FHA Responds to Rep. Perlmutter’s Request to Ease Condo Financing Rules

[Published Aug. 30, 2012, in the Denver Post and 4 Jefferson County weekly newspapers]

It’s no surprise that the number of condos on the MLS and the number of sales of condos has fallen from a year ago. 

That’s because the FHA eliminated case-by-case acceptance of loans and requires that condo associations go through a costly and time-consuming approval process before any condo within their association can be approved for FHA financing.

Our own Rep. Ed Perlmutter took an early lead in appealing to FHA for a reconsideration of their new policy, writing a letter to FHA in April 2012 detailing the implications of their policy.

Epitomizing its poorly thought out policies, FHA makes condo association officers sign a legal certification that carries a $1 million fine and 30 years in federal prison as a penalty for misrepresentation. This alone is a major disincentive for associations to file for FHA approval.

The Realtor Associations (which support Perlmutter for re-election), were pleased that the congressman took the lead on this issue, and were, like Perlmutter, frustrated that FHA didn’t respond to his April letter until August 10, when Pete Kovar of FHA wrote the congressman, without going into specifics, that “a number of the concerns raised in your letter are among those that FHA is evaluating at present, and I anticipate that the forthcoming interim and permanent requirements for the condominium program will address these matters.”

How severe an impact has the current FHA policy had on condo sales?  At the end of July, 2012, there were 1,740 listings on     Metrolist’s condo database.  Two years earlier, there were 5,467 listings on that database.  That’s a 68% reduction in inventory.  In the single family database — unaffected by that FHA policy — the reduction was only 49% over that same time frame.

The whole intention of FHA loans, with their 3.5% down payment requirement, has been to help those in the lower middle class to achieve the American dream of home ownership.  Condos are a common first purchase for such Americans, because of their lower price range.

As a result of this policy, the vast majority of condos (as I wrote in my Dec. 22, 2011, column) are not eligible for FHA financing and can only be sold for cash. As you’d expect, this has significantly reduced the market for condos.

Perlmutter told me, “I am gratified that FHA is going to address some or most of the more serious problems with their condo rules, and I’ll be watching to see what they propose as final rules.”

Updated Review of the Chevy Volt

[Published Aug. 30, 2012, in the Denver Post and 4 Jeffco weekly newspapers]

Back in June I reported that I had purchased a Chevrolet Volt, the all-electric car with a “range extending gasoline engine.”

Well, I’ve now owned the vehicle for 2½ months and driven it 3,300 miles, and I can update the review that I posted on my blog in July. I have filled the 9-gallon gas tank only twice, and my lifetime miles per gallon is hovering around 180. Now that I can re-charge my Volt while at the office, it’s unusual for me to burn any gas in my travels.

My OnStar iPhone app tells me  the car has driven 2,690 miles on battery power alone, which, at 4-5 miles per kW-hour, cost me about $60 in electricity from Xcel Energy. Now that I have solar panels on both home and office, even that small cost will be reduced.

The savings in gasoline are only the most obvious. There are subtle savings, too.  For example, there is no transmission, no catalytic converter, no differential to maintain or repair.  Because of the regenerative braking, I won’t need a brake job for years.  I won’t need an oil change until I’ve driven about 100,000 miles, since it will probably take that long to put 3,000 or so miles on the engine.

And my Volt, with no hot engine, doesn’t heat up my garage!

 

Some Useful Questions to Ask When Interviewing Your Next Listing Agent

[Published Aug. 23, 2012, in the Denver Post and in four Jefferson County weekly newspapers]

Selecting the best listing agent is important, but how do you go about it?  The buyer’s agent from across town who helped you purchase your current house may have kept in touch with you in hopes that you’ll use her, but I feel it’s wiser to select an agent who specializes in your part of town or at least lives and works nearby.

First you need to create a list of agents to interview.  I suggest searching your ZIP code on realtor.com to see who is doing the best job of promoting their listings on that all-important website.  If you choose to interview an agent who is not on realtor.com, the first question you need to ask him or her is, “Are you a Realtor?”  If your agent is not a member of a Realtor association (usually because they can’t afford the dues), that agent’s listings will not appear on realtor.com — a HUGE disadvantage!

