FHA will increase its Mortgage Insurance Premium (MIP) rates effective Oct 4, 2010.  Actually the monthly FHA MIP rates will increase while the upfront premium will decrease.  More on the specifics in a moment.

Okay, let’s get the boring stuff out of the way first.  Congress recently passed HR 5891 which gives the FHA authority to adjust MIP rates. Basically FHA can increase the cap on premiums from 0.55% to 1.55%.  Now before your eyes glaze over from all the acronyms, premium percentages and HR numbers (not to mention the use of the word “congress”), there is a very good reason all this is so important.

The word on the street is that FHA mortgage insurance funds are way to low to support the curent default rate. If the funds pool cannot cover defaults we could be looking at yet another government bail out.  I don’t know about you, but I’ve suffered through just about all the bail outs I can stand.  Not sure how many more our still fragile economy can take either.  At least some thought is being given to avoiding potential problems with this issue.

What does this mean to you?

The monthly MIP rates will increase by just over 63%.  Here’s an example of what this means on a $200,000 home mortgage.

MIP before Oct 4 is $91.66

MIP after Oct 4 will be $150.00

Increase of $58.34 per month

The annual MIP fee that is paid up-front will actually decrease from 2.25% to 1% of the loan amount.  In the same $200,000 loan amount example, this is a decrease of $2,500.  Since this typically gets added to the loan amount, at todays rates we talking about somewhere around $13 per month.  Taken with the $58.34 per month increase in this example, monthly payments will still go up.

Sometimes we end up overcomplicating what it takes to sell a home in today’s competitive real estate market.  You are either in the market or out of the market.  And it’s really pretty easy to tell which applies to your listing.

My friend Jay Papasan explains this concept in simple, plain language.  Take a look at this video and then contact me to talk about exactly what it will take to get your home sold.

Leaving a home vacant can cause you to be exposed to serious insurance coverage risks. You could face a loss of thousands of dollars only to find out that the coverage you thought you had does not apply.

When a home seller has a new job in another city, or a loved one somewhere else who is in need of their care, sometimes they must move on before their house sells.  Chances are good that their insurance policy only has coverage for an occupied home.  When a home is left unoccupied or vacant the terms of the insurance policy could be inadvertently violated by the home owner and the home could be effectively uninsured.

Insurance companies price policies based on risk.  The higher the risk, the higher the premium. For residential homes there are three categories of insurance coverage.  Occupied, unoccupied and vacant. Each carries a different risk and therefore a different price or premium. Insurance companies place terms in policies that define the risk for which you are buying insurance.  When you violate the terms, such as leaving your home vacant versus maintaining an occupied home, you add risk that you are most likely not insured against.

Insurance companies consider an unoccupied or vacant home a greater risk for the following reasons.

Burglary and vandalism. Thieves actively seek out vacant homes. This is an easy target for them and it is typically easy to figure out that no one is living in a home.

Emergency response. If a small fire starts in an occupied home it can many times be handled without even involving the insurance company.  If no one is home it could spread and burn the home to the ground.  If someone is at home to call 919, even damage from rapidly spreading fires can be minimized. The same risk would apply to a small plumbing leak that left unattended could flood the house and result in tremendous damage and mold growth.

Accident liability. When the home is vacant there is no one available to prevent others from entering the property or supervising their activities.  If someone gets hurt on your property, even though they were uninvited, there is a good chance you could be held liable.

How to Protect Yourself

The first step is to read your insurance policy.  Boring, I know, but there’s no other way to know about your coverage. Then speak to your insurance agent about your situation.  Be honest and ask for clarification on your coverage and alternatives such as increased premium pricing to cover a vacant home.  Yes, you may have to pay more for coverage during the time you are not in the home, but experiencing a catastrophic loss without coverage could cost you more.  Much more.

Be sure you understand the insurance company’s definition of vacant.  Most policies define this as a certain number of consecutive days that no one is living in the home.  Your insurance company may also differentiate between unoccupied and vacant. Discuss your exact situation. When you will move out, if furniture will be left in the home, if anyone else stay in the home during the time you are not there.

And of course the best way to avoid this issue altogether is to sell your home quickly. Ironically selling quick can sometimes mean selling at a higher price too. If you would like to discuss what it will realistically take to get your home sold for top dollar in the shortest time possible, please contact me for a private, no-cost and no-obligation consultation.

Initial price has emerged as the single most important factor in selling a home for the most money in the shortest amount of time.  Pricing too high has serious risks with regards to eventual sell price and days on market.

You want the same thing every other seller on the planet wants.  Your home to sell fast and sell for the most money.  But the hard cold reality is that currently only about 11% of houses listed sell in any given month.  How do you get to be a member of the 11% group?

