40 Frustrations fly over FHA loan hangups

WASHINGTON – May 12, 2016 – At the Real Property Valuation Forum during the 2016 Realtors® Legislative Meetings & Trade Expo Tuesday afternoon, real estate professionals, appraisers and underwriters all aired grievances about the difficulty and confusing language of the FHA loan process, and specifically the new FHA single-family handbook and its effect on appraisals.

John Anderson, broker-owner of Twin Oaks Realty Inc. in Minneapolis, Minn., said he sees a huge reluctance for sellers to accept offers that will be financed by FHA loans.

“Sellers are looking the other way and saying ‘I don’t really want to deal with FHA,'” Anderson said. Still, he said some 25-30 percent of his deals are FHA-insured and noted that sometimes it’s more of a word-of-mouth reluctance than actual experience of collapsed deals. “Often it’s because of misconceptions … sellers are saying ‘I hear there’s problems with FHA appraisers.'”

Gary Eisenbraun, a housing programs policy specialist with FHA, said he does his best to explain the limits of the FHA’s power to change the process, noting that appraisers don’t decide where the home should be valued.

“The appraiser has a responsibility to tell the story,” said Eisenbraun. “It’s the underwriter that clears the property.”

While some panel experts noted that recent changes to FHA’s appraisal handbook seem to imply that the appraisers’ work is more akin to that of a home inspector, Eisenbraun disputed that. He said appraisers and lenders can always order a more experienced or capable inspector to do follow-up work to help the lender determine proper value.

“HUD would never expect anyone to put themselves in a dangerous situation,” Eisenbraun said. “We don’t expect the appraiser to be a chemist.”

Another point of contention: The practice where appraisers ask to see outside home inspection reports

“The home inspection should never be given to the appraiser,” Eisenbraun said. “That’s giving someone something they really don’t need in order to determine value and acceptability of the property to HUD.”

Perhaps the greatest number of individual audience questions centered on the working order of appliances.

The way Eisenbraun laid it out, FHA doesn’t technically require any appliances to be present or in working order. It only requires that occupants have areas in which they can sleep, eat, prepare food and bathe.

“We are not saying you have to have kitchen appliances unless they are conveyed in the context of real estate,” Eisenbraun said. “But if it’s customary in your local market, then it may be considered real estate.”

Several questions focused on appliances that weren’t in tip-top shape. Eisenbraun said the basic functionality of an appliance should be the litmus test. If the fridge can keep the milk cold, it’s working. If the icemaker doesn’t appear to be making ice, “maybe that has a defect on the overall contributory value,” but it’s not really a deal-breaker for the appraisal.

There were calls from the audience and panel participants to increase training, but Eisenbraun said there’s only so much the federal government can do at the local level, and he appealed to real estate professionals and lenders to stay involved in the appraisal process and demand a high level of performance from appraisers.

Anderson added that sales associates and brokers have a responsibility to consider future appraisals when they work with sellers to determine the price of a home.

“We have to build our cases when we list our properties, just like appraisers have to do; [otherwise] we’re not doing our fiduciary duty,” he said, telling attendees to consider the work of the appraiser throughout the listing process. “Sometimes we think, ‘We just sell them and you make it fit,’ but it doesn’t really work that way.”

Source: Meg White, Realtor Magazine

© 2016 Florida Realtors®

Right to inspect: The devil is in the details

Right to inspect: The devil is in the details
By Margy Grant

May 16, 2016 – One of the most common clauses buyers utilize when submitting an offer to purchase real estate is the “right to inspect.” Based on the number of calls to the Florida Realtors Legal Hotline, this also is one of the most misunderstood clauses, and one that could have serious consequences for buyers and sellers if it is not interpreted and enforced correctly.

