Houston Real Estate and Mortgage Blog

If you’ve spent any time watching HGTV or the DIY network, you probably think that the best place to start when making home improvements is your kitchen or bath. These are both areas of focus for potential homebuyers and also areas where design trends are most evident, so it stands to reason that an investment in one, or both, of these areas would pay off.

Think again. Numerous university studies show that an investment in landscaping can provide a return on investment of more than 100 percent, and ultimately increase your home’s value by ten percent or more. This is a better return than any interior improvement. If you really think about it, it stands to reason that the curb appeal of your home would heavily influence its market value. Many potential homebuyers may never enter your home if the exterior is not attractively maintained and landscaped. Studies also show that homes with updated landscaping sell up to six weeks faster than other homes. This is good news whether you are trying to sell your home in a difficult market, or merely looking to get the highest appraisal possible when you refinance your mortgage.

What should you do if you are struggling to get your house sold? Take a look at your landscaping plan. Do you have dead plants or beds that have been taken over by weeds? Does your yard look barren? Do you have too much of a green thumb and your yard has turned into a jungle? Think about what a typical buyer, a buyer that is not you, is looking for. They want a nicely manicured yard with enough greenery to frame complement your home, but not so much that it becomes the focus of the home. Trees have the biggest impact, so placing an attractive tree, or trees, in your yard to provide shade and frame your home or backyard may well be worth it. Furthermore, landscape experts add that the way your landscaping funds are invested has a great deal to do with the return you experience. Buying a ton of small homogenous plants is far less desirable that a few well placed mature ornamentals that complement the rest of your yard. You should focus on the front yard first as this is what grabs a potential buyer’s attention. Make sure your beds are weed fee and covered with a nice layer of mulch.

The winter season makes landscaping more challenging because lawns, plants and trees are largely dormant. Nevertheless, there are varieties of camellia, juniper, iris and viburnum that bloom in the winter months. Winterizing your lawn will insure that it greens up rapidly when the cold weather departs in early Spring. Your local nursery or a qualified landscape architect can provide you with guidance on how to maximize your landscape investment.

The long-awaited rate increases appear to have finally arrived as mortgage rates hit five month highs early today before retreating slightly. As we have been commenting for months, we believe this is the start of a gradual rate increase that extends well into 2010. We are currently quoting a rate of 5% on a 30-year fixed rate mortgage to a well-qualified borrower.

Here's the good news. The U.S. Treasury announced last week that it would provide an unlimited amount of assistance for the next three years to Fannie Mae and Freddie Mac. These are the embattled quasi-government mortgage agencies who own the majority of mortgage loans in the U.S. today and have been taking record losses. This is good news because the Federal Reserve (our central bank) has been artificially keeping rates down by buying mortgage backed securities (pools of mortgages made by lenders) since there have not been enough buyers in the market at current rates. Think of it this way. Too much supply and not enough demand for these mortgage securities means the prices fall, and rates go up. With Fannie Mae and Freddie Mac getting a longer leash from the Treasury, they might be able to step in and absorb some of the supply that will be abandoned when the Fed stops their buying at the end of the first quarter of 2010.

If the recent news of lower than expected jobless claims continues, we believe we will see higher rates next year, though we may see a stabilization in the 5.25% to 5.5% range if the government plans go as expected.

Stay tuned!

	So, you’ve read the headlines. One in five mortgages is either behind or in default and for homebuyers today, this may indicate an opportunity to buy a house at

a highly discounted price. Many buyers have done just that; buying houses in the Houston area at 20% discounts or more to their pre-housing meltdown levels by focusing on foreclosures or short-sales, a practice of buying a home below the mortgage balance before it goes into foreclosure. Unfortunately, this exercise of buying low and having a load of immediate equity in your new home may not be as easy as it seems. Below are five things to keep in mind when considering the purchase of a foreclosed property or pursuing a short sale.

1. Be sure to consider repairs - Foreclosures, also known as “bank-owned” or “REO” properties are often in need of substantial work. As an institutional owner, a bank just wants to get rid of the property for as much as they can, indifferent to repairs that are needed. Furthermore, the bank cannot provide a seller’s disclosure providing the buyer with an insight as to problems with the house. The house may have foundation, roof, or HVAC problems that will need to be repaired. The costs of these repairs can often wipe out the perceived discount the buyer receives on the purchase price. Therefore it is especially important to negotiate an appropriate option period to allow for a thorough inspection of the home. Banks are typically less willing to make repairs than traditional sellers, so understand that if you can’t come to an agreement on remedies, you will be out your option money and the cost of your inspection.

2. Be wary of special provisions in the sales contract - Often, bank contract amendments require the buyer to pay additional closing costs not found in a typical real estate transaction including additional title and recording fees which can amount to thousands of dollars. In many cases, these provisions can be negotiated so be sure your REALTOR is familiar with these provisions and thoroughly reviews the contract and any addendums.

3. Be prepared to wait – If you make an offer on a bank-owned property, your seller (the bank) is rarely prompt in providing responses to questions or contract offers. Loss Mitigation representatives are the people who manage the process of foreclosing on, and disposing of, bank-owned properties and are often overloaded with files. If you are buying a home through a short-sale transaction, where the bank has agreed to take a loss on the property in exchange for selling before foreclosure, you will definitely need to rent a stack of videos from Blockbuster. Obtaining responses to contract offers on short sales can take a month or more.

4. Peel back the onion on special mortgage financing – You might see that the bank, or government agency if the house is owned by Fannie Mae, Freddie Mac, or HUD, is willing to offer special financing incentives such as $100, or 3% down payments. Keep in mind that these lower down payments do not include your closing costs which, as referenced above, are often on the high end for a bank-owned property. In some cases the interest rates offered are also higher than current market rates. You should check with a BBB-accredited mortgage lender to compare mortgage options before making a decision.

5. Consider Location – While a property discounted from its pre-bubble price may seem like a great deal. You should consider the long-term prospects for the neighborhood. If one of every three houses in the neighborhood is a foreclosure or short sale, it will take years to work through that inventory, and even longer for prices to rebound. Furthermore, these neighborhoods often become over-weighted with rental properties. As a rule, renters do not care for their home as well as an owner occupant, so they may not be as worried about maintaining an immaculate yard, or fixing the fence when it falls down.

The current housing market is no doubt a buyer’s market. As the inventory of unsold homes increases, prices fall. The astute buyer can be the beneficiary, if they have a good understanding of the local housing markets and the economics of buying a foreclosure. The assistance of a qualified REALTOR is worth its weight in gold when entertaining the purchase of distressed property.

Recently, the Federal Housing Administration, which insures millions of mortgage loans nationwide, announced that they had fallen well below their mandated capital requirement. This means that the money they have set aside for additional losses is lower than it needs to be. There have been a number of proposals suggested which are outlined in the article below.

Ultimately, if you are a buyer with limited down payment resoruces and perhaps good, but not great, credit scores, it would make sense to buy now, especially if you can take advantage of the expanded homebuyer tax credit.

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/02/AR2009120203473.html