Guest Post: Tim Richmond on Good Faith Estimates and Why They Stabilize Home Buying

Whether it’s the San Francisco real estate market or another one, buying a property is an intricate process that many people are unprepared to handle efficiently. A buyer that isn’t equipped with home buying knowledge isn’t at fault; it’s just that real estate is much more complicated than a down payment and monthly dues.

Know Before You Owe - Image Source: Consumer Financial Protection Bureau

Know Before You Owe – Image Source: Consumer Financial Protection Bureau

The first step in most people’s home buying journey is at the local mortgage grocery store. Many buyers wander aimlessly through the aisles, pretending they understand all the numbers and agent vernacular. Simultaneously, they’re often exclusively considering the lump sum down payment they’ll have to put on the table and the monthly dues they’ll owe their own bank account.

The good news is this is a pretty humorous visual! The bad news is that many homebuyers are naïve and don’t understand the depth of finances associated with the situation.  If a person or family doesn’t have the whole picture of how a property transaction will affect their life and finances, they won’t have an accurate idea of how it will hang on their life’s wall. This is a big deal.

The fortunate news is that while mortgages and the real estate market in general are complicated, there are resources available to simplify the process. One of those resources is a Good Faith Estimate, or GFE. GFEs make the home buying process more efficient because they accurately (for the most part!) portray the wide-ranging financial obligations associated with a mortgage.

Whether we’re talking about a San Francisco technology guru buying a townhome or a Native American buying a property on tribal land with an HUD 184 loan, the principle is the same. GFEs make a difference. This is how:

  1. They provide buyers the option of testing different providers on all costs associated with a home loan. The more loans a buyer applies for, the more GFEs they receive and the more efficient their decision can become because the best offers filter to the top.

  2. They provide accurate assessment of the buyer’s credit and financial stability, and how those circumstances affect their decision and interest rate. This up-front knowledge is a realistic way for buyers to look in the mirror and see where they stand financially. If there is an issue that is leading to a high interest rate, they then have the opportunity to step back for six months or a year to better their position.

  3. They level the playing field amongst lenders. When the RESPA (Real Estate Settlement Procedures Act) declared that GFEs were needed for the buyer within three days of a loan application, this created a more genuine mortgage marketplace. Rather than a lender adjusting their offer based on leverage or some other alternative motive, they are grounded in a numbers game. This benefits the buyer by creating healthy competition amongst providers.

There are many resources out there for buyers to take advantage of during the home buying process. The reality, though, is that many people simply don’t know about them. GFEs are one of the many to think about.

Author: Tim Richmond writes about the housing market and Native American mortgages.

 

Guest Post: Sustainable Businesses and Residences – The Green Movement is Growing

As a contractor, I’ve seen both commercial and residential use of green materials and sustainable building continuously grow over the years. Today, it’s a booming business. Analysts have shown that it’s a $116 billion market. That number is surprising, but not as surprising as what the future is projected for green materials and sustainable products. In 2020, the green materials industry should grow to over $254 billion. That’s an incredible amount of change in just several years. The hope is that this number relates to the number of people around the world who switch to green products and choose sustainable energy over draining the Earth’s resources.

The Las Vegas Palazzo Hotel and Resort is a prime example of a business choosing green materials and sustainable building. For their water system, the hotel chose a drip irrigation system for their landscapes. They also replaced part of their outdoor areas with fake turf grass. The grass looks incredibly realistic but it doesn’t cost any water to keep beautiful. They also incorporated moisture sensors to continuously save on water. All of these methods add up to 10 million gallons of water being saved. In fact, this hotel alone saves eight million gallons of water every year. These types of methods aren’t just unique to this hotel. As a result the hotel was recently named the most eco friendly hotel in America.

Homes today have a variety of different ways to save on water. They install tankless water heaters that don’t require a whole tank of water to be stored and heated. Homes also have drip irrigation systems to water lawns and gardens that use gray water from showers and washers. In addition to low flow toilets and shower heads, they can also save on water just by cutting down on their usage of water for routine activities as well. All of this combines to reduce a home’s carbon footprint.

The Three R’s rose as a popular way to look at materials around the home when deciding what to throw away or recycle. “Reduce, reuse, recycle” has become a mantra for businesses as well. For example, the ARIA Hotel in Las Vegas developed a large sorting center to reduce 47 percent of its waste from going to landfills. They also save food scraps and send to local farms in order to feed pigs. As more technology becomes available, it’s easier than ever to save by reducing harmful products, reusing containers and other products and choosing to recycle whenever possible. Most homes have a variety of recycling bins, compost bins and even up cycling practices that achieve the three R’s every day.

It is important for homeowners and businesses to continue innovating the industry. This innovation is what makes it possible for facilities in the desert to go green as well as facilities in one of the most populated cities in the world. It is important for not only businesses to continue to embrace sustainability, but for those living in homes and apartments across the world.

Ed Note: Today’s guest post is courtesy of Sam Marquit, an independent ‘green’ contractor and co-author of Fair Marquit Value.