In the “As Is” Residential Contract for Sale and Purchase approved by Florida Realtors® and The Florida Bar — the purchase contract most commonly used by members — the right to inspect clause contains the language “in the Buyer’s sole discretion.” This phrase is intended to mean that a buyer may cancel the purchase contract at any time during the inspection period for any reason. Occasionally, Realtors confuse this language. They interpret it to mean a buyer is required to discover a defect in the property or structure and only then is entitled to cancel. This is incorrect.

A buyer may terminate the contract by delivering written notice to the seller for any reason, even something as minor as the color of paint in a bedroom. However, to be binding, the notification has to be made prior to the expiration of the inspection period.

Another issue that is often misunderstood is the process for renegotiating a contract before enacting the right to terminate.

Let’s say you are representing buyers who have signed a contact to purchase a home. An inspection has revealed the roof is aged and leaking in one section. Your buyers still want to buy the house; however, they want the seller to either fix the roof or reduce the purchase price to reflect the repair amount. Otherwise, they will have to cancel.

Simply contacting the listing broker to communicate the problem does not constitute a cancellation under this section of the contract. If a buyer wishes to renegotiate then you, as the buyer’s Realtor, need to provide specific information to the listing broker. Explain exactly what the buyers want and explicitly say that if the seller refuses, then the buyers intend to cancel under the inspection clause of the contract.

If you fail to accurately explain what the buyers want as a remedy, and the seller does not respond before the time to inspect the property lapses, your buyers may be in jeopardy of losing their deposit.

How do you as a Realtor protect yourself from situations like this? Simple: Communicate and watch the calendar. In writing, explicitly explain to the listing broker what your buyers want from the seller. At the same time, make sure your buyers do not miss the deadline to cancel the agreement if the parties cannot agree on repairs or a reduction in purchase price. Remember: The “As Is” form contract is calculated on calendar days, not business days.

Real estate contracts vary in terms of when a buyer or seller can amend or cancel. You should carefully review each contract’s right to inspect clause. In the event there is confusion about which day is the final date to cancel, you should contact the other side and make sure everyone is in agreement. But when in doubt, err on the side of the earlier date to protect yourself and your buyer.

In most transactions, a buyer wants to buy and a seller wants to sell, so approach all negotiations positively and work toward a sale. But, at the same time, take precautions to make sure you do not inadvertently put the buyer’s deposit at risk.

Margy Grant is Vice President and General Counsel for Florida Realtors

Rising prices could increase mortgage rates

WASHINGTON – May 16, 2016 – Home sales will grow modestly this year, but a continuing inventory shortage will keep upward pressure on prices and make it hard for many people to buy, even though interest rates remain low.

On the downside, a tight inventory creates a challenge for homebuyers. On the upside, low interest rates make these higher-cost homes more affordable.

National Association of Realtors® (NAR) Chief Economist Lawrence Yun said low interest rates are a bright spot, but he warned that when inflation picks up, mortgage rates will follow suit. Today’s low consumer price index (CPI), at about 1.7 percent, doesn’t reflect the rise in prices people are seeing on everyday items because low gas prices keep the broader index down.

But CPI won’t stay low forever, Yun said. The monthly rental rate tenants pay is going up (almost 4 percent this year, a seven-year high), and that will send the broader index up. When that happens, the Federal Reserve will raise the short-term interest rate it charges banks, which in turn will impact mortgage rates.

Yun predicted that existing home sales would rise to 5.5 million by the end of the year, up slightly from 5.4 million last year. New-home sales will rise to 540,000 units from half a million, but because that segment of the market is currently so far below historical levels, the gains won’t come close to closing the inventory gap, Yun said.

What’s more, most new homes are at higher price points, exacerbating affordability struggles for first-time and moderate-income homebuyers. Yun said larger homes are the most profitable for builders, who have to worry about meeting local ordinances and other costs. He added that most new homes come on the market at more than $300,000.

Inventory shortages continue to drive most price increases, which were almost 7 percent nationally last year. The increase far outpaced wage gains, which were up only about 2 percent. Yun is forecasting prices to rise another 4.5 percent this year.

