Author: Al Lorenz (page 1 of 3)

by Al Lorenz

Realtor, Media Mogul

Author website

From the Wall Street Journal, complete with video, is Brett Arends take on why now might be a great time to buy a home.  This is the action item to follow Greg’s last post on Why Housing will come back.  I’m in a very seasonal, resort type of market.  A buyer’s negotiating position right now, when a seller who doesn’t have a deal is likely going to still own their home next spring, is amazing.  Make that reason eleven.

Enough with the doom and gloom about homeownership.

Sure, maybe there’s more pain to come in the housing market. But when Time magazine starts running covers that declare “Owning a home may no longer make economic sense,” it’s time to say: Enough is enough. This is what “capitulation” looks like. Everyone has given up.

The Sept. 6 cover of Time magazine: This is what capitulation looks like.

After all, at the peak of the bubble five years ago, Time had a different take. “Home Sweet Home,” declared its cover then, as it celebrated the boom and asked: “Will your house make your rich?”

But it’s not enough just to be contrarian. So here are 10 reasons why it’s good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer’s market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We’re four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor’s Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it’s mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You’ll never catch the bottom. It doesn’t really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair Read more

by Al Lorenz

Realtor, Media Mogul

Author website

Have you heard of Private Transfer Fees?  A private transfer fee is a fee that is required to be paid each time a property is sold at closing.  The transfer fee is attached to the property as a covenant that can run for a period, often 20 or 100 years.

The fees are being used for a variety of purposes.  In some cases, they have been used to satisfy demands from environmental groups.  Developers have also used them, by securitizing them up front, to help pay mitigation costs and up-front infrastructure costs on new developments.  Supposedly even private home owners might be able to add a 1% transfer fee to their homes with revenues serving as future household income.

The NAR, American Land Title Association and the NAHB are all looking at ways to prohibit or limit private transfer fees.  While that tends to make me like the idea of transfer fees on its own, I really don’t see issues with them.  Admittedly, I develop properties from time to time.  Yes, I am frustrated with impact fees, mitigation and infrastructure fees that have climbed to the stratosphere in my little part of the world.  This approach could really help to create some affordable homes that people might actually buy.

Freehold Capital Partners is active in the reconveyance fee financing arena working with developers to structure financing for infrastructure improvements.

Essentially, the concept is based on the premise that improvements which enhance real property are in the immediate and long-term public interest; and a system enabling present owners of private property to better and more fairly apportion present costs and profits amongst multiple future beneficial owners increases economic efficiency.

Traditionally, initial buyers shoulder 100% of the burden of amenities, infrastructure and other improvements, which creates a high barrier to entry into the development. By utilizing this funding tool, developers can now more fairly apportion expenses incurred for permanent improvements among successive owners of the property who will be enjoying the amenities and improvements for years to come. (A familiar example would be bonds issued to finance new schools, where the bonds are paid off over time by Read more

by Al Lorenz

Realtor, Media Mogul

Author website

Mr. Obama’s latest program for the foreclosure crisis attempts to stabilize the market in a different way than his previous attempts.  Before, the feds tried to keep people in their homes by negotiating reduced payments through loan modifications.  Few people were able to use the programs and of those that did the rate of default recidivism was 50% within six months.  The “new” approach is to help those in trouble get out of their homes by streamlining the short sale process and adding requirements that will force banks to accept many more short sales.  Basically, the feds will pay owners to sell at a loss and give them a little cash in the process.

Starting April 5th, hundreds of thousands of delinquent borrowers will be encouraged to sell their homes through this process.  Since the basic laws of economics still apply, that flood of inventory at fire sale prices will create heavy downward pressure on other homes in their markets.  Prices should fall.

That’s just one problem with this approach.  The Home Buyer’s Tax Credit was already a magnet for fraudulent filings. The government mandated short sale process could be even worse.

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it. – MSN

With the high regard that the public holds for real estate agents, they should be a pinnacle of integrity when it comes to setting values for lenders.  Or, could that be a problem?  I’ve found that real estate agents offer different values, at times in spite of the Read more