Aug. 2, 2019

Federal Reserve Cuts Interest Rates: Will It Help Buyers?

The small cut isn’t expected to have a big impact on real estate, but it could trigger a slight rate decrease in adjustable rate loans and maybe fixed-rate loans.

The Federal Reserve on Wednesday cut interest rates for the first time since the Great Recession took hold in 2008, though the move is not likely to deliver significant juice to an already favorable borrowing environment for homebuyers.

The federal funds rate – what banks charge one another for short-term borrowing – will now hover between 2% and 2.25%, according to news reports.

The Fed says its decision to lower interest rates is designed to stave off the threat of an economic downturn – but it’s unlikely to translate into additional mortgage savings for many buyers. With the interest rate for a 30-year loan already hovering below 4%, the Fed’s move may be more meaningful for buyers with other types of financing, says Lawrence Yun, chief economist for the National Association of Realtors®.

“Many borrowers will benefit, especially those with adjustable-rate mortgages and commercial real estate loans,” Yun says, but “the longer-term 30-year fixed-rate mortgages will see little change in the near future because they had already declined in anticipation of this latest move by the Fed.

Yun thinks the rate cut will “partly help with housing affordability over the short-term. Both rents and home prices have been consistently outpacing income growth, (but) the only way to mitigate housing-cost challenges as a long-term solution is to bring more supply of both multifamily and single-family homes to the market,” Yun says.

Still, lower borrowing costs are helping buyers manage rising home prices. Buyers able to spend $1,500 on monthly mortgage payments can afford to purchase a $402,500 home this year compared to $367,500 last year, for example, when mortgage rates averaged 4.57%, according to realtor.com.

“Last year, buyers would have needed an additional $145 a month on top of the $1,500 to afford a $402,500 home,” says Danielle Hale, realtor.com’s chief economist.

In some locales, buyers’ money can stretch even further.

“An extra $35,000 in purchasing power, depending on where you are in the country, can really make a difference to buyers today,” Hale says. “It still counts, even with home prices up 6% nationally. That increase in purchase power is greater than the national price increase.”

Source: “Realtor.com® Reports How Much More Home Buying Power There Is Today Thanks to Lower Mortgage Rates,” Forbes.com (July 30, 2019); “The Fed Just Cut Interest Rates. Here’s What That Means for You,” The New York Times (July 31, 2019); National Association of Realtors®

© Copyright 2019 INFORMATION INC., Bethesda, MD (301) 215-4688

Aug. 1, 2019

Happy Floridians: July Consumer Sentiment Up 3.7 Points

Consumers felt better in both the short- and long-term measurements, suggesting optimism for the future and content in the present.

GAINESVILLE, Fla. – As the U.S. entered its longest economic expansion in its history, consumer sentiment among Floridians increased 3.7 points in July to 100.2 – an increase from June’s revised figure of 96.5.

All five components that make up the index increased.

Current conditions
Floridians’ opinions of their personal financial situation now compared with a year ago increased 3.6 points from 93.2 to 96.8, though opinions varied greatly by demographics; male respondents and those under age 60 reported less-favorable opinions. Similarly, opinions as to whether now is a good time to buy a major household item like an appliance increased 3.2 points from 100.3 to 103.5, though men reported less-favorable opinions.

“Overall, these two components showed that views regarding current economic conditions improved among Floridians in July,” says Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research.

Future expectations
The three components corresponding to Floridians’ expectations about future economic conditions also improved. Expectations of personal financial situations a year from now increased 4.5 points from 103.5 to 108.

The outlook of U.S. economic conditions over the next year showed the greatest increase in this month’s reading, up 5.1 points from 92.6 to 97.7.

Finally, expectations of U.S. economic conditions over the next five years increased 2.2 points from 92.7 to 94.9. These expectations are shared by almost all Floridians; however, men again reported less-favorable expectations.

“Despite the divided views by gender, Floridians are overall more optimistic in July,” says Sandoval. “The gain in July’s reading comes from consumers’ expectations about the national economy in the short run.”

