Real Estate Blog Now

Are you looking to buy or sell a home? If so, then you surely realize that the absolute wrong way to go about such a purchase would involve rushing in and making a buy without weighing your options and carefully deliberating on the venture. Rushing in to purchase a home is never a good idea because it could lead to making a poor purchase that undermines the entire reason you want to own a home: safety, security, and an equitable return on your original investment. This is where a Comparable Market Analysis (CMA) becomes such a great help. It is the perfect way one can increase the odds that the buying and/or selling decision is arrived at in the proper manner.

As the name would lead one to believe, a comparative market analysis centers on a detailed step by step guide to the many differences between the home you own or the home you wish to purchase to those other properties in the area that are similar. The actual reports can vary depending upon who is providing them and how detailed of a request you wish. Some reports can be as small as a one page printout while other reports could be upwards of a mini eBook. The key component of any CMA report will be the actual comparison itself which is sure to provide the detailed information one needs in order to make a clear and definitive understanding of the value of a particular property.

How can a CMA report be devised? First, a look at the active market listings in the region will be undertaken. Then, homes that are similar in size and condition will be examined. Afterwards, the prices of the various homes will be looked at as well. This will be used to arrive at the determining values of cost. For example, if you compare a home you wish to buy that is priced at $200,000 to a completely identical home that is selling for $250,000 then you are getting a great deal.

However, if the reason that the price of your home is lower due to deficiencies, you will be made aware of this as well. Case in point, two identical homes will have very different sale prices if one home has a thoroughly modern basement and the other home’s basement has long since fallen into neglect. This does not mean that the “neglected” home needs to stay neglected. Improving the dilapidated basement can turn around and raise the properties equity in a rather expedited manner. Depending upon how much the equity is raised and the cost of the renovations, the repairs could end up being paid for. Obviously, that would be a solid deal.

It would be wise to use a Comparable Market Analysis report prior to buying or selling any real estate. This will ensure you get the most out of the deal and prevent any weak purchase agreements from arising.

When the HVCC rules came into effect in mid 2009, appraisers learned quickly that working with appraisal management companies wasn’t an option, but a necessity. Although there are many small “here today, gone tomorrow” AMC’s, the larger companies were well prepared with their legal contracts and processing software to bring in and maintain thousands of appraisers nationwide. Unfortunately, some of the contracts only benefit the AMC and can be seriously detrimental to the appraiser. This article will explain the major flaws in appraisal management company contracts and what you can do to protect yourself.

Indemnity Clause

One of the biggest problems in AMC contracts are the indemnity, or “hold harmless” clauses. Because of the mess the industry has gotten itself into, everyone is trying to protect themselves from lawsuits and settlements. What does this mean for the appraiser? Basically, if there is a problem with any portion of the appraisal process, the fault will lay on the appraiser’s shoulders. The indemnity clause can state that the appraiser will pay all legal fees for the management company as well as their own.

“But I have E&O Insurance!” you may say…

E&O Insurance

Currently, E&O insurance is extremely affordable and well worth the cost. It brings wonderful peace of mind knowing you are covered for just about anything. So what is one major area it does not cover? You guessed it…indemnity clauses.

Out of desperation to bring in more work, appraisers have been signing these contracts without even looking at them.

Case Study:

Let’s say, you, as the appraiser, receive a job from an appraisal management company you have already signed up and been approved with. You are the best appraiser in your area and perform the “perfect” appraisal. You complete it in record time and send it back to the AMC. Unfortunately, the AMC has lost the appraisal (or reviewed and transposed numbers on the final value or any other scenario); the client loses their dream home valued at 2.5 million. They decide to sue. Because of the indemnity clause, it doesn’t matter what the AMC did, you are responsible.

Your E&O insurance is still in place, so you are covered for anything you did, but now because of the “hold harmless clause”, you now have to cover all legal costs of the appraisal management company as well.

The AMC’s Response

As appraisers are getting wiser regarding the contracts they are signing, some appraisal management companies have made changes to their contracts to make them more fair. Remember that it is mostly the largest AMC’s that carry questionable contracts. Huge corporations, such as Bank of America or Wells Fargo, that have big corporate lawyers are the ones causing the most damage. There are still hundreds of small AMC’s, many that carry a simple one page contract or none at all, that you can sign up with.

