With romance in the air this February Nick Churton of Mayfair International Realty takes a loving look at how we could fall head over heels with…a real estate agent.

Spring is round the corner and love is in the air. Yet spare a thought for poor real estate agents. These, often undervalued, creatures are amongst the least likely to receive a lot of affection from their clients on Valentine’s Day – or any other day for that matter.

But right at the moment, in this challenging economic climate, good brokers and agents are a bit like perfect sweethearts.  There are times in life when it is best to have someone by your side who really values you, who will fight for you, who won’t answer back – too much, who will only hang around your home when you want them to and has all your best interests at heart. Such a person may not make such a bad partner. 

Of course there are good partners and bad partners.  Selling real estate well rests heavily on the partnership built up between seller and agent.  A good agent will lovingly put your home on a pedestal and then negotiate fiercely to achieve the best deal for you.  On the other hand, a lesser agent may just put your property on the internet with all the others and then haggle to find the easiest deal all round.

There is a great difference between the two – often many thousands of dollars.  You could come to love the former but hate the latter.  The trick is finding the right one at the outset. It’s a bit like finding the best date.  They all may look roughly the same but in practice they each act very differently.

So if you are searching for the type of broker or agent you could come to love this spring invite a few around to give you some marketing advice and see how you get on. Then ask yourself which you would prefer, the flashy one who brags a lot and is cheap or the one who you feel most comfortable with to act in the most decent way: the one you can come to depend on.

Many of our readers ask us if appraisers use distressed properties (short sales and foreclosures) as comparables when doing an appraisal on non-distressed properties. We have posted on this issue on several occasions (examples: here and here). Last month, the Appraisal Institute issued a paper on the subject. In the paper, the Institute explained that:

“Foreclosures and short sales can provide important information for appraisers, who develop valuations based on market data and market forces.”

On whether an appraiser should use distressed properties as comparables, the Institute was very direct (all items in bold were shown as bold in the original paper):

“An appraiser should not ignore foreclosure sales and short sales if consideration of such sales is necessary to develop a credible value opinion.”
And they explained the possible differences between short sales and foreclosures:

“A short sale … might have involved atypical seller motivations and so might not be an ideal comp…

A sale of a bank-owned property might have involved typical motivations, so the fact that it was a foreclosed property would not render it ineligible as a comp.”

Bottom Line

Some will argue that distressed properties should not be used when appraising non-distressed properties. However, there is no longer any doubt that they will be.

http://www.kcmblog.com/2012/02/07/do-appraisers-use-distressed-properties-as-comparables/

There is a growing belief among many experts that 2012 will be the year housing turns the corner and starts heading in a more positive direction. Whenever we write a post like this, we unleash the hordes of critics who say we are again wearing rose colored glasses or are puppets being controlled by the National Association of Realtors (NAR) and other industry groups.

It is for that reason we will not be covering the projections of those groups. Instead, we want to share the beliefs of other organizations.

 

 

Washington Post:

“Housing Market and Economy Showing Encouraging Signs.”

The Wall Street Journal:

“From Bottom Up, Signs of Housing Recovery”

USA Today:

“Housing Outlook is More Upbeat”

CoreLogic:

“CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.”

Freddie Mac:

“With the New Year comes a sense of cautious optimism. There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery.”

Fannie Mae:

“The housing sector will likely take incremental steps forward in 2012 …according to economists at Fannie Mae.”

http://www.kcmblog.com/2012/01/24/real-estate-2012-many-positive-outlooks/

Although mature real estate brokers and agents are apt to say that they have seen it all before, this time it is different.  No one has seen this market under this set of national and international financial conditions before.  But what is rather refreshing is that the uncertainty now cuts down the speculation aspect of a home purchase and strips the requirement to buy down to the real and age-old essentials.  This makes for easier choices. 

Le Corbusier, the pioneering architect, stated that, “The requirements for a house should be to provide a shelter against heat, cold, rain, thieves and the inquisitive”.  He didn’t add that a home should also provide its owner with an investment return of seven per cent year-on-year. 

For the first time since, perhaps, the 1960s property investment can take more of a back seat in the home buying mindset and, instead, fundamental life requirements can come back to the fore.  Of course with other financial instruments providing so little in the way of return, real estate is a natural arena in which to invest.  But with little or no indication about if or when the market will return in any zest we are left with simpler decisions and choices – does a home suit our requirements in size, location, style and price? 

It is although our needs have been simplified in the way they may have been fifty years ago.  With less frenzy and greater choice, for a while at least, this may be a very good time to choose a primary or secondary home for all the very best lifestyle reasons. 

We quickly learn to expect that there is an investment opportunity to be gained from property purchase in a rising market.  But we are rather slow to appreciate the reverse is likely in a poor market and/or in particularly adverse economic circumstances as we have now.

2011 was a hard year in property and this year may not be much better. We may have new US, Russian and French presidents, more ructions in Europe and the Middle East, and greater privations at home before we see greater improvement. But still there is a reassuring level of market activity that has more to do with need than discretion.  This is the market we have and this is the market we have to deal with – and deal with it we will.

But real estate buyers and sellers should not be deterred.  Indeed they should be encouraged as the more life there is in the real estate market the more life there is in the economy.  But those still insisting on the sort of financial profit they may have achieved several years ago should perhaps think again and get real. It will be the enlightened that get to the top of the property class in 2012, not those in denial.