The quick answer is to give buyers what they want when they look at your marketing.  Find out what they’re seeking and offer it to them. If you think it’s nice hardwood floors, or granite counters, fresh paint and carpet, or a nice flat back yard, you’re right.  The problem is these things alone are not enough in today’s market that is already crowded with excess inventory.

Today’s buyer is seeking a bargin.  That’s the mindset.  Price is the primary criteria buyers are using to filter the huge lists of possible homes they could see.  There is no shortage of beautiful homes filled with all the eye candy the typical buyer wants.  But there is a serious shortage of buyers.

All things being equal, buyers will choose houses to look at based on price.  Condition and marketing cannot be compromised, but price is the differentiating factor that will put your house at the top of the list.  And price can also be the reason you don’t even make the list.

Our market may have shifted to a buyers market but the principles of selling houses has not changed.  Stand out from the crowd, attract as many buyers as possible, and watch the price go up.  I have seen this happen many times in sellers’ markets and in buyers’ markets.  Including the buyers’ market we’re in right now!

Even in today’s sluggish market selling houses is really a numbers game.  The more buyers you attract, the more offers you can expect.  More offers almost always result in a higher price; if the negotiations are handled by a professional, experienced negotiator.  So why do many sellers fail to list their homes in the range that gets them on the short list?  I think there are two reasons.

I want to try a higher price first.  On the surface, this might sound reasonable.  In reality, it’s the kiss of death. The first few weeks are when your house will get the most attention.  The listing is fresh.  Buyers looking in your neighborhood will spot the new listing.  So will their agents.  The problem is at this point they pretty well know the market price for your neighborhood.  If you are too high, they won’t waste their time.  They will simply pursue the large group of other suitable homes that are priced lower.

Stacey Anfindsen, publisher of the Triangle Area Residential Realty Report, did some interesting research. He looked at two groups of recent sales in the Triangle area. The first group was all homes where the final list price was equal to the original.  The second group was all homes where the final list price was lower that the original.  The group that was priced right from the beginning (no reductions)  sold in an average of 49 days for 98% of original list.  The group that was priced too high in the beginning (had been reduced) sold in an average of 144 days for 88% of original list.  Which group do you want to be in?

What if I don’t get multiple offers? A home priced strategically really should bring multiple offers.  If that does not happen, perhaps you still missed the mark on price.  If  you only get one offer, I wouldn’t necessarily call that a complete failure.  Evaluate it honestly and stand your ground on price.  If you’re too high, you cannot successfully do that.  Have a great negotiator on your team.  Getting the home sold for the most money in the shortest time with the least hassel is the goal.  If you set your price where your house continues to be eliminated from the competition, you will not even get showings.

If you’re ready to explore what it will take to get your home sold in today’s market, request a no obligation home value analysis.  You’ll get an honest, no-pressure evaluation of your particular scenario.

What was the impact of the Home Buyer Tax credit?  It definitely had an impact on the local Raleigh area real estate market during the first half of this year.  Was it a positive or negative impact?  Was it good for buyers?  Was it good for sellers?  Let’s  see what the numbers tell us.

As we try to understand the impact of the Home Buyer Tax Credit, the first place we should look is closed sales. What does a normal, unstimulated year look like?  We’ll have to go all the way back to 2008.

For our purpose today the important thing to notice is the shape of this graph.  It increases from January, peaks in June, then decreases through the end of the year.

Now let’s compare the unstimulated year of 2008 with the stimulated year of 2010 to get an even better understanding of the impact of the Home Buyer Tax Credit.

Easy to see the difference, isn’t it?  Look at the relatively flat January sales activity in 2010. Think this might have been a mindset that said let’s wait, we have until April 30th to be under contract?

Now look at the sharp increase in sales activity from March Through April.  The mindset among buyers during this time was hurry up before time runs out.

Now for the most chilling fact of all.  Take a look at the incredibly sharp decrease in closed sales for the month of July.  Here are the exact numbers of closed sales for July of both years.

July 2008 – 1424 Closed Sales

July 2010 – 865 Closed Sales

That’s a 36% decrease in sales.  It’s clear to see from the data that sales in general are down from 2008, but July sticks out as the sharpest decrease of the year.  Think this might be due to the Home Buyer Tax Credit?  Does it look like sales were moved from the months of June and July into the months of February, March and April?

Want to take our study of the impact of the Home Buyer Tax Credit even further? I think the effects are still not over.  Showings precede purchases in the real estate business.  Showings are down too.  Take a look at the difference in showings for the month of June.

Wow… showings were down by 30% in June!  Taking this into consideration, we easily have another 30-60 days of lingering effects left to deal with.  That puts us out to September or October when the market normally starts to slow down for the holidays.

So back to my original questions about the impact of the Home Buyer Tax Credit.

