Q&A: Does Commission Change When a Family Member is the Buyer?

Q. We have our home listed with a REALTOR whom we feel has done a really good job for us in getting the house listed. The agent also has done a great dealing of advertising, has nice flyers etc. The house has been on the market for more than 4 months but we have not gotten any offers. Now we have what could be a good thing or it could be a problem. WE have been approached by a family member who wants to buy the house. We would like to sell it to them and can negotiate the terms between ourselves. Our question: Do we owe the full commission to the real estate agent who has the house listed since they did not technically find the buyer?

A. Most likely you owe the full commission to the company who has your home listed. As you presented the scenario it appears that the discussion with the family member only came up recently and therefore could not (or might not) have been discussed prior to you signing the listing contract.

The major consideration is what does your contract state:

a. About the amount of commission which will be paid?

b. About any ‘exceptions’ to that payment arrangement?

If you had known that a family member MIGHT be interested in buying your home, then you could have included in the contract a provision which excluded you from paying a commission if this SPECIFIC PERSON decided to purchase. Or you could have negotiated to pay a smaller percentage of commission to compensate the brokerage/agent for their work and expenses but something less than the full commission. The brokerage most likely would have insisted that the exclusion be for a set period of time, like 45 days. It would have been a matter of negotiation between you and the agent to determine what amount of commission and what amount of time worked for the two of you.

One of the core principles of issues related to housing is that it always comes down to ‘what does the contract state’. You can be held to the terms which you agreed to when you entered the arrangement.

What can you do now?

1. Read your contract so you know what it states. Are you prohibited from selling to anyone who has ‘viewed’ the home during the terms of the listing for a certain period of time AFTER the listing expires? (Most contracts have such a provision)
2. Ask your agent for a meeting to discuss your listing. Speak candidly about your situation and suggest a compromise of less than full commission.
3. If you get their agreement, then you need to have them put that in writing and get the signature of the broker who will ultimately be the party who is receiving less than the contract stipulated.

IF you are reading this and are considering listing your home, it would be wise to include an exclusion of anyone who has already expressed even minimal interest in your home, how long do they have to submit a contract and clearly state what amount of commission will still be due under the contract.

Selling to family members can be dicey (to say the least). I personally feel both of you still need the help of a real estate professional to work through the details and that you should expect to pay for that representation.

Best of luck with your home sale!

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.

Mildred's Musings

Knowledge is Power!

Knowledge CAN BE Empowering!

Knowledge is Power! How often have you heard that said? How frequently I have personally stated and written it. It has been the cornerstone of much of the work and writing I have done for more than 17 years in the real estate market. I believed it until a couple of days ago—and now I don’t. No one said anything different which changed my mind, more, I just became aware that knowledge, in and of itself, does NOT equate to power.

I should point out that I just finished reading M. Scott Peck’s “The Road Less Travelled and Beyond” for the 3rd or 4th time since it was released in 1997. His books are awesome and will cause you to think. One of the dominant themes in this specific book is ‘thinking well.’ Reading the book (an attempt on my part to gain some knowledge or insight into why I have been feeling stuck in some areas of my life) was the nudge I needed to deepen my understanding. Just as an aside, this book was given to me by my daughter (now deceased) with the inscription “To Mother with Love, Live and Learn, Dovie”. Now, as during her lifetime, she provides inspiration at just the moment I need it. I found and re-read this ‘gift’ just when I needed to be reminded to dig deeper. I am sure that digging deeper has led to the revelation that knowledge is NOT power.

Knowledge is an all important tool to changing our situation but it has no power UNLESS and UNTIL it has been activated and then utilized. Let me explain. I would be rich if I could be paid even $1 for every time I have said, “Mildred, you are supposed to be smart, how did you get yourself into this situation?” Or, “Why can’t you get out of this situation?”

The answer to both questions is that having a great deal of knowledge does not necessarily equate to having fewer problems or knowing how to deal with them when they crop up. Additionally, being knowledgeable in a specific area (say, foreclosure intervention) does not translate into being knowledgeable in other areas (say, relationships or finances). So knowledge of the subject at hand is needed (whatever the subject at hand happens to be).