Right now Yun’s forecast call for mortgage rates to be at 3.9 percent at the end of this year, about where they were last year, and to rise to 4.6 percent in 2017. Yun identified 6 percent as a mortgage-rate threshold, noting anything much higher than that will curb home sales.

“If rates get to 7 or 8 percent,” Yun said, “watch out.”

Bottom line: Look for modest market growth this year and next, but as long as inventory shortages persist, homes will become increasingly unaffordable. Once mortgage rates start going up, which they could do as rental rates continue rising, sales will be hurt.

Source: Rob Freedman, Realtor Magazine

© 2016 Florida Realtors®

Problems related to new TRID rules seem to be over

WASHINGTON – May 23, 2016 – For the second consecutive month, the average time to close all loans was 44 days, suggesting that new mortgage rules that took effect last have less of an impact delaying loans, according to Ellie Mae’s latest Origination Insight Report.

Credit scores

68 percent of purchases (69 percent of refinances) had FICO scores of 700 or above
31 percent of purchases had a FICO score between 600-699
26 percent of refinances had FICO scores between 600-699
Conventional loan FICO distribution found 81 percent of scores above 700
FHA FICO distribution found 39 percent of FICO scores over 700 and 56 percent of FHA loans with FICO scores between 600 and 699
“Days to close a loan remained steady at 44 days in April,” says Jonathan Corr, president and CEO of Ellie Mae. “Additionally, while our FICO distribution charts show that approximately 68 percent of average FICO scores for both refinances and purchases in April were above 700, we’re seeing purchase credit availability with 31 percent of FICO scores in the 600-699 range.”

The closing rates for all loans dropped to 69 percent in April, retreating from the high of 71 percent in March, according to Ellie Mae. Purchase closing rates dropped to 73 percent in April, down from 75 percent in March.

The average 30-year interest rate for all loans dropped from 4.12 in March to 4.10 in April. Debt-to-Income remained steady at 25/38 and Loan-to-Value stayed at 80.

© 2016 Florida Realtors®

FHA may be reopening doors to condo financing

WASHINGTON – May 23, 2016 – Could the Federal Housing Administration (FHA) finally be opening its doors again to financing more condominium units? If so, that could be excellent news for young, first-time buyers and for seniors who own condo units and need a reverse mortgage to supplement their post-retirement incomes.

Here’s why: FHA financing offers not only 3.5 percent minimum downpayments but is far more lenient than other options on crucial issues such as credit scores and debt-to-income ratios. Plus FHA is the dominant source of insured reverse mortgages – the only game in town for the vast majority of seniors.

But if a condo building is not certified as eligible for financing by FHA, all the individual units in the project are ineligible for mortgage financing as well. Young families can’t buy using FHA loans, sellers can’t sell and seniors can’t tap their equity through a reverse mortgage. It used to be different – for years FHA allowed so-called “spot” loans on individual units – but no more.

But maybe things are about to change. In a speech last week to the National Association of Realtors, Housing and Urban Development secretary Julian Castro said revisions to controversial FHA rules on condos have been completed and only await final Obama administration approval. The changes would simplify controversial certification procedures for condo buildings and amend other rules that have knocked thousands of condominium buildings out of eligibility.

Since adopting highly restrictive qualification rules early in the current administration, FHA – once a major player in the condo field and the go-to source of financing for moderate-income purchasers – has steadily seen its market share shrink. FHA once financed 80,000 to 90,000 condo units a year, but last year volume fell below 23,000. Many condo homeowner associations began losing their eligibility several years ago, and because of what they consider onerous recertification requirements, have never sought to reapply.

Castro provided no details on what changes are coming. But real estate and condo industry sources say they could build upon reforms announced last November that appear to have had at least modest success in encouraging condo homeowner boards to get onboard again.

Two California-based consultants who help associations and community managers work through the certification hoops told me they have seen a jump in activity in recent weeks. Condo boards that had been resistant to the FHA rules “aren’t fighting them as much any more,” said Natalie Stewart, president of FHA Review. “People need to sell their homes, people need to buy” affordable condo units, so some associations grudgingly are returning to the FHA fold.