Economic indicators have remained positive. July is the 121st consecutive month of gross domestic product growth since the Great Recession, breaking the record of 120 months of economic growth between March 1991 and March 2001. Starting in June 2009, the current growth trend is now the longest economic expansion in U.S. modern history.

In Florida, unemployment peaked at 11.3% in January 2010 as a result of the Great Recession, but Florida’s labor market strengthened with solid job gains statewide and has led to an unemployment rate of 3.4% in June 2019. Compared with a year ago, the number of jobs increased by 218,800 in June, an increase of 2.5%.

Among all industries, education and health services gained the most jobs, followed by professional and business services, leisure and hospitality, and construction. The information industry was the only sector losing jobs. Moreover, according to the U.S. Bureau of Economic Analysis, in the first quarter of 2019, Florida’s gross state domestic product increased 2.9%.

“Looking ahead, in view of the labor market conditions and current economic outlook, we expect consumer sentiment in Florida to remain high in the coming months, continuing the economic expansion,” Sandoval said.

© 2019 Florida Realtors®

July 31, 2019

NAR: Pending Home Sales Climb 2.8% in June

It’s the second consecutive month with the number of listings under contract increasing and the first pending-sale year-over-year increase after 17 months of declines.

WASHINGTON – Pending home sales continued to rise in June, marking two consecutive months of growth, according to the National Association of Realtors® (NAR). Each of the four major regions recorded a rise in contract activity, with the West seeing the highest surge.

The Pending Home Sales Index (PHSI) – a forward-looking indicator based on contract signings – moved up 2.8% to 108.3 in June, an increase from 105.4 in May. Year-over-year contract signings jumped 1.6%, snapping a 17-month streak of annual decreases.

The 2.8% increase is likely the start of a positive trend for home sales, predicts NAR Chief Economist Lawrence Yun.

“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing,” says Yun. “When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”

The uptick in pending sales suggests that buyers are enthusiastic about the market and of the potential wealth gain via homeownership – but Yun says home builders still need to increase inventory.

“Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes,” he says. “Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion – but the number of potential buyers exceeds the number of homes available. We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”

June pending home sales regional breakdown

All regional indices are up from May and from one year ago. The PHSI in the Northeast rose 2.7% to 94.5 in June and is now 0.9% higher than a year ago. In the Midwest, the index grew 3.3% to 103.6 in June – 1.7% greater than June 2018.

Pending home sales in the South increased 1.3% to an index of 125.7 in June – 1.4% higher than last June. The index in the West soared 5.4% in June to 96.8 and increased 2.5% year-over-year.

© 2019 Florida Realtors®

July 30, 2019

High-Debt Home Borrowers May No Longer Qualify in 2021

The “Qualified Mortgage Patch” helps Fannie- and Freddie-backed lenders qualify people with higher debt-to-income ratios, but it expires, at least for now, in Jan. 2021.

WASHINGTON – The Consumer Financial Protection Bureau (CFPB) issued an Advance Notice of Proposed Rulemaking (ANPR) relating to its QM Rule, commonly called the qualified mortgage patch. Should the QM Rule expire in January 2021, home borrowers with enough debt to exceed the QM debt-to-income test will likely be turned down for a loan.

The QM patch was designed as a temporary provision applicable to certain mortgage loans eligible for purchase or guarantee by the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Fannie and Freddie back loans for more than 50% of all U.S. mortgages.

“On Thursday, members of NAR’s (National Association of Realtors®) policy staff, Joe Ventrone and Ken Fears, were briefed by Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger on the agency’s review of the Qualified Mortgage Patch,” says NAR President John Smaby.

“The QM patch was intended as a temporary measure to prevent turmoil in the mortgage and real estate market as the CFPB implemented the Ability to Repay rule,” Smaby explains. “Analysts estimate that as much as 30% of mortgages for home purchases fall into this market segment, and its disruption could result in higher costs and/or reduced access to mortgages for otherwise creditworthy homebuyers. This, in turn, could send ripples throughout the U.S. housing market.

