Can't afford to Move

A recent survey of people who stay in their homes long after they probably should move found these “top 10 reasons” given. These are the worst reasons not to sell. Bad reason #1: "I can’t afford to move." Sellers who say this mean that they are stuck in the house they live in, maybe they owe more than they could sell the house for, and when that’s the case, they are often deferring much-needed maintenance and foregoing life’s pleasures. Actually they can neither afford to move nor stay--without making drastic lifestyle changes. There may be options here. Refinancing or renting out part of the house could represent a solution that may make this home affordable, but there may also be genuinely affordable housing out there. Usually this reason is given by folks who have not investigated all their options. Bad reason # 2: "It’s my home, and I’m used to the area." The suburbs change every day, so don’t count on your neighborhood or community staying the same over the decades of extended living that lie ahead for you. The changes you will see are not always for the better. As a homeowner, if you want permanence in your neighborhood, look toward homes found around universities or natural wonders like National Parks or unique ecosystems like wetlands. Bad reason #3: "There’s nowhere else I like as much as here!" Sellers who make this statement have rarely explored all the corners of their region. Are you really sure the home you live in is the best you can do? The best your money can buy? Check the magazine rack for “best places to live, or best places to retire”, issues. Life is not a dress rehearsal, keep your eyes open and you will find a step up opportunity. Bad reason #4: "I can’t afford the areas I really like." Lately real estate values have taken some dramatic shifts and will likely continue to do so. Most sellers do not know exactly what they could sell for or exactly what comparable housing in their preferred neighborhood would cost. More and more properties have separate rental-income suites that make moving up financially feasible. Some owners live in the suite and rent out the house until they can afford to reverse this arrangement. Take the positive approach, "How can I afford the area I really love?" Bad reason #5: "I’ll leave this house feet first, in a box." People are living longer today, and their active engaged living can last for decades. Digging in your heals to stay--out of fear of losing control of your life and ending up in a "home"--is a bad reason to stay. Get out and explore your housing options, everything from reverse mortgages to communal living choices can give you reasons to get moving. Five runner-up bad reasons not to sell include: 1. All my friends live near this house. 2. I raised my kids in this house. 3. My beautiful summer garden makes up for everything. 4. I renovated once and I can’t do it again. 5. The thought of packing and moving is too much. The bad reasons to stay go on, but they are still bad reasons. Too often, stress related to problems that keep us hanging on to our "home" shields us from decisions that make more sense by solving problems and relieving stress. Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties. He can be reached at dane.hahn@gmail.com or by phone at 941-681-0312. See him on the net at www.danesellsflorida.com

Real Estate Investing

My father’s wisdom suggested that because buying a home is a long-term investment--you should buy as much home as you can possibly afford. And that general opinion has been in place for a good number of years, and even up to today. Think of your home as an investment, they said. Well look over the sales data for the last 5 or 6 years--some investment that was. But this is now, and the question is, what makes sense for today? I say, buy all the home you need, but draw the line there. Over the long haul, home values generally increase and so it is possible to build equity over time, but that depends largely on what you paid for the home, how robust your market is, and how long you occupy the home. When all the stars are in alignment, your home MAY be a good investment, but don’t buy your new home as an investment, buy it as the best place to live for you and your family. Sometimes you have to sell off your investments, that can be painful enough--but it really hurts when you have to sell off your residence. To choose the right home, you have to try to see as far into the future as possible: How long will you likely live in the home? How large is your family likely to grow? What activities will you have and what space requirements? Where do you want to live – near work, near family, in a certain school district? These questions are a way of trying to figure the number of bedrooms, baths and living areas you want as well as other features you want your home to have. Woodworkers always want a shop, artists want a studio, and chefs want a fancy kitchen. You probably know what you will want in a house, but it’s a good thing to discuss with your spouse. I have sent people who were really undecided on their needs home with the assignment to have some wine and decide what they want. Now it’s time to look at affordability. How much can you buy, and how much home can you get for your money? The trick with buying a home is getting as much as you can on your wish list without becoming “house poor.” House poor means you can afford your house payments but you can’t afford to do anything else. House poor can sneak up on you if unforeseen expenses come your way, or if you refinance to cover the cost of a college education, and suddenly have much bigger living expenses. That’s why lenders have a conforming loan standard that they use as a benchmark for pre-qualifying you as a borrower. This is true whether you’re a first-time home buyer or a millionaire move-up buyer. To qualify you, lenders use two ratios – income to mortgage debt, and income to total debt. To qualify for a 30-year fixed rate conforming loan that is federally insured, your income to mortgage debt can be no higher than 29% of your gross annual income, and your debts plus mortgage payment can be no higher than 41% of your gross monthly income. An easy way to “ball-park” what you can afford is to take your total annual income from all sources, and multiply times three. That means that if you make $3000 gross income per month, ( $3,000 a month is $36,000 a year, times 3 is $108,000. You should think that $108,000 is your maximum purchase.) Under the banks conforming loan standard, your house payment (principal, interest, insurance and taxes) should be no larger than $870.00. If you’re carrying credit card debt, student loans, or pay child support, the monthly debt service must be accounted for. To get the income to total debt ratio, multiply your monthly income by 41%. If you make $3000, your total debt including your house payment can be no larger than $1,230.00. That means to qualify for a $870.00 house payment, your debt service can be no higher than $360 per month. This formula is time-tested, and it’s designed to help you minimize the risk of home buying by making sure you can afford your payments over time. Qualifying to buy a home is only the first step. You will want to be able to handle whatever home expenses come your way - repairs, rising utilities, remodeling or other updates, and ongoing maintenance. If you’re relocating, and believe you’ll only be living in your home three to four years, a fixed-rate loan may cost more than you need. You may be better off with a hybrid loan sometimes called a 5-25 or a 7-23. That’s a 30 year loan that gives you a lower fixed rate for the first few years, and then adjusts after that. Talk to your lender and see what you can qualify for before you go shopping for a home. Get a pre-qualification letter and give a copy to your Realtor to help with negotiations. Lock in your rate, so you can calculate your payments and obligations accurately. If mortgage interest rates go up, that could impact the amount your lender will loan you. If you qualify for a smaller amount, consider buying a smaller home or a home in a less expensive neighborhood. It’s really about affordability. The more comfortable your payments are, the more likely you are to enjoy your new home. Dane Hahn is a real estate professional serving Florida's Sarasota and Charlotte Counties. You can reach him at dane.hahn@gmail.com, or by phone at 941-681-0312. See him on the web at www.danesellsflorida.com