That knowledge—even when acquired—has NO Power. . .

UNLESS—you decide to implement it

UNTIL—you decide to enforce it

UNLESS—you are willing to withstand whatever recriminations

may come against you as you utilize it

UNTIL—you have the conviction that utilizing the knowledge is

more beneficial than choosing not to use it has been

UNLESS—you are willing to challenge the current situation

based on the knowledge you possess

Let’s say you have a contract or a will which clearly shows you as the beneficiary of a substantial amount of money. You have the document in your possession. You are aware (have the knowledge) that you have the document and further, you are aware that it states you are the beneficiary to receive the funds.

• That knowledge has NO inherent power.
• That knowledge is worthless.
• That knowledge is impotent . . .

UNLESS and UNTIL. . .

That knowledge can be empowering—when it leads to action.

Be empowered by the knowledge you hold! Seek the knowledge you need.

Be Blessed.

Mildred

Host: Home Ownership Matters Preservation Center, Inc. www.HOMPCI.org

Copyright © 2010. All Rights Reserved. Mildred Wilkins Consulting, Inc.

WORD: Days on Market (DOM/D.O.M.)

And the WORD for Today is...

DOM stands for “Days on Market” and is used primarily by real estate agents to indicate the number of days between when a property was first listed and when it eventually closed. You would think this would be simple math and not likely to be misleading, but the reality is that it (like most things) can be manipulated to give a more favorable picture than the actual truth.

First, let’s discuss WHY the number is important. If you are a buyer, you are likely interested in whether or not the listing is a new one (with a low number of DOM). This might indicate the seller has not gotten too worried about getting an offer and may be less willing to negotiate. On the flip side, a larger number of days on market could very well signify a seller who is starting to worry about the chances of getting the price they want and has become more willing to negotiate as a consequence.

Next, let’s discuss how this is one of those times when what you see may be an illusion. If the property has been listed with Agent Y for 95 days, then the listing sheet will show 95 DOM. But suppose the property has previously been listed with Agent X for a full 6months, 180 DOM but the listing expired without being sold. The cumulative DOM is actually 180 + 95 = an astonishing 275.

A seller might prefer you not be aware of the lengthy timeframe the home has been marketed, without success. Many REALTORS would also prefer that you not have access to that information. Only recently have real estate boards begun changing their guidelines to include CUMULATIVE days on market as information which can be accessed by the general public. While the information has always been available for an agent who chose to check the listing history on a property, a potential purchaser could not gain access to this information which was controlled by MLS systems.

As a consumer advocate, I believe it is only appropriate that the potential buyer have full disclosure of ALL pertinent facts. It is certainly important to have an opportunity to question WHY a home has been marketed for over 9 months and not been sold. The answers to the WHY could shape the decision of this potential buyer—whether the issue was the price, condition, some external factor, whatever it might be. Those boards which have chosen to fully disclose this important information are to be commended; those who still fail to do so should consider the implications of providing less than full disclosure a material fact to the public.

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Press Release: HOM Announces (FIS) Course in South Carolina

NEWS RELEASE

FOR IMMEDIATE RELEASE – January 5, 2010

Contact: Mildred Wilkins at (866) 507-5105

Lora Able at (843) 760-9400 x125

Home Ownership Matters announces 1st Foreclosure Intervention Specialists (FIS) course offering in South Carolina

Indianapolis, IN, January 5, 2010—HOM President and Founder Mildred Wilkins joins Lora Able, Director of Education, Charleston-Trident Association of REALTORS®, in announcing that (FIS), a comprehensive foreclosure certification program, will be offered for the first time in the state of South Carolina. Registration was officially announced during a live webcast with Ms. Wilkins on December 15th. More than 27 REALTORS® have already registered; capacity is set at 75. The Foreclosure Intervention Specialist Program (FIS) has additionally been approved for CE credit by Real Estate Commissions in Colorado, Kansas, Ohio, Oklahoma, Nebraska and Indiana. The program has been offered in Florida without CE credit to attendees from a number of states. NAR provided funding for this critical training.