Jon Eberhardt, president of Condo Approvals, LLC, said “we certainly have seen an uptick” in FHA certification applications. “I wouldn’t call it monumental, simply a steady growth” in the wake of last November’s changes, he added.

Dawn Bauman, senior vice president for government affairs at the Community Associations Institute, a Virginia-based group that represents 33,000-plus condo and homeowner associations and managers, confirmed that she’s also detected “an increase in the number of applicants” for condo certification and that regional FHA offices have been “more flexible” in recent months in evaluating applications.

What will be crucial to continuing the positive trend, industry experts say, is for the upcoming guidelines to make changes beyond simply streamlining condo certifications.

On the list of needed reforms:

The return of spot loans. That alone would significantly expand opportunities for millennials, minorities and seniors.
An end to FHA’s blanket prohibitions against community-benefit homeowner transfer fees collected by some condo associations when units change hands. In California, this ban alone has led to the loss of thousands of units from FHA financing – a huge problem in areas where affordability is tough and condos are the lowest-cost alternative for many consumers.
Relaxation of strict limits on commercial space in residential condo properties. Revenues from commercial leases are important to the financial health of urban condominiums, but current FHA caps render many buildings ineligible.
Copyright © 2016 the Boston Herald, Distributed by Tribune Content Agency, LLC.
Related Topics: Condos, Mortgages

Fla.’s housing market: Median prices, new listings rise in April 2016

ORLANDO, Fla. – May 20, 2016 – Florida’s housing market reported increased new listings, rising median prices, fewer days to a contract and fewer cash closed sales in April, according to the latest housing data released by Florida Realtors®. With inventory still constrained, statewide closed sales eased last month: Single-family home sales totaled 24,144, remaining relatively the same (down 0.6 percent) as April 2015.

“Still-low mortgage interest rates and a strong jobs outlook are positive trends for Florida’s housing market,” says 2016 Florida Realtors®President Matey H. Veissi, broker and co-owner of Veissi & Associates in Miami. “We’re also seeing a rising number of new listings added to the market, which is a trend that needs to continue as many areas still face a shortage of supply, particularly for single-family homes. New listings for existing single-family homes rose 3.1 percent compared to a year ago while new listings for townhouse-condo properties rose 3.7 percent.”

Meanwhile, sellers continued to get more of their original asking price at the closing table. Sellers of existing single-family homes in April received 95.9 percent (median percentage) of their original listing price, while those selling townhouse-condo properties received 94.5 percent (median percentage).

The statewide median sales price for single-family existing homes last month was $213,000, up 9.2 percent from the previous year, according to data from Florida Realtors Industry Data and Analysis department in partnership with local Realtor boards/associations. Thestatewide median price for townhouse-condo properties in April was $160,000, up 4.4 percent over the year-ago figure.

In April, statewide median sales prices for both single-family homes and townhouse-condo properties rose year-over-year for the 53rd month in a row, Veissi noted. The median is the midpoint; half the homes sold for more, half for less.

Accordingto the National Association of Realtors®(NAR), thenational median sales price for existing single-family homes in March 2016 was $224,300, up 5.8 percent from the previous yearthenational median existing condo price was $209,600.In California, the statewide median sales price for single-family existing homes in March was $483,280; in Massachusetts, it was $329,505; in Maryland, it was $252,068; and in New York, it was $230,000.

Looking at Florida’s townhouse-condo market, statewide closed sales totaled 10,738 last month, down 5.3 percent compared to April 2015. However, the closed sales data reflected fewer short sales and cash-only sales in April: Short sales for townhouse-condo properties declined 43.2 percent while short sales for single-family homes dropped 35.9 percent. Closed sales may occur from 30 to 90-plus days after sales contracts are written.

