What to Do When Homes Linger on the Market

The showings have started to slow, interest from potential buyers is waning, and your home seller is getting worried. What should you do? Time to update your listing photos. The listing may benefit from having new photos taken of the home to post on the Internet, which may help to renew interest online and get more potential buyers to the front door, according to real estate professionals in a recent article in The Chicago Tribune. “Does the home still look as good as it did in the listing photos or does it look more lived-in now, a few months later?” The Chicago Tribune article also notes. Many real estate pros have also opted for staging homes to try to renew interest: Decluttering, make sure the home is in neutral colors, washing the windows, and paying attention to the smell of the home (particularly if there are pets) to make sure the home is more inviting to potential buyers. And if the home continues to linger, agents may need to revisit comparable sales in the neighbor and have a frank talk with sellers about the price they’re asking for the home. "At the end of the day, it's going to come down to the price," Kevin Tatum, an @properties broker in Chicago, told The Chicago Tribune. "We may be at the bottom, but we're not going to see a rebound. It's not going to be a V-shaped recovery. It's going to be a straight line. That's what we try to have (sellers) keep in mind." Source: “A Reality Check for Idle Home Sellers,” The Chicago Tribune (June 1, 2012)

Gulf Between Good Faith Estimate and Actual Closing Costs Troublesome

A home buyer gets ready for settlement day only to discover right before the “Big Day” that they are going to have to bring a lot more cash to close the deal than they originally thought. The surprise can sometimes threaten to derail a deal. Lenders are required to provide buyers a good faith estimate of closing costs within three days of receiving borrowers’ mortgage applications. But these good faith estimates reportedly are sometimes underestimating—or even greatly over-estimating—the true costs of settlement. The Consumer Financial Protection Bureau is working on revamping the good faith estimates and the HUD-1 settlement sheet, which is given to borrowers prior to closing listing the costs. The revamp is expected to provide more clarity to borrowers on closing costs and also make it easier for borrowers to shop around for their mortgage. Title professionals report that a lot of the times the estimates provided to borrowers on the good faith estimates over-estimate the true cost of the loan. “Lenders' estimates for services rendered by third parties such as appraisers and surveyors are supposed to be within 10 percent of the final figures,” The Chicago Tribune reports. “If the charges listed on the HUD-1 exceed the tolerance, lenders are required to eat the difference.” As such, many title agents report in a recent survey that some lenders “pad” their initial estimates so they ensure they come within that 10 percent limit at closing. “Overquoting” violates the law, says Michelle Korsmo, American Land Title's chief executive. Korsmo says that even if borrowers aren’t charged for items like document preparation and warehouse fees, lenders who provide inaccurate information on good faith estimates make it difficult for home buyers to shop around for the best closing services. Also complicating the picture, title agents report in a survey that often times borrowers are receiving more than just one good faith estimate. Sometimes borrowers are receiving two or even up to seven estimates of their potential closing costs. Source: “Beware of Bad 'Good Faith' Closing Estimates,” The Chicago Tribune (June 1, 2012)



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Radar Logic: Prices Will Fall Further, Strengths Due to Temporary Forces

Even though Radar Logic reported a monthly increase in home prices for March, the analytics company expects prices to fall and gave credit to “temporary market forces” for recent strengths seen in the housing market.
“In light of the oversupply we continue to see in the market, we disagree with the widespread view that home prices have reached a bottom or will do so in the near future,” said Michael Feder, president and CEO of Radar Logic.
Feder added that a negative response to economic news, either in the U.S. or elsewhere, could also undermine housing demand and seriously hurt home prices.
According to Radar Logic, the RPX Composite price, which tracks home prices in 25 major metropolitan areas, showed a 1.8 percent increase on a monthly basis, but decreased by 0.87 percent year-over-year in March.
With distressed homes remaining a significant portion of home sales transactions, Radar Logic said the significant discounts for distressed properties in relation to non-distressed means a further fall in prices.
According to RealtyTrac, homes in foreclosure or bank-owned accounted for 26 percent of all residential sales during the first quarter of 2012. In addition, the average sales price of homes in foreclosure or bank-owned in the same quarter was $161,214, which is a 27 percent discount compared to the average sales price of homes not in foreclosure or bank-owned.

Quinn W. Eddins, director of research and author of the report, wrote, “Large inventories of REO and homes in the foreclosure process still have to make their way into the ‘visible’ inventory of homes listed for sale, and as they do they will weigh on home prices.”

As for the temporary forces giving the market an added boost, the report named institutional investors as one of the driving factors. As rental prices increase, large investors are buying up discounted properties to convert them into rental units. This trend is driving up prices for distressed properties in certain metros where investor demand is high. Once prices for discounted properties rise to the point that investors won’t yield the return they are seeking, demand will decline again.

Another market influence Radar Logic highlighted is the mild winter weather that was seen in many parts of the U.S. This led to an earlier start for home shopping. As a result, Radar Logic said the price for March’s strength may be paid by a weaker buying season later.

Radar Logic expects national home prices to decline over the next 18 months, but said when it comes down to it, timing of the bottom is academic.

