Rent-to-own, or rent-to-get-the-shaft?

I am not a big fan of rent-to-own or lease purchase agreements on houses. Too many of them turn out poorly.

For example,I just returned from doing an inspection for a bank in connection with a short sale request. It is a house in Brandt's Landing in Nampa. There are tenants in the home that have lived there for about 4.5 years, stating they have never been late on a payment. They rented the house under a lease to purchase agreement where 1/3 of the rental amount was to be applied toward their purchase of the home. Not only can that not happen now, but the landlord told them he no longer has the deposit they had paid either. In addition, he has not paid the irrigation water and it was shut off so the tenants, rather than let the grass die, are paying and using city water to irrigate.  Certainly sounds like some folks are getting the shaft!

 

Renting that house you can't sell?

I have spoken with several people who have either decided to rent a house they cannot sell or are considering it. Many times it is the most prudent course of action. But sometimes folks jump into the landlord role without considering all the pertinent facts. I just read a great article regarding some things to consider from KCM Blog. I decided to post it here.

"Things to Consider Before Renting a Home You Can’t Sell?

In this difficult housing market, more and more homeowners are considering renting their house instead of adjusting the price. We strongly believe that residential real estate is a great investment and therefore can understand this thinking. However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for.

Before renting your home, you should take the following steps to make sure this is the right course of action for you and your family.

Set a consultation appointment with an eviction attorney

People rent out their homes assuming that every tenant will pay the rent every month. We must realize, because of the current economy, there are millions of people not paying their mortgage. There is a chance you may rent to someone who at some point can’t (or simply won’t) pay you the rent. Understand what the legal challenges of eviction could potentially be before deciding to rent your home

Interview property managers

If you are not a full-time investor, hire a professional to handle the property. You need someone to find a qualified tenant, collect the rent and manage the problems. You don’t want to have to make collection calls. What would you say if a tenant told you that they had enough money to either buy food for their children or pay you your rent but not both? You need a person experienced with these situations to help.

You also don’t want to receive calls at all hours of the day and night regarding maintenance issues or challenges a neighbor may be creating for your tenant.

Create an honest budget

Sure, you will receive revenue in the form of rent. However, don’t forget you will also have expenses. Some of the expenses you should consider:

• Mortgage Payment (unless there is no mortgage on the home you will rent out)


• Property Taxes


• Maintenance Expenses such as repairing or replacing: roof, heating/air conditioning unit, appliances, etc.


• Insurance – Check with your insurance company who may suggest or demand that you increase your liability coverage.

Bottom Line

Again, renting out residential real estate historically is a great investment. However, it is not without its challenges. Make sure you have decided that you want to rent the house because you want to be an investor, not because it looks like an easier way out than selling the house."

 

July PTC Index Slightly Down for Ada Canyon Counties

I have been reprinting this index from Pioneer Title Company for the past few months. It seems to provide a concise overall snapshot of the health of our local market. There are lots of numbers out there and it can often be difficult to obtain a clear picture with so many different sources of data.

To give you some reference points, the highest index was February of 2008 with an index of 218, lowest January 2010 at 28.

The Index number is down slightly from June, not any thing major but slightly lower from June's 122. The PTC Index utilizes a proprietary algorithm that weighs nine key real estate variables. These variables, though widely available, have not been easily collected in a single location. The PTC Index changes that.

 

July 2011

Building Permits	142
New Home Sales	80
Existing Home Sales	757
Refinance	433
Average Sales Price	140365
Financial-Bond Market(10-yr Treasury)	3
Days on Market	81
Distressed(Short Sales and REO)	3467
Notices of Default	374
PTC Index	113

OVERVIEW

As the summer months wind down and with the first official day of autumn just over a month away, we are all taking advantage of the good weather and getting the kids ready for a new school year. July is typically one of the stronger months for real estate and we made gains over June in some areas. Building permits were the brightest spot, up 25%. Refinances also made gains of 11%, and the number of distressed properties and notices of default both fell by just over 4%. The average Treasure Valley sales price dipped, with average prices in Ada and Canyon Counties settling at $184,241 and $96,489 respectively, down 2.4% and 7.6% from the respective June prices of $188,761 and $104,472. New and existing home sales also dropped following June’s strong increases, in this case by roughly 12% each.

