Wednesday, February 29, 2012

Warren Buffett: It’s Time to Buy Real Estate !

Warren Buffett appeared live on CNBC’s Squawk Box this week. During the interview, he was asked about the current real estate market and whether he felt now was the time to buy. His response was rather emphatic and has been used as a headline in hundreds of articles since the interview:

“If I had a way of buying a couple hundred thousand single-family homes I would load up on them.”

However, throughout the interview, he addressed the market from a few angles. Here is what he said:

Why invest in real estate now?

“It’s a way, in effect, to short the dollar because you can take a 30-year mortgage and if it turns out your interest rate’s too high, next week you refinance lower. And if it turns out it’s too low, the other guy’s stuck with it for 30 years. So it’s a very attractive asset class now.”

Is buying your own home better than investing in stocks right now?

“If I knew where I was going to want to live the next five or 10 years I would buy a home and I’d finance it with a 30-year mortgage… It’s a terrific deal.”

Should we buy multiple houses?

“If I was an investor that was a handy type and I could buy a couple of them at distressed prices and find renters, I think it’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make now.”

Over the last couple of months, there have been more and more financial analysts coming to the same conclusion: It’s time to buy real estate.

House Prices: Window of Opportunity Beginning to Close


The Folks at KCM Blog make a persuasive case below, and I believe if any thing here in Ada County we likely even have a smaller window of opportunity. I do not believe banks held back as many foreclosures in our area due to Idaho being a statutory foreclosure state.

There have been conflicting opinions as to where housing prices are headed. We want to give our opinion on this subject for the short term. We believe sellers have a window of opportunity for the next 90-120 days in most parts of the country in which to sell their homes for maximum price. We believe there will be increased downward pressure on home prices throughout the rest of the year.

Why renewed downward pressure?

Any item’s price is determined by ‘supply and demand’. In many parts of the country, existing housing inventory has dropped to historic norms in the last few months. However, an inventory of distressed properties (foreclosures and short sales) will be coming to market this year. This inventory has been delayed for over a year as the Federal and state governments crafted an agreement with the five largest banks and mortgage servicers to establish a roadmap for how a foreclosure must be properly completed. That agreement, the National Mortgage Settlement, was reached two weeks ago.

What Impact Will the Agreement Have on Foreclosures?

Brandon Moore, chief executive of RealtyTracexplains:
“The settlement sets forth clear guidelines for lenders and servicers to follow when foreclosing, which should allow them to push through some of the delayed foreclosures from last year.”

How Many Foreclosures Could We Be Talking About?

Mark Vitner, a senior economist at Wells Fargo Securities tells us:
“The settlement helps the housing market in the long run because it allows banks to proceed withmillions of foreclosures that have been stalled.”

What will this mean to home prices?

As this inventory comes to market, it will impact prices in two ways:

  1. It will bring to market discounted competition for buyers

  2. It will impact the appraisal values of all homes in the area

Which States Will Be Impacted the Most?

The states that have the largest backlog of properties currently in the foreclosure process will be the states that will see the greatest price depreciation.

Bottom Line

There is a window of opportunity currently which sellers should take advantage of. Waiting until later this year will not guarantee a higher sales price. If anything, in many regions of the country, it probably guarantees the exact opposite.


Tuesday, February 28, 2012

Idaho Housing Offering Some GREAT Programs!

The Idaho Housing and Finance Association is offering some really good loan opportunities to purchase a house, and not just for 1st time home buyers. Combined with our extraordinary low rates and low home prices, they provide even more reason to BUY NOW! With no mortgage insurance your payments will be even lower.

Tomorrow I will share some more insight on BUYING NOW.

Give me a call now to get started, I partner with some outstanding loan officers.

Monday, February 27, 2012

February Take My Breath Away Winners

As I travel about the valley I take photos of those homes that are so brightly painted that they make you look at them. I share them occasionally here, usually as monthly winners. If you have any you would like to include, send them my way and we will see if they have what it takes to become a monthly winner. And by the way, as you look at these houses you need to have the Top Gun Theme going through your head, at least I do. (You know, "take my breath away...") In fact I had to go to You Tube and have it playing while I am uploading!

Located on N 28th St in Boise, just down from a cute little house that I closed today.

This home, I believe is located out in the country in either North Caldwell or perhaps the Middleton area.

