Friday, October 23, 2009

Sunday, October 11, 2009

New FHA Condo Purchase Guidelines take effect on November 2, 2009

Under revised guidelines which were to be effective October 1, 2009 but now delayed until November 2, 2009, the Federal Housing Administration (FHA) is implementing a new stricter approval process for condominiums to be eligible for FHA financing. Like the Fannie Mae regulations issued earlier in the year, the new FHA guidelines will surely slow down condominium mortgage financing, and negatively impact first time home buyers for condominium units.

For those who don’t know, FHA is a government program designed to help more people buy homes, and more borrowers will qualify with FHA financing than with conventional. It is a low down payment (3.5% down) program and the credit standards are much looser. The mortgage rates are typically better, as well.

To obtain a FHA mortgage on a condominium, the project must be FHA approved. Prior to these changes, there were two ways a condominium could be FHA approved: (1) full project approval, and (2) “spot” approval. Full project approval means that FHA has already done the approval on the entire condominium. Spot approvals were performed on non-FHA approved projects on a loan by loan basis, and were a way to make FHA loans available to home buyers in well run condo projects even if they haven’t gone through the full approval process.

No More Spot Approvals

Under the new guidelines, the popular spot approval process will no longer be available and will be replaced with something called a Direct Endorsement Lender Review and Approval Process (DELRA). FHA claims the DELRA process is more uniform and streamlined that the former spot loan approval process. Also, full project approvals expire every two years, so condominiums will have to re-certify every 2 years.

New Project Eligibility Guidelines

Under the new project eligibility requirements, all condominiums (consisting of 2 or more units) must meet the following requirements:

•At least 50% of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 % of the number of presold units (the minimum presale requirement of 50 percent still applies).
•Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.
•At least 50% of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence that a lender is willing to make the loan.
•No more than 15% of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.
•No more than 25% of the property’s total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogeneous with residential use, which is free of adverse conditions to the occupants of the individual condominium units.
•Reserve Study - a current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. A current reserve study must be no more than 12 months old – if recent events or market conditions have affected the finished condition of the property that information must be included. When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed. The regulations don't definition of what is "adequate," however. Guidance may be found in the new Fannie Mae guidelines which mandate at least 10% of annual operating budget in reserves.
•No more than 10% of the units may be owned by one investor. This will apply to developers/builders that subsequently rent vacant and unsold units. For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100% complete; and only one unit can be conveyed to non-owner occupants.
•Rights of first refusal are permitted unless they violate discriminatory conduct under the Fair Housing Act.

Buried in the fine print is a requirement for an affirmative action-type housing plan. For both new construction and conversions, if the developer intends to market 5 or more units within the next 12 months with FHA mortgage insurance (that would be most), an Affirmative Fair Housing Marketing Plan (AFHMP) or a Voluntary Affirmative Marketing Agreement (VAMA) must be in place. An affirmative fair housing marketing plan requires that the racial, socioeconomic, and ethnic composition of the condominium residents closely mirror that of the neighboring area, to the greatest extent possible. Most new condominiums don’t have these in place.

Click here for the new FHA condominium guidelines. You can look to see whether a condominium is approved on the HUD Homes & Communities website located here. Here is the FHA Condominium Mortgage webpage.

The Impact: More Work For Lenders, Condominium Associations/Managers And Attorneys

I expect FHA lenders will approach condominium association boards and managers, asking for certain information, certifications, and even legal opinions regarding compliance with FHA (and Fannie Mae) legal requirements. If a condominium is not on the FHA-approved list, or has lost its approval, condominium associations should consider applying for approval (or re-approval). Reportedly, FHA/HUD is backlogged a month or more in reviewing submitted applications. Thus, should your condominium need to be submitted for approval, keep in mind the process may take some time.

Thursday, August 6, 2009

Attended the Miami21 Commission presentation hearing this evening. If passed, the initiative will make Miami the most community-minded, pedestrian and cyclist oriented, and environmentally responsible city in the country. With our incredible weather and awe-inspiring skyline, the American Riviera will emerge as the new standard for planning and zoning of cities around the world.