What You Should Do

For most appraisers, it is necessary to sign up with AMC’s if you are going to stay in business. Read the fine print, and if necessary, hire a professional to help you understand what you are signing. If you are uncomfortable with signing…don’t! Look for other AMC’s, or as several appraisers have done, cross out or change the portion of the contract that you don’t like and send it back. In most cases, the company accepted the changed contract without question.

In order to curb some undesirable effects of the residential appraisal process Fannie Mae adopted an agreement that went into effect May 1, 2009. The code only applies to all single family loans, up to 4 units, that are sold to Fannie Mae. The code does not apply to multi-family homes or to loans that are guaranteed or insured by a federal agency. Beginning in 2010, a version of the HVCC will be adopted by FHA. Although some of the rules will be different, most will be identical to the original HVCC.

Is this change permanent? As of this moment, yes, although there are several bills in congress waiting to be heard. Specifically, one bill that requests the HVCC rules be reversed, and another that would postpone implementation for 18 months.

Does the new code require lenders to obtain an appraisal? No, a lender is under no obligation to obtain an appraisal. Also, the code does not specify the scope of work necessary for particular assignments.

Can appraisers still be “blacklisted”? Yes, an appraiser can still be blacklisted if impropriety is involved, such as influencing or trying to influence appraisal outcome. Also, the lenders are required to policies and procedures in place that can be followed that include mechanisms to report and discipline.

Can a lender still order a second appraisal? Yes, as long as the lender is not value-shopping, or trying to influence the outcome of the appraisal.

Can an appraiser still communicate with the real estate agent? Yes. This is not prohibited by the HVCC.

Is the Lender required to provide the borrower with a copy of the appraisal,and what is the time frame for providing the copy? Yes. The lender must provide a copy, if requested, upon completion of the appraisal, but no less than three business days prior to closing. The lender can send the appraisal via email or mail.

Can the appraiser collect payment directly from the borrower? No. The appraiser must collect fees from the lender or a third party authorized by the lender.

Does the Code apply to AVM’s, BPO’s or tax assessments? No, the Code applies only to appraisals.

Can a lender use a selected group of appraisers through an appraisal management company? Yes, as long as all aspects of HVCC rules are followed.

Does the Code apply to Form 2075? No, Form 2075 is an inspection report. It is not an appraisal, and therefore the Code does not apply.

How does Fannie Mae audit compliance with the Code? Compliance with the Code will be part of the lenders’ operational review.

Is the definition of application date the actual date of the application or the date of receipt of the application by the lender? The application date is defined as the date the borrower(s) signed the application certifying that the information is correct.

May an appraiser use foreclosure data? The Code does not mention foreclosure data. It is the appraisers responsibility to decide if the information is applicable or not.

Do HVCC rules apply when trying to remove PMI? No. The rules only apply for a “mortgage financing transaction”.

Are there rules regulating how appraisers are chosen off an ordering list? The lender may choose how its systems are run, as long as they abide by HVCC guidelines.

May in-house appraisers prepare appraisal reports? Yes, in-house appraisers may prepare appraisal reports.

Can a lender’s in house appraiser adjust the value of a loan? Yes, this is not prohibited by the code.

May a correspondent lender use in-house appraisers? Yes, as long as they comply with the Code.

Can a lender dictate to a broker which AMC is to be used? Yes, as long as the lender has prearranged an agreement with the AMC.

May a lender accept an appraisal prepared by an appraiser that was ordered by a mortgage broker? No. The appraisal may not be ordered directly from the mortgage broker.

Can the broker request that the lender use specific appraisers for orders from that particular broker? No.

Can a broker order an appraisal from the AMC if it was authorized by the lender? No.

Can a broker choose the appraiser from the lenders list of approved appraisers if the lender is the one to place the order? No.

Can an appraisal be transferred from one lender to another? Yes, as long as it complies with the HVCC code.

Can the borrower pay the AMC for the appraisal? Yes. The borrower is prohibited from paying the appraiser directly.

Who is allowed to communicate with the appraiser? Anyone who is not compensated by commission, anyone not part of the loan production staff, or anyone who does not report to officers or loan production staff.