Saturday, February 25, 2012

Where does Idaho rank in Number of Foreclosures?

We do not look too bad in comparision to the rest of the country, I believe we are in a better position than we have been in  the past. We could be Florida or Nevada!



Methodology as per CoreLogic: The foreclosure inventory represents the number and ratio of homes that have been placed into the process of foreclosure by the mortgage servicer. Mortgage servicers start the foreclosure process when the mortgage reaches a specific level of serious delinquency as dictated by the investor for the mortgage loan … The foreclosure inventory is measured only against homes that have an outstanding mortgage. Homes with no mortgage liens can never be in foreclosure and are therefore excluded from the analysis.


Friday, February 24, 2012

Idaho Home Sellers and How the Serenity Prayer Applies To Selling a Home

You may believe that selling your home is impossible in today’s market. You may feel powerless to the process. What could YOU possibly do to turn this housing market around? There is no doubt that today’s real estate market is extremely difficult to navigate. However, we want you to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.

It is totally within your power to guarantee that your house will sell even in the current market.

How you ask? Let’s look at the simplicity of the famous Serenity Prayer and apply it to selling a home in today’s real estate market.

“Grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”

Accept the things you cannot change

The two main reasons that the housing prices have softened:

  1. the current economy

  2. the inventory of distressed properties (foreclosures and short sales)

As an individual homeowner there is no way for you to impact either of those two situations. The best think-tanks in the country are struggling to discover solutions.

Have the courage to change the things you can

There is not a vacuum of buyers in the market. There is a vacuum of homes a buyer in today’s market will purchase. Let us explain: could you sell your home today for $1? … $1,000 … $10,000? Of course you could. There are plenty of buyers in the market for a home they consider priced correctly. You have to decide what the correct price is for your home if you truly want to sell. If you want your house sold, you must list it at a price a buyer will pay for it. Not a buyer from 2006 but today’s buyer who has plenty of homes from which to choose.

It will take courage to sit with a real estate professional and honestly decipher the true value of your home. If you want to sell, you must have that courage.

The wisdom to know the difference

We all realize that the economic situation will take some time to correct. If we want to wait for prices to return to 2006 levels, we will probably have to wait for 5-7 years.

Look at the reason you decided to sell in the first place and decide whether the extra money you would get from the sale is worth that wait. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

This is where your wisdom must kick in. You already know the answers to the questions we just asked. You have the power to take back control of the situation by pricing your home to guarantee it sells. The time has come for you and your family to move on and start living the life you desire. That is what is truly important.


Thursday, February 23, 2012

Memories of Grandpa and Grandma-now rubble.

In reading the paper a couple days ago I noticed this article about tearing down an old building in Caldwell to make way for future use by Canyon County. I have a very personal connection to that structure, my only memories of my Grandmother are of going to that building, which was then a apartment house owned by my Grandfather, entering through the back door via the kitchen and being greeted by my grandmother offering me a piece of candy.

This current picture certainly indicates the place had seen better days. My grandmother passed away over 50 years ago. My grandfather had purchased the apartment house and moved after he sold the farm. The apartment they occupied had a kitchen, bathroom and living room that doubled as their bedroom with a Murphy Bed on the wall.


Wednesday, February 22, 2012

Eagle Idaho Custom Rustic Home on 1.88 Acres

My latest listing is this great home in Eagle, it is not a short sale or bank repossession, which is nice in today's market.

Custom home with rustic features situated on fenced 1.88 Acres suitable for horses or other livestock. Three car attached garage PLUS a detached 1200 sf shop/garage with another 450 sf unfinished space above shop. Upstairs bedroom features a balcony with mountain views. Main level master, formal dining, soaring ceilings in great room, walk in pantry, granite kitchen counters. Garage floor plumbed for radiant heat. Corner lot with the feeling of openness.

Give me a call I will arrange your private showing. Or for more information and photos you can visit www.lowesflatfee.com

Tuesday, February 21, 2012

Will Mortgage Forgiveness Debt Relief Act Be Extended?

I have written about the Mortgage Forgiveness Debt Relief Act a few time because of it's impact on the Idaho folks involved in short sales and foreclosures. Here is the latest on whether it will be extended beyond the end of this year.