Through the ANPR, the CFPB will solicit comments on possible amendments to the rule, including whether to revise Regulation Z’s definition of a qualified mortgage in light of the GSE Patch’s scheduled expiration. The ANPR seeks information and comment on whether the definition of qualified mortgage should retain a direct measure of a consumer’s personal finances (for example, debt-to-income ratio), and whether that definition should include an alternative method for assessing financial capacity.

“The national mortgage market readjusting away from the patch can facilitate a more transparent, level playing field that ultimately benefits consumers through stronger consumer protection,” says CFPB Director Kathleen L. Kraninger. “We want to hear all perspectives on how to move beyond the GSE Patch, the impact on credit, the role of the private mortgage market, and possible modifications to the definition of qualified mortgages and the rules governing the documentation of debt and income. The Bureau is committed to ensuring a smooth and orderly mortgage market throughout its consideration of these issues and any resulting transition away from the GSE Patch.”

“Going forward, NAR will continue to advocate for an extension of the patch and a permanent solution that will prevent disruption as we work with CFPB to secure stability in the housing market,” says Smaby.

A copy of the ANPR with instructions on how to submit a comment are posted online.

© 2019 Florida Realtors®

July 29, 2019

Florida Growth to Top 300,000 People Each Year

TALLAHASSEE, Fla. – Florida will continue growing by more than 300,000 people a year and will top 22 million residents in 2022, according to a report posted online this week by state economists. The rate is equivalent to adding a city population larger than Orlando each year.

The Demographic Estimating Conference updated population forecasts through April 1, 2024 and showed steady growth during the multi-year period.

“Between April 1, 2018 and April 1, 2024, population growth is expected to average 330,605 net new residents per year (906 per day), representing a compound growth rate of 1.53% over this six-year time horizon,” an executive summary of the report said. “These increases are analogous to adding a city slightly larger than Orlando every year.”

The report estimated the population on April 1, 2018, at 20.84 million, with an increase to 21.2 million on April 1, 2019. It’s forecast to hit 22.2 million as of April 1, 2022 and 22.8 million on April 1, 2024.

The population increases will primarily stem from “net migration” as people move into the state, rather than births, which are largely offset by deaths.

The report noted that the state’s forecasts are actually lower than population predictions by the U.S. Census Bureau, saying they use different methodologies in reaching their estimates.

Source: News Service of Florida

July 26, 2019

Increasing Number of Buyers Getting Zero-Down Mortgages

In April, 3.6% of all loans nationally required no downpayment. That’s up from an all-time low of 2%, but nowhere near a pre-recession high of 12.7%.

ORLANDO, Fla. – More Central Floridians are taking out zero-down loans to buy a home, but not at the rate or with the risk that helped bring on the U.S. recession a decade ago.

Experts say zero-down programs, through which people can purchase a house without a downpayment, have become more popular since the 2008 housing crisis, creating an easier path to homeownership but posing risks if the market takes an unexpected downturn.

“We didn’t have to put $30,000 down on a house, but you still get the house you want,” said Christina Martinez, whose family bought a home in Kissimmee a few months ago with a zero-down loan through Veterans Affairs. “We could have put (something) down, but since we didn’t have to, we just didn’t.”

In April, zero-downpayment loans accounted for 3.6% of loans nationally, and 3.5% in Orlando, according to data from Realtor.com, compared with 2% nationally and 1.3% locally in 2008 when they hit a low.

But zero-down loans are still nowhere near as popular as they were pre-recession, when they made up 12.7% of loans nationally and 16.6% of those in Orlando.

“As people have recovered, now banks are becoming a little bit looser with their lending standards,” said Jason Martin, a financial adviser with Allgen Financial.

Economists said it’s a relatively safe time to use zero-down programs, as home values continue to rise and the labor market remains strong. But some urged caution, pointing out the programs usually have high interest rates and high monthly mortgage payments.