There is no shortage of opinions as to where home prices are headed in 2012. From Clear Capital’s expectation that prices will show a ‘slight uptick’ this year to Fitch’s projection that prices ‘will fall another 13 percent’, there seems to be no consensus as to where real estate values are headed. How can there be such a disparity of opinion among industry experts? Prices are determined by the relationship between supply and demand and there are many unanswered questions regarding both of these components.

Questions about Demand

Will this be the year that the 5.9 million adults between the ages of 25 and 34 that are still living with their parents decide to purchase a home of their own?

With mortgage payments lower than rent payments in the majority of the country, will first time buyers finally decide it makes more financial sense to buy rather than rent?

Will the baby boomers take advantage of the great deals available and start purchasing vacation and retirement homes?

Will investors continue to purchase large quantities of distressed properties?

Will hedge funds negotiate a deal with the banks for bulk purchases of foreclosures?

Questions about Supply

Will 2012 be the year that builders again increase inventories of newly constructed homes?

Will baby boomers put their primary residences up for sale and relocate to their retirement destinations?

Will 2012 be the year that the shadow inventory of foreclosures finally makes its way to market?

If prices depreciate, it will force more homes into a negative equity situation. Will this create another surge in short sales and foreclosures?

Will the government put together a plan to convert large numbers of foreclosures into rental properties?

Bottom Line

With so many unanswered questions regarding both the demand for housing and supply of properties, it is very difficult to determine where prices will be at the end of the year. We suggest you contact a local real estate professional to help you determine where values are headed in your area.

Fiscal policy issues and political economic uncertainty will take center stage in determining the degree of consumer and business activity—key drivers of economic growth—during 2012, according to Fannie Mae’s (FNMA/OTC) Economics & Mortgage Market Analysis Group. The forthcoming presidential election, potential expiration of tax provisions for businesses and households, and the ongoing healthcare debate are among the uncertainties expected to keep the economy moving at a moderate pace with growth of 2.3 percent expected for the year. Moreover, contagion effects from the sovereign debt crisis in the euro zone, which appears to be slipping into recession, are expected to remain as a primary risk to growth in 2012.

Consumers seem to have gotten out of their summer rut due in large part to improving labor market conditions and improving attitudes toward employment prospects and future income. As consumer sentiment shows signs of improvement, so do recent housing indicators, which are trending in a positive direction with incremental improvement expected to continue throughout 2012 – albeit only modestly initially, and moving from historic lows.

“We’re entering 2012 with decent momentum, especially on the employment side, which is fostering positive household and consumer behavior. Unfortunately, we expect this momentum to slow as we move through the first half of the year,” says Fannie Mae Chief Economist Doug Duncan. “2012 will be replete with policy changes and challenges that involve the global economy, the domestic economy, and the housing sector. We expect the net effect will be a year of moderate growth edging away from the 2011 threat of a double dip.”

For more information, visit http://www.fanniemae.com

http://rismedia.com/2012-01-16/2012-is-the-year-of-the-political-economy/print/

Many believe that very few houses are selling and that almost no one can get a mortgage. We want to let everyone know that neither of these assumptions is true. Recently, the National Association of Realtors (NAR) released their Existing Homes Sales Report. According to the report there are, on average, 12,109 homes selling in the United States EACH and EVERY DAY! That means that approximately 12,000 houses sold yesterday, approximately 12,000 will sell today and approximately 12,000 will sell tomorrow. So the thinking that homes aren’t selling just isn’t true.

Another interesting fact in the report was that 72% of these transactions were accompanied by a mortgage. That means that approximately 8,719 people qualify for a mortgage on a daily basis in this country.

There are over 12,000 homes sold and over 8,000 mortgages granted every day. The real estate market is doing better than many believe.

We recently posted Real Estate: Today’s Golden Opportunity comparing the current housing market to the market for gold about a decade ago. Some commented on the fact that you can’t compare gold to real estate as an investment as gold is a very liquid asset and it would take more time and effort to sell a house. We were not trying to make the case for real estate vs. gold as an investment in our blog. We were just showing that all investments go through cycles and that the best time to buy any investment may be when everyone is saying not to.

However, since the subject of comparing real estate to other investments has come up, let’s take a closer look. There are two major advantages to investing in a home of your own rather than another option:

You Can’t Live in Your IRA

When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially.  There are two challenges with this conclusion:

1. Today, in the vast majority of the country, renting is actually more expensive than owning a home.
2. History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

Today, study after study shows that owning a home is no more expensive than renting a home. However, even if this wasn’t the case, history shows that owning a home creates greater wealth.

Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study last year titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

There Are Tremendous Tax Advantages to Investing in a Home

There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:

Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates, was good enough to explain the Home Sale Exclusion Rules:

“You may qualify to exclude from your income all or part of any gain from the sale of your main home. 

Maximum Exclusion

You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

• You meet the ownership test.
• You meet the use test.
• During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.

You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)

Ownership and Use Tests

During the 5 year period ending on the date of the sale, you must have:

• Owned the home for at least 2 years, and
• Lived in the home as your main home for at least 2 years

Certain exceptions exist in which you may qualify for the exclusion without satisfying the tests listed.”

Bottom Line

Every investment has pros and cons. That is why there is such an assortment of great opportunities. Real Estate has been, is and always will be one of those opportunities.

http://www.kcmblog.com/2012/01/04/comparing-real-estate-to-other-investments/