This certification program was developed in 2005 by Mildred Wilkins, president of HOM, LLC headquartered in Indianapolis, Indiana. The program provides 30 hours of material in a classroom setting designed to prepare attendees to become knowledgeable about the options available to consumers who are in default on their home loans. Included in the course are components which address the foreclosure process, ethics, fair housing, the short sale process as well as options for keeping the home. Real estate professionals need a broad knowledge base to make appropriate recommendations when a default has occurred. (FIS) training provides that broad base.

The practice of real estate has evolved rapidly as foreclosures have increased dramatically, creating a need for a new field of knowledge. Foreclosure is frequently avoidable but unfortunately consumers have limited opportunities to learn what options are available. Nor is there a way for consumers to identify professionals who have the ability to help them. (FIS) addresses that need by empowering REALTORS® to be prepared to handle borrowers in default with increased knowledge and professionalism.

The Foreclosure Intervention Specialist (FIS) certification will set apart those agents who have taken extensive training to be prepared to handle the challenges associated with transactions when the consumer owes more than the property is worth on the open market. The training can alter the outcome of mortgage default when a consumer chooses an agent who is an (FIS) specialist. The completion of this program will also help licensees avoid liability while helping them to work more effectively to avert foreclosure.

Ms. Wilkins is a former Fannie Mae Broker-Specialist who sold foreclosed properties for their disposition department out of Dallas, Texas. She has received loss mitigation training from NeighborWorks America, Fannie Mae and HUD. Since founding HOM in 2002, she has been quoted in the New York Times, BusinessWeek and the Huffington Post. She has appeared on MSNBC and NPR. In addition, foreclosure related articles she has written have been published in BAS and REALTOR® magazines around the country.

Wilkins has taught for Graduate REALTOR® Institute (GRI). She is also a member of the faculty of NeighborWorks America as a trainer in Foreclosure Intervention. She is regularly a speaker or trainer at numerous state/regional conferences on foreclosure intervention, predatory lending, loss mitigation and/or mortgage fraud. She is widely recognized as a leading expert on these subjects. HOM has been certified as a continuing education provider for real estate professionals in Colorado, Nebraska, Ohio, Indiana, Kentucky, Tennessee, Oklahoma, Iowa and Alabama. Wilkins is an approved instructor for attorneys in Indiana and Ohio.

Today’s challenges require more expanded knowledge than ever before. The next (FIS) training is scheduled in Florida the week of Feb 22-26. Combine education and vacation. Get the edge you need!

Or register for the course in Charleston, South Carolina scheduled to begin March 15th. Education directors who are interested in auditing the first 3 days or scheduling an (FIS) training series in your area may contact Mildred directly. Funds from NAR’s FPR grants could make this certification a viable option for your membership. Call today!

www.HomeOwnershipMatters.com for registration/information.

Email: MildredWilkins@HomeOwnershipMatters.com

From the Desk Of..."Nothing from Nothing"

Nothing from Nothing Leaves Nothing

“And that ain’t nothing, believe you me” is a refrain of a popular song from my youth. Who knew they were talking about real estate commissions? In today’s tight market it behooves you to start with the end in mind. Literally. It would seem obvious that licensees would always do that since they’re self-employed, paid only via commissions. Unfortunately, keen observation signals that far too often REALTORS® focus on the accumulation of listings without focusing on the realistic possibility of a completed closing. They bought into the myth that whoever has the most listings is the winner of the trophy and therefore is most productive.

Something is Wrong With This Picture . . .

Can you imagine an agent who regularly carries an inventory of 25+ listings (average price $125,000) but is seriously struggling. Obviously, the agent has no problem convincing folks he can sell their home. The problem lies in failing at some other very basic issues which are likely to prevent someone from converting a listing into a “closed” transaction. Let’s consider the most likely culprits.

