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We
Don’t Need a Crystal Ball: HUD’s Reverse Mortgage and Long-term Community
Health
Laurie MacNaughton
Reverse Mortgage Specialist
As a movie, the script would sound implausible: 78 million
Americans disappear from local neighborhoods, leaving behind empty homes and too
few people to fill them. And yet, the U.S. housing market faces just this
specter as baby boomers in increasing numbers “retire, relocate, and eventually
withdraw from the housing market,” as stated in a report in the November, 2009
issue of the Journal of the American Planning
Association.
The authors of the report, Dowell Myers, professor of urban planning at the
University of Southern California, and SungHo Ryu, associate planner with the
Southern California Association of Governments, conclude measures must be taken
to limit the impact of an aging population and to avoid a massive disruption in,
and permanent devaluation of, the housing market.
To combat a massive Boomer exodus from the housing market,
the report states that local communities need to limit overbuilding of new
housing and put measures in place to retain the elderly in the community.
For the real estate professional the government-backed FHA
Reverse Mortgage and FHA Reverse For Purchase programs are perhaps the most
effective tools available for accomplishing this goal.
It is important to note that many older homeowners and
homebuyers are leery of the Reverse products, or are only superficially
familiar with them. This places the real estate professional on the front lines
of the effort to keep seniors in their own home. Therefore, at least a basic
understanding of the FHA Reverse products is vital.
The now-familiar traditional Reverse Mortgage allows
homeowners, aged 62 or older, to access some of the equity stored in their
home. There are no credit or income requirements, and the loan is not repaid
until the homeowner dies, sells the home or otherwise permanently leaves the
home. He always retains title of the home, unless he fails to pay taxes,
maintain homeowners insurance or keep the property up to FHA standards. He
never has to move—unless he chooses to—and cannot get “upside-down,” or owe
more than the market value of the home.
In Reverse For Purchase the homebuyer, aged 62 or older,
brings a portion of the purchase price to the table, and the balance is
provided by the lender. Again, the loan is not repaid until the homeowner dies,
sells the home or otherwise permanently leaves the property. Title is fully in
the name of the homeowner, the same guarantees exist, and the same tax,
insurance, and FHA upkeep requirements apply.
In using the Reverse Mortgage products the real estate
professional, versed on both the traditional FHA Reverse Mortgage program and the
newer FHA Reverse For Purchase, will play an increasingly large roll in
preserving the vibrancy of the housing market, maintaining the well-being of
the nation’s fastest growing demographic, and sustaining the health of
communities in general.
Keeping the senior homeowner integrated into neighborhoods will
impact the long-term health and stability of our communities far into the
future. The well-informed housing professional has never played such a crucial
role in providing solutions for, and helping meet the financial needs of, our
older citizens. And this, in turn, is in the best interest of us all.
Laurie
MacNaughton
Reverse Mortgage Specialist
Senior Products Division
Wells Fargo Home Mortgage
21355 Ridgetop
Circle, Ste. 100
Sterling,
VA 20166
703-433-1012 Tel
703-477-1183 Cell
866-548-5107 Fax
Laurie.L.MacNaughton@wellsfargo.com
© 2010. All rights reserved.
Used by permission.
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Renovation Financing
I have always been told (and taught) that the role of the
Realtor was that of a consultant. I am
constantly surprised by the number of experienced agents that don’t know how to
spell FHA 203k Renovation loans, let alone understand how this loan can best
serve their client.
The basics: Why
should you consider a Renovation Loan?
While many lenders will tell you that all it takes is $5,000 to justify
renovation financing, in my opinion the real number is more like $12,000 plus
in repairs. So, anyone buying a
foreclosure, a short sale or a fixer upper that needs work should at least be
familiar with the loan and what it can and can’t do. The 203k is a single loan that includes
either the purchase (or refinance) value of a property and the cost of the
repairs or renovations. The required
down payment is 3.5% of the purchase price of the property plus
the renovations or the after
improved value, whichever is LESS.
All FHA loans require an FHA approved appraiser and in the
case of the renovation loans the appraiser is not looking at the as is
value, rather they are looking at the after improved value – a point
that gets agents into trouble when they advise their clients to make a high
offer with the plan that the appraisal won’t support the higher price. Know the rules before you commit your client
to expenses that may not be acceptable!
