March 2010 Archives

March 31, 2010

Did Someone Say the Home Flippers Are Back?

A recent article in the San Francisco Chronicle sported the headline, "Pace of House Flipping Picks Up." That's right, the investors are back, buying up properties for cheap, fixing them up, and then selling them at a profit.

Does this mean that the real estate market is picking up? Well, it's not exactly a sign of robust economic health, given that the investors are focusing on foreclosure properties.

But it is a reminder that, even in the worst of times, homebuyers need to get to know their local market. There may be more competition out there than you realize, and the investors readily acknowledge that they may be edging out some would-be first-time buyers.

Oh, and while shopping for a house, be sure to notice whether it's being flipped. (It's easy to tell, based on how recently the last sale was recorded.) If so, don't be overly wowed by the new materials -- also check into their quality and level of workmanship. Remember, whoever did the work was out to make money, not to create a home they'd be happy to live in.
March 23, 2010

Home Seller Disclosures: Don't Wait Until Last Minute!

Having recently sold my house, I had to be grateful that the State of California has created a form with which to make the mandatory seller disclosures. Grateful for having to fill out yet another form, you ask?

Yes, it might sound odd, but I've read and written enough Nolo books to know that not only is providing full disclosures the law, but that it's far better for buyers to learn stuff ahead of time than be unpleasantly surprised later.

And here's the thing: After having lived in our house for ten-plus year, we'd fallen into the common rut of having become somewhat blind to its minor repair needs. That side door that had a little trouble opening? Oh, right, but we'd always used the nearby back door. The oven door that didn't quite close? That's what the nearby broom handle was for!

It was a shock to realize that, even when I wanted to give the prospective buyers a full set of disclosures, my memory was slow to cooperate.

Good thing I started a draft of the form a few days before we were to meet with our Realtor. And still, we remembered a couple more things while sitting in her office filling out the final version. But it was only the next day when we remembered the crack in the front door.

Remembering house defects after having filled out the disclosure forms doesn't excuse a seller from having to tell the buyers. This could have involved both hassle and embarrassment if we'd needed to amend our disclosures, but luckily, our Realtor still hadn't filled out her version of the disclosure form. She added the aforementioned crack to her list. 

Whew. Now you see why my opening advice was, don't wait until the last minute to fill out the form! 
March 8, 2010

New FHA Loan Guidelines

For anyone who was counting on getting FHA help with lining up a home mortgage -- via the FHA loan program, in which borrowers who present higher risks than others, most likely due to low credit scores, may qualify for a loan backed by the FHA -- that plan is starting to look a little more tenuous.

The FHA has tightened up its standards, including:
  • requiring down payments of at least 10% for anyone whose credit score is less than 580
  • cutting the allowable amount of seller financing to 3% of the transaction price, and
  • requiring buyers to pay a higher mortgage insurance fee at closing.

For a good summary of these provisions and their implications, see Al Heavens's article in the Philadelphia Inquirer, "On the House: FHA alters borrowers' guidelines."

If you're a home seller, don't panic. The changes don't address all borrowers, but only those who were having trouble finding and closing on a loan in the first place. Qualified buyers are still out there, and in some regions of the United States, eager to find a home. Research your local market before drawing any conclusions on whether now is a good time to put your home up for sale.