Silly Details

This will surely not be stepping on your toes to mention “silly” reasons why a listing is unlikely to result in a sale.

• The owner filed bankruptcy, two weeks ago
• The spouse never signed the listing contract
• The lender will be “short” and no one mentioned it
• The house is already scheduled for a sheriff’s sale
• The paperwork for a deed-in-lieu was mailed the day you had your listing appointment
• The “summons” was received two (2) days before they called you

Shame on YOU

In today’s market it is not intrusive to conduct a thorough analysis of the reasons why a potential seller chooses to sell at this junction—that just reflects market savvy. Further, it is a disservice to the potential client and to your agency/yourself to list property without addressing the most common reasons why real estate becomes “unavailable” for the completion of the transaction in today’s market. What a shame to have unearthed the proverbial needle in a haystack (a qualified, ready and able buyer) only to discover you don’t have anything to sell. If you are lucky—really lucky—this qualified buyer will be too busy to sue your client for “failure to perform,” with yours truly as a co-conspirator.

Price ‘em RIGHT…from the beginning

The operative word is RIGHT. The correct view is from a buyer’s prospective. Must I tell you I mean for today’s market, not the market THAT WAS—which is no more. If you’re not able to convince a potential seller of the appropriate listing price based on your BPO/CMA and supporting documents, are you a good enough salesperson to convince someone to buy it at the inflated price you listed it for? Think about it.

Is the owner committed?

I’m sorry, I didn’t mean “should the owner be committed” or perhaps, “the owner plans to get committed.” I mean, IS THE OWNER, TODAY committed to selling their home? Well, how can you tell? That’s easy. An owner who is committed to selling has some basic awareness of the market and will be receptive to your education/documentation of current value. They will already be working on getting their home ready for showings and quite willing to set a definite date when those preparations will be complete. A committed seller is not “testing the water.” They have concrete plans for moving. In other words, they’re an active participant in their real estate process, not your reluctant sidekick.

Ready for the debut?

Not you, the house. Too often, in their anxiety to seal the deal and tally another listing, agents list homes which are not only not ready for showings (clutter, minor cosmetic issues which need to be addressed, lack of curb appeal, etc) but whose owner has demonstrated a lack of commitment to making them ready. It’s such a simple practice to ask “How long will it take to get your home ready for showings?” (Notice, I did not say for listing). Then clearly say, “Call me when it is ready for showings. We can then do the paperwork needed for the listing agreement and I will take photos for marketing.” There, wasn’t that simple? Don’t list a home you are ashamed to have viewed. Day One. Dot. Period.

The Four Rules for Listing

The “rules” I encourage you to implement assume your relationship with your client is strong enough to have resolved any issues related to:

1. a. Appropriate market-based pricing
2. b. Acceptable condition
3. c. Provisions for showings
4. d. Possible impact of “undisclosed pertinent information"
5. e. Any “other” current realities

Rule #2—List at no more than 3-5% above the current market (short sale is an exception to this rule)

Rule #3—List only when the home is “camera ready”

Rule #4—List only AFTER the seller has demonstrated they are committed to selling

Closing = Commission Paid

Now for the first and most important rule. The FIRST rule for listing should be: Don’t list anything you don’t REALISTICALLY believe you can close. It was a good rule to live by when I started my real estate career in the early 90’s. This was not a company rule, but my personal standard in order to become a successful REALTOR®. My logic was that if I closed everything I listed, then folks would believe that I was a good REALTOR®. Such a novel idea. But it worked. My fall-thru rate with buyers was less than 5%, almost always because of inspections issues. My expired listings—less than 1%. Time on market—well below the average for the market then. I appreciate that times have changed. Nonetheless, it was an excellent idea then. I encourage you to consider adopting it as your personal mandate today. You’ll accept fewer listings, but if you close 90-95% of what you list, will you be better off in 2009 than you were in 2008? You do the assessment. It’s a business decision. Marketing listings which are not likely to sell is costly.