Many of our readers have asked whether we believe theMortgage Forgiveness Debt Relief Act of 2007 will be extended past its current expiration scheduled for the end of the year. As a reminder, the legislation ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.

The reason this act is important in today’s housing market is that, without the act, debt reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence.

Last week, DSNews reported:
“Obama’s FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007…

In the Treasury’s Green Book, its summary explanation of the administration’s budget proposal, it calls for an extension of the tax break due to “the continued importance of facilitating home mortgage modifications.”

The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015.”

In today’s political environment, the passage of any budget proposal could be considered doubtful. However, both parties seem to be in agreement that this provision should be extended. We can only hope that it doesn’t fall victim to an election year.

Disclaimer: As with all tax issues, we strongly suggest you consult with your accountant to find out how this may impact you and your family.


Thursday, February 16, 2012

Idaho Homeowners and Strategic Short Sales?

Here is more on short sales, and whether you should do a strategic default. I find this to be a very personal thing, and I have heard arguments on both side of the coin. The following article makes some very good points for consideration. If you do decide that a short sale is the route for you, give me a call, we need to get started today!  (See yesterday's post.)

"We normally say that a company “went bankrupt,” implying that it had no choice. But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills. But it has been losing money for a while, and its board decided that it was foolish to keep throwing good money after bad. Declaring bankruptcy will trim American’s debt load and allow it to break its union contracts, so that it can slim down and cut costs.

American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different. The bursting of the housing bubble has left millions of homeowners across the country owing more than their homes are worth. In some areas, well over half of mortgages are underwater, many so deeply that people owe forty or fifty per cent more than the value of their homes. In other words, a good percentage of Americans are in much the same position as American Airlines: they can still pay their debts, but doing so is like setting a pile of money on fire every month.
These people have no hope of ever making a return on their investment in their homes. So for many of them the rational solution would be a “strategic default”—walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages; studies suggest that perhaps only a quarter of all foreclosures are strategic. Given how much housing prices have fallen, the question is why more people aren’t just walking away.

Part of the answer is practical. Defaulting (even in so-called non-recourse states) is still a lot of trouble, and to most people it’s scary. In addition, homeowners are slow to recognize how much the value of their homes has dropped, and have inflated expectations of how much it will rise in the future. The biggest hurdle, though, is social: while companies get called “very smart” for restructuring their contracts, there’s a real stigma attached to defaulting on your mortgage. According to one study, eighty-one per cent of Americans think it’s immoral not to pay your mortgage when you can, and the idea of default is shaped by what Brent White, a law professor at the University of Arizona, calls a discourse of “shame, guilt, and fear.” When the housing bubble burst, the banking industry was terrified by the possibility that homeowners might walk away en masse, since that would have stuck lenders with large losses and a huge number of marked-down homes. So strategic default was portrayed as the act of dishonorable deadbeats. David Walker, of the Peterson Foundation, waxed nostalgic about debtors’ prisons, and John Courson, the head of the Mortgage Bankers Association, argued that defaulters were sending the wrong message “to their family and their kids and their friends.”

Paying your debts is, as a rule, a good thing. But the double standard here is obvious and offensive. Homeowners are getting lambasted for doing what companies do on a regular basis. Walking away from real-estate obligations in particular is common in the corporate world, and real-estate developers are notorious for abandoning properties that no longer make economic sense. Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.

When it comes to debt, then, the corporate attitude is do as I say, not as I do. And, while homeowners are cautioned to think of more than the bottom line, banks, naturally, have done business in coldly rational terms. They could have helped keep people in their homes by writing down mortgages (the equivalent of the restructuring that American Airlines’ debt holders will now be confronting). And there are plenty of useful ideas out there for how banks could do this without taxpayer subsidies and without rewarding the irresponsible. For instance, Eric Posner and Luigi Zingales, of the University of Chicago, suggest that, in exchange for writing down mortgages in hard-hit areas, lenders would take an ownership stake in a house, getting a percentage of the capital gain when it was eventually sold. Lenders, though, have avoided such schemes and haven’t done mortgage modifications on any meaningful scale. It’s their right to act in their own interest, but it makes it awfully hard to take seriously complaints about homeowners’ lack of social responsibility.

