfall, the FHA has raised premiums and will raise them yet again next month. FHA loans are becoming increasingly expensive.
Meanwhile, as the housing market improves, private mortgage insurers are starting to remove overlays on higher loan-to-value loans, meaning the percentage of the home value that is mortgaged. Low LTV’s and high credit scores were the rule recently for the private insurers, but that may now be loosening, making these loans cheaper than FHA.
“FHA is certainly becoming more expensive,” noted Craig Strent, CEO of Apex Home Loans in Bethesda, Maryland. “The increase in low down payments is reflective of first time buyers coming off the sidelines and entering the market. We’re going to see more of this trend in the next couple of years as the economy improves and renters start to once again see the benefit of buying over renting. FHA has become more expensive and the mortgage insurance companies are the beneficiary of that, which is really not a bad thing as it means the private market is insuring the lower down payments rather than the government.”
The stocks of mortgage insurers like MGIC and Radian spiked in the first months of this year, as home prices improved and FHA policy changes designed to shrink its share of the market were announced. There is currently a bipartisan effort in the U.S. Senate to reduce the FHA’s role, and in the House of Representatives a hearing is being held Wednesday looking at, “the competitive advantages the Federal Housing Administration has relative to private mortgage insurers and how those advantages contribute to the crowding out of private capital in housing finance,” according to the House Financial Services Committee release.
Despite the advantages, FHA’s share is already shrinking, as Fannie Mae’s is rising. In the first quarter of 2012, loans with between 3 and 10 percent down payment made up 15 percent of Fannie Mae’s business for home purchase loans (not refinances). In the second quarter it rose to 17 percent and in the third to 18 percent. Fannie Mae has not reported its fourth quarter yet, but that share is expected to rise again. While a credit thaw is part of it, as mortgage interest rates rise and fewer borrowers apply to refinance, lenders are simply looking for more business.
“…Realtors report their strongest defense against sellers who go it alone are legal requirements that sellers disclose problems with their homes in writing or risk liability…”
Isn’t this a reason to spent $5k on an residential real estate attorney to help you out with the process, which is a third of the seller’s desired commission on a $500k house? If the issues are negotiation, contracts, and disclosures, then why are you choosing a person to represent you who likely has no more than some JC courses on their resume with a state license received after passing a very basic simple test, rather than an attorney?
Most people won’t go to an attorney. They won’t go before a deal is struck because it’s spent money. And many won’t properly negotiate the deal without help of an attorney because they don’t understand all the disclosures and contingencies that need to be negotiated up front. It’s a catch-22 that drives most people to licensed agents.
We have the fed pumping $85bil each month into the current buy-now ‘rate’ subsidy, yet mort purchase apps sit at 1997 levels….
http://confoundedinterest.files.wordpress.com/2013/03/mbapurh031313.gif
…. so, it appears the folks are being ‘punked’ once again…. as ‘beating easy YoY comps’ is being
presentedsold to them as recovery.“as ‘beating easy YoY comps’ is being sold to them as recovery.”
——————————————————————-
el ORACLE says:
March 7, 2012 at 6:48 am
‘’Equity is the single most important predictor of default behavior’’– Laurie Goodman; Amherst Securities
Are those “Realtors to Avoid” cartoons actual ads? If so, that’s awesome.
Those were actual ads. i added the commentary.
Some interesting previous 90 days stats of Orange County.
Median List Price $729,000 Avg. # Offers 4.8
Median $ / Sq. Ft. $362 Avg. Down Payment 20.4%
Median Sale / List 98.8% # Sold Homes 6,619