Tuesday, July 28, 2009

Interior Paint - Colors That Sell

Here are a few suggestions of paint colors that enhance the visual appeal of home interiors. In addition to the items covered in my previous post, Sellers can enhance the attractiveness of a home by using soft warm colors to gently guide the eyes and direct a buyer's perception around the home.
There are also a few colors you need to be very careful with. Blues, pinks, yellows, grays and blacks tend to overpower the subconscious, and actually become the focal point of a room or a home. It is safer to stay away from them.

S Florida Foreclosure Rescue Scams Under Siege

S Florida Foreclosure Rescue Firms Nailed

Friday, July 24, 2009

FoxBusiness on Three Months of Existing Home Sales Growth

Realtor Kelly DeGroot delivers a comprehensive account of the market's recent surge in sales activity. Neil Cavuto probes for national trends, but DeGroot reminds him of the localized nature of the industry. She also touches on the current appraisal-related challenges facing buyers and sellers, and how contracts are falling through due to undervalued appraisals. This is one of the few reports I have seen where this issue is addressed.

Wednesday, July 22, 2009

New Bill Could Extend $8000 Tax Credit To All Home Buyers

New Bill Could Extend $8000 Tax Credit To All Home Buyers

The Bill makes the following changes to the current law:
1. Extends the deadline from Dec. 1,'09 to Jan. 1, '10
2. Eliminates the income restriction to qualify for the credit
3. Opens up qualification to ALL BUYERS, not just First Time Buyers.

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Tuesday, July 21, 2009

What Buyers Are Looking For

In most cases by the time a Buyer walks into your home for the first time, he/she/they have already narrowed down their preferences in terms of price range, location, number of bedrooms/bathrooms, and major features (pool, garage, etc.).

By the time a Buyer decides he/she/they would like to see your home in person, they have satisfied at least 78% of the buying criteria.

If they have searched through the internet and found quality descriptions and photos of your home, the percentage of predetermined satisfaction goes up to 90%.

Of all the interior aspects of a home that Buyers focus on when visiting a home, 72% is entirely within the ability of the Seller (and his/her/their Realtor) to manage and improve.

By addressing things like odors, clutter, de-personalizing and minimizing the decor, cleaning or replacing the floor coverings, and making minor repairs around the house, you dramatically increase your chances of being the next home in your neighborhood to sell!

Monday, July 20, 2009

Home Energy Efficiency On The Cheap

Did you know that in a typical South Florida residence, cooling, lighting, refrigeration and water heating account for 77% of electricity consumption?

Recently public awareness has been raised to unprecedented levels with respect to energy efficiency and all things green. When it comes to the home, we are bombarded by information from a variety of sources regarding such things as wind energy and solar energy generating technologies. Despite the availability of tax credits, rebates from utility companies, private financing and other private sector incentives, the potential cost of such improvements is a daunting challenge to many homeowners. As a result, many are discouraged from taking the matter beyond interesting cocktail chit chat.

While solar and wind energy are becoming more and more accessible in terms of cost and availability, properly sealing your home is still the most cost-effective method to reduce your energy costs, saving homeowners as much as 30-40% off their electrical utility bills.

Most people aren't aware that air leakage amounts to 30-40% of a home's heating and cooling bills. Stopping air leakage is important not only for energy savings, but also for protecting your home from the damaging effects of moisture. Air, leaking into walls from the interior of the home, carries humidity with it. This moisture hits a cold surface and condenses, causing the insulation and surrounding wood to get wet. Eventually, the air leakage can lead to mold growth and wood rot.

It is a common misconception that the majority of a home's air leakage comes through windows and doors, but in actuality, only 10-15% of air leakage is through windows and doors. That is why window replacement is seldom a cost-effective means to save energy. There are lots of ways to greatly improve the efficiency of windows without replacing them.

Most people think that tightening up the home means caulking around the outside of the home. This prevents rainwater from getting into your walls and that's important, but does very little to stop air from leaking into your home.