Courtesy of Pioneer Title Company

Home Ownership: Still the American Dream

Just read a great post from the folks at KCM Blog.

• Yesterday, Fannie Mae released theirNational Housing Survey for the second quarter of 2011. They survey the American public on a multitude of questions concerning today’s housing market. Each quarter, we like to pull out some of the findings we deem most interesting. Here they are for the most recent report:

Most Important Reasons to Buy a Home

When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. However, the study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:

• It means having a good place to raise children and provide them with a good education


• You have a physical structure where you and your family feel safe


• It allows you to have more space for your family


• It gives you control of what you do with your living space (renovations and updates)

The Home as an Investment

Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what they said on this issue:

• 65% of the general population (and 67% of homeowners) believe that homeownership is a ‘safe’ investment.


• 56% believe that homeownership has more potential as an investment than any other traditional asset class.


• 69% think that now is a good time to buy a home (this number has increased in each of the last two quarters)

Rent vs. Buy

We are always interested in the difference people see in renting vs. owning.

• 63% of renters have aspirations to someday own their own home


• 72% of renters think that owning is superior to renting


• 95% of homeowners see homeownership as a positive experience (4% see it as a negative experience) while 82% of renters see renting as a positive experience (17% see it as a negative experience)


• 96% of homeowners live in a single family residence while 46% of renters live in a multi-unit building

Bottom Line

Even in difficult times, Americans still realize the value of homeownership.

 

Take My Breath Away Winner for August

I have not seen any real good contenders for my "Take my breath away" contest lately. These are homes that are painted with such vivid colors that they scream LOOK AT ME.  I did see one over by Wilder last month but I deleted the photo in error. So today on my way to a home in Nampa, north of the interstate at the entrance to the subdivision I was entering was this worthy contender.

It also had a large shop behind the home painted to match. We have our August winner!

I always welcome any submission from my readers!

Ada County July Market Report-GOOD NEWS

I am including the monthly report given by Marc Lebowitz of the Ada County Association of Realtors. Sales are up, the percentage of distressed sales are continuing to decline, days on market are declining, so basically good news!

"July sales were 564 in Ada County, an increase of 42% compared to sales in July 2010…yep…that’s right 42%!

Historically, July sales are 9.75% below June levels. July 2011 had 8.6% fewer sales than June 2011.

I am really happy to report that year-to-date 2011 sales, which total 3,580 are ahead of YTD 2010 sales; 3,524. As of the end of July we are 56 units ahead of year-to-date 2010! That’s a 1.5% increase.

Of our total sales in July… 42% were distressed….down 5% from June 2011. In January 2011 57% of our sales were distressed. (Short sales 15% and REO’s 27%). Distressed sales continue to cast a long shadow over the market, but they are no longer the “majority” of transactions!

For homes sold in July, the average number of “Days on Market” was 79. This is down from 89 days last year this time and down from 93 days in January 2011.

Pending sales at the end of July were 937; and decrease of 3% from the end of June.  Looking back at pending sales from March 2011 to July 2011, we see an average near 1,000 at the end of each month.  This is another sign of the long term recovery we are experiencing. The percentage of pending sales in distress was essentially unchanged from June, totaling 43% overall. We are now at four consecutive months below 50%.

July median home price held on to gains made in June.  Overall median price was $152,750; down 6.6% from July 2010. This is the second highest median price we’ve had so far this year.

New Homes median price for June 2011 was $212,000; the same as June 2010.

The number of houses available for sale at the end of July stayed below 2,600 for the second month in a row.  This is down 2% from June and 33% less than last year at this time. Currently available inventory compares to early 2006.

At the same time, the percentage of active inventory that is distressed dropped almost 1% from June to 33%.  This is the fifth consecutive monthly decline and keeps us below the 40% levels set last spring….when we were on the increase.

In Ada County we have 4 months of inventory on hand…historically this number defines a strong “seller’s market”.  The price category in shortest supply is <$119,000 with 2.8 months available. This is closely followed by the $200,000 to $249,000 with 4 months.  Consumption of inventory is expanding to all price ranges. In the price ranges from $250,000 to $499,000 we have less than 6 months of available inventory. These are the lowest numbers in more than a year!