In the past year, home values in the United States have shot up 5.2%, and Zillow predicts they will rise another 2.2% within the next year. Median home prices in Central Florida have gone up 94% in the past seven years to $239,200, according to Zillow.

Martin says typically people who can’t afford to save enough for a downpayment are not ready to buy a home, and most people who lost their homes in 2008 were those who put little down. If the home’s value drops, buyers wind up owing more than the houses are worth.

“Why take the risk? You don’t want to get yourself into a position where, if the market does top, you’re way underwater on your home,” Martin said. “It’s very dangerous for someone to buy a home when they’re not ready to buy a home.”

Stacy Luna, a lender with Atlantic Bay Mortgage Group, says buyers who don’t make much of a downpayment are more likely to lose their homes to their lenders.

“Unfortunately, what we do find with people with less skin in the game, those are the people who end up in foreclosure,” Luna said. “Maybe they lose their job, or maybe they had a roommate and now the roommate’s gone, something breaks on the house. All they know is I only had $1,000 in it so why should I stay?”

Some experts say the zero-down programs themselves are much safer than in the early 2000s when applicants in some cases didn’t even have to prove income. The most popular zero-down loans are for former military through the Veterans Affairs and people living in rural areas through the U.S. Department of Agriculture.

The Federal Housing Commission requires buyers to put 3% down.

“We certainly are not back in the freewheeling days of 2006 where anyone could get a half-million-dollar mortgage,” said UCF economist Sean Snaith. “Availability to mortgage credit was beyond easy.”

For Dana Signore, a single mother who recently bought a house in Clermont, the only way she could afford to buy a home was if she didn’t put anything down. She qualified for a zero-down loan through the USDA for her $230,000 home.

“That was really the only option,” Signore said. “The money wasn’t there.”

If her clients qualify and are comfortable with the monthly mortgage payments, Annie Amalfitano, a manager and loan originator for Motto Mortgage Exclusive, encourages them to utilize the VA and USDA programs. It’s better than renting, she says.

“Why would you pay $1,200, $1,500, $1,600 a month … when you can get into a home for that much? Why would you?” Amalfitano said. “You’re just lining somebody else’s pockets and you’re not building any equity yourself. Your rent is going out the window.”

Copyright © 2019 The Orlando Sentinel (Orlando, Fla.), Caroline Glenn. Distributed by Tribune Content Agency, LLC.

July 15, 2019

IRS Allows Fewer Disaster-Related Tax Deductions

Last year’s tax reform changed the IRS’s formula for claiming deductions for storm damages. For one thing, a home must be in a federally declared disaster area – declarations by a county executive, mayor or governor don’t count under IRS regulations.  

WASHINGTON – High winds, flash flooding, wildfires, tornadoes, deadly storms and hurricanes keep us glued to the Weather Channel and leave many fearful of what’s next. Most of us, frankly, aren’t stopping to think: What will all the storm damage mean for my taxes?

But the next calamity could hit when you file your 2019 tax return if you’re expecting a big break relating to a severe storm or natural disaster.

Under the Tax Cuts and Jobs Act, the rules relating to such deductions changed dramatically as of Jan. 1, 2018.

What’s important to know: You cannot claim a casualty or disaster loss on your federal income tax return unless you’re in a federally declared and designated disaster area. Watch out for word from the Federal Emergency Management Agency. See www.fema.org/disasters.

“We really look to the FEMA declaration,” said Amy Wang, CPA and senior manager on the tax policy and advocacy team for the American Institute of CPAs.

“It can be a challenge,” Wang said.

Taxpayers in a “hard-hit” area for flooding or tornadoes, for example, would not be allowed a deduction for losses unless the area is declared a federal disaster area and their specific county is included, said Mark Steber, chief tax officer for Jackson Hewitt in Sarasota, Florida.