There are two types of 203k loans, Streamline (under $35,000
for the work and the fees) and what is generally called the Full K or Full 203k. In Northern Virginia
the maximum loan amount is $729,750 and can include and combination of purchase
price and renovations. The Streamline
loan is good for minor repairs and cosmetic improvements – such things as paint,
kitchen appliances, flooring, cabinets and the like. The Full K is good for additions, major
repairs almost anything short of luxury items such as swimming pools.
Most Home Inspectors are not schooled in the specific
requirements of an FHA appraisal. When
the agent uses his/her favorite home inspector on a property that is a likely
candidate for a renovation loan, you and add anywhere from 2 to 4 weeks to the time
it is going to take to get to settlement.
In my experience, I find that owners, and asset managers are not always
happy about extending the settlement date.
The best way that I have found to avoid this time delay is to use a Home
Inspector / HUD consultant for the initial home inspection. By doing so it eliminates the delay, educates
your client to the requirements of the loan, gets you lender on the right page
faster and gives notice to the seller that you the agent know what you are
doing. My home inspector / HUD
consultant has become a solid part of my team and I would not hesitate to
recommend him to anyone. If you need his
contact information, just send me an email and I will be happy to send it along
to you.
Any questions or for more detail, just ask.
Adam Davis
SearchHaymarket.com
AshburnTownhomes.com
With our move to Keller Williams in Ashburn, the opportunity arose to add a new web site. This new creation is AshburnTownhomes.com, dedicated to the eastern Loudoun County area and to townhome living in particular. I have chosen this portion of the market because in my opinion it has more impact on the health of real estate in Northern VA than any other portion of the marktet. Think for a moment - most of the new and younger buyers are buying townhomes from an affordability basis. The financing is often either FHA or VA ( gone are the days of alternative zero down conventional loans), these days the homes are often a little older and in need of some TLC and the cash reserves for the buyers by the new buyer are often to low to easily accept the burden that a new roof or HVAC (heating and airconditioning system) will cost. Our govenment seems bent on making it easier for owners to walk away from their upside down properties and with limited funds it is not hard to understand why financially straped owners are deciding to walk a away. We need a new mind set on the part of real estate professionals. Buyer protection is good for everyone. A first time buyer that does not receive a Home Warranty as part of settlement is at risk. Buyers who are not encouraged to have a home inspection are at risk. New homeowners who have not been told about renovation financing are at risk. We all need to up the quality of the advice and help that we offer to our first time buyers. The Davis RE Group is making itself avaialble to answer quesitions and provide advice - no strings - just ask.
My rant for the day. Thanks for reading! Adam
I have been spending a lot of time working with first time buyers lately. One of the biggest issues that stands out is the terrible shape of our housing, especially those short sale and foreclosure types of properties that are priced where they are affordable to first time buyers (investors too). What has been even more frustrating is the lack of financing available to help buyers purchase these properties and then renovate them to a point where they are really livable. You know that point where pride of ownership kicks in and the owners become proud of what they have – where it is logical to assume that appreciation will once more begin to take place.
I have also been spending a lot of my time with the folks at Single Parent Properties, the organization that has tasked itself with assisting single parent households, as well as low and moderate income families with finding affordable housing. Many of the foreclosures and short sales that are available are in such terrible shape that they are no longer a suitable home.
With a lack of 100% financing and a lack of available rehab financing these properties are sitting on the market, reducing tax revenue for the various local governments, draining capital from the banks who must insure and maintain them while taking funds away from the prospective buyers who are in the market looking for a place to call home.
Clearly this situation can’t continue. After months of looking and talking to lenders, state and local housing officials, and representatives of the Federal government, we have discovered a solution. It is neither a one size fits all nor a perfect solution, but it is a very workable solution. We have discovered how to enable cash strapped buyers with fair to good credit to buy homes. It makes no difference whether they are owner occupied, short sales or foreclosures with no money down and with funds available to do the rehab work necessary to truly make these livable homes. The interest rates are highly competitive and the loan qualification process is no more difficult that a standard loan application. There are some extra steps involved and yes, it is a bit complicated, but don’t you think that it is worth the effort to be able to buy a home at substantially below market prices and rehab it into a home that you can be proud of for years to come? If you think that this might be a program that will work for you, I’ll be happy to discuss it in greater detail, just contact me at AdamD@SearchHaymarket.com.