Of course, many borrowers made bad decisions and acted irresponsibly. But so did lenders—by handing out too much money and not requiring sensible down payments. So far, banks have been partially insulated from the consequences of those bad decisions, because Americans have been so obliging about paying off overinflated mortgages. Strategic defaults would help distribute the pain more evenly and, if they became more common, would force lenders to be more responsible in the future. It’s also possible that a wave of strategic defaults—a De-Occupy Your House movement—would get banks to take mortgage modification more seriously, which would be all for the better. The truth is that banks have been relying on homeowners to do the right thing. It might be time for homeowners to do the smart thing instead. ♦"


Wednesday, February 15, 2012

Understanding Mortgage Debt Cancellation

I wrote recently about doing short sales and if you are considering  them you should get started now due to scheduled law changes taking effect the end of this year. I came across this article that provides a more comprehensive look at mortgage debt forgiveness.

A lender will, on occasion, forgive some portion of a borrower's debt. The general tax rule that applies to any debt forgiveness is that the amount forgiven is treated as taxable income to the borrower. Some exceptions to this rule are available, but, until recently, when a lender forgave some portion of a mortgage debt (such as in so-called "short sales," foreclosures and "workouts"), the borrower was required to pay tax on the debt forgiven.

A law enacted in December 2007 provides relief to troubled borrowers when some portion of mortgage debt is forgiven. That relief expires on Dec. 31, 2012. Use this information to better understand mortgage debt cancellation:

General Rule for Debt Forgiveness:

If a lender forgives some or all of an individual’s debts, the general rule is that the forgiven amount is treated as ordinary income and the borrower must pay tax on the forgiven amount. Exceptions apply for bankruptcy, insolvency and certain other situations, including mortgage debt. (See below)

Current Law for Mortgage Debt (January 1, 2007 through Dec 31, 2012):

A borrower can be excused from paying tax on forgiven mortgage debt. The debt must be secured by a principal residence and the total amount of the outstanding obligation may not exceed the original mortgage amount plus the cost of any improvements. The objective of the legislation was to assure fairness: Homeowners should not be required to pay income tax where there is no cash realized in a transaction.

Example: The provision is best understood with an example.
Assume a family purchased their home for $175,000, with a mortgage of $150,000. In 2012, they need to sell the home. They find that the value of homes in their area has declined, so they can sell for only $120,000. At the time of the sale, the outstanding balance on their mortgage is $132,000. Thus, there will not be enough cash at settlement to repay the lender the full balance of the mortgage. If the lender forgives the entire difference between the amount owed ($132,000) and the sales price ($120,000), the debt forgiven will be $12,000. The relief provision assures that the homeowner will not pay tax on the $12,000 forgiven.

Does the relief apply only to a sale?

No. The provision has broader application. Lenders might forgive some portion of mortgage debt in a sale known as a “short sale” (as above, when value at sale is less than the amount owed) or in a foreclosure when the debt is wiped out. In addition, if a borrower still living in the home is able to make an arrangement with a lender that reduces the principal balance of a mortgage, the amount forgiven in that workout will not be taxed.

Can the homeowners in a short sale or foreclosure claim a loss?

No. The loss is considered a personal loss and is therefore ineligible for either capital loss or ordinary loss treatment.

What happens to the seller when mortgage debt is forgiven?

Until January 1, 2013, the homeowner will pay no tax on any forgiven amount. Under pre-2007 law, the amount of forgiven mortgage debt (the $12,000 in the example above), would have been treated as income, and taxed at ordinary income rates.

Does this provision apply to a refinanced mortgage?

Only in limited circumstances. The relief provision can apply to either an original or a refinanced mortgage. If the mortgage has been refinanced at any time, the relief is available only up to the amount of the original debt (plus the cost of any improvements). Thus, if the original mortgage was $125,000 and later refinanced in a cash-out arrangement for a debt totaling $140,000, the $15,000 cash-out is not eligible for relief if a lender later forgives some amount related to the cash-out. Tax relief is generally not available for second mortgages or home-equity lines of credit where the funds are not used for home improvement. Any amount that is not eligible for the relief provision will be taxed as ordinary income.

How does the homeowner get the correct information to the IRS?

The lender is required to provide the homeowner and the IRS with a Form 1099 reflecting the amount of the forgiven debt. The borrower/homeowner must file a Form 982 to reflect the amount forgiven and to show the reason why the forgiven amount is not taxable. Any taxable portion of forgiven debt will then be reported on the homeowner’s Form 1040 for the tax year in which the debt was forgiven. For example, a lender that forgave mortgage debt in March 2012 would provide the 1099 information to the IRS and the homeowner as required. The forgiven amount would then be reflected as appropriate on the 2012 Forms 982 and 1040 that will be due April 15, 2013.