Was the impact of the Home Buyer Tax Credit positive of negative? I believe that overall it will be a non-factor if we look at 2010 as a whole.  I have always said that the government cannot make anyone buy a home who does not need one.  It’s pretty clear to me that the results of this tax credit was that buyers were moved around relative to when they purchased.  I think it’s safe to say that no new buyers were created.  Our government does not have that power.

Was the tax credit good for buyers? If you got $8,000 for buying a house that you intended to buy anyway, you would probably answer yes to that question.

Was the tax credit good for sellers? Maybe.  If you timed your best pricing and marketing efforts for the February through April timeframe, you at least had a great number of motivated buyers look at your home.  But if you are still trying to sell you are dealing with a 30% reduction in showings at a time when it should be peaking.

Stay tuned… things change quickly!

The 2009 American Housing Survey has just been released. Since 1973 HUD has surveyed American households to gather statistics on what the typical American home is like. This important data is used by the department to shape policy and better understand the typical standards of the American home.

Here are a few of the key stats from this most recent American Housing Survey.

• There are 130,112,000 residential housing units in the US
• 86% of all homes are occupied
• 68% are owner occupied
• The median age of the American home is 36 years
• The median size of an occupied home is 1800 square feet
• Electricity is the most common cooking fuel at 68%
• Natural gas is used for cooking in 35% of homes
• 86% of homes have AC (65% central AC & 21% window units)
• 88% are connected to a public or private water system, 12% use wells

Does this align with your perception of the typical American home?

To read the entire 2009 American Housing Survey article click here.

Are you looking for a custom home builder in Raleigh, Cary or Wake Forest?  Then you’re going to want to read on as I introduce you to Ryan Johnson of Revolution Homes.

First, let’s identify what a custom home builder is.  A custom home builder can be best defined as a firm that has the capabilities to sit down with you and take your ideas of what your dream home should look like and turn it into a reality.

If a builder has to work from an existing plan, and modify that plan by moving a few walls and changing things around, that’s not a true custom home builder.  A builder that modifies stock plans is called a semi-custom builder, or a design-build builder, and typically cannot build a truly custom home.

However, there is some overlap between the two.  For instance, a custom home builder may also be useful to you if you already have a base plan and want modifications made.  Actually in this case either a semi-custom or custom home builder could do the job for you.  And I know what you’re thinking.  The pure custom home builder is going to be more expensive if you’re working from a base plan with modifications.  That’s what I thought too… until I met Ryan Johnson of Revolution Homes.

Ryan has put together a really fascinating company, Revolution Homes, that approaches custom home building in a unique way.  To answer that cost question, let me start by saying that Revolution Homes has established partnerships that allow the company to purchase many of the typical high cost items directly from the manufacturer.  This alone has the potential to actually lower the cost of building a home.

To further control costs, Ryan does all of his own estimates.  From scratch!   He does not use standard, per square foot, building block type estimating guidelines.  Every home he builds has the cost for that particular home built up from scratch and then the materials are ordered direct.  He does not order “packages” of materials that contain built-in waste factors.  Ryan tells me that I should not be at all surprised if his cost to build is lower that many of the design-build builders.

Ryan has created a very interesting tool he calls The Discovery Guide.  This 16 page guide starts a client on a discovery process that examines how the proposed new home will be lived in.  He figures that if the lifestyle needs can be identified up front, and the home designed and built with those needs in mind, then the finished product will “fit the client” much better.

When it comes to building a home, planning and communication are super critical success factors.  Ryan puts his former career as an Army Major to use with the same attention to detail that he used to manage huge projects while serving our country.

Communication with the client is detailed in another tool Ryan has created called The Building Guide.  This Building Guide goes into an amazing amount of detail of the entire process.  Every stage and phase is explained in simple, easy to understand language.  The tools Ryan has created to guide the client through the home building process are designed to educate the client and dramatically reduce the element of surprise.  And trust me, without proper planning and communication, building a home can be an experience that is full of surprises.

In addition to a great custom home builder, you’re going to also need a great building lot in order to see your dream home become a reality.  Ryan has this covered as well.  He has spent lots of time developing relationships with other builders and developers in the area and has some pretty amazing access to building lots in many of the popular neighborhoods in Raleigh, Cary and Wake Forest.  And of course if you have your own land and just need a builder to create your dream home, Ryan has the flexibility to accommodate that as well.

Ryan says this is the year of the deal.  The current real estate market has left many builders and developers with land inventory they really don’t need.  Both Ryan and I seriously doubt that we are likely to see building lot prices this low ever again.

Whether you already have a plan or you just have some really great ideas in your head of what your dream home could be, Revolution Homes is set up specifically to serve your needs.  And to do it in the most cost effective way possible.

If you think a custom built home might be in your future, give me a call or email me and I’ll schedule a time for us to meet with Ryan and you can personally discover what a true custom home builder is all about.