6% of Nothing is Nothing

One of the prime reasons I teach and write is because I recognized that the strategies which are being used by many agents are counterproductive and therefore, very frustrating. Handling foreclosed properties for Fannie Mae, after some well-meaning agent had tried to sell them—the traditional way—predictably resulting in foreclosure—I decided to teach agents how to better understand the lender/insurer’s position, and how to successfully structure a short sale. It works, IF YOU WORK IT.

Getting to the closing table is the ultimate goal for all real estate professionals. Strategies for posturing yourself, from the inception of the transaction, with the goal of getting to the closing is the cornerstone of the foreclosure related classes taught by HOM. The (FIS) certification is wholly focused on GETTING TO THE CLOSING TABLE.

Want to learn more?

Web: www.HomeOwnershipMatters.com.

Blog: http://www.HomeOnwershipMatters.blogspot.com/

Mildred Wilkins

President of Home Ownership Matters

Author of “Your Real Estate Advisor”

available at: www.DovePublishingHouse.com

Toll-free 1 (866) 507-5105

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more articles by Mildred at HOM's website.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Short Sale Buyer: 10 Critical Areas of Concern

Short Sale BUYER

Ten (10) Critical Areas of Concern

If you are thinking of buying a home in today’s market, there is a pretty good chance that you will find a home you like which is upside down (seller owes more than the house is worth in today’s market and the sale will require that the lender approve a short sale). Buying a ‘short sale’ is not necessarily a BAD thing but it is definitely a DIFFERENT thing than a regular purchase and so you need to ask yourself some important questions before you embark on this journey. I am going to assume that if you know the right questions to ask that you will be diligent about getting some good answers before you move forward.

Here are areas where you need to do your homework:

1. AGENT—Is your real estate agent experienced in working with short sale buyers? Know how short sale transactions differ from regular transactions? Provided you with sufficient documentation to help you know what the current value of the property is?
   
   
2. TIMING—Are you aware that it could take months (several months) for you to get an answer and go to closing on a short sale? Can you afford to wait for an indefinite period of time? Can you STAY in your current housing until you get closed—however long that might be? Did you know you can decide to walk away anytime you want to even though you have made an offer? Simply tell your agent to rescind your offer if you want to consider another house. (You know to do that in writing, yes?)
   
   
3. NEIGHBORHOOD—Have you done the research you need to do to be sure that the back side of the neighborhood is as appealing as the front side? Are you comfortable with the mix of owners vs. tenants in the neighborhood? Is the neighborhood moving more toward tenants? Are homes well-kept or more of them in disrepair? Have you driven the area at night—do you feel comfortable with the nighttime look and feel of the area you will be calling home? Is there a significant numbers of homes empty—whether for sale or otherwise available for occupancy (rent, lease, etc)? Are property values still falling or have they hit a plateau? Where did you check? (and don’t tell me you just asked your agent). Are you comfortable with the levels of taxes in the area? Are there any special assessments which you need to consider? If there is a neighborhood association, how financially sound is it? Have you stopped and talked to neighbors to see what is REALLY GOING ON IN THE NEIGHBORHOOD?
   
   
4. PROCESS—Did your agent carefully explain the short sale process to you? Did you ask for a response based on how long you are willing to wait (2-3 months) or based on the traditional practice of allowing only a few days? You wrote an offer which was presented to the local owner/seller but then forwarded to their lender/servicer for consideration. Are you aware that the lender may/will consider multiple offers and then make a decision on ONE of them? Were you warned that the Lender may counter your offer—after a very long time—even months after you initially wrote the offer? Are you prepared to increase the amount you are willing to pay or risk losing the house? Have you pre-determined how much you are willing to pay? May I suggest that should be the amount you should offer in the first place?
   