Once you have assembled a list of two or three agents to interview, you need to come up with the questions to ask them. A couple years ago I wrote a column in which I suggested 18 such questions. The column was so popular that I put it it online with its own web address: www.The18Questions.com.

Here are just a few of them for this limited space:

1) What is your commission rate, and will you reduce it if you “double-end” the transaction (i.e., don’t have to share your commission with a buyer’s agent)?

2) Do you promise to complete all the MLS data fields and not just the mandatory ones?

3) Will you provide professional staging advice so my home shows its best?

4) Do you use a professional showing service like Centralized Showing, which is open long hours every day and has a great system for requesting feedback?

5) Will you create a video tour and/or virtual tour (slideshow) of high quality pictures?

6) How else will you promote my listing?

 

My Buyer Teaches Us All a Lesson About Not Taking “No” for an Answer

[Published Aug. 16, 2012 in the Denver Post and four Jefferson County weekly newspapers]

Last month I participated in a closing that was not supposed to happen. The story behind it should be a wake-up call for any seller who uses a relocation company to sell his home but then doesn’t relocate.

Here’s what happened, and it may well have been a first in real estate.

A client of mine fell in love with a house, and I helped him get it under contract. The seller was relocating to another state, and his future employer provided relocation benefits, including paying the cost of selling his house and paying for his moving costs. These are great benefits. 

However, after the house went under contract (very quickly), the job offer fell through. No worries, the seller thought — after all, his buyer was not under contract with him but with the relocation company, and the buyer had signed the standard relocation company addendum which states that the contract to buy the home from the relocation company was contingent on the relocation company acquiring title to the home — which typically happens the day of closing.  The relocation company buys the house from the “transferee” and then resells it to the buyer — standard procedure in relocation transactions. 

So, upon learning that the transfer was not going to happen, the listing agent sent me a notice to terminate the contract and an earnest money release signed by the relocation company. 

Now, any “normal” buyer would have accepted the termination — and I expected my client to do so.  However, my buyer loved that house and wasn’t going to let the seller off the hook.  I pointed to the addendum’s provision and told my client that, in my layman’s opinion, he didn’t have a case, and I’d never heard of a buyer challenging it.

Well, you need to know that this client is an attorney.  He hired an attorney to represent him and pressed an interesting legal point that had never occurred to me. He maintained that the relocation company was functioning as an agent for the seller and that the seller couldn’t get out of the sale even though his name was not on the contract itself.

Well, the case never got to the point of litigation.  The seller, who did not want to sell, agreed to sell rather than press his case in court at what would probably be great expense.

Since it didn’t go to trial, no precedent was set, but nevertheless this should be an interesting lesson for other sellers who find themselves in a similar situation — and, of course, a great lesson for the disappointed buyer!

I'm in a Dunk Tank This Saturday to Benefit the MS Society

      Do you think I’m all wet? Well, this Saturday, you can make sure I am all wet by dunking me at a benefit for the Multiple Sclerosis Society. The “Music for MS” event runs from 12:30 onward at The Spot Bar & Grill in North Golden.

We Welcome 2 New Agents at Golden Real Estate

Two new agents have joined Golden Real Estate. 

Peggy Randall has extensive real estate experience, having started out at RE/MAX in the Cherry Creek area, but more recently with a smaller company in her home town of Idaho Springs. She holds the Graduate Realtor Institute (GRI) designation and is a hard-working addition to our Golden Real Estate team! You can reach her at 720-878-7598.

Another new agent is Kristi Brunel. A native of Wisconsin, Kristi has lived in Golden for 16 years and married into the Brunel family which has been here for 125 years. She is particularly experienced in investment properties and property management but looks forward to serving the real estate needs of other families. You can reach her at 303-525-2520.

Making the Rent vs. Buy Decision: Zillow Calculates the Breakeven Horizon

[Published 8/9/2012 in the Denver Post and in four Jefferson County weekly newspapers]

How does a renter determine when it is financially advantageous to buy? Last week, Zillow.com came out with a report detailing the “breakeven horizon” for different U.S. cities.