When working with a real estate agent, whether for buying or selling a home, some are highly skilled and can complete a sale quickly while others lack in experience and determination. In this market, you do not have the luxury of having an agent that does not work hard to get the home sold or to help you find one to buy. You need to prepare specific questions and then go through each one with several real estate agents until you find the one you are most comfortable with and who has the most knowledge of the real estate market.

One thing would be asking about the amount of commission charged. Although it is rare to find an agent that charges only 2%, they do exist. Typically, most agents charge 6% but you need to know for sure. If you are in a position of money being tight, you can always try to negotiate a lower commission rate. Because agents are struggling along with buyers and sellers, some will take a reduction.

It is also important to choose a real estate agent that locks into a specific amount of time when the listing would be on their books. In other words, when you sign a contract to work with a particular agent, you are agreeing to a certain period in which that agent would represent you. However, if you lock into a long contract and the agent is not doing a good job, you would find yourself in a big mess. Therefore, we suggest you go with four weeks for the initial contract.

Of course, if the agent is doing a great job but the house being sold is simply taking some time, you could have the initial contract revised and extended. Remember, you are the agent’s customer so just because you are quoted a certain commission rate or contract period does not mean you are obligated to accept. You can negotiate the agent’s contract and establish it to renew at certain times, if you elect to do so.

Unfortunately, some agents will try to sell a fast-track scheme, which means for an additional cost to you, that agent would put your home ahead of others, meaning potential buyers would know about your property first. Although there are times when this can work, you need to look at the cost being charged to determine if the extra money works for your or not.

Legal fees associated with buying and selling a home also needs to be considered. Most real estate agents have a legal representative or attorney they use but you can go with anyone. Since prices can vary dramatically, it would be worth the time and effort to look at services and prices so you can choose the one that is going to benefit you most.

The person handling any legal issues should be available when needed, especially if some type of obstacle arises during the transaction. This individual would also be present during closing on the house or anytime when legal documents were signed to make sure you are not signing something that should be researched more or not signed at all. Obviously, having a good business relationship with the legal representative would make it easier to speak to them when needed, which makes the process of buying or selling a home less complicated.

If you like, you could use legal services of an online company but you want to be careful in choosing. Although there are a number of excellent internet services specific to real estate, some are dishonest. Therefore, look at several companies and research their reputation and prices to see if an online service makes more sense. If you cannot find someone, remember, your real estate agent would be able to make a recommendation.

Now, if you have a home for sale but planning to purchase a new home, which means a new mortgage loan, you might ask your agent for broker recommendations. Typically, agents know some of the best in the industry, which would help. However, you might also talk to a number of independent mortgage brokers and lending institutions to see what they offer so comparisons could be made.

Another important service of the real estate agent would be someone that can handle showings of the property him or herself, especially the first time a potential buyer wants to walk through the home. If a potential buyer wants a second walk-through, the agent should be open to you being present. The reason is that at that time, the prospective buyer is serious and likely has questions that only you could answer.

Building a relationship with a buyer creates a stronger level of trust, which makes it easier for the sale to go through. Even though you would be in the home and available for questions, you would not want to follow buyers around. They would still need the opportunity to look in drawers, under cabinets, run the disposal, and so on without feeling uncomfortable or embarrassed.

Your real estate agent should take buyers and as they walk through the home and outside on the property, point out positive aspects but without going through a hard sell. That way, potential buyers do not miss anything that might be of importance but they also do not feel as if only the positive aspects of the home are being revealed and nothing negative.

It would also be beneficial to you to look at the agent’s brochures for other properties they are managing. In fact, looking over the agent’s website could reveal something to you that you like or dislike. The agent should have a site, which along with the MLS would create more exposure for properties being sold. That way, your home would be seen by more buyers, helping it to sell faster.

Then, look at the listing for your home, making sure the description is accurate and photos high quality and current. This means confirming that listed number of bedrooms and baths is correct, square footage accurate, and that all amenities included. If photos of your home are poor quality, they would need to be replaced immediately. Most people are visual so allowing them to see the property is highly beneficial.

Finally, the real estate should provide you with a progress report on a regular basis but he or she should also be comfortable with you asking whenever you want. The bottom line is that the right real estate agent would make the sale of your home or the purchase of a new home seamless. Your responsibility is getting the home in excellent condition so potential buyers would want to make an offer at or close to the asking price.

