Credit Score

All the time I hear people talk about their credit score. And everyone who is hoping to buy a house seems to have found a way to unearth the three-digit number that they claim is “their score”. I say I am always skeptical of the numbers they offer up—because one set of credit score numbers from one source can be different from the numbers from another source—for the same person. Credit score numbers are based on formulae and algorithms, and in my mind are based on five parts history and five parts of sorcery. This seemingly harmless number is strongly tied to the amount you can borrow. It influences the terms you will be offered. In order to stay on top of your finances, it is crucial for an individual to thoroughly understand credit scoring in order to make well-informed decisions. There are three main credit bureaus, Equifax, Trans Union and Experian. While each credit bureau uses a different method for calculating your credit score, individuals with a long history of paying their debts on time, using the appropriate types of credit and not exceeding their available credit lines are most likely to have a good credit score. The higher your credit score, the higher are your chances of securing a loan with desirable terms. Put yourself in the position of a lender, if you were considering lending money to someone you didn’t know, wouldn’t you would want to try to figure your chances of getting your money back, with interest, and on time? If you had Tony Soprano to help you collect the debt, maybe you wouldn’t mind a higher risk, but for a mortgage for a home—banks and other lenders live with your credit score as created by one or more of the three main credit bureaus. Since payment history is a clear reflection of an individual's likelihood of defaulting on financial obligations, your credit history is the biggest contributor in a credit score calculation. As the highest contributor to your score, individuals with a habit of paying bills late are most likely to suffer. Payment history is about 35% of your credit score. The next biggest contributor to your credit score is credit utilization, sometimes called outstanding debt. If your debts are close to your credit limit, your score will take a steep decline. Similarly, if you have outstanding balance on several accounts—let’s say several credit cards—expect that to count against you. Outstanding debt makes up 30% of your score. The next most crucial aspect of your credit score is the length of credit history. They say old credit is the best credit. This is indeed true because the longer your accounts are open, the better it is for your score. Credit history has a 15% contribution to the credit score. Your debts are your friends only if they are well managed. It’s better if they have been in place for years. Clients who always pay cash for everything—thinking that having no debt is better for their credit score--are often advised to borrow some money from a well-known bank. They should take a personal loan (which is generally a short term loan and unsecured) or an auto loan (if they already have a car that’s all paid for, consider refinancing the car). Accepting debt will demonstrate your willingness and ability to handle these loans, as long as you make your payments on time and in full. The last 20% of your credit score is partly based on the kind of debt you have, the more debt and the more appropriate the types of credit you have (and can manage in a timely manner), the better. Finance company accounts, retail accounts, instalment loans, and credit cards accounts are the ideal mix of accounts. And your recent activity rounds out the report. Meaning that if three or four loan companies have recently “pulled your credit”, this will lower your score. If you decide you want a mortgage, before you get started, spend some time with a lender and discuss your credit. Then, when you apply for a mortgage, you will actually have some credit, and they will see that you are someone able to manage debt. Dane Hahn is a real estate professional affiliated with Sarasota Realty Associates in Venice--serving both Sarasota and Charlotte Counties. You can reach him at dane.hahn@gamil.com or by phone at 941-681-0312. See him on the web at www.danesellsflorida.com

Homes Always Cost More

This is the season for giving thanks, and I think I can speak for all Realtors—nation-wide, this has been a year that we are thankful for. Home sales started up again, and the foreclosures and short sales are fewer and fewer. That’s really good for our communities, as even vacant homes get back on the tax roles and new owners take pride in their new house.

On my street there are an even half dozen homes that have new owners, and everyday there are contractors trucks in their driveways. New roofs, new pools, new kitchens and baths seem to be the main expenses, but these “additions” to the cost of the home brings employment to the contractors and their staffs, brings furniture sales, brings new appliance sales and—helps everyone.

The new homeowners are like the Freshman Class, in they come and they don’t know anybody—so they have a need to meet the neighbors, to take their place in the society, and to establish themselves. They will stick together because they all moved in the same year, and they will reach out to the rest of us for the names of contractors, doctors and dentists and where the best restaurants are.

The data is a little sketchy, but it seems like the first year expenses of owning a new (or different) home run around 15% of the selling price. Meaning that the buyer of a $200K home will be spending something on the order of $30,000 in general fix-up and re-dos, just the first year. And next year should be as good or better, just look at the headlines: Air Canada will be serving Sarasota with non-stop flights. Which is all the better for us Realtors, since Canadians love our climate and come here with cash (no US mortgages for non-citizens).