The breakeven horizon, according to Zillow, is the number of years you need to own and live in a home for it to become more financially advantageous than renting the same home. This varies from city to city, and Zillow made the analysis for thousands of cities in 224 different metro areas.

The range was from 1.6 to 8.3 years. Here are some of Zillow’s numbers for Jefferson County:

• Lakewood—2.6 years
• Arvada—2.6 years
• Littleton—2.4 years
• Golden—3.5 years
• Wheat Ridge—2.7 years
• Evergreen—3.5 years
• Genesee—4.8 years
• Morrison—3.0 years

Here's a link to the full Zillow analysis:

http://www.zillow.com/blog/2012-08-02/should-i-buy-or-rent-we-do-the-math-for-you/

Is buying right for you? You’ll also need to consider how long you expect to stay put, your marital status (and whether it’s likely to change), your job situation, and, of course, your credit score and whether you can qualify for a mortgage. If you need a good mortgage person to advise you, give me a call and I’ll recommend one or two whom I think would be a good fit for your particular situation.

July Market Report Shows Slowing (But Still Good) Buyer Activity

Here's my regular end-of-market statistical report by MLS area and county:

And here's the breakdown by price range:

You’ll Love This Great 2008 Home South of Belmar

     There’s much to love about 8250 W. Alabama Avenue, which went back on the MLS this week at a reduced listing price.  For starters, it has gas hot water heat instead of the more typical forced air furnace. It has extensive hardwood floors in great condition and one of the biggest kitchens and master bedrooms (each 14’ x 30’) you’ll find anywhere. It has one of the only 4-car garages in the neighborhood, and its 1/4-acre lot is 50% bigger than the typical lot in its 80-home subdivision. It’s 2 blocks from the nearest arterial, so it’s quiet too! Open this Saturday, 1-4pm.

MCC Program Dwarfs the Earlier $8,000 Tax Credit, But Is Often Overlooked

[Published Aug. 2, 2012, in the Denver Post and in four Jeffco weekly newspapers]

The Mortgage Credit Certificate (MCC) program has been around for several years, but many eligible buyers don’t take advantage of it, compared to the flood of first-time home buyers who took advantage of the $8,000 tax credit a couple years ago.

It’s easy to see why — it’s more complicated.  To fully appreciate the MCC program, you have to understand the difference between a tax credit and a tax deduction.  Everyone knows and appreciates the fact that you can deduct the interest expense of a home mortgage on your tax return. That certainly has value, but what if you could take 20% or more of that interest expense (for the life of the loan) as a direct tax credit — worth 5 to 10 times more than a tax deduction, depending on your tax bracket — and still take the rest of the interest expense as a tax deduction?  If you do the math, you’ll learn that this tax credit can easily add up to tens of thousands of dollars.  I remember computing this on a $200,000 listing of mine, and the tax credit over the life of the loan amounted to more than $40,000!

As before, a “first-time home buyer” is defined as someone who has not owned a home for three years. But, if you buy in one of many distressed neighborhoods, you don’t have to be a first-time home buyer.  (There are no such areas in Jefferson County.)

The Colorado Housing Finance Authority (CHFA) is a leader in lending to first-time home buyers with as little as $1,000 out-of-pocket cost.  If you combine such financing with getting the MCC tax credits, then buying rather than renting becomes a no brainer — although you do, of course, still need to have good enough credit to qualify for a mortgage and take advantage of the tax credit.

Shelley Ervin of CHFA called me this week to complain about the under-utilization of the MCC program. Many lenders who recommend a CHFA loan to their buyers simply forget about the program, and if a buyer doesn’t initiate the loan and MCC application together, it’s often impossible to insert the MCC program before closing.

If you’re a first-time home buyer interested in taking advantage of the MCC program, ask your loan officer about it.  Not all loan officers are trained and authorized to process such applications. If you want the name of one who is authorized for MCC, please ask me.

Space does not permit me to go into greater detail about the program in this column, so I have put links for additional information about CHFA and the MCC program online at www.JimSmithColumns.com.