“Disasters and casualties, especially for taxes, are a hot and developing topic,” Steber said. “Tax changes are continually being suggested by Congress. Currently, there are no new rules coming but that can change quickly.”

So far this year through early June, FEMA has declared disasters in Louisiana, Oklahoma, Arkansas, Kansas, Montana, selected areas in the Navajo Nation, Missouri, California, Guam, Oregon, California, Kentucky, Tennessee, Alabama, Ohio, Iowa, Nebraska and elsewhere.

In the past 18 months, the Internal Revenue Service said it responded to disasters in 15 states and U.S. territories. The IRS offered tax relief and assistance to victims of hurricanes, typhoons, earthquakes, volcanoes, fires, tornadoes, severe storms, high winds and floods.

The IRS will let you know if a federal disaster has been declared. When there is a federally declared disaster, a special IRS toll-free hotline at 866-562-5227 is open so affected taxpayers can speak with specialists trained to handle disaster-related tax issues.

But remember, even though a county executive, mayor or governor may declare an event to be a disaster, it doesn’t mean it is a disaster for federal tax purposes, Steber said.

In Michigan, for example, FEMA has begun doing preliminary assessments in flooded areas of Wayne County after weather disasters in the spring. But the review does not guarantee a federal disaster declaration. On April 30 and May 1, heavy rainfall caused widespread flooding in parts of Wayne County, damaging infrastructure and private property. Michigan Gov. Gretchen Whitmer announced a state of emergency for Wayne County.

Wayne County Executive Warren Evans issued a similar declaration, noting that about 3,000 homes in the county including Detroit were damaged. Again, we’d have to wait for further word on whether a tax break will be part of the picture, too.

Here’s what you need to know about claiming casualty losses on your 1040:

Take time to prepare for floods

Ask anyone who went through a significant flood, such as the historic flooding that took place nearly five years ago in metro Detroit communities along Interstate 696, and they will tell you that they wish they had done more to protect family treasures and documents.

If you have tax returns and other financial paperwork stored in a cabinet in the basement, watch out because you could see soggy paperwork ahead. You might want to reconsider that strategy.

The IRS notes that taxpayers should try to make sure that bank statements, tax returns and insurance policies are stored securely in a waterproof container. Have a duplicate set of documents stored safely away from the originals.

Many financial institutions provide statements and documents electronically, making retrieval of that information easier. Original paper documents can be scanned and downloaded to an external hard drive, flash drive, CD or DVD.

It’s also a good idea to gather some photos and keep those in a safe place, too. “Photographs can help prove the fair market value of property when filing insurance or casualty loss claims,” the IRS stated in its disaster readiness tips.

Talk to your insurance agent first

If you’re hit by a bad storm, you may not take an income tax deduction for casualty and theft losses already covered by insurance. So you must file a claim with your insurance first before you’d consider taking any tax deductions relating to storm damage, Steber said.

Some roadblocks will stop any tax breaks

In order to claim a deduction, you must subtract 10% of your adjusted gross income from all the disasters claimed. Say, for example, your income is $100,000. Your losses would need to exceed $10,000, and then you’d only claim what’s in excess of that amount. You also must subtract $100 from each disaster.

So if you had $30,000 in losses, you’d claim $19,900 in deductions. If you had $9,000 in losses, there would be no deduction.

You’d file IRS Form 4684 for “Casualties and Thefts” in order to claim a loss. You’re going to need a FEMA disaster declaration number to enter on your Form 4684. Individuals are required to claim their casualty and theft losses as an itemized deduction on Schedule A.

Internal Revenue Service Publication 584 details the rules for Casualty, Disaster, and Theft Loss. If you take the standard deduction, you won’t be able to claim losses relating to major storms.

Headlines don’t guarantee a tax break

Being hit by a big storm that gained some coverage on TV isn’t quite enough for a tax break. “It has to be in a federally declared disaster area,” said Russell Schneidewind, lead tax researcher at the H&R Block Tax Institute. “It’s an important deduction because it helps people rebuild their lives.”