Is there a limit on the amount of eligible debt?

Yes. Up to $2 million of mortgage debt on a principal residence may be forgiven tax-free. Any amount of forgiven debt above $2 million is taxable as ordinary income.

Does this provision apply to commercial real estate?

Permanent rules enacted in 1993 provide relief to debt-burdened commercial real estate and rental properties. The 2007 provision puts commercial/investment property and residential owner-occupied property on similar footing.

What if a property declines in value, but the owner stays in the house?

The provision would not apply. The provision applies only at the time of sale or other disposition or when there is a workout (reduction of existing debt) with the lender. No mechanism exists to reflect a loss of value while the property is still being used as a residence. (See the question on capital losses, above.)

Do all lenders forgive mortgage debt when property values decline or in foreclosure?

No. Some states have laws that allow a lender to require a repayment arrangement, particularly if the borrower has other assets. Forgiveness of debt is always at the lender's discretion.

When did this legislation pass?

A version of the mortgage relief provision passed the House in 1999 and 2000, but was not enacted. The rules of current law were enacted in 2007 as part of H.R. 3648, a bill focused solely on housing issues. The original rules were effective from January 1, 2007 through December 31, 2009. The provision was extended through December 31, 2012 in 2008 as part of the stimulus legislation enacted in 2008. (HR 1424, PL 110-343).

What is the revenue effect?

No current score exists for an extension of this provision beyond 2012. When originally enacted in 2007, the score was a loss of $1.4 Billion over 10 years. The 2008 extension added $362 Million to this score.


Tuesday, February 14, 2012

January market report in…its going to be a good year.

Here is my Valentine present for you. (and Me!)

2012 January sales were 384 in Ada County, a decrease of 10.4% over January 2011. This is the strongest January sales we’ve had since 2007.

Historically, January sales are the lowest of the year. January sales decreased by 100 units from December; down 20%. In the previous two years the drop off in sales from December to January was more than 200 units…this suggests a stronger than normal fist month of the year.

Of our total sales in January… 53% were distressed….up 6% from December 2011, but down from the two previous years. In January 2011, 57% of our sales were distressed. We have seen a mild overall increase in the percentage of sales in distress. In July we were down to 42% overall and have seen the amount increase one to two points each month. Few days from last month. Down from 94 days last year.

Pending sales at the end of January were 856; an increase of 25% from the end of December. In general pending sales increase in January compared to December. The percentage of pending sales in distress decreased 2% from December, totaling 47% overall. We are now at nine consecutive months below 50%.

At the end of January, we had 18% more sales pending than at the end of January 2011.

January median home price was 139,000; up 2.6% from January 2011.

New Homes median price for January was $209,000; a decrease of 1% from January 2011.

The number of houses available continues to decrease. At the end of January our total active inventory was 1,947 homes. This is down 3% from December and 29% less than last year at this time.

At the same time, the percentage of distressed active inventory dipped 1% to 35%. We have been hovering between 33% and 36% since May. We remain well below the 40% levels set last spring….when we were on the increase.

In Ada County we have 4.5 months of inventory on hand…historically this number defines a strong “seller’s market”. The price category in shortest supply is <$119,000 with 2.5 months. In the range of $120,000 to $159,999 we have 4.2 months. All price points up to $200,000 have less than 5 months supply. We have benefited all year from inventory levels much lower than national average. Now, however, we are starting to see some slowdown in sales as the inventory continues to fall.

Based on January sold data, our most desirable price point is $120,000 to $160,000 which made up more than 20% of total sales.

There is no longer any doubt that, in Ada County, we have passed our “low water” point.

The challenge to our continued recovery is available product.

At Mike Turner’s Real Estate Summit last week, Mike had some compelling data showing how 2012 is going to be a strong year for real estate in Ada County.

We also have several new developments regarding Federal policies addressing home ownership (HAPR 2 and HARP 3) and a big announcement about a settlement between banks and States Attorneys General over their foreclosure practices.

So now what…?  Will loads of new foreclosures flood our inventory… doubtful.  There will be an increase, but we need all of the inventory we can get.