   
5. RISKS—Are numerous but forewarned is better than being caught off guard. Risks include:
   
   a. The SELLER may file bankruptcy—and the house cannot be sold to anyone
   
   b. The LENDER may foreclose and the property become unavailable
   
   c. ANOTHER OFFER may be accepted instead of yours (even if the seller signs your offer that does not mean that the LENDER/SERVICER is going to approve your offer instead of another one which they have received)
   
   
6. LONGTERM—Have you carefully considered whether this house meets your long-term needs (say for the next 10 years)? Lifestyle? Location? Size? Amenities? Condition? Does it have ‘growth potential’?
   
   
7. FINANCING—Do you already have a firm loan commitment from your institution—not a pre-approval? You should start out with a /loan commitment/ to increase your chances of getting your offer accepted and to avoid any surprises down the road. Can your lender use the appraisal recently acquired by the selling institution in order to speed up the process at the end? Did you know that your earnest money check should not be cashed until AFTER you have an offer accepted by the LENDER who is the real decision maker on a short sale transaction? (That could be 3 months from now.)
   
   
8. INSPECTION—Are you aware that most states allow you to have inspections on any property which you wish to acquire (including REO’s, short sales and anything listed ”as is”?) Is your agent encouraging you to have a full property inspection as a way to be sure you fully understand the ACTUAL condition of the property you want to acquire? (Good agents will insist that you should, especially on a short sale which probably has not been well maintained if the home is in foreclosure). Are you aware that you can decide NOT to move ahead with the purchase if the inspection shows some substantial issues which are unacceptable to you?
   
   
9. REPAIRS—Are you prepared to cover the cost for any repairs which are needed immediately (and in the near future) once you close? Have you gotten estimates based on the items uncovered during the inspection?
   
   
10. GETTING TO THE CLOSING—Are you prepared to wait a few or several months to get to the closing date? Are you comfortable knowing you may be asked to increase your offer amount at the last minute, once the lender knows EXACTLY how much is needed to make the deal work under the guidelines from the Guarantor on the loan?

I am a firm believer that if you point someone in the right direction, they will usually get where they were headed. These are not ALL the questions you need to be asking but you are certainly headed in the right direction.

A short sale does not have to be a nightmare. Not with an experienced agent and a well educated consumer. Good luck with your new home experience.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Pended House—Available?

Q: My wife found this house which we really, really love from looking at the outside and peeping in the windows. When we called our agent to tell her we wanted to look at it she told us ‘It is pended’. If a sale is pending on a house, can I still take a walk-through with my agent and if I want it, make an offer?

A: Yes and Maybe. Real estate is changing at break neck speed these days and things which were iron clad just a few months ago are not so concrete any more. Coupled with the fact that all real estate agents do not understand exactly what certain terms mean, causing them to misuse terms and confuse the general public as well as other agents.

“Pended” is SUPPOSED to mean that there is an accepted offer between a bona-fide buyer and a seller. It is SUPPOSED to mean that the parties have agreed on all terms and are waiting for a closing date in the near future. However, it does not always mean that in today’s market. Today there are agents who “pend” properties which have been listed as potential short sales once they have an “offer in hand”. Such an offer must always be accepted not only by the homeowner who is upside down and possibly in default, but also by the lender who will be ‘shorted’ at a potential closing. When this is the case, an offer being submitted does not equate to an acceptance by the lender. Additionally, the fact that the homeowner who is attempting to sell has agreed, does not necessarily mean that the lender will go along with that specific offer.

Under the scenario I just described, it is possible to have an offer ‘pended’ in your local mls which has not been lender approved and which could be viewed, followed by an offer being written which the lender could entertain. On short sales, the lender reserves the right to consider all offers until THE LENDER has granted approval and ordered a closing. They reserve that right up until the time of the actual closing

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Down Market

And the WORD for Today is:

Down Market—is a phrase used to describe a real estate market with an over supply of properties for sale, extended days on market and properties selling for less than the optimum price. An extended “down market” will lead to a recession if market factors do not adjust to move to a more balanced situation within a reasonable period.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Affordable Housing

What is “Affordable Housing”?

Q. With so many people losing their homes to foreclosure and the loud discussions about whether or not they should be ‘rescued’ being raised all over the country by folks from all walks of life, perhaps we need to try to figure out what makes a house affordable.  Is ‘affordable’ a term which means a certain price point?  Is affordable different in different parts of the country?  How can person know if a house is affordable? It is all so confusing.