But it’s a deduction that no longer applies to many situations involving severe storms or other disasters. If you lost your home in a big fire, for example, it won’t trigger a tax break under the new rules that are part of the Trump tax reform unless that fire is part of a federally declared disaster, such as the wildfires in California.

Copyright 2019, USATODAY.com, USA TODAY, Susan Tompor

July 10, 2019

How Flood Insurance Works: 6 Questions Answered

What is flood insurance? Homeowners’ insurance doesn’t cover damage to a home caused by flooding; instead, a separate policy is needed to cover flood-related losses, defined as caused by water traveling along or under the ground.  

ATLANTA – How does flood insurance work? Robert W. Klein, an expert from Georgia State University in Atlanta, Georgia, answers questions about the topic.

1. What is flood insurance?

Homeowners’ insurance does not cover damage to a home caused by flooding. A homeowner must have a separate policy to cover flood-related losses, defined as water traveling along or under the ground.

Most such policies are underwritten by the National Flood Insurance Program, which is part of the Federal Emergency Management Agency. The National Flood Insurance Program was established in 1968 to address the lack of availability of flood insurance in the private market and reduce the demand for federal disaster assistance for uninsured flood losses. Another purpose was to integrate flood insurance with floodplain management, which includes such things as adopting and enforcing stricter building codes, retaining or restoring wetlands to absorb floodwaters and requiring or encouraging homeowners to make their homes more flood-resistant.

The National Flood Insurance Program’s activities are funded largely by the premiums and fees paid by its policyholders, supplemented by a small amount of general funds to help pay for flood risk mapping. Because the National Flood Insurance Program serves the public interest, some believe that more of its funding should be borne by taxpayers.

Homeowners can purchase a federal flood policy directly from the National Flood Insurance Program or through a private insurer. Separately, some private insurers sell their own flood policies on a limited basis for properties that are overcharged by the National Flood Insurance Program.

2. How many American homeowners have flood insurance?

It is difficult to determine exactly how many homeowners have flood insurance.

The National Flood Insurance Program had just under five million policies in force as of June 30. Of these policies, approximately 68% were on single-family homes and 21% on condo units. There is no source on how many private flood policies are in force, but my sense is that it is very small relative to the number of National Flood Insurance Program policies.

In recent years, the number of such policies has been dropping across the country. Some of the counties hardest hit by Harvey, for example, such as Harris (which includes Houston), have experienced significant declines.

A more revealing – and more difficult to ascertain – stat is the share of homeowners in a disaster area who actually have flood insurance. In Harris County, for example, experts estimated that only about 15% of homeowners were insured for floods – though the percentage was higher in areas near coastlines.

3. Why do people at great risk of flooding forgo insurance?

A number of factors affect a homeowner’s decision to buy flood insurance (or not).

People who perceive that their exposure to floods is high are more likely to buy it, all other things equal. And the mandatory purchase requirement forces owners of mortgaged homes located in Special Flood Hazard Areas – areas at high risk for flooding – to buy insurance.

However, 43% of homeowners incorrectly believe that their homeowners’ insurance covers them for flood losses.

Other factors also come into play, such as a lack of information, the difficulty of calculating flood risk and the expectation that the government will provide disaster assistance – which is rarely the case.

4. What does flood insurance cover?

With a National Flood Insurance Program policy, a homeowner can purchase coverage on a dwelling up to U.S. $250,000 and the contents of a home up to $100,000. It does not cover costs associated with “loss of use” of a home.

The National Flood Insurance Program policy limits have been in effect since 1994 and need to be updated to account for the increase in the replacement cost of homes and the actual cash value of their contents. Although not the best measure of the replacement cost, the median price of new homes sold in the U.S. has soared 132 percent since 1994.

Some homeowners buy additional flood protection from private insurers to make up any shortfall.