It’s time for a creative real estate agency to install a kiosk at the airport and capture the buyers as they arrive in town. Maybe the best idea would be for agents to offer free orange juice and a printout of the newest listings for sale in the area of your dreams. Another headline indicates home selling prices are climbing a bit. I can never tell which side the writer is taking until I get into that story. On the one hand, increases in price are good for the seller, and for the taxman. Of course there is the concern that with increases in cost, houses will no longer be affordable, and so perfectly nice people will be priced out of the market--but in truth if a seller wants to sell, he’ll drop the price until a buyer is found.

Meaning that affordability is a function of what the buyer will pay. And so it is that most of us remember to say thanks—remember to give thanks at Thanksgiving, only once a year. But in fact, buyers and sellers (and Realtors) have much to give thanks for. Both Sarasota and Charlotte Counties have wonderful infrastructure, including not just good roads but schools, libraries, hospitals, shopping, sporting arenas and entertainment venues. All of this costs us tax money—but it makes the quality of life, and therefore the appeal to live here all the better.

Dane Hahn is a real estate professional affiliated with Sarasota Associates in Venice, serving Sarasota and Charlotte Counties. You can contact him at 941-681-0312, or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

Buyer Confidence up

All the Realtors I talk to--myself included--are pretty happy with the general look of the real estate market right now. We’re in a completely different position than this time last year, with solid price increases, steady inventory and a building demand as we move into our “season”. So 2014--bring it on! National data in October reflects a positive adjustment in inventory of approximately 1 percent compared to previous months. After six months of steady improvement, housing supplies are now just 1.51 percent lower than they were one year ago, which signals a greater balance between demand and supply. As a seller, you may feel a little confused. Are you in a seller's market or a buyer's market? The quick answer is we are moving away from the buyer’s market of the last several years and moving closer to a seller’s market. A buyer's market simply means that conditions are favorable to homebuyers. High inventories of homes for sale, falling prices, and seller concessions are characteristic. A seller's market favors the seller with rising prices, quick sales and eager buyers paying close to or above asking prices with few requests for discounts or better terms. My office--just to discuss a topic I am conversant with--is promoting a number of higher end new construction properties. Starting new homes is something that requires confidence in the housing demand and the local economy. It doesn’t hurt to have deepish pockets on the part of the builders and willingness to invest the resources into the development of new homes--which may take a year to close (and therefore a year to get paid). And of course, high-earning buyers have rebounded more quickly from the recession than entry-level buyers. This, in turn, has prompted more home builders to go upscale to match the shift. Still, builder and buyer confidence is a function of national numbers. U.S. home prices in October were relatively unaffected by inventory supply shortages. Most notably, the median age of inventory – which in other words would be called Days On Market and which is a leading indicator of demand – has improved (is lower by) more than 12% over last year, demonstrating resilience to seasonal changes and stabilized inventory. This suggests that properties continue to turn over quickly in contrast to the usual patterns, despite increasing prices and stabilizing inventory. Nationally, list prices are 7.57 percent higher than where they were one year ago. So higher prices + faster sales = a better market. National Association of Realtors Chief Economist Lawrence Yun says, “We expect rising home price conditions to continue through the balance of the year.” Of course you have heard me on Local and Regional data verses National data. Remember, all business is done locally. Unlike the “’49ers” who went west when gold was discovered, I can’t sell houses in Utah just because the market there may be going great guns. I work here, live here and focus on things here. And comparing local real estate sales with national sales is really no different than comparing our weather with the national weather. Except for June, July and August I’ll take the Suncoast. Dane Hahn is a real estate professional serving the Suncoast of Florida, 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

Adverse Posession

Squatters are in the news again.

For those of you who may not know what a squatter is, it's a person or persons who move into a building with no legal ownership or permission from the owner, and act as though the property was their own, openly and notoriously.

The term we use in the business is "adverse possession", meaning taking possession of a property without the right to do so. But with adverse possession comes a specific set of rules which says that if a "squatter" lives in the property, openly and notoriously, and pays the taxes, after seven years he can apply to the town to deed it to him--in theory because the owner has abandoned the property.

Today towns will sell a property for back taxes--unless the taxes are current. I'm not a lawyer, but I can tell you that squatters pop up here and there year after year. We would occasionally see them in the states where owners would be absent for months or sometime years at a time. So Florida is a good fertile area for squatters, and so is northern New Hampshire, Maine and Vermont where little cabins and cottages were often vacant for years, and sometimes the owners no longer ever used these cabins and squatters moved in.