Global Warming

We have friends from up North who think that our living in Florida is tempting the rising oceans to flood our home and wash me and my lovely wife out to sea. She is pretty sure that Global Warming will one day bring our demise. In their opinion my generation had much to do with all the so-called warming. Somehow, living in the woods of New Hampshire we had unusually large carbon footprints and somehow laid waste to the countryside and atmosphere. I admit I had 4 chainsaws when we decided to move to Florida, and I had used them regularly clearing land, making firewood, and burning brush. So apparently I need to accept some of the blame. But now, all of a sudden, the reports of the impending demise of our planet happily may be premature. I note that the arctic ice has begun to refreeze and at least some of the reports of whole earth melting and a great flood caused by rising oceans are now subject to additional discussion. So who’s right? Well, the bulk of climatologists are convinced that the release into the atmosphere of carbon dioxide by the combustion of the fossil fuels oil, coal, and natural gas in recent years has accelerated the warming of the Earth to what could be a dangerous level in the near to mid future, there are increasing signs that these dire warnings have been somewhat overblown. By far the most complete data on climate parameters is obtained by meteorological satellites. And when reviewing the data, it is important to distinguish between weather and climate data. Weather data are, by their very nature, concerned with relatively short-term predictions-days or at most weeks. Climate data, on the other hand, involve parameters that range over years to decades and even to centuries and geological eras. Although satellites have been in use for only a very limited time in geological-era terms-about a half-century-there are other data on climate variations that go back many millennia. A large, vocal, and growing community of scientists and policy analysts has been questioning the climate-change orthodoxy for a number of years. They insist that many of the so-called signs of warming, such as arctic ice depletion and extreme weather disturbances, are not necessarily caused by human-made greenhouse gases but by natural meteorological phenomena, and that the global push for 'green' energy technologies such as wind power and solar farms is both unnecessary and economically disastrous. Although certainly controversial, these views are indeed supported by geological data over the millennia, which suggest that the current indications of global warming have been encountered often in past eras, and perhaps more important, that not only do satellite data not provide the essential verification of the computer models (whose predictions on temperature and ocean level rise vary from year to year by several hundred percent) but they also indicate that although there are regional variations, there has actually been no global warming (or cooling) since 1998. Germany and the UK have recognized the negative economic consequences of subsidizing limited green-energy sources and ignoring newly discovered large fossil-fuel resources such as shale oil and natural gas. And a recent bill introduced in Congress (H.R. 2413) calls for NOAA to reduce funding for climate-change research in favor of improved short-term weather forecasting. So my friend's concern of rising water levels seem to be unwarranted and now I can feel comfortable selling Florida homes to people who—I know in my heart—will not drown in their sleep due to glacier melting. Florida really is a pretty nice place to live, especially if you are retired, and so when our friends from up north are no longer worried about the oceans rising—that makes it all the sweeter. Dane Hahn is a real estate professional serving Charlotte and Sarasota Counties. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