A.  Oh what a difference a few bank closings and a little recession make. Back in the olden days, say 2007, even then the term was elusive, referring to an elusive, unidentified house that the average middle class American could afford. Now we can’t even figure out who is a middle class American much less what is or is not affordable. All our bench marks have shifted. The value of a home today changes almost as frequently as you need to change sheets. Nonetheless, we need to get a handle on this whole affordable thing.

Let’s take the first question: Is affordable a term which means a certain price point?

It is more helpful to look at a home as being affordable in relationship to your overall income rather than a certain dollar amount. All houses are affordable to SOMEBODY. But maybe not affordable to you. Back in the very conservative, distant past, lenders used the guideline for loan approval as 28% of your gross monthly income (amount you earned before taxes) to be allocated for housing expenses. More than that and you could easily fall on hard times if your income shifted a bit. 

Our current crisis was caused in large part by a shift in practice which allowed many homebuyers to commit as much as 50% or more of their income to their housing payment. If you had a healthy savings account, property values remained stable, the creek didn’t rise and your dog didn’t die, then you MIGHT have been okay. But life happens. Your money got ‘funny’ (that’s what Aunt Carolyn calls it when it doesn’t stretch as much as it used to), property values started going down like elevators (every day) and interest rate resets have taken their toll. Now not only can many folk not afford the home where they currently live, they are unsure what is “affordable” for them. Hopefully, this guideline will help you decide. Very simply, if you make enough in 1 week to pay for your housing that should leave you with a comfortable amount to manage the other expenses of your life.

Conservative, traditional lenders have found that as long as the consumer’s total long term debt is no more than 36% of their total gross income then there is enough wiggle room to afford other items which constitute a “reasonable” lifestyle. This rule has proven over the years to help people to have medical coverage, some degree of entertainment as well as build a small savings account.  Rarely would such a consumer end up in default on their mortgage unless there was a total loss of income.  

This then would represent an affordable house payment. Each individual has a unique affordable housing expense amount which would determine what is affordable for this family. I strongly believe it is important to keep home prices as low as possible, to offer a wide range of homes at different price points so that more consumers are able to comfortably afford to own a house and spend less than the  50%+ that many families currently spend to have a roof over their heads. What I have just described is “an affordable house payment” which is the goal for all us.  

The American Dream has almost universally been described as the desire to own a home. Politicians, housing professionals and the general public are encouraged to take a fresh look at our current concept of what achieving that dream means. Are we being successful if we provide the dream to people who can acquire but not retain the home for more than a few years? Are we achieving  our goal if many of the people we get into new homes are paying so much for that home after interest increases and a full tax assessment that 50%-60% of their income is required for basic housing expenses leaving precious little for any of the other necessities of life? Are we really providing affordable housing or housing which appears to be affordable at the beginning because of creative financing ploys which reduce the initial payments by hundreds of dollars per month deluding consumers into believing it is “affordable”? Why are foreclosure rates so high in the FHA arena with many first time buyers? Are the down payment assistance programs leading to more people being home owners (retaining a home for several years) or just  a revolving door of more people who build/buy but are back in the rental market within a couple of years? 

It is time to raise the difficult questions and look for some honest answers in trying to shape what will be done to improve our housing market. It is important to offer “affordable” housing to help stabilize our communities, to allow more consumers to enjoy both the emotional and financial benefits of home ownership. It is a dream worth working toward and saving to achieve. It should be more than a fleeting illusion which disappears and leaves in its wake a disillusioned, frustrated consumer who barely comprehends that the beautiful home and future they envisioned was doomed from the beginning.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Your Real Estate Advisor: Deal or No Deal?