5. Why is the National Flood Insurance Program underwater?

The National Flood Insurance Program has faced considerable criticism over its underwriting and pricing policies, which have resulted in a substantial debt. Essentially, its premiums are not high enough to cover how much it pays out on claims and its other costs.

Part of the problem is that about 20% of the properties the program insures pay a subsidized rate. But many other National Flood Insurance Program policyholders are also paying premiums substantially less than what it costs to insure them because the rates do not adequately account for the catastrophic losses incurred during years when more major storms than normal strike, such as Katrina and Rita in 2005 and Sandy in 2012. As a result, the National Flood Insurance Program currently owes an accumulated debt of about $20 billion to the U.S. Treasury.

In the short term, Congress will have to increase the National Flood Insurance Program’s borrowing authority for it to pay the claims.

These inadequate rates also exacerbate the moral hazard created by flood insurance. People are more likely to buy, build or rebuild homes in flood-prone areas and have diminished incentives to invest in flood risk mitigation, such as by elevating their home, if they can buy insurance at below-cost rates.

6. What can be done to fix the program?

Legislative efforts to reform the National Flood Insurance Program to put it on firmer fiscal footing have produced mixed results.

Fundamentally, the program millions of Americans rely on to help them rebuild their lives after a devastating flood needs to be fixed. Its dire financial straits could be resolved by either making taxpayers foot more of the bill or increasing premiums closer to full-cost rates for most homeowners, while also raising total coverage levels.

At the same time, the government needs to do more to convince or compel more at-risk homeowners to buy flood insurance – which would be harder to do if it were to raise rates. To me, this suggests that increasing taxpayer support for the NFIP will have to be part of the solution so that pricey premiums don’t become a deterrent to someone buying insurance.

With the likelihood of much more flooding in the coming weeks and years, more needs to be done to mitigate the risk, including producing more accurate and timely maps of the flood risk in various areas, especially high-risk areas, educating people about what those risks really mean and helping relocate homeowners as necessary.

July 9, 2019

Land a Home Despite a Tough Market

Lessons for homebuyers in some areas: Act fast, bid over the asking price, remove contingencies, prepare to lose to all-cash buyers – and do it again and again.

WASHINGTON – Jonah Leff felt good about the third offer he put on a house in Washington, D.C. The home was renovated just enough but had some of its original features and character that Leff, 43, and his wife loved.

Their bid was $35,000 above the asking price.

But it wasn't enough.

"We ended up losing out to someone with all cash and no contingencies," says Leff, a director of a nonprofit.

Almost a year into house-hunting, Leff has learned some hard lessons on being a buyer in what still remains a seller's market.

Act fast. Bid more – much more – than the asking price. Remove all contingencies. Prepare to lose to all-cash buyers. Do it again and again.

"What I heard from family and friends is that you go through several offering processes before you get one," he says. "It sounds like we're par for the course, unfortunately."

It's still not easy to find a home and you want every advantage possible when you submit your offer, especially if there are multiple bids. Here's how to land a home, according to experts.

Go beyond pre-approval

It used to be good enough to be pre-approved for a mortgage. Now, buyers need to be even further along in the loan process before they make an offer and compete with all-cash buyers.

That means submitting all the documents your lender needs to approve the mortgage, such as tax returns, W2s, pay stubs and bank statements.

Find a 24/7 lender

Use a mortgage lender that is open on weekends. That way, if you put an offer on a house over the weekend, the lender can contact the seller's real estate agent and reassure the sellers that you'll be able to close quickly.

"The lender can tell the listing agent where you are in the loan process and stress that you're good buyers," says LaDawn Sperling, an agent with Coldwell Banker Residential Brokerage in Lakewood, Colorado.

Write a love letter

Anna McGee, a real estate agent in Lake Tahoe, California, encourages all her buyers to write a letter to the sellers to go along with their offer. The letter typically includes a paragraph about the buyers themselves, their experience when they first saw the property online and then again in person, and a note of appreciation of how the sellers took care of the property.

You also can do some research on the sellers to see if you can connect to them on a personal level, she says.