There is also positive news on some of the higher priced inventory; $500,000 to $699,999 inventory dropped for a third month in a row to 7.2!

We continue to “benefit” from inventory levels much lower than national average.

So…what about the impact of the last few days on our recovery? That sort of depends on who you’re asking.

This morning the Wall Street Journal headline is: “U.S. stocks surge as investors eye a rare dose of encouraging jobs data and stronger revenue at Cisco”. As of noon today the Dow was up nearly 400 points.

Inman News reports: “Market turmoil has home buyers on edge” but then says: “So far, investor flight to the relative safety of bonds and mortgage-backed securities that fund most home loans has pushed the cost of borrowing down -- a boon for both homebuyers and homeowners looking to refinance.”

NAR continues to advocate for all of us in our continued opposition to “policies that ensure qualified borrowers can obtain safe and sound mortgage financing. NAR called on regulators to revise the unnecessarily high down payment requirements of the Qualified Residential Mortgage (QRM) exemption from risk retention requirements under the Dodd-Frank Act. A broad QRM definition will encourage sound lending and reduce future defaults without delaying or denying homeownership to millions of creditworthy borrowers.”

The Federal Reserve Board has pledged to keep interest rates at near zero until 2013.

NAR’s Housing Affordability Index is at 176.6; the third highest on record.  The index measures the relationship between median home price, median family income and mortgage interest rates; the higher the index, the greater household purchasing power.

So…you decide who to listen to.

To paraphrase an old southern saying: “If the Lord’s willing, and the creek don’t rise”, we’re going to continue to push our way out of this."

 

5 Big Mistakes to Avoid When Choosing a Neighborhood

So you've found your dream home — but what about the community around it? If you make one of these common blunders, that home may not be so great after all.

By Melinda Fulmer of MSN Real Estate

 

 

Buyers spend months combing through real-estate listing sites looking for that perfect home: the dwelling that fits their budget and their dreams of a better lifestyle.

But how much time do they spend looking at the area around it? Not nearly enough, says Andrew Schiller, founder and CEO ofNeighborhoodScout.

"Most people focus on the house … and only secondarily look at the neighborhood. It should actually be the reverse," Schiller says.

You can have a glorious house, Schiller says, but you will find your lifestyle suffering if the neighborhood isn't a good fit. The people, amenities, schools and a host of other factors are what help determine whether you're living the American dream or just living.

Here are the five biggest mistakes people make in choosing a neighborhood, as well as some tips on scoping out your next community.

1. They think short-term.
Often, moves happen because people are in a transition of some sort — divorcing, downsizing or getting ready to start a family, says Deena Willis, associate broker/owner of Re/Max Property Concierge in South Pasadena, Calif. Although their circumstances are changing rapidly, she says, people tend to buy from their old mindset and not think about how their life is changing.

"They are conflicted and may still want to be very urban when a sidewalk neighborhood with kiddies all around would suit their new lifestyle much better," Willis says. That amazing hillside view home might not look so appealing after you've lugged a couple of giant boxes of diapers up the stairs, she says.

Similarly, people moving after divorce or the death of a spouse may look for a safe suburban area and fail to consider the risk of social isolation in a neighborhood without nearby amenities such as coffee shops, bookstores and restaurants, Schiller says.

"People often think they are more 'Leave it to Beaver' than they really are," he says.

Solution: Get advice tailored to your situation.
Most people start their neighborhood research by talking to friends and co-workers. Although it's helpful to solicit advice or suggestions on neighborhoods, consider the source, says Diann Patton, Coldwell Banker's consumer real-estate specialist.

That friend without kids might not have a good grasp of the schools or children's activities in his neighborhood and think it's a fine place to raise a family. Likewise, that co-worker with young children might not have a good handle on the arts scene and places for young professionals to mingle after work. Talk to someone who's in your situation — or the situation in which you will soon find yourself.

Greatschools.org lets you see how students at the neighborhood schools fared on standardized tests.

City-data.com allows you to search cities by demographics such as age, median income and education levels, as well as a whole host of other factors.

