Buying a Foreclosure Is No Picnic

Buyers seeking a foreclosed property should realize that not every foreclosure is a good deal.

Urge would-be buyers of foreclosures to have the property thoroughly inspected, says Dan Steward, president of the Tampa-based inspection firm, Pillar to Post. Lenders are not held to the same disclosure requirements as sellers.

Steward says damage isn’t always obvious. While it doesn’t take an expert to see that a toilet has been ripped out, it does require someone with knowledge to know that ripping it out damaged a pipe 20 feet down the line.

The best way for the buyer to get the property is to follow the bank’s instructions closely, says Ryan Melvin, co-owner of More Realty Group in Las Vegas, which specializes in foreclosures.

Another quirk that sometimes surprises buyers of real-estate-owned properties, or REOs, is the scrutiny that banks place on the buyers' credit, even though they are using a different lender.

Source: The Wall Street Journal, Amy Hoak (09/27/2009)

Signaling Confidence, Fed Holds Rates Steady

In an announcement that should bolster the housing industry, the Federal Reserve said Wednesday that it intended to keep key lending rates near zero "for an extended period" and continue to buy mortgage-backed securities and debt through March 2010.

That’s the second time the Fed has decided to stretch out its program to encourage spending and stimulate the economy.

Economists predict that the Fed will keep the key lending rate near zero into the first quarter of next year. Holding that rate low means that consumer loans, including mortgages, home-equity loans, and credit-card rates, remain at the lowest point in decades.

Greg McBride, senior financial analyst at Bankrate.com, warned that these low rates will eventually head higher and said home owners interested in refinancing should realize that "it could be a different story 12 months from now," with much higher rates for 30-year fixed-rate mortgages.

Source: The Associated Press, Jeannine Aversa (09/23/2009)

Commercial Prices Fall as Vacancy Rates Rise

The value of commercial property is being driven by vacancy rates—the higher the vacancy rate, the lower the price.
At the height of the boom, a high vacancy rate was sought after because the buyer could fill the space and raise rents. Today, finding tenants is a major challenge in many areas and buyers will pay more if a building has guaranteed tenants for the long term. Robert Von Ancken, the senior appraiser for Grubb & Ellis in New York, estimates that substantial vacancies cost a seller as much as 30 percent of value.
“Investors today are very hesitant to make a mistake by underwriting improvement, decreasing vacancy, or increasing rent,” says Scott A. Singer, the executive vice president of the Singer & Bassuk Organization, a New York company that arranges financing.
Source: The New York Times, Terry Pristin (09/15/2009)

How to Spot Foreclosure-Prevention Scammers

Here’s how the most common foreclosure-prevention scams work:
The desperate home owner gets a letter that says something like, “We know you’re having a hard time. We have a pipeline to your lender and can help you save your home. Call this toll-free number now.
”Home owners call the number and agree to pay $1,200 to $1,500 upfront for help with their mortgage. Nothing happens. Their home still goes into foreclosure.
Harold Kirtz, a lawyer for the Federal Trade Commission who is prosecuting these scammers, says victims are often well educated and financially savvy, but they also are “in a very vulnerable state.

”Here are some red flags that should make a home owner run in the opposite direction:

• If the company guarantees success. Nobody can guarantee a lender won’t foreclose or will modify a loan.
  
• If the company wants money upfront. "We can't say all advance fees are illegal," Kirtz says, “But in most cases they're probably bogus."
  
• If the company wants the home owner to send mortgage checks directly to the modification firm. The only certainty there is that the company will cash the checks.

Source: Washington Post Writers Group, Kenneth R. Harney (09/13/2009)

IRS Changes Rules to Ease Commercial Refis

The U.S. Internal Revenue Service announced changes to tax rules Tuesday that make it easier for commercial property owners to refinance.
The new guidelines allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, or REMICs, to be refinanced without penalties for investors.
The new regulations allow investors to keep tax savings that they would have lost under the old rules. The IRS is considering expanding the changes to other investment vehicles like real estate investment trusts (REITs).
"A stalemate now exists on commercial mortgage backed security (CMBS) loans that are not currently in default but need modification," said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying body for property owners and investors. "Today's announcement should help break the stalemate."
Sources: The Associated Press, Stephen Ohlemacher (09/15/2009) and The Wall Street Journal, Lingling Wei (09/16/2009)