My grandfather had a cabin in Charlestown, New Hampshire, almost on the Vermont border. It was nothing special, two stories and about 5 or 6 acres of stoney fields. As kids my mother and uncle used to go there with their family. Later they would take their friends up for long weekends. My grandfather lived in New Jersey and during his lifetime the family used the "farm" for winter vacations, ski vacations and occasional summer outings, but as the family grew up (and got older) Cape Cod was more to their liking--still he kept the "farm".

In the last years of his life he would occasionally talk about the "farm" and how he'd like to go back and see it again, but that wasn't to be--when he died it had probably been 10 or 15 years since he had been there. Following the death of my grandmother about 15 years after my grandfather's death, my uncle--who had inherited the "farm"--went up to Charlestown to see what condition it was in.

And lo and behold, he had squatters. These were not the Florida variety of squatters who move into a home as a place to stay, with little hope of future ownership. These folks were well on their way to ownership of grandfather's farm, having lived there for years.

At the end of grandmother's life she wasn't on top of the tax bills--and really didn't notice that the taxes were being paid by others. In his situation, if no bill came in the mail, no money was due, and so this clue slipped through the cracks. So then my uncle had to figure what to do with these people. Of course the sheriff was willing to evict them, but lawyers were needed to deal with them, since they were--at least to all outward observers--good citizens. Employed at the Charlestown Lock Co. making door locks and the like, they were liked by the neighbors and known around town. Still they didn't want to rent the place, which might have been the best solution, and so they were evicted and had to make up a story about why they had to move.

And so armed with this history, I was surprised when we had squatters move into our neighborhood just this past season here in Englewood. The Florida squatters are not hoping to acquire the title by adverse possession, they were just looking for a free dwelling, and maybe one that they could live in for a month or two.

They picked a nice house, albeit one with tallish grass and dark windows. Somehow they found a way to get in, and soon enough they had the electricity turned on. The didn't bother having the water turned on, they connected a hose from the sprinkler pump to an outside faucet, which charged the water pipes in the home--so the toilets would flush. Even though this isn't drinking water, they still were able to make use of it.

That house was in the hands of a bank. The owner had been evicted, but the ownership was still in limbo, the bank holding off on taking on the ownership and thereby having to pay the back taxes even without a potential buyer. And because of the cloudy ownership, there were no "owners" who the sheriff could call. And to make matters worse, the squatters had a (forged) lease from someone which gave them the right to be there.

So when the president of our association was made aware of the situation by neighbors who noticed there were lights on in the house and a car there at night--and who also noted that the sprinkler well was pumping water into the house--he went right over with the sheriff.

The people were surprised to be visited at about 7 PM by this little band of upset neighbors with the sheriff in tow. But they produced the lease they said they had received by mail from the owner who advertised his place for rent on Craig's List. The sheriff said he couldn't do anything until the owner was contacted, and that couldn't be in the evening, but they would be able to call the name on the lease--and also the name on the property deed in the morning.

And you know what? In the morning the squatters were gone. Maybe they just moved on, I noted this week that the Charlotte County sheriff's office has rounded up 4 squatters--fewer than they thought they would catch--but proof that there are still squatters in all the nicest neighborhoods.

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 web at www.danesellsflorida.com          