"A buyer may hit an emotional chord," she says. "Sometimes it works, sometimes it doesn't."

In some states, including Colorado, love letters aren't allowed because they can violate fair housing laws.

Be flexible for the seller

Time is money for sellers, so anything you can do to shorten how long it takes to close, do it, McGee says. In your offer, agree to reduce how long you have to get an appraisal done and the loan completed. These stipulations then will go into the contract.

For instance, McGee's buyers agree to get an appraisal and loan completed in 10 and 12 days, respectively, down from the typical 17 and 21 days in that market.

Another way to entice a seller to take your bid? Cover costs that the seller customarily pays for in your market. That could include a home warranty, title or escrow fees, and home and carpet cleaning.

Be even more flexible

The market in Washington, D.C., is so hot for properties priced less than $1 million that many buyers are waiving appraisal and inspection contingencies altogether, says Colleen Harkins Carter, a real estate agent there.

That means if the appraisal for the lender comes in too low for the sales price, the buyer can't back out of the contract. Instead, the buyer has to pay for the difference by bringing more cash to the closing.

And instead of requiring an inspection after going into contract, buyers are getting inspections before they even make an offer. It's not cheap, either, about $500 a pop.

"It's not uncommon at an open house to see prospective buyers going through the house with their home inspector," Harkins Carter says. "So when they make an offer, they already know what they're getting into."

Consider stale properties

Buyers often jump at the newest listings, largely because many markets have such a dearth of inventory. But those turn into bidding wars, and you end up paying more than the listing price, says Jason Castro, a real estate agent in Dallas.

"Oftentimes I find opportunities by looking at a property that has been sitting on the market for 30 days," Castro says. "No one is looking at it even if the price has been reduced."

Manage expectations

Instead of focusing on finding their dream home, buyers should concentrate on a good-enough house, agents say. Think of which must-haves you can let go of, so you have more properties to choose from.

"You have to make compromises and sacrifices on things you may want," Leff says. "You may not find that perfect house. If you do, oftentimes you'll be outbid."

Copyright © 2019, USATODAY.com, USA TODAY, Janna Herron

July 8, 2019

Home Maintenance Chores Your Clients Shouldn’t Delay

Homeowners who fail to perform certain maintenance tasks in a timely manner may face hefty repair bills in the future. Professional home inspectors shared with Apartment Therapy some of the most important home maintenance chores that owners should be doing.

Clean your gutters. Be sure to check and clean gutters throughout the year to remove any debris. “Once debris is carefully removed, any dirt or grime should be thoroughly cleaned and cleared; any missing caulk replaced; and holes, cracks, or loose areas repaired,” Benjamin Martin, a home inspector and president of Florida Certified Home Inspections, told Apartment Therapy.

Check the HVAC system. Change filters out once a month. If any condensation is gathering on the outdoor AC unit, flush the condensate drain with soapy, hot water and vinegar, experts say. Hire an HVAC professional for semi-annual maintenance to keep it operating correctly and potentially stave off an expensive replacement.

Flush out any plumbing clogs. Even seemingly small clogs can become more problematic if not taken care of right away. Regularly remove any grime or hair buildup in the shower; remove any gunk that accumulates near a toilet valve; and replace worn flappers (the rubber seal inside the tank), Martin says. Check underneath the sinks and inside the cabinets to make sure there are no water spouts from a leak.

Address insect problems. Don’t let bug problems escalate, warns Kathleen Kuhn, CEO and president of HouseMaster Home Inspections. Termites can cause extensive damage; carpenter ants can damage the wood where they nest; and powder post beetles can create hollowed out spaces in your wood. Also, watch out for supersized bee hives. Call in a professional to get the home’s yard sprayed.

Source: “The 5 Most Important Home Maintenance Tasks You’re Forgetting to Do, According to Home Inspectors,” Apartment Therapy (June 2019)

© Copyright 2019 INFORMATION, INC. Bethesda, MD (301) 215-4688