Most Affordable Markets Ranked

In its annual survey of most- and least-affordable housing markets, BusinessWeek quoted a number of experts who believe that for many people, the current low interest rates and low housing prices have combined to offer a once-in-a-lifetime opportunity to buy a home.
Dennis Torres, executive director of real estate operations at Pepperdine University, says, "People are going to talk about this as 'I could have, I should have' for decades," he said. "If you're confident that you'll stay in the location for seven years and you're confident of your income, don't walk, run."
To calculate the most- and least-affordable areas, BusinessWeek considered the share of homes sold in the second quarter of this year that would have been affordable to a family earning the local median income. Housing costs were calculated using new and existing sales records supplied by First American Real Estate Solutions and include principal, interest, estimated property taxes, and insurance.
Here are the 10 most-affordable areas:
1. Kokomo, Ind.
2. Lansing-East Lansing, Mich.
3. Mansfield, Ohio
4. Elkhart-Goshen, Ind.
5. Lima, Ohio
6. Bay City, Mich.
7. Indianapolis-Carmel, Ind.
8. Saginaw-Saginaw Township North, Mich.
9. Youngstown-Warren-Boardman, Ohio-Pa.
10. Canton-Massillon, Ohio
Here are the 10 that are least affordable:
1. New York-White Plains, N.Y.-Wayne, N.J.
2. San Francisco-San Mateo-Redwood City, Calif.
3. San Luis Obispo-Paso Robles, Calif.
4. Ocean City, N.J.
5. Honolulu
6. Los Angeles-Long Beach-Glendale, Calif.
7. Santa Ana-Anaheim-Irvine, Calif.
8. Santa Cruz-Watsonville, Calif.
9. Nassau-Suffolk (Long Island), N.Y.
10. Flagstaff, Ariz.
Source: Business Week, Prashant Gopal (09/11/2009

Fed's Beige Book Offers Some Positive News

The Federal Reserve says it's “cautiously positive” about the economy in its widely watched regular report called the Beige Book.

Eleven of the Fed’s 12 regions called economic activity in the area “stable,” “showing sings of stabilization,” or “firmed.”

Analysts said the economy is growing in the third quarter at an annual rate of 3 percent to 4 percent because businesses are spending more.

But the market for homes continues to be weak. In most areas, buyers are first timers and others purchasing the lowest-cost properties. Philadelphia was an exception: Sales there are up even for expensive homes.

In the commercial real estate market, sales were down, and construction was off in all parts of the country.

Source: The Associated Press, Jeannine Aversa (09/09/2009)

Will Taxpayers Have to Bail Out FHA?

The Federal Housing Administration stepped up to guarantee low-down-payment mortgages for riskier buyers after the mortgage market crashed. Now with many of them in default, the FHA’s losses have mounted, and it’s possible that its reserves will fall below the 2 percent level required by law. If that happens, taxpayers may have to bail out FHA.

Some housing analysts believe that this will lead to tighter restrictions FHA mortgages. "It absolutely changes the political dynamic once you have to ask taxpayers" for money, says Lisa Marquis Jackson, vice president for John Burns Real Estate Consulting.

The 10 states with the most FHA-insured mortgages are:

1. Texas


2. California


3. Florida


4. Georgia


5. Ohio


6. Illinois


7. Pennsylvania


8. Michigan


9. Virginia


10. North Carolina

Source: The Wall Street Journal, Nick Timiraos (09/05/2009)

Madoff Beach House Is Listed at $8.75 Million

The U.S. Marshals Service announced Tuesday that the Corcoran Group will list imprisoned financier Barnard Madoff’s beach home in Montauk, N.Y., for $8.75 million.

The property sits on a 1.2-acre lot, nestled close to the southeastern tip of Long Island.

Its proximity to the water and the eye-popping view are the grandest aspects of the 3,014-square-foot garageless home, observers say. The house, described by marshals as "simple, stylish and understated," is at the foot of a steep driveway off Old Montauk Highway.

"Our goal is to place the homes on the market soon to minimize the amount of time they remain in our inventory and maximize the return to the victims," U.S. Marshal Joseph R. Guccione said in a statement.

Source: The Associated Press, Tom Hays (09/01/2009)