Tightening up an existing home begins on the inside. The greatest areas of air leakage in a home are around the top of the foundation and around penetrations into the attic. You can seal the top of the foundation (rim joist) with caulk or expanding foam. To seal the penetrations into the attic, the easiest way is to push back the insulation, and seal the holes around wiring and plumbing stacks and caulk along to tops of interior walls. To seal the inside of the house, use a clear caulk around the window frames where the trim meets the wall and all cracks in the window that aren't operable. Add weather-stripping to the windows if necessary. Install foam gaskets on outlets and switches on exterior walls. Seal around all ceiling fixtures, heat registers, medicine cabinets, bath tubs, kitchen cabinets, drain and water pipes where they enter the wall in kitchen and bath and any other interior wall penetrations. There are many things you can do to reduce air leakage in your home. However, keep in mind that a professional with the proper training and equipment is best suited to pinpoint air leakage and to identify and deal with combustion safety problems.

In a nutshell, you don't have to go out and spend thousands of dollars to save a significant amount of money every month on your electric bill. By taking some some simple and inexpensive measures to prevent cool air from escaping and warm air from getting into your home, you can save money and create a more comfortable home environment for you and your loved ones.

Sunday, July 19, 2009

In Real Estate, The Media Is A Lagging Indicator

As the saying goes,"If you get a great stock tip from the newspaper, TV, or radio, it's already too late." In financial matters, journalism is an outlet for historians. In fact, reporters can be regarded as the accountants of recent events when it comes to the markets. They give us an account of what has already taken place. Stocks, bonds, commodities and all other investment vehicles are far too dynamic for their fluctuations to be captured in real time by the press.

The same rule can be applied to real estate. While real estate is a slower moving commodity than other financial vehicles, the media is only able to report and interpret data findings that have been reported in months prior, and is therefore a historical reference source. This is not purely their fault; it takes time to compile, extrapolate and record real estate performance. By virtue of this time lapse, however, the media is simply ill equipped to accurately report what is going on at the moment in a specific market.

Moreover, the media tends to report real estate activity in very broad terms, providing national, regional, or state statistics with respect to growth, contraction, or new developments. Real estate is a localized industry and varies greatly from community to community. Just take a short drive through your own area, and in a brief period of time, you will see a variety of homes in varying price ranges with different landscapes, school districts, demographics, business communities, etc. Therefore, any attempt to capture developments or forecast trends on a broader scale by reporting national, regional or state based findings fails to give an accurate account of the market condition of a specific location or community. People live, work and play in specific communities, not in general geographical designations. As a result, the media is not only a lagging indicator, but many times misses the mark completely when it comes to providing useful information to guide their readers on the decision whether to buy or sell their homes or relocate to another community (market).

Also, there is a social dimension to real estate that distinguishes it from all other commodities. Homes and businesses are not pieces of paper that can be traded without having a profound effect on the quality of of our lives. Besides the financial considerations, real estate is where we live and play, work and rest, raise our families, make friends, worship and shape our own lives and the lives of those whom we love. We belong to communities, and those around us affect who we are. Where we live directly affects us as individuals, and the media can not even begin to grasp the nuances and particulars that this entails.

Enter the professional Realtor. As a Realtor, I am the first to admit that every local market is different. No self-respecting real estate professional can claim to be an expert in every market. We specialize in communities, and our business is about people. The only way to develop expertise in a given community is to be a part of it. In addition to having an extensive awareness of the recent sales activity, homes currently available, mortgage interest rates and other hard analytical data (all critical to the decision making process), a dedicated professional in our field must also tap into the social makeup of a community by understanding the wants and needs of the client and what the community has to offer in order to fulfill them.

Miami is known the world over. From the famous beaches and electric nightlife of South Beach to the lush backdrop and bohemian eclecticism of Coconut Grove, no other city in America offers the excitement and cultural diversity of our great city. Miami is now home to the third largest skyline in the US (behind New York and Chicago-and frankly, we have better weather). Whether you are looking for a stately Coral Gables Old Spanish residence, a majestic Pinecrest estate, a home on the water to fulfill your need for tropical breezes, or a waterfront condo to get away on South Beach, Miami offers something for everyone.

Don't be misled by media reports of gloom and doom (according to the NAR, Miami sales of single family homes surged 72% higher in May 2009 over the same month last year, and condo sales rose 51%-I guess not everyone is reading the papers!). If your thing is tracking economic activity at the macro level, the media is a great source. If, however, you're looking to buy or sell real estate in Miami. ask a Realtor.

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