I recently received this in an email from a prospective new client:
We are interested in a 3-4 bdr single family in Gainesville or Haymarket area for a sale price of $250,000. I realize that is low, but I'm sure there are some folks out there that will take that in this market. we are also interested in any foreclosures (that have not been gutted out) or properties that are available for auction. My wife and I have been looking for new construction as well, and ran into a few builders that were willing to negotiate prices. $250,000 may be a stretch for new construction, but I'm aiming to catch a bargain. We have a six month window for a purchase, so we have time to wait for the right property.
My response was:
Thank you for the email. I understand why you would be looking for a bargain – with all of the short sales, foreclosures and “educated sellers” putting properties on the market, it is a good time to shop wisely. While I have found that some of the builders are willing to negotiate, they are a lot more realistic about their costs than the banks who are selling foreclosures. In the good old days, before the run up in prices, builders were selling their homes on a cost per square foot basis and the combined cost of home, land and improvements averaged to around $100 per square foot or $250,000 for a 2500 sq. ft. four bedroom, 2 bath, 2 car garage home. Since then materials costs have gone up (a little), labor is about the same, fuel has gone up (a lot) and land prices have begun to drop back towards the pre-boom levels. If you can find a good buy for under $250,000 in a single family home, don’t waste any time doing so. While I think that what you are trying to do is possible, you may want to have a long talk with a lender that does the old fashioned 203K style FHA loans – they will allow you to purchase the home and will provide up to $35,000 in funds for improvements – paint, appliances, minor repairs, counter tops – that sort of thing. In my experience you will want to be wary of any homes that don’t offer photos of the interior – in many cases they have been gutted by the previous owner and can be very expensive to repair. All of the short sales and foreclosures are being sold “as is, where is” so plan on hiring a home inspector to make sure of the condition and a plumber to pressure test the pipes as most of the homes have had the power turned off and if the pipes did freeze, you could have a heck of a mess on your hands when the water gets turned on.
FYI. I just ran a similar search for a new client and there are 50+ properties for sale in the Bristow, Gainesville and Haymarket area priced under $250,000 and none of them were single family homes. Warrenton was just about the same, but the few single family homes were not very pretty and kind of old. And, in this market depending on the seller, expect to take from one to six weeks negotiating with the owner/bank, and then typically settlement takes place in three to six weeks – if you plan on the low key approach – occasionally on week ends, the search phase will be another 4 to 6 weeks so on the long side of time table if you started today it could be 16 weeks or 4 months until you were able to move in. OK?
If you would like some help with the search and negotiations, give me a call, I’d be happy to help.
Good luck with your home search.
My concern is that I be as open and honest as I can when answering questions from friends, clients and prospective new clients, so my question is: Was I clear? Did I answer the question or raise more questions?
Have a great day and thanks for reading.
One of my pleasures is referring my old friends to my new friends. On this page you will find information on local companies that I personally know and like and believe that I can recommend to you without hesitation. As time goes on I would like to add businesses that you have found that you feel the same way about. When you find such businesses, email be at Adam at SearchHaymarket.com and provide me with a little information about why you believe they should be added to the list. Enjoy getting to know my friends and please, let them know how you heard about them!
Regards,
Adam
In No Special Order Because They Are All Special:
CertaPro Painters, Richard Van Lear. Phone 703-455-6200. www.CertaPro.com Richard covers all of Prince William County and on occasion will go outside of border for friends and past clients. Richard has been know to recommend Muralo Paint and Benjamin More. I have painted two homes with the Muralo and really understand why Richard sings its praises. According to Richard, the beauty of a paint job begins with the prep(preparation). If you are looking for high quality work at fair prices you should give him a call.
Atkins-Palmer Corporation. 866-753-6994. Ken Palmer, President. When I think about plumbing, heating, air conditioning or gas fireplaces, my first call is to Ken. Atkins-Palmer is not the biggest company, but they may be the most honest. In all my years of meeting contractors at my clients homes, Ken is the ONLY one that I have met that actually takes the time to verify that the furnace actually is burning properly and surprisingly, none of them are. You change the oil, check the brakes and rotate the tires on your car, don't you? Why not call Ken and arrange to make sure that your heating and cooling systems are being maintained as well ? If you don't, you may find out how expensive furnaces can be to replace. With all of the knowledge and all of the proper licenses, Ken is the one to call to make your home safe and comfortable.