Appraisal management companies, in general, have been stereo-typed as unethical and greedy. And while I can agree with this on some levels, as I am an appraiser myself, there has been a shift in the reliability and effectiveness of some of the older AMC’s and a definite change in the newer companies that are popping up all over the nation.

As appraisers have expressed their unhappiness and frustration at the big appraisal management companies, many of the the smaller companies have begun to change their policies. They are working toward getting qualified appraisers in the local market area to perform the appraisal, they are taking smaller commissions, they are not demanding 24 hour turn times, and they are giving consistent work to those appraisers that turn in quality reports.

So, how do you know which AMC’s are the best?

Unfortunately, they can be difficult to find. Talking to other appraisers is a great way to find out if they are reputable. Going to forums and discussing the appraisal management companies you are interested in. Appraisers are a wealth of information, but don’t discount an AMC just because you hear one bad account. More than likely, you will need to sign up with them yourself and see how you are personally treated. I have heard many stories of how an AMC treated one person well and another person badly.

One bit of advice…be careful with some forums. Some are great and some are just a place where they can spout out all their woes about appraisal management companies. While I agree with a lot of what they say, they are not looking for solutions, they are looking for a place to vent. There are still thousands of appraisers who enjoy what they do for a living and are willing to share information.

One of the most common questions for homeowners or buyers getting a conventional loan here at the end of this decade is who exactly just did the house appraisal for my property. In the past, it was typically someone who had developed a business relationship with your banker or broker, but that is not the case anymore.

Now, given the changes brought about by the HVCC and the requirement of using an appraisal management company, there is no way of knowing what appraiser might show up. So, especially in rural communities, you could end up with an appraiser that has driven 2 hours, one way, just to do your appraisal since they were selected by the appraisal management company.

The process of using appraisal management companies was brought about in the Home Valuation Code of Conduct (HVCC), through the efforts of Andrew Cuomo. This shift has had several intended and unintended consequences.

First, all previous business relationship between appraisers and lenders are out the window. The premise is that the housing market collapse was due in large part to lenders and appraisers working in unison to drive values.

Naturally, they are giving individual appraisers and lenders far to much credit, and not spending nearly enough time looking at their friends on Wall Street who fund both their political ambitions, as well as the mortgage backed securities that were the real underlying problem in the housing market.

Second, appraisals are now ordered through these appraisal management companies who, as of now, have little to know oversight and regulation. They can essentially do as they please, as long as they are following the guidelines of the HVCC.

Who created the guidelines of the HVCC you ask? Well, that would be power motivated politicians working in unison with the large mortgage companies, who were at the heart of the original problem. How bout that?

Third, these appraisal management companies are primarily owned and controlled by the same mortgage companies they serve. Whooaa there, Ronnie, how does that work. Well, with these changes coming down, the large mortgage companies created their own appraisal management companies. Different company, same people. Not that there is anything wrong with that. But they now have even more control of the entire process.

Fourth, as with any company, the appraisal management companies, since they had to be formed anyway thanks to the HVCC (in fairness, there were a handful of appraisal management companies already in existence…think Landsafe, who, coincidentally, was owned by Countrywide, hmm) are profit driven. So, you now have to pay whatever amount it might be…$400, $450 or more, before an appraisal is even ordered for the process to begin.

Which brings us full circle to who actually did your house appraisal. Who knows, really. Just somebody who had the minimum license necessary to get “added to the list” of approved appraisers for that appraisal management company. Has that person ever done an appraisal in your town, your neighborhood, or for your lender? Does that person have the professional expertise to develop a credible opinion of value for your specific property? Who knows…not even the appraisal management company!

It is easy to know about the business works and the booming nature of the Letting companies. However, until and unless we get a complete sketch of the entire process we cannot bring clarity of how the procedure runs. Therefore, here are some simple steps that one has to follow for the same.

1) First, you have to register online and search for the Letting Agency you are looking for. Every Letting Agency website has an enquiry page. The client has to fill up the inquiry page stating their wish and budget. These options make the agency’s work much easier. They can search for the desired property and can save considerable amount of time.

2) After the agency finds the desired property, they send its specifications to the client. There can be one property or multiple properties that can match the client’s wish list.