Buyer knocks down a $4 million home

What DAY is it? What day is IT? If you answered Hump Day, you’ve apparently been watching too much TV. But in the real estate business, it really we just had a real Hump Day, and here’s why. Every once in a while the stars align, the moon is in it’s seventh house, and the real estate agents begin to tremble as FINALLY all the parts that make a strong market come into focus. For the last few months real estate sales have been growing and holding. Growth against last year has been strong, and most of the really crappy properties have been snatched up by investors with the promise of returning them to the market “fixed up” and ready to sell at a profit. More on that in a week or so. Even the big homes, in the over $1 million range are moving again, and I smiled to see a $4 million dollar home up on St Armand’s circle was recently sold and now they are taking it down in favor of building a new and bigger more modern home. I suppose if you have gabillions of dollars in your various accounts, maybe you don’t want a home with used bathrooms and last year’s tile patterns. I’m too much of a Yankee for that—if it were me, I would have bought a vacant lot. I mean why knock down a $4 million home? The owner answered, “it was all for the deepwater dock and the view…” And yet, with all the good real estate news, mortgage rates had begun to climb and each upward tick in the cost of borrowing money shut a few more buyers out of the market. Quantitative Easing (QE) is not my favorite economic concept because it means the Federal Reserve is buying Government bonds back from the owners using freshly minted money; money which has no value of it’s own which is obviously inflationary. QE is a method of keeping the bond rates low (which keeps the mortgage rates low). It turns out that Wednesday this week really was Hump Day—it was the day the world thought QE was coming to an end—tapering they called it, and tapering would cause mortgage rates to soar because, as we had been told, the market was strong and the economy was getting better. But then…nope. Didn’t happen. Even as the President spoke for an hour or so in the morning, discussing all the wonders of the economy, in the afternoon the Fed announced that the economy was still too weak, unemployment still too large, and inflation was not yet a huge problem. So armed with these concepts, they decided to prolong QE, which had the effect of lowering mortgage rates overnight. We got over the hump. So is it a good time to buy or sell? Yes. For sellers, the August resale home numbers were plus 12% from last year, and September will no doubt be similar. The new construction is selling briskly even where total sales numbers are a function of how many homes can be built. So if you plan to sell, clean up, paint up, fix up and get the house ready for the buyers who are ready and now can still find cheap mortgage money. If you’re a buyer, the time is right. Homes are still affordable. Get yourself pre-approved with a bank or well-known mortgage company. Give a copy of your pre-approval letter to the Realtor you are planning to buy through. When you are in need of a mortgage, you are not a cash buyer, but if you are pre-qualified and pre-approved, you are ALMOST a cash buyer. If you actually have cash, you eliminate having to get financing and the bank’s appraisal and that is of great value to the sellers, who will be on pins and needles from the time they accept your offer until the home inspection is complete. If you have a pre-qualification letter, you demonstrate to the buyers that you can afford the house—even thought it still has to appraise. One note regarding that approval letter: if the mortgage company approved you for a home up to $300,000 and gave you a letter so stating, and you find a house at $275,000 and decide to offer $259,000. Don’t hand over the letter that says you can go to $300K, have the mortgage agent write a new letter that says you are good to $260K. If negotiations take you to $265,000, have the mortgage person write a letter Okaying you up to $265K. The mortgage agent wants to have your mortgage business, so these letters are no problem. Dane Hahn is a real estate professional serving Charlotte and Sarasota counties. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