Brunson Designs, Lynnette Brunson, www.BrunsonDesigns.com, 703-368-5371. Did you know that if you finished your basement without permits and something goes wrong, your insurance company can delay the claim? Did you know that your tax record will let future buyers and home inspectors know if you obtained the necessary permits? Did you know that a smart buyer's agent will require you to furnish the permits even after the fact? What fun is that? Hiring a professional like Lynnette at the beginning of a project is likely to ensure that the money that you will spend will be spent wisely. Good designs and plans will help make the project more attractive, usable and eventually help with the re-sale value of your home. If words like safe, happy, secure and attractive are words that you would like to apply to your next addition, basement build out or deck, then you owe it to yourself to give Lynnette a call.
Mary Kay, Donna Altepeter, www.MaryKay.com/DonnaAltepeter, 703-994-7185. Donna tells me that a good client for her is anyone who has skin. Huh! Seems like a lot of you would qualify as potential clients. I know and like Donna and trust her to give her clients good advice. Donna will be happy to tell you about skin care, makeup, sun protection and just about any topic that is related to her Mary Kay products. Donna is also a great go to person for those of you that wait until the last minute and need a great and thoughtful gift. On numerous occasions, her gift baskets have really helped keep me out of the dog house. So, got skin? Need advice? Call Donna!
David Hoffman, Attorney, 703-267-6100. David knows, wills, trusts, estate planning and all that death related stuff better than anyone that I have ever met. He has the ability to make the complicated understandable and the patience to help families deal with all of the details that arise when one needs to make those final arrangements. For my readers with elderly or terminally ill family members, David is a must call. For those of you with children and pets that are concerned with taking care of their future, David is must call as well. Remember, if you fail to plan then you can be accused of planning to fail.
What an incredible time. Lenders are closing their doors or laying off 1,000's of workers. Home builders are cutting back or closing their doors. Realtors are leaving the business in record numbers - some say that less than half of us will be left when this is all over. Homeowners are walking away from their homes, the media harps constantly on the economy and the problems, state, local and federal governments are wringing their hands and EVERYONE is looking on where to place the blame. What a great time to be a buyer! Yes, the market may dip a little lower but the fear that home seller's have that they won't find a buyer may make some of them take offers that will go way beyond any further correction. And, buyers who are buying for the long term will have just that much more time to enjoy their new home, that much more time to enjoy the tax benefits and maybe even to have that new home paid off that much sooner.
True, it is a difficult landscape to navigate through, but the Short Sales, Pre-Foreclosures, Foreclosures, new home offers and all of the offers being made by home sellers offer so many attractive opportunities that new buyers may never see anything like it again.
For sellers, it is a challenge and most are not used to having to market in a competitive environment. But for those who have to sell, the opportunities are still there, provided that the experts they employ are truly expert. Proper preparation and aggressive marketing are every bit as important as price in bringing a property to market. Emotion won't get you a buyer, but hard work, careful planning and attention to detail will.
At the beginning of the month I try and sit down and update the numbers that I publish on my web site. Since Bristow, Gainesville and Haymarket are ground zero for my business and since the web site is SearchHaymarket.com this makes some small amount of sense to me. As I update the numbers for each community, I get a feeling for where the market is going and what prices are doing. In addition, my travels through the area keep me in touch with a wide range of other professionals in the industry. From what I am seeing, as the days get shorter, the days on the market get longer and the major holidays loom on the horizon, the sellers are beginning to panic. From this panic I can see different things happenings; 1) The buyers give up hope and surrender their homes to the bank - helping to extend the wave of foreclosures and short sales that are the major factor behind the decline of the market. 2) The sellers that have been in their homes for longer than 3 or 4 years are cutting their prices - in some cases substantially lower than the prices that the banks will be willing to consider for their foreclosed properties. 3) Savvy sellers, who have lots of equity and common sense and who do not panic are doing what it takes to prepare their properties for sale in a down market. Things such as upgraded kitchens and appliances, new flooring, new paint, updated landscaping,staging of the principal rooms and upgrades to the lighting of the various rooms all helps to offer an attractive package at an affordable price.
I don't believe that it is in anyone's long term interest to see homes go back to the bank. However, rising interest rates, greatly reduced availability of mortgage funds, employment concerns, rising gas costs, corporate relocations and illness all play a role in determining what options are available in each individual situation. As a real estate professional, I try to provide my clients with the best advice possible. Sometimes that advice is to consult an attorney, financial planner or accountant. Sometimes times the best advice is to "tough it out" and sometimes it makes sense to talk to the existing lender.