“The positive growth we’re seeing in sales for homes priced above the $150,000 mark is being offset by a continuing decline of homes for sale in the most affordable price ranges,” says Florida Realtors®Chief Economist Brad O’Connor. “This trend is due in part to the ongoing decline in sales of distressed properties. In April, distressed sales accounted for less than 12 percent of all closed Multiple Listing Service (MLS) sales in Florida – the lowest such percentage we’ve recorded since the initial stages of the downturn last decade.”

Inventory was at a 4.5-months’ supply in April for single-family homes and at a 6.3-months’ supply for townhouse-condo properties, according to Florida Realtors.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.61 percent in April 2016, down from the 3.67 percent average recorded during the same month a year earlier.

Realtors also have access to local market stats (password protected) on Florida Realtors’ website.

© 2016 Florida Realtors®

Average 30-year mortgage rate ticks up to 3.58%

WASHINGTON (AP) – May 19, 2016 – Long-term U.S. mortgage rates were little changed this week, at or near their lows for the year.

The low rates come amid the spring home buying season, luring prospective purchasers.

Mortgage buyer Freddie Mac says the average 30-year fixed-rate mortgage ticked up to 3.58 percent from 3.57 percent last week. It’s far below its level a year ago of 3.84 percent.

The average rate on 15-year fixed-rate mortgages was steady at 2.81 percent.

AP Logo Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Why do sellers sell? Top 5 reasons

CHICAGO – May 19, 2016 – Inventories of homes are tight nationwide. What’s going to get homeowners to finally sell?

In a recent survey, realtor.com researchers identified some of the top motivations today:

Want to be in a different neighborhood (40%)
Need a home with different features (28%)
Need a bigger home (22%)
Want location with better weather, views, or lifestyle (19%)
Need to lower cost of living (17%)
However, different needs motivate different age groups. Households between the ages of 35 and 44 tend to be driven by the desire to be in a different neighborhood and have a bigger home. On the other hand, households of those 65 and older are more motivated by retirement. They tend to want a home with different features or an element that will improve their weather, views or lifestyle.

However, “the biggest factors standing in the way of today’s sellers are time, making necessary improvements in their existing home in order to sell, and finding a replacement home to purchase,” says Jonathan Smoke, realtor.com’s chief economist.

Source: “It’s a Great Time to Sell a Home – and to Buy Again,” realtor.com® (May 18, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

Women are more skeptical but driven to buy a home

Women are more skeptical but driven to buy a home

NEW YORK – May 19, 2016 – A new survey indicates that women may be a harder sell than men.

However, women want to own their own homes. In fact, they want one more than men. According to the ValueInsured Modern Homebuyer Survey, 77 percent of women who don’t own a home would like to buy one compared to just 70 percent of men.

But when it comes to confidence in the value of attaining homeownership, there appears to be a significant confidence gap:

Women are less confident that the American housing market is healthy, with a confidence gap of 21 percentage points (68 percent of men vs. 47 percent of women).
Women are less confident that buying a home today is a secure and smart financial investment, with a confidence gap of 15 percentage points (76 percent of men vs. 61 percent of women).
Women non-homeowners are less confident that they can afford the downpayment on a home, with a confidence gap of 13 percentage points (42 percent of men vs. 29 percent of women)
Among homeowners, men are more confident than women that they can sell their home for the same amount or more than what they paid for it. In addition, more men (83 percent) than women (74 percent) would like to sell their current home and upgrade to a new one.

Out of those potential buyers interested in upgrading, women (69 percent) are less confident that they can afford the downpayment on that new home than men (92 percent).

The housing confidence gap between genders could be attributed to a stronger desire to avoid debt. When asked about their personal definition of the American Dream, women were more likely to cite being “debt free” while men were more likely to cite “owning my own home.”

Equation Research conducted the ValueInsured Modern Homebuyer Survey online in March 2016 among a nationally representative sample of 1,157 American adults ages 18 and older.

© 2016 Florida Realtors®