Clear Title

Reading through the classifieds this week I noticed a number of Petitions for Quiet Title in the legal ads. Just so you know what this is, if you recently bought a house—let’s say a foreclosure acquired from a lender or municipality, the chances are you bought the property “as is” without any title insurance, and if you paid cash, there may be no title insurance. Or, you may have bought a short sale and received a “quit claim deed”—which essentially says, “The seller transfers all the rights he has in the property to you”, (but he may not have 100% of the ownership rights, which is always a concern). Or you may have owned a home for some years, without knowing who owned the vacant land next door, and even a bona fide search does not show a live owner. You may even have used the land as though it was your own…land like this might have been planned to be a road but was never built, and the tax cards show it is owned by a bankrupt corporation, maybe a developer. A “quiet title” is a title to real property that does not have any disputes over ownership of the property. It is said that when a deed is filed and recorded and the deed is clear of any encumbrances or claims of ownership, then you are engaging in the act to quiet title. But what if there are other claims—or what if there could be other claims? A petition for quiet title is a lawsuit that you as the probable property owner would bring to quietly settle real or potential land disputes. It is used to determine in court who has rights to the disputed land. A quiet title petition can be filed in Florida by first establishing occupation of the land and then filing a quiet title petition with the local court with proof of who owns the land. This proof can be mortgage documents and title documents. There are many ways for a title to become clouded. The seller's ex-spouse could still have some legal claim to it. An ambiguous will could make it unclear if the seller really inherited the property. Or you might want to remove a lien that's been paid off, but not listed, or make sure that the title you bought at that foreclosure sale is completely free of clouds. By filing to resolve these questions, you can get it on the record that the property is 100 percent yours. You must make a good faith attempt to warn anyone with a claim on the property that you plan to assert your ownership. The first step is to search county land-title and tax records, probate records and any other appropriate information sources. If you turn up any names that might have a claim on the property, you must contact them by mail, if possible, as well as posting a notice in the paper of record. You can't win a quiet title action just by invalidating someone else's claim, the ”Quiet Title Action” website states: To win your case, you have to prove the strength of your own claim to the property. If you can show the judge evidence that the title is yours and nobody responded after your title search, the decision should be simple. If one of the other owners challenges you, determining title may involve weighing the respective claims. If the judge confirms your title, you can record the court’s decree and that gives you a legally valid title. This is something you'll need if you want to sell the property or use it as collateral for an equity loan. There are law firms that will handle this effort for you, although you can bring the petition on your own. But as Abraham Lincoln said, “a man who acts as his own lawyer has a fool for a client.” Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the net at www.danesellsflorida.com

"Honey, we can finally afford that divorce."

My regular readers understand that I am pretty conservative, quite a bit more old-fashioned than the young-folks who elected our president. So I was pleased that one of the very few good things to come out of the recent long-term recession was that fewer divorces were being filed. My wife and I are passing 43 years of marriage and I can tell you I understand it's not all a bed of roses. But we have hung in so long that our kids tell us when they review their friends, we are about the only parents they can point to who are still married. Anyway, getting back to divorces, as it turns out about the only asset that disgruntled couples have to "split" is the equity in their home. So during the recession, when there was no equity, there was no financial reason to get a divorce--and as we all know, Americans won't do anything unless the money is right. Well the money is right all of a sudden. The market is coming back and so are the divorces, now that home values are back to their 2003-4 values. I wrote a column a few years back about a couple I had done some real estate work for. Actually they are married to each other and both are lawyers. Their legal practice focused on divorces, and due to the recession, had weakened so much that they were in jeopardy of losing an investment home they owned in North Port to foreclosure. As it turned out, they were able to pull off an 11th hour short-sale, but due to their other holdings, they had to make up the deficiency amount (the difference between the amount owed and the sale proceeds). These outcomes are reason enough for many people to hold back on their future investments, even though there are some great home values out there right now. Which brings me to the headlines in our local papers. You would think if you reviewed a week's worth of headlines that housing values are up, no wait, down--and affordability and mortgage rates are up, no wait, they're down too, and new homes are selling like hot cakes, no wait, maybe not. What is really going on? Well it all depends where you sit. If you are a simple newspaper reader, you must be totally confused. Let's look at our area, (and by our area I mean zip 34223, 34224 and maybe a peppering of North Port and Venice). Prices are growing back up a bit, so if you are thinking of selling, the likely-hood of selling your home for an appropriate price in the next 5 or 6 months is pretty good--as long as there has been regular maintenance and the neighborhood is not threadbare. If you are thinking of buying, today there is a limited inventory, but generally it's fairly priced, and today much less of the inventory is offered by a bank or lender, so any offers you are considering making are welcomed and will be negotiated quickly. If you are still waiting for the market to hit bottom, you missed that opportunity, which actually occurred about 18 months ago, so you are SOL. If you are thinking of buying a new home, remember the data that gets into the newspapers is probably national in scope, or if the paper is tying to do a really good job, the data could be statewide. My point is that our area is different from the state-wide data or the national data. Here there are perhaps 5 or 6 builders building homes right now. I have had a chance to talk to most of them and can report some of them have sold all the homes they can build for the next year (so new starts will be recorded, but are already contracted) other local builders may have larger crews and will continue to build homes that could be sold right away, but these are not affecting the available inventory in a significant way. My message here is--don't take the information you see in the larger papers as being accurate here in our area. Rates are going up, yes. But the new higher rates are still lower than most of us expect will be the norm in a year or two, so if rates are your "hot button" buy now. These rates will go up for a few more years and likely at that time, they will level off in the 6-7% range. Today you can fin 3.5% if you want a 10 year or even a 15 year mortgage. Think 4.25 for a 30 year mortgage. Actually "jumbo" mortgages are available in the 4.25% as well, so if you're chasing down a $750,000 home, get it now. Here's a quick way to figure out what a 6% mortgage would cost you on a monthly basis. At 6% annually, you pay 1% per month, so a $100,000 mortgage costs $1,000 per month. If you wait for a year or two when the mortgages are back at 6% to buy a $200,000 home, your mortgage will be $2,000/month. (Remember this includes interest AND principle). Affordability rates are really easy to mis-report. How about this: home prices have gone up 12% but salaries have only increased by 2%. So the Affordability index indicates that home sales will take a nosedive. Well, here's the deal,that kind of reporting is done by a recent college graduate who is reading the Associate Press releases for that day. In fact, homes have been undervalued for long enough so that as the prices grow, sellers will lower their asking prices if the homes don't sell. Home prices always will come down to find the first buyer. Banks used to determine what you could afford would be about three times your annual family salary. So if a couple each are making $35K, they could afford a home in the $210,000 range. Plus or minus, depending on condition, location, desirability of the school system and neighborhood. As I say, affordability is in the eye of the buyer. So what's our area's real estate market looking like? Let's say it's much better than the bad headlines, and a little worse than the good ones. Dane Hahn is a real estate professional serving our area, including Sarasota and Charlotte Counties. Reach him at dane.hahn@gmail.com or 941-681-0312. See him on the net at www.danesellsflorida.com