One thing is sure: Like all previous market corrections, this to shall pass. When it is over and we look back there will be as many stories told about great successes as there will be about great failures. I believe that the more you know about the "numbers" in your area, the greater the likelihood that you will be able to be one of the success stories. Know the average "days on market", average selling price, high selling price, low selling price, average home size, typical amenities and every other statistic that you can get your hands on, learn them, chart them over time and prosper!
This seems to have been my week to work with desperate families that are looking to short sales and preforeclosures as a means of getting out from under debt that has become unmanageable. I'm happy to do what I can to help, but there is a lot of outright bad information, misinformation, and confusing information floating around. In an attempt to better understand the various options, I have spent a great deal of time asking questions of some of the more experienced real estate attorneys in the Northern Virginia area. As a result of those conversations, I have concluded that in general the best advice that I can give a family is to consult with a qualified bankruptcy attorney before finalizing any decisions. One of the groups that I work with has furnished me with a series of check lists and questionnaires that when fully completed will lay out the total financial picture and generally will save time and money when meeting with an attorney. I would be happy to share them with you. If you know someone who could benefit from some good, honest advice, please have them get in touch with me. I do not charge for initial consultations, and my preference would be to work with clients who would rather keep their home than to work with clients who are simply looking for a "fast fix". These are trying times for way to many families. The real estate industry has been good to me over the years and I feel a responsibility to try and give back.
Adam Davis, SearchHaymarket.com, AdamD@SearchHaymarket.com, 571-209-1029
Early in my career, I was taught that the real estate agent was the "gate keeper" for all real estate related information. Thanks to the Internet, that is no longer the case. In fact, I find that most of my clients are extremely good at researching listings, areas, schools and almost any other factor that is important to them. I serve as a facilitator, making good search tools available for those that want to learn more about the areas that I serve. In todays difficult market my skills in evaluating the pros and cons of various properties, preparing and presenting well written contracts that protect my clients interests, my negotiation skills and finally my skills in administering the contract from ratification through settlement are the things that fuel my referral based business. What are the things that you consider important in your real estate consultant? Where do you go to find one? How do you know that you made the right choice? If you would like to know a little more about me, you can find me on Google at Adam Davis / linkedin - there you can also see what some of my clients have written about me and the type of services that I provide.
$15,000 Seller Contribution to Closing
• 2,978 sq. ft., 3 bath, 4 bdrm colonial "Bright & Open Floor Plan"
-
MLS®
#PW6229458
$488,999
- Pristine Condition
Virginia Oaks, Gainesville
-
Virginia Oaks. Private Cul-De-Sac location. Bright and open floor plan in better than new condition. Fenced, oversized back yard, great deck, all of the features you have been looking for. Three finished levels, lots of hardwood on the main level, master bedroom with sitting room, masther bath with tub and shower, finished lower level with Rec Room, full bath with exit to the back yard. This is a 10+
Property information
Pristine Condition
• 6,258 sq. ft., 4 bath, 6 bdrm 2 story "Custom Home"
-
MLS®
#Pw6352408
$1,099,000
- Golf Course
Piedmont Country Club, Haymarket
-
One of the most beautiful of all of the custom homes built in Piedmont. This 6 bedroom, 4.5 bath home was built by Middleburg Builders to showcase their homes. Situated on an oversized wooded golf course lot off the 12th fairway of the Piedmont Club, this brick home features custom triim everywhere, a gourmet kitchen with granite (two colors) custom cabinets and stainless steel appliances. Gleaming hardwood floors on the main level, each room is elegant and oversized. There are three full baths and a laundry room on the upper level and in the finished lower level there is a rec room, exercise room and a fully equipped theater room. The music conservatory on the main level overlooks the woods. This is a must see home.
Property information
$10,000 In Closing Costs Paid by Seller
• 2,954 sq. ft., 3 bath, 3 bdrm colonial
-
MLS®
#PW6445997
$489,000
- Short walk to Bristow Run
Foxborough, Bristow
-
Beautiful, well maintained home on a large lot within a very short walk of Bristow Run Elementary. The back yard is privacy fenced, and includes a beautiful paver patio. The kitchen has been updated with Stainless Steel Appliances and Granite counter tops. The family room is just off the kitchen and has a fireplace. The lower level includes a full bath a bonus room, a large rec. room and direct access to the back yard. The master bedroom is large and has its own bath with separate tub and shower. In move in condition and the seller will pay $10,000 of the purchaser's closing costs.
Property information