Courtesy of Marc Lebowitz, Ada County Association of Realtors.

Monday, February 13, 2012

Fed Announces Low Rates Through 2014, Mortgage Affordability Remains High

The Federal Reserve announced  that they will keep interest rates low until at least late 2014 in an effort to help jump-start the sluggish economy by making it less expensive to borrow money across all segments of the economy.

What this means for home buyers and current homeowners is that mortgage rates for a purchase loan or to refinance will remain remarkably low in the near-term, keeping affordability high. The 30-year fixed mortgage rate fell below four percent onZillow Mortgage Marketplace in mid-October 2011 and has dropped as low as 3.67 percent in recent weeks.
Here’s a quick comparison of mortgage rates and affordability using today’s rates compared to 2008:

Today’s rates: For a home buyer shopping for a home today assuming 20 percent down and today’s interest rate of 3.7%, they would be able to afford a $215,000 home with a monthly mortgage payment of about $1,000 per month (including principal and interest).

2008 rates: If a home buyer shopped for a home in 2008 when mortgage rates averaged roughly 6 percent, the same home buyer would only be able to afford a $165,000 home for $1,000 per month (including principal and interest)

Difference: $50,000

Courtesy of Harris Real Estate University


Friday, February 10, 2012

If you are going to need to do a Short Sale or Foreclosure--DO IT NOW!

If you an Idaho homeowner who is still trying to hang on to their homes and figure some way to make it work, I applaud you for the effort but now is the time to make the hard decision.

Unless it is extended by congress the Mortgage Debt Relief Act of 2007 is set to expire Dec 31, 2012. This act "generally allows taxpayers to exclude income from the discharge of debt on their principal residence," according to the Internal Revenue Service. So in the absence of this act, the amount that is forgiven, either in a foreclosure or a short sale, will taxable on federal income taxes. YIKES! That could be huge, if a house sold for $50,000 less than what is owed, homeowners would owe taxes on that $50,000.

So Idaho homeowners, you need to decide now what you are going to do-to give yourselves time. Short sales can take an extremely long time and if that is the option you are going to do, you need to start  TODAY.

If you are able to stay in home great, but if it just not going to be possible, I have completed numerous successful short sales, give me a call.

I am not a tax or legal professional and I encourage you to contact a tax and/or attorney to review your options.

Thursday, February 9, 2012

Appraisers: Don't Blame Us

Yesterday, I wrote on the use of distressed properties for the estimating of value here in the Ada and Canyon county areas and shared a KCM Blog post.

Here is some more on that, quoted from the RealtorMag:

“Don’t shoot the messenger,” is the message the Appraisal Institute has for those in the real estate industry. Appraisers have been taking heat the last few months over low home values, with critics arguing that values aren’t matching a home listing or contract’s price and valuations are unfairly weighing distressed properties into the equation.

“Appraisers don’t set the real estate market; they reflect what’s happening in the market,” Sara W. Stephens, the Appraisal Institute’s president, said in the handout. “Obviously, the market is depressed — home prices have fallen far below the values of a few years ago. Many homes simply aren’t worth what their owners think they are.”

Appraisers say their main goal is to protect lenders against entering into a risky mortgage, not justifying the sales price for a buyer or seller. But the report emphasizes: Appraisers are independent, third-party experts and serve as an unbiased source of information.

Buyers and sellers “shouldn’t assume an appraisal is somehow ‘wrong’ if it doesn’t match the listing or contract price,” Stephens says. “There’s no reason to assume the contract price is the ‘correct’ price simply because it’s higher than the appraisal.”

A lot of the criticism over appraisals recently has centered on appraisers using  distressed sales in their comparables — comparing an abandoned foreclosure to a lived-in home that may not have the maintenance issues that the foreclosed home might have.

“Appraisers know what adjustments to make, if any, when using distressed sales as comparables,” Stephens notes. “In some markets, distressed sales are so prevalent that it would be improper not to use them as comparables.”


Wednesday, February 8, 2012

Do Appraisers Use Distressed Properties as Comparables in Idaho?