3) After the client boils down on a number of options, the Letting Agencies arranges for viewing of those properties. Especially this takes place at weekends and at the client’s convenience.

4) When you identify a particular property, you have to furnish about the referees to the agency. After this formality, they will take your information forward to the property owner.

5) Next is the Tenancy Agreement. Once the property owner is satisfied with the terms and conditions the agency prepares the relevant papers for the agreement. You have to sign the paper along with the property owner that marks the closure of the deal.

However, before that the Letting Agency will hand you over the paper that states the condition of the property and its belongings. The property owner also receives the same set of paper from the agency. Neutral valuation experts are there who facilitates the entire process.

6) Now, the rent and the deposit part are also very important. You as a tenant have to give a deposit in advance. After the completion of the tenure, you will get back this advance in condition that the contents of the property are not damage. Now a day as a part of law in order to safeguard the interest of the tenants, a third party takes care of the advance deposits known as Tenancy Deposit Protection Scheme.

A client should understand the following terminologies for better understanding of the letting process.

1) Application Fee-Lender charges this fee to make up for the cost of processing a mortgage application. If the application is not complete, the lender may not return the amount.

2) Annual Percentage Rate-This is a compound interest rate figure. You can use it to compare various mortgages. It depicts the actual cost of borrowing over the entire time-period.

3) Assured Short Hold Tenancy-This is one of the most common type of agreement where the tenant is an individual or a group of individuals rather than a company. The agreement should be more than six months.

Therefore, these are the processes and procedures in a nutshell that you as an investor should always remember.

Memphis is one of the metropolitan cities in Tennessee. Most of Memphis’ high-status housing areas, shopping, and office centers are situated in East Memphis. The Memphis Botanic Garden, Audubon Park, Lichterman Nature Center and other public parks and gardens give a unique appeal to East Memphis. Chickasaw Gardens, for one, is full of elegant houses. The Pink Palace Museum and Planetarium lie adjacent to that neighborhood. Then there is Cordova, which is a rapidly growing community in the Metro area.

The Greater Memphis Area is historically one of the most appealing places in the country to own real estate due to factors such as steady job growth, reasonable property taxes and cost of living, as well as robust rental returns relative to home prices. Investors from all over are flocking to Memphis in order to capitalize on the incredible benefits of owning income-producing property on a long-term basis.

Real estate is typically bought and sold either through a licensed real estate agent or directly by the owner. The modern real estate market is very competitive. Perfect timing matters a lot in the Memphis real estate scenario. Many agents provide free home evaluation to their clients, who want to sell their houses. They also provide free information about, the various aspects of buying and selling a house in Memphis. They update their clients about the latest housing options available, periodically, via emails and letters. To provide better after sales service, real estate agents also provide, a list of services to their clients to help them settle in their new homes.

First National Realty has been one of the leading companies in the Memphis Area for years. Our agents and professionals are equipped with all the necessary selling and buying tools available today. First National Realtors are ready at any moment to deliver results to their clients. We have access around the clock to Memphis MLS property listings. Quickly and easily find great homes for sale in the Memphis – Mid-South Tennessee area.

We have the tools to effectively find homes for sale in the Memphis area that match our client’s needs. We support each client every step of the way through the real estate transaction process. With years of experience in the Memphis property market, you can rest assured your next home will be the right choice.

As we enter the first true ‘new’ market any of us have seen in the past 20 years, we can be sure of one thing….2009 ended on December 31, 2009. Ok, not funny.

But seriously folks, here is what we do know:

Fact 1
Where are the new houses?

No one is adding ‘for sale’ inventory. This is pretty much universal and cuts across all property types and all regions of the country. Historically, the USA absorbs about 1 to 1.5M new houses each and every year. Beginning in the middle 1990′s, the average approached 1.5M and gradually rose to its peak in 2005/6 of over 2M.
In 2009, we built less than 600,000. In 2008, we built less than 700,000.

What does this mean? It means that we are heading for a period of undersupply of housing. From the time that a new home is demanded and it is delivered, the lag time is about 9-15 months, depending on the season, region, size, etc. The lack of supply will be acutely felt soon (mid-year, maybe?) and will carry us into 2011.
The undersupply of housing is probably needed to allow pricing to recover a bit (more on this later).

Fact 2
Equity makes a comeback.