Did you buy your new home in time to qualify for the Home Buyer Tax Credit?  Great… now you need to take the next step and claim your tax credit.

The deadline to be under contract was April 30th.  And the deadline to close is June 30th.  Here’s what you will need to do to claim the tax credit.

Download and read the filing instructions

Here’s a link to the IRS instructions for claiming your Home Buyer Tax Credit.

http://www.irs.gov/pub/irs-pdf/i5405.pdf

You will need a copy of your settlement statement from closing.  You should have received a copy at closing, but if it’s been misplaced your Realtor should be able to provide you another copy.

Fill out IRS Form 5405

This is the official form used to submit, or claim your Home Buyer Tax Credit.  Here’s a link for the form.

http://www.irs.gov/pub/irs-pdf/f5405.pdf

It’s my understanding that you can fill out Form 5405 anytime after closing.

More information

Here’s a link to the official IRS webpage for the Home Buyer Tax Credit.

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

Consult your tax professional

I should have put this first.  If you have someone who does your taxes for you, then it would probably be a great idea to at least touch base with them.  The rules how to claim the credit are pretty straight-forward.  But it never hurts to ask the professionals for advice before you get started.

If you’ve read this far, you probably made a home purchase that qualified for the Home Buyer Tax Credit.  Congratulations to YOU!  It’s certainly been an interesting  time in residential real estate recently.  Mortgage rates continue to be very low and the affordability of homes is just about as as good as it gets.

Pile an $8,000 additional discount on top of all that and it truly is a great time to buy a home.

Funding for USDA 100% financing ran out a few months ago. But fear not, it’s back!

But before we continue, I must warn you.  Please, whatever you do, if you are considering buying a home with no money down, be very very careful. All too often these days I find myself talking to someone who needs to sell a home and owes more on it than it’s worth.   Not a good position to find yourself in.  Seriously, don’t do this unless you have really thought through how long you will be in the home, your future ability to earn income, etc.

That being said, USDA 100% loans have their place.   The best purpose for any no money down loan program is to get renters who are responsible with their finances, and do not have money right now for a down payment, into a home.   Renting is just not a good long term solution.  There are no tax advantages to renting and the monthly payments do not build equity.   Houses are on sale right now, so if your debts are in good order and your income earning potential is solid, and you do not have the money for a traditional down payment, you might want to consider a USDA 100% home loan.

Here are a few things to remember about USDA 100% loans:

• There is a 3.5% USDA fee that can be rolled into the loan amount
• There is no monthly PMI
• USDA loans are only good for a primary residence
• USDA loans are income capped based on the county
• A minimum 620 credit score is required
• Only certain homes qualify for USDA loans, depending on location

Here is a link to the USDA website where you can check an address to see if the home qualifies as a candidate for a USDA loan.

USDA Property Eligibility

If you think you could benefit from a USDA 100% loan, please contact me to discuss the details.  No money down financing in today’s real estate environment can be very risky.  You need to fully understand the risks.

Does installing a fence add value to your home?  I get lots of questions about making home improvements.  Some from clients who are selling their home and want to be competitive when we list.  Some from past clients who want to add a feature or improvement for their enjoyment and want to know if there will be some return when they sell.

The most shocking thing I tell some people is that no home improvement project will return 100% of the cost.  Well, almost none.  There are exceptions to everything.  And most of the exceptions to this rule exist because of location.  Improving a older home in a super popular  location could very easily return above 100% of the cost when you sell.  But let’s talk about the homes most of us own.  Homes in average locations.

Fences for the average back yard can cost anywhere from a $2-5 thousand dollars.  And in general, you should expect to get about 50% of that investment back when you sell.

Appraisers have told me that they will add somewhere between $1-2 thousand dollars when they are comparing a home with a nice fence in the back yard to one that has no fence.

The problem with nailing exactly what value a fence adds when you list and sell your home is that other factors are influencing price too.  General appreciation over time for your location.  Condition of your home.  The market when you sell.

I can definitely tell you that having a fence in your back yard increases the available pool of buyers who would consider your home.  I show lots of homes and have never had anyone tell me to only show them homes without a fence.

I have, on the other hand, had buyers tell me to only show them homes with a fence in the back yard.  Then if we cannot find the right house with a fence already installed, they will begin to look at homes with a nice flat yard where a fence could easily be added.

This is where not having a fence can cost you.  Someone who must have a fence, and otherwise likes your non-fenced home, will offer some amount that includes a discount for what they perceive they will have to spend on a fence.

So, will installing a fence add value to your home?  The better question is, do you need a fence installed for enjoyment or the safety of a child or pet?  If a fence in your back yard will improve your lifestyle, then do it.  Chances you will sell your home faster when the time comes.  And there is a real good chance the price you get will be higher that it would otherwise.