Many times as I visit with folks about the current value of their homes our conversation inevitably turns to the effect of dis-stressed sales on housing values in the Boise-Nampa Metro market in general and on their home in specific. Back in the days of normal market forces, dis-stressed sales were generally not used as comparable properties for valuation purposes to non-distressed homes. They were considered an anomaly and as such were excluded. Fast forward to today and now they are considered in many neighborhoods to be driving the market, and as such they are setting value.

We may hate it, but at least for now in most of our local areas that is the case.

For more on that subject here a post from the KCM Blog folks:

Many of our readers ask us if appraisers use distressed properties (short sales and foreclosures) as comparables when doing an appraisal on non-distressed properties. We have posted on this issue on several occasions. Last month, the Appraisal Institute issued a paper on the subject. In the paper,  the Institute explained that:
“Foreclosures and short sales can provide important information for appraisers, who develop valuations based on market data and market forces.”

On whether an appraiser should use distressed properties as comparables, the Institute was very direct (all items in bold were shown as bold in the original paper):
“An appraiser should not ignore foreclosure sales and short sales if consideration of such sales is necessary to develop a credible value opinion.”

And they explained the possible differences between short sales and foreclosures:
“A short sale … might have involved atypical seller motivations and so might not be an ideal comp…

A sale of a bank-owned property might have involved typical motivations, so the fact that it was a foreclosed property would not render it ineligible as a comp.”

Bottom Line

Some will argue that distressed properties should not be used when appraising non-distressed properties. However, there is no longer any doubt that they will be.


Tuesday, February 7, 2012

Blink and they are gone!

I mentioned last week that I was going to showing houses on Saturday to a young newly married couple. We viewed several homes in the Kuna area, almost all were either listed as a short sale, bank repossession (REO) or Hud owned homes. As they were narrowing down to their favorites, I was calling to find out current availability, and 4 different properties had received an offer THAT DAY, with some receiving more than one. The couple decided on a HUD home whose price was actually nearly $10,000 less than the MLS had listed. To get the most up to date information on HUD homes it is necessary to check their site as the local agents get notified after the fact. With most potential buyers not aware of the lower price, my buyers were able to offer even less and had their bid accepted at a great value.

The moral of this story? Reasonably priced home are not hanging around on the market and I can help you find the deal that is right for you!

Sunday, February 5, 2012

Idaho: Meet them coming and going!

Here is a national map of 2011 Migration patterns. Here in Idaho we appear pretty balanced with 454 outbound shipments of household goods vs. 399 inbound.





Saturday, February 4, 2012

Time for Idaho Young People to Buy a Home!

I am excited, I am scheduled to show houses to a young couple on Saturday. They were referred by some friends of mine and they are ready and anxious to buy. We will be looking in Kuna, and there are several good choices for them to consider. All within their comfort level and below the amount for which they have been qualified. The first step was visiting with my loan officer, then I visited with them to see what they would like. The next step is to look while I listen closing to ascertain their likes and wants.

We have reported that almost six million adults between the ages of 25 to 34 are currently living with their parents. That number reflects an almost 50% increase since 2003. These young adults are now being advised to jump into homeownership.

Who are the people selling them on the American Dream? Their parents! It seems that parents of some adult children are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some moms and dads are helping financially and are even co-signing for the mortgage. Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.

In Fannie Mae’s most recent National Housing Survey, they asked the question directly: Is this a major reason to buy a home?

The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:

  1. It means having a good place to raise children and provide a good education.

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

  3. It allows you to have more space for your family.

  4. It gives you control over what you do with your living space (renovations & updates).

Should this surprise us? Aren’t these the same reasons our parents bought their home? Aren’t these the same reasons we purchased our home? These are the same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.

And today, the cost of homeownership is at all time lows:

J.P. Morgan
“The numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”

“[S]omeone who plans on staying put for seven years would come out ahead by about $9,000 if they bought a median-priced home rather than being a tenant in a median-priced rental.”

“Homes today are more affordable for average families than they have been since 1971. Median-income families today have nearly double the funds needed to purchase the average home.”

Bottom Line

Now that the economy is beginning to show signs of stabilizing, people are getting back to the core values that families have always embraced. Homeownership is definitely high on that list. And today, from a financial standpoint, it may be the opportunity of a lifetime.



Friday, February 3, 2012

Who's the Quarterback?