Drug Money Estates

This column finds me in Central America, looking at property in Columbia and Panama. Well, not exactly looking to purchase, but more accurately “just looking”. I can report with some accuracy that one million dollars US will buy a pretty nice property in Cartegenia, and a smaller amount will buy a smaller property. Columbia is a country of "haves" and "have nots". Most of the residents fall into that latter class, but the cartels and some of the wealthy families most certainly are haves. Cartagenia is a city in Columbia, and is a city where the average income is around $500/month. So as it turns out, we were romancing the stone in the Old City, when it became pretty obvious that there is a new residential area, and it's a "gold coast" of spectacular condos. How could this city afford to build these properties? Where is the money coming from? Well, it's all guesswork, but here goes: One of the topics I follow is the cycle of real estate. The cyclical concept is really a prediction by those of us who live the market every day what will happen next...based on the concept that all civilization rests on change. But the real estate cycle, which has it's trigger points based on the ups and downs of the buyers and sellers can be modified when large quantities of cash need a home. And so it is in Cartegenia where large amounts of cash have found their way into the real estate market, and an Gold Coast of tall buildings has literally sprouted up out of the sand along a stretch of beach called Boca Grande. (Here they pronounce it Gran-day, opposed to the more nasal New York-ish pronunciation GRAND that we have come to accept in Englewood.) Syndicates in Cartegenia, (or cartels if you are more comfortable with that term), have found that they can spend the extra money they may simply have kicking around by building condominiums, and then waiting for buyers to find them. So today there are a multitude of beautiful white and largely empty buildings along a gorgeous stretch of Atlantic Ocean beach. I was not able to visit these condos in person, but my source here was our guide—a man of some 55 years and who was born and raised in Cartegenia. Building residences for people who are not ready to buy does fly in the face of reason and modifies the real estate cycle so that what we expect to happen simply does not, and what we don't expect seems to when we don't think it should. OK, so the message here is our crystal ball is a little cloudy—I would have expected a smallish building boom to be getting underway, but there are hundreds of condos all ready for buyers as I write this. Maybe HDTV will have a segment on these lovely buildings. A few months back I wrote that in the cycle of real estate there is a Seller’s Boom and then there is a Buyer’s Boom. Think of a seesaw, at some point in time sellers can pretty well set their prices and terms, and buyers just have to agree if they want to purchase a property; other times buyers are in control, and sellers who want to sell have to cave in to the buyers wants and desires. The beginning of the buyer’s market cycle will be quite hazy to all involved. As sales volume stagnates, sales prices erode, sellers become desperate and then lower prices to attract the few buyers left in the market—and then, not finding buyers, they default or abandon the property. The increase in inventory and the lower prices attract buyers and a buyer's market in underway. In a sellers market, the primary driver is buyer greed and optimism. A buyer's desire to get a good deal now before the market prices climb to a new record high. Sensing the “feeding frenzy” sellers react with a quick upward value trend, which normally will eclipse the previous value trend, and new record sales are recorded. But when there is an artificial building boom, all bets are off, and the cycle goes all askew. Time will tell what will happen here, but I suggest there will be some wonderful opportunities for buyers who want to live in this island paradise. 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 web at www.danesellsflorida.com

Who's Buying Up Florida

If the Mormon church can complete a real estate deal they are working on, they will own nearly 2 percent of the state of Florida. This week they put forth plans to buy most of the real estate presently owned by the St. Joe Co. for more than a half-billion dollars. Completion of the deal will leave the Utah-based Mormon Church with 678,000 acres, more than any other private holding in Florida, according to widely shared but unconfirmed rankings of top landowners. Folks who follow these mega deals learned of the deal just this week from a corporate representative of Church of Latter Day Saints, which owns the nearly 295,000-acre Deseret Ranches in Central Florida. Besides their prior holdings in Florida, the Mormons also have a real estate and timber business, and have already built several communities along the Panhandle coast. According to the representative, AgReserves Inc., will buy an additional 382,834 acres – the majority of St. Joe’s timberlands – in Bay, Calhoun, Franklin, Gadsden, Gulf, Jefferson, Leon, Liberty and Wakulla counties for $565 million. AgReserves is a taxpaying company, owned by The Church of Jesus Christ of Latter-day Saints, and will maintain the timber and agricultural uses of the Panhandle acreage. Owned by the Mormon Church for nearly 60 years, Deseret Ranches sprawls across Orange, Osceola and Brevard counties and propoerties like these are increasingly seen as critical to the region’s water supply, road and rail network and future development. AgReserves--as the operating company, has a good track record with regard to land stewardship and prudent resource management. According to Paul Genho, chairman of AgReserves. “We will apply that same commitment and expertise to managing the property we are acquiring in Florida’s panhandle.” Last week, Gov. Rick Scott signed an executive order that created the East Central Florida Corridor Task Force to plan for roads, development and environmental protection in an area dominated by Deseret Ranches. Commissioner of Agriculture Adam Putnam was enthusiastic about the announced deal as long-term investment in the state’s timber and cattle business. No other metropolitan area in the state borders such a huge and potentially developable piece of property as Deseret Ranches, which covers a largely roadless and unpopulated area southeast of Orlando. With 44,000 head of cattle, the ranch property also is one of the nation’s largest producers of calves and manages thousands of acres of citrus groves, vegetable farms and timberlands. Orlando, Orange County and state water authorities have been planning for years to accommodate their growing populations by pumping water from Taylor Creek Reservoir within ranch boundaries. The seller, St. Joe Co. said the sale would help the company focus on its general real estate development. St. Joe still owns 184,000 acres after the sale. Dane Hahn is a real estate professional helping buyers and sellers in 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

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