2. They assume and don't verify.

People often move into areas that they hear have low crime rates, good schools and low taxes, etc., without bothering to verify these facts themselves or see for themselves.

They don't check with that sterling school district to see if a subdivision or community falls within its boundaries, which can cut across city lines, Willis says.

Likewise, they don't independently verify that a certain neighborhood is outside of proposed freeway construction, flood plain or landslide areas. They don't check records to see if an area is really low in all types of crime and free of special taxes or restrictions.

Then, when construction begins, their car is vandalized or they receive a tax bill they weren't prepared for, they're up in arms.

Solution: Don't assume. Get it in writing.

Check county and transportation-department records and get key documents about community restrictions and financial standing.

Check out crime statistics and talk to local police about recent trends in crime in that area, agents say.

And if you want to know what a "good school" looks like in the area, go out and visit one, take a tour and talk to its principal, says Todd Hetherington, CEO of Century 21 New Millennium in the Washington, D.C., metro area. You may find the school overrated.

3. They underestimate or ignore the commute.

Sure, that neighborhood with the tree-lined streets and charming Victorian houses looks great. But how much will you get to soak up this ambience if you're leaving the house at the crack of dawn and coming home late?

And how much money will you have left over to spend on the weekend if the gas pump is draining your wallet?

While some people buy into a bad commute simply because they adore a neighborhood, others do it unknowingly, agents say. They come to look at a house in the middle of the day and think, "This drive isn't so far." Then, when they move in and make the drive at rush hour, it turns out to take twice as long.

Solution: Try out the commute at rush hour.
Drive to your work at the same time you would in the morning and drive back when your workday ends. How long did it take you? If it's approaching an hour, you may want to reconsider. According a recent study by Umea University in Sweden, couples with one partner who commutes longer than 45 minutes are 40% more likely to divorce. Don't risk it.

4. They don't check out the neighbors.
The people who surround you play a large role in shaping your lifestyle. Yet many homebuyers give only a cursory glance to the people walking the streets of the community they are considering.

Choose wisely and you increase your chances of potlucks, pleasant conversations and a peaceful night's sleep. The wrong fit can lead to isolation, tension and tears.

"There are not bad neighborhoods," Schiller says, "just bad matches."

For instance, a neighborhood with lots of condos and residents over 50 might not yield a lot of play opportunities for a parent of a preschooler, Schiller says. Likewise, an engineer or college professor might not find the social interaction he's looking for in a neighborhood with low educational attainment.

Education, income, housing mix and the percentage of renters compared with owners can all be researched online and used to narrow your choice of neighborhoods. If you have kids, you should also check out your state's Megan's Law databases to make sure you're not moving into a high-risk area.

But it's just as important, agents say, to go out and talk to people.

Solution: Walk the neighborhood.
Get out of your car and walk around the community. Talk to people who are out watering their yard or walking their dog about their experiences with their neighbors, their habits and where they go for fun.

Take in the feel of the place. Are there people loitering on street corners for hours? Do you see a lot of dogs chained up and barking? Is there a lot of noise? Or conversely, are the streets vacant in the evenings because everyone has such a long commute?

Walk the streets in the morning and night to make sure the residents in an area are people with whom you feel comfortable.

5. They don't consider an area's amenities or culture.
That new development is safe and the houses are pretty. But what is there to do on the weekends? An array of family-style restaurants, fast food, movie theaters and a bowling alley might not cut it for someone used to galleries, live music and sushi.

Many people overlook the importance of the right amenities, services and culture in buying a house, agents say. Then they spend more time in the car driving to find the stores, restaurants and entertainment that they crave and don't connect with as many people in their own community.

Solution: Spend a weekend getting familiar with the scene.
Pretend you're a tourist and spend a night at a hotel in the area, Patton suggests. Wake up and walk to have coffee at a local shop, browse the stores in the main business district, head over to the local park and then eat dinner at a busy restaurant on a Saturday night.

Just as telling, she says, is the local grocery store. You can get a feel for how fast- or slow-paced a community is, she says, and how people are treated.