With the Superbowl almost here, I thought the following analogy quite appropriate. If you are going win in the game of buying a house you need a good quarterback along with a good offensive coordinator. That is where I and my outstanding loan officer Sheila Moore come in, we will arm you with your successful game plan. Give me a call 208/602-0055 or shoot me an email roger@lowesflatfee.com

Come Sunday sit down and enjoy the game, or the commercials or maybe the snacks. I suppose you could enjoy all three. I may not know a lot about football, but I do know Idaho Real Estate!

By KCM Blog

Given that it’s Superbowl Week (Go Giants!), I thought we might go with a football theme today. I can’t tell you how many different people I hear proclaim that they are the quarterback of the real estate transaction – the agent, the loan officer, an attorney, accountant or financial planner. But for goodness sake, the buyer/borrower had better be the one calling the shots. Not that everyone else doesn’t play an important role, but the buyer/borrower is the one most impacted by the choices made.

Here’s my opinion of how the team works best:

  • Head Coach (Your Loan Officer) – Your loan officer should be the Head Coach. After careful analysis of your income, credit and assets, this is the person in the best position to make sure you are playing to your strengths and minimizing your weaknesses.  Your loan officer can discuss the economic realities of homeownership, while listening to your quality of life concerns. (How often you’ll be able to eat out or vacation, for example.) The loan officer can set up the game plan.

  • Offensive Coordinator (Your Real Estate Agent) – Your real estate agent is your offensive coordinator. Armed with the game plan (which includes your limitations), the agent calls the plays, counseling you on the geography, the competition, the best ways to negotiate your way to your personal touchdown. Agents know the playing field (the inventory and the market). If you hire them to represent you, they can disclose the weaknesses of your competition (the seller).

  • Offensive Line (Your Attorney, Accountant and Financial Advisors) – Your attorney, accountant and financial advisors are your offensive line. They are there to protect you from the blitzes that come from outside (sellers, title issues, tax consequences, and protecting your assets). Not the glamour positions, but vital to any success you are going to have.

  • Running Backs and Wide Receivers (Your Friends and Family) – Your friends and family are the running backs and wide receivers. They often receive the glory and attention, but honestly, if everyone else doesn’t do their job, they rarely ever see success. Bad game plans, weak play calling, poor execution on the offensive line or by you, as quarterback, leave them merely as names on the roster.

As with any team, communication is the most important component to getting the desired results. Being the center of the action on the field, the quarterback (you) needs to honestly talk with your coaches and coordinators, so they can help direct you on the proper play calling. Simultaneously, you need to heed the feedback from your offensive line, running backs, and receivers to filter wise advice from emotion. Be the quarterback of your own home-buying process and you’ll be more likely to realize your dreams (and not the dreams of someone else).


Thursday, February 2, 2012

What Does Warren Buffet Think About Buying A Home?

Warren Buffet is seen by many as the greatest investor of our time. When he speaks, people listen. Like anyone else in his position of influence, he is criticized by some for using his bullhorn to promote his own business agendas at times. That makes it very interesting when we occasionally learn of how he privately advises those closest to him.

Such a situation occurred this week. Debbie Bosanek, Warren Buffet’s secretary of 37 years, recently purchased a second home in Surprise, Arizona.

In an article in the Omaha World Herald, Mrs. Bosanek discussed her reasons for purchasing a second home and the personal advice she received from Mr. Buffet.
“I just thought it was time to buy a home. Warren tells me that it will be the best opportunity in my lifetime. Mortgage rates are low and prices have dropped dramatically…I share Warren’s view about the future of America, and we believe that our country will do just fine. I’m happy to make this investment.”

The greatest investor of the last century privately has told the people closest to him that buying a home right now will be the best opportunity in [their] lifetime”.

That’s good enough for us. How about you?


Wednesday, February 1, 2012

Top Real Estate Internet Sites

Getting your property listed on the top internet sites is of utmost importance in today's marketing world. Over 90% of home buyers in 2010 reported using the internet in their home search with nearly 75% reporting they used it frequently.

So if you want to sell a home you need to be on the top internet sites. If you are not there, give me a call we offer the most economical ways of getting there!

Top 10 real estate websites in December


For the sixth month in a row, Yahoo Real Estate was the most popular real estate-related website in December, according to the latest rankings from Web metrics firm Experian Hitwise.


Zillow once again took the No. 2 spot on the list, after dropping to third place in November, and Realtor.comdipped to the No. 3 spot.