For those unfortunate souls that bought 2-4 years ago, they have seen their property values drop by 10-20% (or more…) depending on region, asset class, price, etc. The bottom line is that the folks who bought with leverage are upside down and the ones who put money down have seen that equity vanish.

That being said, as the loans age and/or are refinanced at some of these amazing low rates, the balances are being paid down 2-4% per year. If we get a moderate increase in value (as much as 7% is expected in some markets) then some folks could see as much as a 10% swing in equity. That would be HUGE for the market.

As we move into 2010 with no new supply, then the buying public will be forced to look at re-sales. The inability for the re-sale market to sell for less than the debt on their respective properties in 2008/9 forced many to stay in place and ride out the storm. This will begin to ease as debt levels and market values begin to move in opposite directions as opposed to the same direction.

Fact 3
The Food Chain Analogy

Sharks eat tuna (I think) while tuna eat something smaller and so on until you get down to plankton. It works exactly the same except oppositely in the real estate world. Think of real estate as more bottom up than top down. When the world went black in 2007/8/9, the real problem was creating the transactions at the bottom. If no one buys the first house, then no one can move up (or even sideways). With no one moving up to house two, no one gets to three….you get the picture.

Several important things are going on at or near the entry level that are changing things. The first time home buyer credit has been expanded to include more people, not just first-timers, and it allows people with higher incomes to benefit. Expanding the base of new buyers is important, albeit at the expense of the future buyer pool, but I digress…..suffice it to say that when someone looks back and says that they bought a home in 2009, they will view it as one of the best decisions ever made.

Secondly, FHA finally expanded many of their programs. The lack of leverage in the market was as responsible for the fall as any other factor. Once a degree of leverage was added back to the market, we found a floor. When your 401k gets cut in half and your boss says you may want to update your resume, you are not too keen on coughing up 20% to put down on a home, regardless of the perceived price. Putting down 5%, however, is a risk at least worth considering. Leverage is/was/will always be key. Dramatically altering down payment options changes pricing dramatically. We are now returning to early 2000′s lending practices.

Lastly, you need to look no further than pricing. Pricing has come down in conjunction with interest rates meaning the affordability factor is as strong as it has even been. The rent versus buy decision can be justified with a simple formula (which one costs me more on a monthly basis) and the lure of being able to afford more house now than ever before (or at least since 2002) is pretty powerful. With the threat of job insecurity diminishing, the collective buying public can see the opportunities.

So, in summary, I feel pretty good about heading into 2010. Of all of the inputs to the market, at the end of the day, supply and demand is really what we are talking about. Supply lags behind demand by at least 12 months and supply is still trending down sharply. Almost every other indicator is neutral to positive as it relates to demand.

Phoenix is the fifth largest and one of the most populated cities of America, thus Phoenix real estate is very crucial for the state as well as the nation. In August 2009, about 1,736 single family detached houses had been sold for the 2009 year. This is an increase from the last year when there were 1,103 homes sold in the same category. However, the average price paid for these homes for sale in Phoenix was $135,656, which is much lower than the average price of $207,662 paid last year. The median price paid in August 2008 for a single family detached home was $165,000, and in August 2009 the median price paid had dropped to $90,000.

As of August 2009, the average time a house was on the market for 2009 was 62 days. When compared to the same time period last year, the average time on the market has decreased from last year’s average of 83 days. Even now, the availability of the homes on sale is much lower than last year. The positive aspect about Phoenix real estate is that there has been consistent activity taking place through out the year.

The statistics for Phoenix, Arizona homes for sale with a listing price below or equal to the limit of Federal Home Allowance receive consistent activity. However, the luxury houses and condominiums above this limit have stalled out on the market. The conventional limit for home loans is $417,000. The properties costlier than this stay on the market for longer periods of time. This is because there are specific buyers for such houses. These houses do not cater to the average buyer, especially in the given market conditions.

The median price of Phoenix houses on sale for the month of September 2009 is $330,000. However, in the last quarter, the average median price paid was $342,000. In this quarter, property above this price is not doing well. There have been many foreclosed homes. Most of these foreclosed properties are in deplorable state. As a potential homebuyer, you can consider these foreclosed properties in Phoenix to purchase for to best suit your needs.

Phoenix real estate