Law of Supply And Demand Changing In South Florida Real Estate Market

The Florida real estate market was hit the hardest from the housing bubble crash in 2006.  Finally, that market is starting to come back.  Read why below from Jeff Lichtenstein’s Real Estate Blog …….

1. Overall Market

The market is improving as of spring 2012 in Palm Beach County, Florida. We are seeing a slight increase in supply because of economic conditions, but a bigger jump in sales because of a 6-year slow drip of investment and must-sell inventory that has dried up.

2. Prices: This Year versus Last

In January of 2012 the average price was $296,000. The average sold price in February 2012 was $318,000. However, the average sold price in February of 2011 was $348,000, so prices are lower today than they were a year ago at this time.

3. Sales Volume

February 2012 home sales are up compared to last month. There were 797 sales in February 2012 versus 749 sales in January 2012. 752 sales took place in February 2011, so more sales are happening now than last year at this time as well.

4. Who is Purchasing?

Snowbirds, some first timers, and downsizers are purchasing. We are also seeing a trend of people selling their northern and small Florida home and then purchasing a medium-sized permanent Florida home. A few foreign buyers, but mostly from Canada. There are not as many Canadian purchasers as the last few years because many Canadians purchased from 2009-2011. Not much activity from Europe because their economy is weak.

5. Distressed properties:

163 short sales sold in February of 2012, which is more than the 128 that sold in February of 2011. There are currently 2621 short sales out of the 9593 homes available on the market. The Palm Beach County MLS has never kept exact track of foreclosures. Some lenders had their agents hide this for fear that agents would not show the property. However, that has changed in the past month, and going forward those properties must be marked in Palm Beach County MLS. Overall it has been reported that Florida, which takes a whopping 3-year time-span to foreclose on the average property, is starting to see that number go down. Banks are foreclosing faster as the overall inventory has diminished.

6. Can Buyers still get loans?

The people who want loans are not having trouble getting them. There is much more verification. I haven’t had problems myself with buyers finding financing. The problem lies more within the appraisal process of homes not appraising. Many times it is because the appraisal is not done well. Some of the appraisers hired are from out of the area, traveling from Miami or Orlando and don’t know the property well.

Natural Laws of Supply & Demand at Work in the Housing Market

For the past six years, economists and politicians have argued about what to do with the housing market. We’ve heard all sorts of solutions, from bulldozing homes to giving huge reductions in principal to homeowners upside down on their mortgages. President Obama blamed President Bush, Republicans blamed Barney Frank, and everyone blamed Wall Street. Quietly, though, as we start 2012 in Palm Beach County, overall inventory is significantly down. There were 9,593 homes available in February of 2012 versus 10,883 in 2011, almost a 12% drop in inventory. I attribute the drop to a change in supply, not so much to a surge in demand. As evidenced by the amount of sales staying the same, there has been a slow drop in supply since 2006. In 2006 we had a perfect storm of excess inventory:

1) Investor purchases of new construction

2) Builder speculation homes

3) Over-confident Sellers who purchased first without selling

4) Sellers who were in a must-sell situation

While we still have many Sellers in the 4th category of ‘Must Sell’, due to a loss of income or loss of job, 80-90% of the first three categories that I outlined have sold since 2006.

Picture a slow dripping faucet as a sale. One drip doesn’t amount to much, but drips from 2006 to 2012 add up to an overflowing bathtub! That is what has happened in real estate over the last 6 years, and 2012 is the year the bathtub overflowed. The investor, builder, and over-confident Seller who got stuck with their good-looking homes have taken their 35% loss and moved on. These Sellers have gone though denial, trying to wait it out by renting their home, got angry at Wall Street, switched to 4 different real estate agents before they stopped blaming everyone and accepted reality. Finally, they have sold and moved on.

Now we are left with a just a bad economy and a lousy market. This market is stronger, though, because the one-time Investor/Builder Spec/Over-Confident inventory has dissipated. I’ve personally had 2 Buyers lose out on homes ranging from $500,000 to $4,000,000 in the past two weeks. Buyers are in disbelief thinking they can wait forever only to lose out. Pending sales for March and April are going to be way up and buyers need to recognize the bottom is here, not because the economy is strong, but because there are no more investors investing, spec buildings being built, and over-confident Sellers buying first without selling first.

The turnaround in housing has begun because of the natural laws of Supply & Demand. In 2007, I explained to my 7-year-old son Sam, to picture a town with 100 homes and 100 people. If one person moves to the town each year, then one new home needs to be built. What happened in housing is that builders constructed 7 homes in one year, giving the town an excess of 6 extra homes. After a 6-year-long wait with no homes being built we have hit equilibrium. We now have 107 homes and 107 homeowners. Supply and demand are smoothing out. Watch for the Republicans and Democrats to fight over who gets credit. Sam, now 13, can tell you that the credit really goes to the free market principals of supply and demand.

Jeff Lichtenstein specializes in luxury real estate in Jupiter homes for sale and  Palm Beach Gardens Florida real estate in South Florida.  His website is at www.JeffRealty.com.