However, the analytics company said, “The important point is that national home prices are not going to increase in a sustained and meaningful manner anytime soon.”

By: Esther Cho

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Distressed Homes Make Up a Quarter of Home Sales

About one in four home sales during the first quarter of this year was in some form of foreclosure, according to RealtyTrac. A growing number of those distressed sales were also from short sales, the newly released report shows. Distressed properties—either bank-owned, in default, or scheduled for auction—accounted for 26 percent of all residential sales during the first three months of this year, which is up 8 percent from the previous quarter, according to RealtyTrac.

 Short sales made up a bigger bulk of that number—12 percent of all home sales—and reached a three-year high during the first quarter of this year. The percentage of short sales rose 25 percent compared to a year earlier. Short sales in the first quarter sold for an average price of $175,461 (which is the lowest average ever recorded by RealtyTrac since 2005).

Meanwhile, foreclosures in the first quarter sold for an average of $161,214, which is 27 percent below the average price of a non-foreclosure, according to RealtyTrac. "Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions," says Brandon Moore, chief executive of RealtyTrac.

Source: “Foreclosures Made up 26% of U.S. Home Sales in First Quarter,” CNNMoney (May 31, 2012)

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Distressed Homes Make Up a Quarter of Home Sales

About one in four home sales during the first quarter of this year was in some form of foreclosure, according to RealtyTrac. A growing number of those distressed sales were also from short sales, the newly released report shows.

 Distressed properties—either bank-owned, in default, or scheduled for auction—accounted for 26 percent of all residential sales during the first three months of this year, which is up 8 percent from the previous quarter, according to RealtyTrac. Short sales made up a bigger bulk of that number—12 percent of all home sales—and reached a three-year high during the first quarter of this year. The percentage of short sales rose 25 percent compared to a year earlier.

Short sales in the first quarter sold for an average price of $175,461 (which is the lowest average ever recorded by RealtyTrac since 2005). Meanwhile, foreclosures in the first quarter sold for an average of $161,214, which is 27 percent below the average price of a non-foreclosure, according to RealtyTrac. "Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions," says Brandon Moore, chief executive of RealtyTrac.


 Source: “Foreclosures Made up 26% of U.S. Home Sales in First Quarter,” CNNMoney (May 31, 2012)

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The 'Walmart Effect' on Home Prices?

When a Walmart comes to town, critics have long argued that the big-box discount retailer has the potential to lower nearby home values. Researchers decided to test that theory to see if there really is a “Walmart Effect” when it comes to home values. What they found: Nearby Walmart stores can actually drive up home prices. Economists Devin Pope at University of Chicago and Jaren Pope at Brigham Young University analyzed more than 600,000 real estate transactions near 159 newly opened Walmart stores between 2001 and 2006 in their study. The researchers found that home owners located within a half mile of a new Walmart store saw their home prices increase anywhere from 2 percent to 3 percent, or an average of $7,000, in two-and-a-half years after a new Walmart store opened. Home owners located a half mile to one mile away also saw a boost, with home prices rising 1 percent to 2 percent or about $4,000. "It was not until after the announcement and during the building process that we see homes close to the Walmart start to increase in value relative to homes that are slightly further away," the researchers say. "This suggests that it was the building of the Walmart itself that caused the change in housing values that we find, and that our results are not simply explained by Walmart building in areas that are experiencing housing price increases." Critics, however, are quick to note that the study doesn’t take into account the effect on home prices with a new Walmart in rural areas. Also, some previous studies have shown that Walmart’s low prices can increase the number of nearby poverty-level households. Source: “When Walmart Comes to Town, Home Prices Go ...” CNNMoney (May 30, 2012)

REO Stigma Fades for Home Buyers, Survey Shows

The number of home buyers who say they are interested in purchasing a foreclosure has nearly tripled in the last two-and-a-half years, according to a new survey by Realtor.com. What’s more, 92 percent of those buyers say they would use the foreclosures as their primary residence rather than using them as investments. "We see a combination of factors coming into play explaining the unexpected interest in foreclosures," says Steve Berkowitz, chief executive officer of Realtor.com. "Reductions in supply, expectations that home prices will rise, and changing attitudes toward foreclosures are contributing to the increased demand, especially among owner-occupants. As lenders begin processing their distressed inventories and releasing them for sale at the local level, we look to them to move carefully and monitor conditions so recently gained home values aren't diminished." Nearly 65 percent of buyers say they’re likely to buy a foreclosure today compared to 25 percent who said that in October 2009, according to the Realtor.com survey. Many of these potential buyers say they expect a 10 percent to 30 percent discount when buying a foreclosed property, according to the survey. They also see greater potential for appreciation with a foreclosure purchase. Fifty-six percent of the possible foreclosure buyers surveyed said they expect their foreclosure purchase to appreciate about 10 percent within the next five years—or about 2 percent a year, according to the Realtor.com survey. "Foreclosures can present a new opportunity for buyers to become home owners, especially considering the discounted purchase prices and lower down payment requirements,” says Errol Samuelson, Realtor.com’s president. “This is especially true for owner-occupants interested in improving the property, and holding to it long enough to realize appreciation that can be carried over to future home purchases.” Source: Realtor.com