She recalls a friend from San Francisco who visited her rural California community and was shocked by the long lines, as cashiers talked up everyone who came through the checkout line. "She asked 'Are they always this slow?' She said she could never live here.

Lastly, look for signs of vitality in a community. Vacant buildings and stalled construction can be warning signs that a community is on the decline. Find out what's happening with these structures.

All of this neighborhood research may seem time-consuming, Patton says, but it's necessary, especially in today's stagnant housing market.

"This is the place you're going to need to live in for a long time," she says, "so make sure you're comfortable living in that location."

 

Is Your House Value in the Toilet? (Or in a sanctuary?)

I suppose you could have a house built in the shape of a toilet instead. This steel, white concrete and glass house was built south of Seoul, Korea. Can you guess the owner? It was built by the World Toilet Association. (Who even knew there was such a association?!) But wait the story ends on a somber note. The Toilet-Shaped house is in fact named Haewoojae, which signifies in Korean “a place of sanctuary where one can solve one’s worries“.

Price Changes: One Up and Some Down

Yesterday was interesting, I received price change requests from three of my clients. Two were authorizing me to make price reductions on their asking prices, each appropriately so. The third, however, stated that he wanted to raise his price, and only by a paltry $100,000! He felt he was perhaps aiming at too low of price point to attract buyers, I was surprised, although I actually have had that line of reasoning work.....once, but that was a quite a different time than now! So time will tell how this plays out.

 

 

Boise-Nampa Foreclosure Rate Drops.

And here is news that states the foreclosure rate is dropping, contrary to my recent experience!

A new report released June 28, 2010 states that the foreclosure rate among homes in the Boise/Nampa area fell to 2.81% in April, while the number of homeowners more than 90 days behind in their payments declined for the 11th straight month.

The foreclosure rate represented a 0.23 percent decline from April 2010 and is below the national rate of 3.47 percent in April, according to CoreLogic, a market research company.

The delinquency rate among local mortgage holders more than 90 days behind in their payments has fallen to 6.60 percent since peaking at 7.95 percent in May 2010. The national rate was 7.39 percent in April, down from 7.84 percent in for the same month a year ago.

We are heading the right direction!

 

Nampa Foreclosures

I am not sure I see bank foreclosures slowing down, I received a listing order for one yesterday and one today. It is interesting, the order I received today the bank sure did not waste anytime, the trustee sale was this morning! Both are located in Nampa in newer subdivisions. I have not been given listing prices yet but it appears that they both will be good deals.

Idaho! Look super LOW rates!

I just had to share the news on how low rates are. They are historically low again!

4.25% on 30 yr conventional loan
3.375% on 15yr conventional loan

4.25% with NO origination fee on FHA loan
3.50% with No origination fee on FHA loan

What a great time to buy with low house prices and historically low rates!

Why Do People Actually Buy a Home?

It seems that every time we talk about real estate today the conversation immediately goes to the financial aspects of buying a home. Where are prices headed? Where are interest rates headed? Should I wait to try and get a ‘better buy’? Should I wait until I can get a ‘steal’?

The odd thing about all these questions is that survey after survey keeps telling us that price is not the reason families actually buy a home. When money is considered at all, it is in light of not paying rent to a landlord. Let’s look at two recent surveys as examples:

National Housing Survey

The top five reasons given in the survey for buying a home, in order, are:

• It means having a good place to raise children and provide them with a good education


• You have a physical structure where you and your family feel safe


• It allows you to have more space for your family


• It gives you control of what you do with your living space (renovations and updates)


• Paying rent is not a good investment

The Myers Research and Strategic Services Survey

The top five reasons given in the survey for buying a home, in order, are:

• Home ownership provides a stable and safe environment for children and other family members


• Home ownership means the money you spend on housing goes towards building equity, rather than to a landlord


• Home ownership creates the opportunity to pay off a mortgage and own your home by the time you retire


• Home ownership creates the opportunity to live in a neighborhood that you enjoy


• Home ownership allows you the right to decorate, modify and renovate your home as you see fit

Bottom Line

Price dominates conversation when we talk about buying a home. However, when it comes down to it, we actually buy for the same reasons our parents and grandparents did – we want a better lifestyle for ourselves and our families.