This catchy title from a popular game show has increasingly become a weekly nightmare for real estate professionals. In a market where an alarming number of clients are behind on their mortgage AND upside down, many agents are finding themselves sitting for ever increasing amounts of time—sometimes months—waiting for the lender in some distant city to notify the interested parties that, “Yes, we have a workable deal”. Now, get it closed in short order (7-10 days is not uncommon) and “No, we will not allow any contributions toward the buyer’s costs”.

Common practices (seller concessions) are not part of this transaction. Local real estate agents negotiating with a distant third party who does not, in fact, own the real estate (lenders’ loss mitigation department) has become a new reality for many real estate professionals. This practice will continue and become more commonplace as more consumers find themselves in a position where they are unable to make their mortgage payments and the local market will not support the full amount needed to cover mortgage payoff and the expenses associated with the sale. It’s called a “short sale” and the rules of the transaction are markedly different from how you used to sell homes.

“DEAL” means yes, we will allow the closing to occur. You must close quickly or we will change our minds. Seldom will any seller concessions be allowed. Worse yet, seldom will full commission be allowed. Frequently, the lender will notify all parties of a counter offer only after an extended period of time of complete silence. Then you are basically in a “take it or leave it” situation. It is critical that you get an actual letter of confirmation which includes ALL terms of the transaction from a representative of the financial institution, so that you know that the deal can be finalized with a closing and exactly which terms are acceptable.

“NO DEAL” means the lender/servicer has determined that the offer(s) is not workable for them or their insurer. There are a number of reasons why this might be true, but in essence you have been told they will not allow the closing and will most likely move forward with completing foreclosure action against the current owner of the home. There are a few options for intervention, but unless you have been trained in foreclosure intervention this an excellent time to utilize a mutual release. “NO DEAL” usually means go home—whether you’re on a game show or trying to sell real estate.




Mildred Wilkins, founder and president of Home Ownership Matters, LLC. She is the trainer for the (FIS) Foreclosure Intervention Specialist certification program. Visit her website www.HomeOwnershipMatters.com or call toll free (866) 507-5105.

Copyright © 2007. HOM, LLC. All rights reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

What's That Mean?! (A-N)

You know how sometimes you see some letters jumbled together, and they just don't make a single bit of sense to you? Well, maybe this list of acronyms and abbreviations will help.

A.B.A.—American Bar Association

ALTA—American Land Title Association

A.P.R.—Annual Percentage Rate

ARM—Adjustable Rate Mortgage

BAPCPA—Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

BPO—Broker Price Opinion

CAIVRS—Credit Alert Investigation Verification Response Systems.

C.D.—Certificate of Deposit, see page

CDC—Community Development Corporation.

CMA—Comparative Market Analysis

C.P.M.—Certified Property Manager

C.T.A.—Cum Testamento Annexo (with the will attached. See Administrator C.T.A.)

CRV—Certificate of reasonable value.

DBA—Doing Business As.

DOM—Days on Market, see page #??

ECOA—Equal Credit Opportunity Act

EEM—Energy Efficient Mortgage

EIC—Earned Income Credit

EPA—Environmental Protection Agency.

ERTA—Economic Recovery Act of 1981.

FDC—Fair Debt Collection law

FDIC—Federal Deposit Insurance Corporation

FHA—Federal Housing Administration

FHLMC—Freddie Mac

FICO—See credit score.

FIS—Foreclosure Intervention Specialist

FSBO—“For Sale by Owner”

FTC—Federal Trade Commission

GFE—Good Faith Estimate

GNMA—Ginnie Mae

HECM—Home Equity Conversion Mortgage

HELOC—Home Equity Line of Credit

HOEPA—Home Owner Equity Protection Act--

HUD—Housing and Urban Development

HUD-1—See Settlement Statement.

IRA—Individual Retirement Account

LIHEAP—Low Income Home Energy Assistance

MERS—Mortgage Electronic Registration System

MIC—Mortgage Insurance Case Number

NAR—National Association of REALTORS

NSF Fee—Non-Sufficient Fund Fee. See Return check fee.

If you have any questions about these, you should always feel free to leave us a comment, or e-mail us.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of Acronyms and Abbreviations like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)