The HARP 3.0 Home Affordable Refinance Program

The federal HARP (Home Affordable Refinance Program) mortgage program has been a godsend to homeowners with existing mortgages who desired to stay in their homes, but found their home worth much less than they owed. HARP allows them to refinance at a much lower rate, thereby lowering their monthly payment, while continuing to own and live in the home. Originally HARP 1.0 was pretty restrictive and few people took advantage of the program, but when HARP 2.0 was designed, it was far less restrictive, and more and more homeowners took advantage of the program. But HARP is scheduled to expire at the end of 2013. It appears it will be extended, more on that in a minute. To be eligible for HARP your present mortgage must: 1. Have been securitized by Fannie Mae or Freddie Mac on or before 5/31/2009, with a loan-to-value (LTV) equal to or less than 200% of the current market value of your home. 2. You must be current on existing mortgage payments and 3. make sufficient income to support the new mortgage payments. (The interest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for Federal income tax purposes.) A tax advisor should be consulted for further information regarding the deductibility of interest and charges. In a recent conference meeting Michael Stegman of the U.S. Treasury told attendees that President Obama is working to extend the program and make some significant changes. These would include accepting privately held, non-Fannie Mae or Freddie Mac home loans into the HARP program. Privately held mortgage loans, meaning someone like Wells Fargo or Bank of America holds the mortgage instead of Fannie Mae or Freddie Mac, are the reason that millions of underwater homeowners cannot qualify under HARP 2.0. Government statistics indicate that these mortgages are responsible for nearly 2/3rd of mortgage delinquencies, a growing problem for the entire housing market. The President doesn’t necessarily need Congressional or even the bank’s approval to move forward as the Treasury department already has the authority to modify many of these privately held mortgage loans, compensating investors for their losses in the process. Most industry analysts agree that the program has been quite successful, particularly given the underwhelming results of earlier iterations of refinance and modification programs. There have been complaints that a series of remaining frictions have allowed lenders to extract higher profits on heavily underwater loans. New Jersey Senator Robert Menendez and California Senator Barbara Boxer have introduced legislation aimed at protecting lenders from losses on refinancing privately-held underwater mortgage loans. The proposed changes would also extend HARP 3.0 for another twelve months. There are several encouraging points to this Home Affordable Refinance Program legislation of interest to those not eligible for HARP 2.0: Incentives to Increase Lender Participation Allow For Non Fannie and Freddy Mortgage Loans Eliminate The Mortgage Cutoff Date of May 31st, 2009 Extend HARP 3.0 by Another Year This is the kind of encouraging HARP 3.0 news underwater homeowners have been waiting for and would benefit the government by reducing delinquencies and foreclosures. If there’s one constant in Washington it’s that Democrats and Republicans can’t even agree to disagree. The longer they delay updating HARP 3.0 the more underwater mortgage holders are motivated to just walk away from their homes. Dane Hahn is a real estate professional serving Florida's Sarasota and Charlotte Counties. Call him at 941-681-0312, email at dane.Hahn@gmail.com or see him on the web at www.danesellsflorida.com